Bhaskar Chatterjee, Director General & CEO of Indian Institute of Corporate Affairs, an autonomous capacity-building body and think-tank under Ministry of Corporate Affairs, has been closely associated with framing the current set of guidelines for making CSR spend mandatory for corporates in the Companies Act, 2013.
Earlier in 2010, he was instrumental in bringing PSUs under the ambit of mandatory CSR spend. In an interaction with Sahil Makkar and Sudipto Dey, he tries to allay fears among corporates over the issue of CSR spending. Edited Excerpts:
Corporates seem to be apprehensive about the new laws on CSR spend. A general feeling is there are ambiguities in the current draft rules.
Their views and perceptions were taken into account even as the Companies Bill was being drafted. This is the reason why so many of the major issues have been comprehensively addressed.
Let me tell the corporates, our Act is very enabling. We want to encourage what they are anyway doing. We want to give them a national platform where they can showcase their activities. Many corporates are doing great work, and this should enable them to show in the public domain what they are doing.
But the clause of penalizing them (if they fail to satisfactorily report CSR spend) with fines and jail term can act as a deterrent.
That is not particular to CSR spend. That Section is applicable for the entire Act. Say, for instance, if a company fails to submit its financials in time, there are penalties. That will also apply to CSR. CSR is being added to that list to which penalties are anyway applicable. So how do you think will corporates align to the new CSR rules?
Many already have systems and processes (in place) and are extensively monitoring their CSR programmes. So, they would actually find it easy to comply with the law. Those not doing any CSR but now falling within the parameters of the new law will have to set up systems and processes in order to comply. The IICA would be happy to play a facilitating role in both cases.
Could you explain the plan for indexing of the companies based on their CSR spend?
This is proposed to be a grading of companies on the BSE, based on well-defined CSR parameters. A broad overview of what each such company is doing in CSR would be taken. Thereafter, companies would be placed at different levels of performance.
The objective is to inspire, engage, motivate and support business in continually improving its positive impact on society while complying with Section 135 of Companies Act 2013. This would also generate awareness about the new CSR agenda in the country
When will this system be in place?
This can only happen when results of Financial Year 2014-15 are available. We are immediately setting up a small committee which will start working on the parameters of how the index will come up.
Is there a similar plan for non-profit organizations?
For NGOs, it is not an index. What is being conceived at this stage - although far from being implemented - is an empanelment process that seeks to identify credible NGOs and Social Enterprises with a proven track record of performance in the social development sector.
Such an empanelment process would help companies locate implementation agencies of substance that could be relied upon to deliver at the grassroots. Companies would, of course, be free to use any implementation agency of their choice. However, the process of empanelment would only be a service available to them, which they could use if they wanted.
How would you go about the empanelment?
There is a process in place. The Tata Institute of Social Sciences has developed a model, and the public sector is already following it. The system takes into account programmatic and financial performance over the last three financial years.
There are checks to see that right procedures have been followed. We could make use of this system and further refine it if necessary.
Will the new CSR rules apply to foreign companies which work as a joint venture in India?
This will apply only to the companies registered in India, with the Registrar of Companies.
Could you give us a flavour of the key suggestions that have come from the Corporates and various other stakeholders in regard to changes in the CSR rules? Which of them are likely to be accepted?
The Ministry’s web portal created for this purpose has received thousands of responses. The last date for accepting these was 10 October 2013. We are now diligently studying the suggestions and compiling them.
Earlier in 2010, he was instrumental in bringing PSUs under the ambit of mandatory CSR spend. In an interaction with Sahil Makkar and Sudipto Dey, he tries to allay fears among corporates over the issue of CSR spending. Edited Excerpts:
Corporates seem to be apprehensive about the new laws on CSR spend. A general feeling is there are ambiguities in the current draft rules.
More From This Section
To me, there are no ambiguities at all. Section 135 of Companies Act 2013 has been drafted after many consultations, which the Ministry has had with associations, chambers and groups of business and industry over many months.
Their views and perceptions were taken into account even as the Companies Bill was being drafted. This is the reason why so many of the major issues have been comprehensively addressed.
Let me tell the corporates, our Act is very enabling. We want to encourage what they are anyway doing. We want to give them a national platform where they can showcase their activities. Many corporates are doing great work, and this should enable them to show in the public domain what they are doing.
But the clause of penalizing them (if they fail to satisfactorily report CSR spend) with fines and jail term can act as a deterrent.
That is not particular to CSR spend. That Section is applicable for the entire Act. Say, for instance, if a company fails to submit its financials in time, there are penalties. That will also apply to CSR. CSR is being added to that list to which penalties are anyway applicable. So how do you think will corporates align to the new CSR rules?
Many already have systems and processes (in place) and are extensively monitoring their CSR programmes. So, they would actually find it easy to comply with the law. Those not doing any CSR but now falling within the parameters of the new law will have to set up systems and processes in order to comply. The IICA would be happy to play a facilitating role in both cases.
Could you explain the plan for indexing of the companies based on their CSR spend?
This is proposed to be a grading of companies on the BSE, based on well-defined CSR parameters. A broad overview of what each such company is doing in CSR would be taken. Thereafter, companies would be placed at different levels of performance.
The objective is to inspire, engage, motivate and support business in continually improving its positive impact on society while complying with Section 135 of Companies Act 2013. This would also generate awareness about the new CSR agenda in the country
When will this system be in place?
This can only happen when results of Financial Year 2014-15 are available. We are immediately setting up a small committee which will start working on the parameters of how the index will come up.
Is there a similar plan for non-profit organizations?
For NGOs, it is not an index. What is being conceived at this stage - although far from being implemented - is an empanelment process that seeks to identify credible NGOs and Social Enterprises with a proven track record of performance in the social development sector.
Such an empanelment process would help companies locate implementation agencies of substance that could be relied upon to deliver at the grassroots. Companies would, of course, be free to use any implementation agency of their choice. However, the process of empanelment would only be a service available to them, which they could use if they wanted.
How would you go about the empanelment?
There is a process in place. The Tata Institute of Social Sciences has developed a model, and the public sector is already following it. The system takes into account programmatic and financial performance over the last three financial years.
There are checks to see that right procedures have been followed. We could make use of this system and further refine it if necessary.
Will the new CSR rules apply to foreign companies which work as a joint venture in India?
This will apply only to the companies registered in India, with the Registrar of Companies.
Could you give us a flavour of the key suggestions that have come from the Corporates and various other stakeholders in regard to changes in the CSR rules? Which of them are likely to be accepted?
The Ministry’s web portal created for this purpose has received thousands of responses. The last date for accepting these was 10 October 2013. We are now diligently studying the suggestions and compiling them.