Corporate social responsibility

(CSR) advisory 8 January 2013

Corporate social responsibility (CSR) advisory Page 2

The context Companies Bill 2012 (section 135)

Board level CSR Committee:

► Comprising of 3 or more directors with at least

one independent director,

► Composition to be disclosed in the annual

Board of Directors’ report

•Responsibilities of the CSR Committee:

► Formulate and recommend a CSR Policy and

amount of CSR expenditure

► Regular monitoring of the CSR initiatives

Responsibilities of the

company’s Board:

► Approve and disclose

CSR Policy in the annual

Directors’ Report and on

company website

► Ensure implementation

of CSR activities as per

the Policy

► Directors’ Report to

specify reasons in case

the specified amount is

not spent

Annual spending on

CSR by companies:

► Every financial year, at

least 2% of the average

net profits made during

the 3 preceding

financial years

► Schedule VII indicates

activities that can be

undertaken by a

company.

Applicable to all companies that have either of the following in any financial year:

► Net worth of INR 500 crore or more

► Turnover of INR 1000 crore or more

► Net profit of INR 5 crore or more The bill will impact 2500+ companies including

the Top 100 companies across sectors

CSR spending is already mandatory for PSUs

Corporate social responsibility (CSR) advisory Page 3

Changes envisaged

Current scenario Key changes envisaged

• Appropriate CSR Governance structure.

• Integration of business objectives with CSR

initiatives.

• Transparent approach to CSR spending.

• Spending CSR funds as per the schedule

VII.

• Independent audit of CSR investment.

Absence of CSR Governance structure

Lack of structured approach to CSR

Lack of comprehensive and uniform reporting of

CSR initiatives

Inadequate experience and expertise of implementing

CSR initiatives

Need for the integration of CSR initiatives with

business objectives.

Sub-optimal use of available funds and inadequate

monitoring

Charitable or Philanthropic approach to using funds.

Ernst & Young is poised to provide hand holding support to implement adequate CSR programmes,

frame structures, develop processes and assess the social impact of the implemented programmes.

Corporate social responsibility (CSR) advisory Page 4

CSR advisory

Brief solution description

► Help effectively manage CSR

initiatives

► Align the social initiatives with

the business objectives

► Helps to comply with provision

of Companies Bill 2012 (clause

135)

► Evaluating alternate forms of

legal presence, deductibility

and obtaining Tax exemptions

Value proposition offered Typical buyer

► CFO/CS

► MD/Chairman

► CSR/Sustainability Head

► Large sized cos- Rs. 25-50 Lacs

► Mid sized cos.- Rs. 15- 25 Lacs

Typical Fee size

Solution champions :

Parul Soni:

Executive Director & Practice Leader,

Development Advisory Services

Chaitanya Kalia:

Partner,

Climate Change & Sustainability Services

Rajiv Chugh:

Partner - Tax &

Regulatory Services

Corporate social responsibility (CSR) advisory Page 5

EY differentiators

Differentiators

Our competitors offering similar services

► PwC

► Other specialized/boutique firms

► End to end service provider- our ‘One Advisory’ framework combining tax, audit and CSR expertise

inclusive of thematic expertise in line with schedule VII of the CSR clause of Companies bill, 2012.

► Vast experience of working with large Indian and Multinational clientele on their CSR agenda

► Largest dedicated team in India specializing in sustainability solutions (CCaSS) and development

advisory services (DAS).

► Deloitte

► KPMG

Corporate social responsibility (CSR) advisory Page 6

Case study snapshot (1)

Business

driver/need

► An auto sector leader with 45 foundations and charity outfits already spends

excess of 25 Cr per year on CSR, still only 50% of clause 153 requirement.

► Key question – Where and how to spend additional 25 – 30 Cr per year every year

What we did ► EY has reviewed the effectiveness of CSR programs implemented by the

charitable foundation and recommended a roadmap for the future.

► EY has conducted stakeholder engagement with diverse stakeholders to capture

holistic feedback to CSR initiatives

► EY is helping the Company develop a business responsibility report (BRR).

Outcome

delivered

► KPIs for monitoring CSR program effectiveness

► Suggestions to improve impact on ground

Corporate social responsibility (CSR) advisory Page 7

Case study snapshot (2)

Business

driver/need

► A large FMCG company in India committed to water conservation aimed at

conserving 100 billion litres of water in 5 years.

► Total CSR spending committed is INR 20 crore.

► They needed support in Planning the entire project, developing sustainable

partnerships, and Grant Management Support

What we did ► Assisted the client in project development through identifying locations and

partners for implementation and assisted the client and Grantees (NGOs) in

project management and monitoring.

► Developed project reporting and monitoring templates and provided

training to the project management team.

► Provided grant management support.

► Validated the most significant change stories reported by the grantees.

Outcome

delivered

► Assisted in generating INR 12 Cr. additional funds from Government.

► Provided valuable insights to strengthen the project design, results framework

which created better visibility and impact for the company

► Enabled a lean team structure, thus reducing the overall administrative cost

of the project.

Corporate social responsibility (CSR) advisory Page 8

Target list for next 90 days

IIC TCE Financial services

[List from select priority accounts at firm level]

► M&M

► Vedanta

► ADAG

► Godrej

► Hero Motocorp

► JSPL

► TVS

► Daimler

► General Electric

► Volkswagen

► Adani

► Avantha Group

► A V Birla Group

► Essar

► Reliance

► Cisco

► Huawei

► IBM

► Sony

► Vodafone

► NCC (Nagarjuna)

► Times Group

► Goldman Sachs

► Axis Bank

► HDFC Group

► ICICI Bank Limited

► Kotak Group

► Metlife, Inc.

► Yes Bank

► State Bank of India

► Other nationalized banks

Action points:

► Support in taking this solution to other priority clients

► A good solution to penetrate other/compete accounts

► Take a lead and align with Tax, Audit to provide comprehensive solutions to clients

Corporate social responsibility (CSR) advisory Page 9

Key questions to ask clients

Our ask of you

Have you evaluated the impact of

the New Companies Bill 2012 on

your CSR spend?

1

Is your CSR program/strategy in

line with your business strategy ?

2

Are you measuring the efficiency

and effectiveness of your

CSR spend?

3

► The new Companies Bill 2012 requires companies

to spend 2% of their net profits on CSR and report

their CSR spend.

► Since this could be a substantial amount it would

require proper planning for effective utilization.

► The EY team with its experience of managing CSR

funds worth more than INR 100 Crores can design

and operationalize your CSR programmes in a

way that will help meet the reporting requirements

and develop a structured approach to CSR

initiatives.

Elevator pitch

Annexes

Corporate social responsibility (CSR) advisory Page 11

EY detailed solution description

Mapping of priority concerns with the

suggested issues in the New

Companies Bill, 2012

Stakeholder identification and

mapping

Designing a stakeholder engagement

framework for the client

Designing a CSR strategy linked to

business objectives to ensure high

impact CSR spend (2%)

Developing a governance structure

at the manufacturing unit and

corporate level to deliver the CSR

action plan effectively at the ground

level.

A 3-5 year roadmap for effective

implementation of CSR programs

and integration of a review

mechanism .

Linking CSR to the sustainability

strategy of the client.

Creating a Sustainability strategy

Sustainability Reporting and/or

assurance.

Enhancement of capacities of

staff and partner NGOs to

implement CSR and other

community engagement

initiatives through

partnerships if required

Partner identification and

selection of suitable modes of

collaboration

Sustainability

disclosure/reporting

Framework to assess the

effectiveness of the program/s,

evaluate impact and redesign

the CSR initiatives through

feed forward.

Provide reliable reports to the

Board on CSR initiatives.

Business

linked

CSR

Strategy

Stakeholder

Engagement

Capacity

building

CSR Roadmap

Monitoring and

evaluation

framework

Social

Management

Plan Conducting a social impact assessment,

creating a social baseline report and

identifying key impacts and their

significance

Recommendations on mitigation and

management strategies for each of the

identified impacts

Corporate social responsibility (CSR) advisory Page 12

Schedule VII

► Activities which may be included by companies in their Corporate Social Responsibility Policies

should be relating to:—

► Eradicating extreme hunger and poverty;

► Promotion of education;

► Promoting gender equality and empowering women;

► Reducing child mortality and improving maternal health;

► Combating human immunodeficiency virus, acquired immune deficiency syndrome, malaria and

other diseases;

► Ensuring environmental sustainability;

► Employment enhancing vocational skills;

► Social business projects;

► 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

► Such other matters as may be prescribed

Corporate social responsibility (CSR) advisory Page 13

Key corporate social responsibility provisions in the Companies Bill, 2012: - In numbers

The value of the CSR advisory opportunity is INR 2,620 million*

*This figure and the industry categorization is for the top (by PAT) 250 Indian Companies according to the Dow Jones index

► CSR Budget: 2% profit after tax of the top 250

companies is: 87,380 million

► Consulting Opportunity: Based on industry

average 3% of the Total CSR spending:

INR 2,620 million .

► 95% of the available opportunity is in the

following sectors

► Professional, Scientific and Technical Services

► Information,

► Utilities,

► Mining, Quarrying, and Oil and Gas Extraction

► Finance and Insurance

► Manufacturing

4% 6%

7%

22%

24%

33%

4%

Professional, Scientific, and Technical ServicesInformationUtilitiesMining, Quarrying, and Oil and Gas ExtractionFinance and InsuranceManufacturingOthers

Opportunity: Share across industries

Corporate social responsibility (CSR) advisory Page 14

Microsoft India

Managed project Shiksha, targeted at increasing computer

literacy in India.

Katha

Support on implementing the

programme on increasing the reading habits of students in

Public schools in Delhi.

Groupe Carrefour

Sustainability sourcing risks and strategies

with respect to Indian markets.

ICICI Bank Ltd

Global practices related to formation of foundations by

corporate companies.

Vodafone Essar Limited (India)

Strategy to initiate, inform and guide their

flagship CR programme in India.

.

Jankidevi Bajaj Gram Vikas Sanstha

Social programme assessment.

Select credentials

Excel Industries

Carbon, water and waste baseline

assessment and impact assessment of CSR

activities

`

GHCL

Need assessment for CSR interventions

Corporate social responsibility (CSR) advisory Page 15

Select credentials

DLF Foundation

Scoping Study for Skill Development Initiative

Tata Motors Ltd.

Scoping Study for Professional Drivers

Skill development Initiative

Monsanto Holdings Pvt. Ltd.

Documentation of Social Initiatives and

Development of Social Investment Approach

Hindustan Unilever Ltd

Project management support for Water

Conservation Projects

Jubiliant Bhartia Foundation

Social Needs Assessment for

Community Development Activities.

Landmark Group

Feasibility Study for setting up vocational

skills development academy focused on retail and hospitality

sector

Lanco Infratech Ltd

Developing CSR investment plan for

Udupi region in Karnataka

Tata Chemicals Limited

Scoping study for skill development initiatives

in Agriculture

Corporate social responsibility (CSR) advisory Page 16

Select credentials

Hindustan Unilever Limited

Project development and monitoring support for Water Conservation

and Management Projects

AIRCEL

Grant Expenditure Evaluation of CSR

Projects

Balmer Lawrie & Co. Ltd.

Development of CSR policy and a long term

perspective plan

Tata Steel Limited

Business model for establishing vocational

training center

Tata Motors Ltd.

Assistance in developing scholarship scheme for children of

truck drivers

Bharti Foundation

Internal Audit Services

Modern India Ltd.

Assistance in developing business

plan for skill development in Gems and Jewellery sector

Cognizant Foundation

Review of CSR policy