NILF - Roundtable

February 14, 2013

Hidden Opportunities in the 2% Mandate

Agenda

1. Catalyzing Change - IT/BPM Industry & Corporate Social

Responsibility

2. The law & prescribed activities (Schedule VII)

3. Key questions specifically for IT-BPM industry

4. What role the NASSCOM Foundation can play?

a) Drafting rules and regulations

b) Implementation

5. Way Ahead…

Catalyzing Change

IT/BPM Industry & CSR • IT-BPM industry’s contribution to the growth of India’s economy -

• provided direct employment to nearly 3 million people, and indirectly to 9 million in 2012.

• revenues of the sector have grown from 1.2 per cent of the GDP in FY1998 to an estimated 7.5 per cent in FY2012.

• History of investing in philanthropy, long-term development projects, humanitarian causes, disaster relief etc.

• Initiatives to promote education, health and general development in rural and urban areas, especially for excluded groups like at-risk children, women and persons with disability

• Community engagements involving employees

• ‘ Catalysing Change – 2012 – Shaping the future’ on the state-of-play of business responsibility (BR) in the IT-BPM industry in India

Clause 135 of Companies Bill 2012 What Does The Law Say?

• Every registered company under companies law or any previous laws

(Section 1, clause 135):

• Net worth of rupees > 500 crore

• Turnover of rupees > 1000 crore

• Net profit of rupees > 5 crore during any financial year

must spend at least 2% of its average net profit every year.

• If the company fails to spend such amount, the board shall explain the

reason for not spending in its financial statement

• A CSR committee of the Board, comprised of three or more directors

and at least one independent director must be formed

• CSR committee will be responsible for designing the policy, deciding the

projects as per schedule VII, decide the CSR spend and monitor that it is

being utilized as planned.

Clause 135 of Companies Bill 2012 Schedule VII – Prescribed CSR Activities

1. Eradicating extreme hunger and

poverty;

2. Promotion of education;

3. Promoting gender equality and

empowering women;

4. Reducing child mortality and improving

maternal health;

5. Combating human immunodeficiency

virus, acquired immune deficiency

syndrome, malaria and other diseases;

6. Ensuring environmental sustainability;

7. Employment enhancing vocational skills

8. Social business projects;

9. Contribution to the Prime Minister's

National Relief Fund or any other fund

set up by the Central Government or

the State Governments for socio-

economic development and relief and

funds for the welfare of the Scheduled

Castes, the Scheduled Tribes, other

backward classes, minorities and

women;

10. Such other matters as may be

prescribed.

• # 1-7: UN Millennium Development Goals

• # 8: Shared Value

• # 9: Public-Private Partnership (PPP)

• # 10: Flexibility

Role NASSCOM Foundation Can Play

Indian Law

Mandated CSR

Companies Bill

Rule Writing

Regulatory Inputs

Industry Inputs

Foundation Programs

Implementation

Advise & Train

CSR Advisory

Services

Awareness Campaigns

Handbook for policy creation, monitoring &

reporting

Convey SEBI reporting divergence & convergence

Strategic & Implementation

Services

Help define CSR Policy

Help companies identify the CSR

activities

Metrics to measure the impact

Support Reporting

Consolidate & Communicate

Role of Aggregator – e.g. NDLM

Thought Leadership

Represent Industry On National

Foundation for CSR

PR

SEBI’s Sustainability Reporting to Top 100

companies

• Should the CSR activities

• be driven from the ‘core business' rather 'environmental & social impact‘?

• involve other stakeholders of the organization – such as suppliers, customers,

investors? If so, how does this impact the supply chain?

• Be driven through ‘Public–Private Partnership’ (PPP), or can it be expanded to

multi-stakeholder projects

• Can CSR training be considered a part of CSR spend?

• Some suggested additions to the Schedule VII

• PwD & Inclusion

• Monitoring & evaluation

• Software donation

• NDLM

Where to spend?

• Internal programs e.g. Accessibility tools development

• Consider volunteering by the staff of companies as a CSR

activity (attaching the money value to volunteering)?

• What should be the maximum percentage of CSR funds

earmarked for Government?

• What happens to the unspent funds – rollover of unspent

funds, anything else?

• Corporate Foundations – should all the activities of

Foundations be considered as CSR for Parent Corporate.

How To Spend?

• Traditional CSR:

• National Digital Literacy Mission (NDLM)

• My Kartavya

• Big Bridge

• NASSCOM Knowledge Network (NKN)

• Urban NKN Centers

• Responsible Business

• Impact Sourcing

• Skills For Employment

Potential Collaborative Projects

• Within financial report?

• Supplemented with narrative format?

• Reporting must include social impact as well as spending

• Integration is the most recent trend on sustainability

reporting; financials to be integrated with Annual

Financial Returns

• National Voluntary Guidelines (NVGs)

• Convergence with global standards

• Global Compact – Communication on Progress (COP)

• GRI Principles

How to Report?

• Recommend Guideline Principles

• Detailed comments on Rules

• Draft Reporting format

Immediate Next Steps

Guiding Principles could include:

• Simple rules , less prescriptive approach , having greater impact, allowing flexibility to business to choose the relevant activities.

• Quantification of the 2% PAT - income from foreign operations must be excluded, same as double taxation between countries ma

• Filter for qualified CSR activities - social and environmental impact

• Inclusion NVGs and the Shared Value principle to include both internal and external initiatives. Will lead to greater inclusive growth and GDP impact.

• Collaborative efforts should be emphasized to leverage efforts and avoid duplication.

Draft Rule Changes

• Reporting on the 2% spend • should be part of existing reporting and standards

• as well integrated with Annual Reports such as SEBI

• focus should be on the impact (both qualitative and quantitative) rather than the financial spend.

• Specific differentiated activities between services and manufacturing need to be considered.

• Schedule VII : Instead of Inclusion, exclusions e.g. Employee Welfare programs in general

Draft Rule Changes continued…

Thank you!

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