CORPORATE SOCIAL RESPONSIBILITY(CSR)

FOR THE ELDERLY,its SUCCESS & CHALLENGES

ByR. N. Mital

CORPORATE SOCIAL RESPONSIBILITY

CSR is not a new concept. Tatas, Aditya Birla Group, TVS Group, GMR and many other business Houses have been spending generously for the welfare of society.

In Dec. 2009 MCA issued an advisory to all Public Sector Enterprises to support CSR which was followed by an appeal on 8th July 2011 to all Corporate Houses to spend at least 2% of their average net profit for social causes. The contribution was voluntary.

From 1st April 2014 contribution to CSR has been made mandatory. All Companies having minimum revenue of Rs 1000 crores or net worth of 500 crores or a net profit of 5 crores or more in a year have to spend at least 2% of their average net profit for the last 3 years on CSR activities. Section 135 was included in Companies Act defining rules and scope of this provision.

MILESTONES IN CSR

Companies BillApproved by LokSabha18th Dec.2012

Companies Bill 2013Approved by RajyaSabha08 August, 2013

Elder Issues includedIn Section 135 thru.MCA notification dtd22 Feb, 2014

MCA advisoryOn CSR in December 2009

SECTION 135 of COMPANIES ACT 2013

Section 135 in Companies Act includes schedule VII which defines the social issues which qualify as activities under CSR and the rules for their implementation. It has been very clearly laid down that activities undertaken in pursuance of normal course of business of the Company or those which benefit only the employees or their families shall not be considered as CSR activities.

Any contribution to a political party or expenditure outside India shall not be regarded as CSR activity.

Only activities which benefit the issues specified in schedule VII in project/programme mode will qualify as CSR activity. One time activity also will not fall under the purview of CSR.

Penal provisions if the mandatory amount is not spent How this activity has to be carried out

SECTION 135 of COMPANIES ACT 2013 cont

It is presumed that the Companies shall give preference to the local area around where it operates for spending the amount earmarked for CSR activities.

The CSR activity can be carried out through 1] its own Dept. set up for this purpose, 2] a registered trust, 3] a registered society/NGO 4] a Section 8 Company.

If a Company contravenes the provisions of this section, it will be punishable with a minimum fine of 50K extendable to 25 lakh rupees and every officer of the Company who is in default with imprisonment for up to 3 years or fine extendable up to 5 lakh rupees or with both. This clause however may not be applied during the initial years.

ROLE OF THE BOARD OF DIRECTORSUNDER SECTION 135

Board of Directors

Formulate CSR Committee and approve the recommended policy & declare it.

Ensure implementation of the CSR Policy

Ensure spend of minimum 2% of average net Profit of last 3 years

Explain reasons for not spending under clause(o) Of sub-section 3 of Section 134

ROLE OF CSR COMMITTEE

CSR Committee consisting of at least 3 Directors with minimum one independent

Formulate & recommend a CSRP0lcy to the Board

Recommend activities & Expenditure to be incurred

Monitor the implementation of theCSR Policy

To judge as to what we can expect from this concept during years to come we have to look at its performance in the past.

Unfortunately its performance in the past presents rather a gloomy picture. The top 100 Companies, including PSU’s spent during last year only 1,765 crores on CSR against the expected 5611 crores that is around 0.6% of the net profit instead of 2%. Figures for 5 top Companies are shown here below as an example,

COMPANY REVENUE PAT ACTUAL 2% of PAT

Indian Oil Corp 442,458 7,783 83 158

Reliance Indust 368,571 21,138 288 423

Bharat Pet. Corp 223,315 1,438 8 29

Tata Motors 170,678 8,437 15 69

State Bank India 147,197 13,056 71 269

Sectoral Breakup Still worse is the fact that less than one hundredth of the total

spend on CSR was spent on issues concerning problems of Elders as shown in the following sectoral breakup.

INDIFFERENCE TOWARDS ISSUES of a FAST AGEING SOCIETY

It is a general experience that both the Central Government and the society are indifferent towards the Age related issues. It is probably because of lack of realization of the serious socio-economic problems which will arise due to the major demographic shift taking place, if remedial measures are not taken in time.

The indifference is apparent from the fact that in the Companies Act passed by Rajya Sabha in 2013 the age related issues were not included even in schedule VII of section 135, listing social causes which qualify for CSR support. It was only through a campaign launched by us and Help Age that on February 27, 2014 Age related issues were included through an amendment which unfortunately appears to be half hearted and does not cover all concerns and issues of an ageing society.

AGE RELATED ISSUES NOW INCLUDED IN SCHEDULE VII of SECTION 135

Elder Issues

Setting up of Old Age Homes

Setting up of Day Care Centres

Setting up of Day Care Centres

1]Such other facilitiesFor Senior Citizens

2]Enhancing vocationalSkills of the Elderly

INDIFFERENCE (cont) The CSR departments of most Companies are not even

aware of the issues arising due to ageing society. They were surprised when we told them that there are 12 crore senior citizens in India 70% of them belong to BPL category & live in villages, 37% of them are so poor that they can not afford even two square meals a day.They are the retirees from the unorganized sector of our economy which contributes more than 62% of our GDP. They are thus our real bread earners but they starve when they become old.

Many are too old, disabled, suffering with terminal diseases often regarded as burden by their families and abandoned in temples, hospitals or even on highways. We have to provide shelters for them

6% live alone or with their spouse. Loneliness causes depression which is source of various health problems. We need Day Care Centres equipped with basic facilities for socializing, health care, physiotherapy etc.

There is need for poor senior citizens of Nursing Homes, Respite and Palliative Care Homes, Alzheimer’s re-habilitation centres, mobile health care facilities etc.

Issues arising out of Fast Ageing of Society can throw up challenges which can prove to be disastrous if ignored. The socio-economic burden due to depleting work force, increasing burden of welfare expenses can hinder economic development of society.

Health care expenses will be a major burden. Take Alzheimer’s for example. Its risk explodes from 1 in 8 at age 65 to 1 in 2 at 85. It cost in 2010 Globally 605 billion dollars. You can imagine its cost to India with 80+ population increasing at 500% from 2006 to 2050

According to WEF the NCD’s alone are going to cost India during next 2 decades more than USD 4.58 trillion which is more than double our GDP.

These are some random examples where CSR can play important role.

INDIFFERENCE (cont)

PRESENT SCENARIO REGARDING CSR

When CSR was made mandatory it was expected that the 16000 Corporate Houses in our Country will be able to contribute around 20,000 crores to social sector. It is now being realised that it was a gross over estimate and it may not exceed 5000 crores in the first year.

The reasons for the shortfall appear to be,-- No penalty at least during the initial period if the

mandate is not complied with hence many Companies are adopting wait and watch policy,

-- Contribution to non project-specific general PM/CM relief funds regarded CSR spend

-- Companies find it difficult to identify credible NGO’s operating with same objectives as those of the Company

PRESENT SCENARIO REGARDING CSR(cont)

Moreover less than10% Corporate Houses are really interested in participating in CSR programmes because,-- many are in a fix to decide which social cause to support,

-- or they are just not interested in any activity other than their normal activity,

-- information gap.

Likewise NGO’s find it difficult,-- to showcase their credibility and ability in a particular field

-- to identify the Corporate House in their area having same objectives

-- most of the Corporate Houses prefer to undertake CSR activity in an area where their major operations or head office is located.

Moreover some NGO’s find it difficult to prepare Project and Progress Reports in the format required by the Company.

According to a study there is a very large number of NGO’s registered in our Country being more than 30lakhs, the largest number is in Maharashtra, next is in Andhra

Pradesh (undivided) being more than 3lakhs. Despite such a large number of NGO’s operating in social sector both NGO’s and Companies find it difficult to find suitable partners.

PRESENT SCENARIO REGARDING CSR(cont)

PROBLEMS IN INITIATING CSR ACTIVITY

By Corporate Houses

1]Difficult to find trustworthy

NGO which can carry out the

Project efficiently & submit prog-

ress reports etc. in right format.

2] Choosing thru Tender/Bid cumbersome.

3]Cause & area restrictions

4]Sustainability of Project

5] Financial restrictions

By NGO’s

1] Locating right Donor a problem

2] Cause & area restriction.

3] Submitting reports in proper format a problem

4] Long time for approval

5] Delayed release of funds

6] Some Donors support only capital costs

PROBLEMS IN INITIATING CSR ACTIVITY (Cont)

Considering that in a year or two CSR is going to be a major socio-economic activity with 16000 Companies and equally large number of NGO’s operating we will require a well knit network of professionals and devoted workers..

The earlier tables show that at least for the Geriatric sector there will be a need for

-- A sort of a Match Maker who is in touch both with the NGO’s and the Donor Companies in the area and can put the right NGO in touch with the right Company

-- Professional CSR executives both in tne Companies and as private practitioners/consultants who can liaise between the NGO’s and the Donors

Probably similar set up will be required for other areas of CSR activity..

Fortunately as far as Ageing issues are concerned we have an All India Organization namely Help Age which can be trusted as the match maker. This suggestion needs further discussion and study.

PROBLEMS IN INITIATING CSR ACTIVITY (Cont)

To my mind provision of CSR opens a very lucrative possibility for retired Senior Citizens having working experience in Corporate Houses. With proper professional training they can look forward to a rewarding second career both in Companies in their CSR Departments and also as private consultants or advisors.

One such on line course is offered by IICA extending over 36 weeks, only they charge a fee of one lakh which probably is too high for most of the retired Senior Citizens looking for second career. We should request IICA to make it free for the retired or at nominal charge.

WHAT SHOULD WE DO? We have seen earlier that less than one hundredth of the total CSR

contribution was spent last year on Issues of the fast Ageing Society. We have to make co-ordinated effort to ensure that this aberration is corrected. There are a few suggestions.

We should represent to the authorities that,-- present situation where there is no penalty for not complying with

the mandate should be corrected,-- credit to non project specific PM/CM general relief funds as

contribution to CSR is not desirable.-- considering that ignoring issues of fast Ageing society can prove

disastrous & as awareness of these issues is very limited, spending 10% of CSR funds on Age related issues should be made mandatory.

(already under consideration of GOI, Ref-Nov.22,2013, TNN)

WHAT SHOULD WE DO? (cont) Most of the Corporate. Houses concentrate their CSR

activities in and around their main centres of operation which deprives major part of the Country of the benefits of this concept. They should be asked to give more impor-tance to district towns, talukas and villages.

All senior citizens’ associations and NGO’s if they are interested in taking advantage of CSR support, should get themselves registered as a trust or society (if they are not) and get recognition by the IT Department under section 12A preferably 80G.

If they are already engaged in philanthropic activities, they should get themselves enrolled as a NGO with IICA or an appropriate authority

WHAT SHOULD WE DO? (cont)

Since the general awareness in the community and the CSR teams of the Corporate Houses is very very poor, it will be useful to meet the CSR officers of the Donor Corporate Houses periodically and inform them of the age related problems. Submit a memorandum giving details about our concerns and problems even if you do not have a project in mind.

India is the only Country in the World which has made contribution to CSR mandatory. If this concept is properly handled, it can prove to be a very effective tool to promote equitable and sustainable growth of the Country specially its Social Sector.

Thank you