Why building sustainable businesses are important for the 21st Century Corporation. The rationale for India's 2% CSR law, and why it makes sense. A journey from global imperatives to national law, and the road ahead for creating sustainable businesses which include all stakeholders in creating value across people, plant and profits.

1. The 21st Century Corporation
NEW IMPERATIVES FOR SOCIALLY INCLUSIVE BUSINESS
J.VIKRAM BAKSHI

3. 3 Billion
THE NUMBER OF PEOPLE WHO WILL JOIN THE MIDDLE CLASS IN
NEXT 10 YEARS
Source: @washpost

4. 6
Degrees
THE IMPACT OF
CLIMATE CHANGE IN
THE NEXT 10 YEARS

5. PRINCIPLE 1: BUSINESSES SHOULD CONDUCT AND GOVERN THEMSELVES WITH
ETHICS, TRANSPARENCY AND ACCOUNTABILITY
PRINCIPLE 2: BUSINESSES SHOULD PROVIDE GOODS AND SERVICES THAT ARE SAFE
AND CONTRIBUTE TO SUSTAINABILITY THROUGHOUT THEIR LIFE CYCLE
PRINCIPLE 3: BUSINESSES SHOULD PROMOTE THE WELLBEING OF ALL EMPLOYEES
PRINCIPLE 4: BUSINESSES SHOULD RESPECT THE INTERESTS OF, AND BE
RESPONSIVE TOWARDS ALL STAKEHOLDERS, ESPECIALLY THOSE WHO ARE
DISADVANTAGED
PRINCIPLE 5: BUSINESSES SHOULD RESPECT AND PROMOTE HUMAN RIGHTS
PRINCIPLE 6: BUSINESS SHOULD RESPECT, PROTECT, AND MAKE EFFORTS TO
RESTORE THE ENVIRONMENT
PRINCIPLE 7: BUSINESSES, WHEN ENGAGED IN INFLUENCING PUBLIC AND
REGULATORY POLICY, SHOULD DO SO IN A RESPONSIBLE MANNER
PRINCIPLE 8: BUSINESSES SHOULD SUPPORT INCLUSIVE GROWTH AND EQUITABLE
DEVELOPMENT
PRINCIPLE 9: BUSINESSES SHOULD ENGAGE WITH AND PROVIDE VALUE TO THEIR
CUSTOMERS AND SOCIETY AT LARGE, IN A RESPONSIBLE MANNER
9 Principles

6. NVGs: the nine principles
1.
•Transparency, ethics and accountability
2.
•Providing goods and services that are sustainable over entire life cycle
3.
•Well-being of employees, including contract labor and home based workers
4.
•Being responsive towards stakeholders, especially the disadvantaged
5.
•Respecting and promoting human rights
6.
•Protecting and restoring the environment
7.
•Responsible policy advocacy that enhances public good
8.
•Supporting inclusive growth and development – impactful community development - CSR
9.
•Providing value to consumers responsibly
NATIONAL VOLUNTARY GUIDELINES – THE RELEVANCE TO YOUR SECTOR 6
P
R
I
N
C
I
P
L
E
S
Indivisibility of principles key to linking competitiveness, responsibility and
development impact.
Source: IICA-GIZ Project

7. Drivers of changeRegulators: Current scenario
The NVGs & BRR
•In 2011, the Ministry of Corporate Affairs released the
National Voluntary Guidelines on Social,
Environmental and Economic Responsibilities of
Business (NVGs)
•In August 2012, SEBI mandated the top 100 listed
companies to file a Business Responsibility Report
(BRR) describing their performance on the NVGs.
The CSR 2% mandate:
•In 2013, the Companies’ Bill was made an Act.
•Section 135 of the Companies’ Act mandates all
companies making a profit of INR 5 crore and above to
spend 2% of their profits on Corporate Social
Responsibility (CSR).
Source: IICA-GIZ Project

8. Four Pillars of Business
Responsibility (NVGs)
Leadership
(Boards)
Integration
(Business model)
Engagement
(Internal and
external
stakeholders)
Reporting
Communication)
8Source: IICA-GIZ Project

9. Why should you care?

10. The NEW Companies Act, 2013
Section 135: Effective from April 1, 2014
Every company having a net worth of rupees five hundred crore or more (USD 100 million
or more),or a turnover of rupees one thousand crore or more (USD 200 million or more)
, or a net profit of rupees five crore or more (USD 1 million or more) during any financial
year shall constitute a Corporate Social Responsibility Committee of the Board consisting of
three or more directors, out of which at least one director shall be an independent director;
The Board's report shall disclose the composition of the Corporate Social Responsibility
Committee.
Source: MCA website

11. Requirement 1: Board CSR Committee ( 3 members, 1 independent)
net worth of INR 500 crore or
more (USD 100 million or
more),
or a turnover of INR 1000
crore or more (USD 200
million or more)
, or a net profit of rupees five
crore or more (USD 1 million
or more) during any financial
year
To Do: Board report should
disclose CSR committee
composition
Requirement 2: CSR Committee Report
formulate and recommend to
the Board, a Corporate Social
Responsibility Policy which
shall indicate the activities to
be undertaken by the company
as specified in Schedule VII;
recommend the amount of
expenditure to be incurred on
the activities referred to in
clause (a); and
monitor the Corporate Social
Responsibility Policy of the
company from time to time.
Requirement 3: Board to disclose CSR Policy on Company Website
ensure that the activities as are
included in Corporate Social
Responsibility Policy of the
company are undertaken by the
company.
The Board of every company
referred to in sub-section (1),
shall ensure that the company
spends, in every financial
year, at least two per cent of
the average net profits of the
company made during the
three immediately preceding
financial years, in pursuance of
its Corporate Social
Responsibility Policy.
Proviso 1: Get Local
Provided that the company shall
give preference to the local area
and areas around it where it
operates, for spending the
amount earmarked for
Corporate Social Responsibility
activities;
Proviso 2: Failure to
spend
Provided that if the company
fails to spend such amount, the
Board shall, in its report made
under clause (o) of sub-section
(3) of section 134, specify the
reasons for not spending the
amount.

12. Read with Schedule VII
Activities which may be included by companies in their Corporate Social Responsibility Policies:
(i) eradicating extreme hunger and poverty;
(ii) promotion of education;
(iii) promoting gender equality and empowering women;
(iv) reducing child mortality and improving maternal health;
(v) combating human immunodeficiency virus, acquired immune deficiency syndrome, malaria
and other diseases;
(vi) ensuring environmental sustainability;
(vii) employment enhancing vocational skills;
(viii) social business projects;
(ix) contribution to the Prime Minister's National Relief Fund or any other fund set up by the
Central Government or the State Governments for socioeconomic development and relief and
funds for the welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes,
minorities and women; and
(x) such other matters as may be prescribed
Source: MCA website

13. Under Clause (o) of Sub-Section (3) of Section 134: There shall be attached to statements
laid before a company in a general meeting, a report by its Board of Directors, which shall
include:
(o) The details about the policy developed and implemented by the company on corporate
social responsibility initiatives taken during the year.
Sub Section (8) of Section 134
If a company contravenes the provisions of this section, the company shall be punishable
with fine which shall not be less than fifty thousand rupees but which may extend to twenty-
five lakh rupees and every officer of the company who is in default shall be punishable
with imprisonment for a term which may extend to three years or with fine which shall
not be less than fifty thousand rupees but which may extend to five lakh rupees, or with both.
Source: MCA website

14. Section 450
If a company or any officer of a company or any other person contravenes any of the
provisions of this Act or the rules made thereunder, or any condition, limitation or
restrictions subject to which any approval, sanction, consent, confirmation, recognition,
direction or exemption in relation to any matter has been accorded, given or granted, and
for which no penalty or punishment is provided elsewhere in this Act, the company and
every officer of the company who is in default or such other person shall be
punishable with fine which may extend to ten thousand rupees, and where the
contravention is continuing one, with a further fine which may extend to one
thousand rupees for every day after the first during which the contravention
continues.
Source: MCA website

15. The
Reporting
1. Provide a brief outline of the company’s CSR policy including the statement of
intent reflecting the ethos of the company, broad areas of CSR interest and an
overview of activities proposed to be undertaken;
2. Indicate the web-link to the CSR Policy. The policy should include the full list of
projects/activities/programmes proposed to be undertaken by the company.
must be provided.
3. The composition of CSR Committee
4. Average Net Profit of the company for last 3 financial years
5. Threshold limit (2% of this amount as in 4 above)
6. Details of CSR activities/projects undertaken during the year in the following
table:
a. total amount to be spent for the year;
b. amount carried forward from earlier years;
c. Amount spent during the year as below;
d. Amount carried forward for the year.
7. In case the company has failed to spend the 2% of Average Net Profit (INR) of last
3 financial years, please provide the reasons for not spending the amount;
8. A responsibility statement of the CSR Committee, that the CSR Policy
implementation and monitoring thereof is, in letter and spirit, in compliance
with CSR Objectives.
9. Signed
…………………………………………..(CEO/Managing Director/Director)
……………………………………(Chairman CSR Committee)
Source: MCA website

16. 6. Details of CSR activities/projects undertaken during the year in the following table : (cont’d)
* Give details of Implementing Agency 16
1.
Sr
N
o.
2.
CSR
project/activity
identified
3.
Sector in which
the project is
covered
4.
Projects/Programm
es
1. Local
areas/others
2. Specify the
state/district
5.
Amount outlay
(budget)
project/
programme
wise
6.
Amount spent
on the
programme
/project
Subheads
1. Direct
expenditur
e on
projects
2. Over heads
7.
Cumulative
spend upto the
reporting
period
8.
Amount spent
Direct
through
implementi
ng agency
Total
Source: MCA website

17. Principle Revenue growth
and
Market Access
Cost savings
and
productivity
Access to
capital
Risk
management/
license to operate
Human
capital
Brand value/
reputation
1 Ethics, Transparency,
Accountability
New
customers
Attractive to
investors and
banks
Positively seen
by communities
and NGOs
Attract and
retain
employees
Positively seen by
Customers and
Regulators
2 Safe and sustainable
goods and Services
Customer
loyalty
Cost savings
3 Well-being of Employees Increased
productivity
Attract and
retain
employees
4 Responsiveness to all
stakeholders
Attractive to
investors and
banks
Positively seenby
communities and NGOs
Positively seen by
Customers and
Regulators
5 Promoting Human rights Attractive to
investors and
banks
Positively seen
by communities
and NGOs- Lower risk of non-
compliance
Positively
seen by
regulators
6 Protecting the Environment Improved access to
green
Customers
Lower
operating
costs
Attractive to
investors and
banks
Positively seen by
communities and NGOs
Lower risk of non-compliance
Positively
seen by
regulators
7 Responsible policy Advocacy Positively seen
by civil society
Positively seen by
regulators
8 Supporting inclusive
Development
Potential
source of
trained
employees
Positively
seen by
governments
9 Providing value to
customer
New
customers
Customer Loyalty
Lower risk of
consumer action
NVGs:
Impact
on
Business
Source: GIZ consulting paper

18. 3 Quick Steps
Source: IBLF Report

19. But then…
Why is the Government legislating this change?
What are the systemic issues?
Should we just deal with the symptoms or tackle the problem at its
very core?

20. Zero Sum Game
Ecosystems destruction
Environmental degradation
Increasing inequality, hunger
Natural resource decline
Climate change
Biodiversity loss
Increasing population

21. The sustainability paradox

22. An Alternative Approach
•Everything is connected to everything else
•Our societies co-exist in a complex web of
relationships
•You can never do just one thing
•Every solution will create further problems

23. Learning from the Living Planet

24. Designing for Abundance
•Capture and recycle essentials like carbon & phosphates
•Avoid adding anything toxic to materials from the beginning of the process rather than remove
them at the end
•Ensure you do not replace one problematic material with another
•Design in concert with nature
•Build vertical greenhouses.
•Recycle Bio and Tech Waste
• View the Earth as a battery, and keep it charged

25. Agenda for the 21st Century Corp
1. Purpose Maximisation vs. Profit Maximisation
2. Designing for Abundance vs. Capital as “Barrier to Entry”
3. Leadership by Design vs. Leadership by scale
4. People+ Planet+ Profie
5. New Ideas, Social Enterprises, Inclusive Businesses

26. A Few Examples

28. Over to you!
@jvbakshi In/jvbakshi Jvbakshi.wordpress.com