Fiinovation webinar on CSR the new understanding and how to promote affirmative action

2. Webinar Objectives • Introduction to The Companies Act 2013 • Understanding the role & scope of CSR and Affirmative Action • Strategizing CSR for improving standard of living of the marginalised • Highlighting efforts of Affirmative Action by India Inc • Scrutinising company's performance & beyond (brand building, consumer trust, increased outreach)

3. Mr. SoumitroChakraborty CEO, Fiinovation WEBINAR MENTOR

4. About Fiinovation • A CSR based research consultancy working in areas of education, livelihood, environment and health since last six years • Assists businesses to support requirements of communities by designing and implementation of sustainable projects • Ensuring quality in functioning of organizational value chains

5. Fiinovation? • Asia’s first proposal research laboratory • Carries out primary and secondary research before initiating an implementable project model • Has sectoral experts carry out Implementation and management of innovative-sustainable project models • Uses modern analysis tools and techniques to monitor and evaluate the performance and sustainability of the projects implemented

6. Fiinovation in CSR Ecosystem

7. Exposure to CSR

8. Corporate Social Responsibility Global Perspective • Coined in 1953 with the publication of Bowen's 'Social Responsibility of Businessmen', which posed the question ‘What responsibilities to society can business people be reasonably expected to assume’. • In 1960s, ambit expanded, suggesting beyond legal obligations companies had certain responsibilities to society • In 1990s companies started integrating social and environmental concerns in their business operations and interactions with their stakeholders Definition: • A strategic business management concept to obtain a balance of economic, environmental and social imperatives Related Concepts: Triple Bottom Line, Strategic Philanthropy, Shared Value, Corporate Sustainability, Business Responsibility

9. Contd… UN EU OCED • How Corporations make 100% of their profits & not only how they spend it • Good business for a good society today and tomorrow • A matter of individual and institutional ethics • Not a repair center for capitalism • Not just about compliance, but going beyond it Corporate responsibility involves the search for an effective "fit" between businesses and the societies in which they operate. A management concept whereby companies integrate social & environmental concerns in their business operations and interactions with their stakeholders  The responsibility of enterprises for their impacts on society • CSR is…

10. Corporate Social Responsibility Indian Perspective • Pre-Independence era restricted to charitable and religious philanthropy by businessmen & rich farmers • Mahatma Gandhi and other socio-political leaders urged rich to pool resources for nation’s upliftment, giving rise to trusteeship movement. • Post Independence, PSUs & Govt. led initiatives played prime role in social development sector • Post 1991, the local players were motivated by the global standards of CSR due to entry of global players in the Indian market

11. Synonyms of CSR Corporate Citizenship Corporate Responsibility Corporate Social Responsibility The extent to which businesses are socially responsible for meeting legal, ethical and economic responsibilities placed on them by shareholders.  Prevalence - Europe It is the duty and  Rationalconduct  expected ofa  corporation; accountability of a  corporation to a  code of ethics and to established laws. Prevalence – North America A company’s sense of responsibility towards the community and environment (both ecological and social) in which it operates. Prevalence – Asia

12. Challenges to which CSR is a solution • Increase in inequality between the private sector and the communities resulting in lower human development • Social unrest & humanitarian crisis • Low consumer capacity • Environmental issues, public health issues etc. “Businesses cannot be successful when the society around them fails.”

13. CSR THROUGH THE COMPANIES ACT, 2013

14. Essence of Section 135 - The Companies Act, 2013 • Not charity, not philanthropy, not giving • If not rupee measurable, it’s not CSR • Activities that can be considered for CSR expenditure are listed under Schedule VII, anything other then them will not be considered • If you are doing CSR, say it out loud & in a transparent manner by filing a return in the prescribed format • What you spend should add up to 2% of your PBT • Govt. building an enabling atmosphere, a culture of doing for the society

15. History Behind The Companies Bill • India is the first country to quantify the mandate • Argentina, Brazil, Canada, Austria, Belgium, France, Denmark, South Africa and China have mandatory reporting • Bill first introduced in 2008, but was withdrawn due to dissolution of LokSabha • Again introduced in Parliament in 2009 & sent to the Standing Committee, which presented its report in August, 2010 • The Companies Bill 2011 was again tabled in Parliament by the Corporate Affairs Minister in 2011 • The Act replaced The Companies Act, 1956 (in a partial manner) after receiving the assent of the President of India in 2013 • Came into force on 12th September, 2013 • On 27th February, 2014, the MCA stated that Section 135 of the Act which deals with CSR will come into effect from 1st April, 2014

16. The Companies Act, 2013 – Section 135 Eligibility: A company with: • Annual Turnover of Rs 1,000 crore or more, • or net worth of Rs 500 crore or more, • or net profit of Rs 5 crore or more Calculation: • Company must spend 2% of its average net profit in the preceding three years on CSR • Net Profit • (Section 198, Subsection 5): • Net profit to be calculated as profit before tax as per the books of accounts and shall not include profits arising from branches outside India

17. Implementation Process - CSR • Board members form a CSR Committee • CSR Committee drafts CSR Policy • Identification of CSR activities and target beneficiaries • CSR – CSO Partnership • Implementation of CSR initiatives • Reporting

18. Schedule VII of The Companies Act, 2013 MINISTRY OF CORPORATE AFFAIRS NOTIFICATION New Delhi, the 27th February, 2014 G.S.R, 130(E).-In exercise of the powers conferred by sub-section (l) of section 467 of the Companies Act, 20l3 (18 of 2013), the Central Government hereby makes the following amendments to Schedule Vll of the said Act, namely :- (l) In Schedule VIl, for items (i) to (x) and the entries relating thereto, the following items and entries shall be substituted, namely :- “(i) eradicating hunger, poverty and malnutrition, promoting preventive health care and sanitation and making available safe drinking water; (ii) promoting education, including special education and employment enhancing vocation skills especially among children, women, elderly, and the differently abled and livelihood enhancement projects; (iii) promoting gender equality, empowering women, setting up homes and hostels for women and orphans; setting up old age homes, day care centres and such other facilities for senior citizens and measures for reducing inequalities faced by socially and economically backward groups;

19. Contd… (iv) ensuring environmental sustainability, ecological balance, protection of flora and fauna, animal welfare, agroforestry, conservation of natural resources and maintaining quality of soil, air and water; (v) protection of national heritage, alt and culture including restoration of buildings and sites of historical importance and works of art; setting up public libraries; promotion and development of traditional arts and handicrafts; (vi) measures for the benefit of armed forces veterans, war widows and their dependents; (vii) training to promote rural sports, nationally recognised sports, paralympic sports and Olympic sports; (viii) contribution to the P me Minister's National Relief Fund or any other fund set up by the Central Government for socio-economic development and relief and welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women; (ix) contributions or funds provided to technology incubators located within academic institutions which are approved by the Central Government; (x) rural development projects."

20. Contd… • MINISTRY OF CORPORATE AFFAIRS • Notification • New Delhi, the 6th August, 2014 • G.S.R. 568(E).-In exercise of the powers conferred by sub-section (1) of section 467 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following further amendments in Schedule VII of the said Act, namely:- • (1) In Schedule VII, after item (x), the following item and entry shall be inserted, namely:- • "(xi) slum area development. • Explanation.- For the purpose of this item, the term 'slum area' shall mean any area declared as such by the Central Government or any State Government or any competent authority under any law for the time being in force." • (2) This notification shall come into force on the date of its publication in the Official Gazette. • [F.No.1/18/2013-CL-V] • AMARDEEP S. BHATIA. Jt. Secy.

21. Contd… • MINISTRY OF CORPORATE AFFAIRS • Notification • New Delhi, the 24th October, 2014 • G.S.R. 741(E).- In exercise of the powers conferred by sub-section (1) of section 467 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following further amendments to Schedule VII of the said Act, namely:- • (i) In item (i). after the words "and sanitation". the words "including contribution to the Swach Bharat Kosh set-up by the Central Government for the promotion of sanitation" shall be inserted; • (ii) In item (iv). after the words "and water". the words "including contribution to the Clean Ganga Fund set-up by the Central Government for the promotion of sanitation" shall be inserted. • 2. This notification shall come into force on the date of its publication in the Official Gazette. • [F.No. 1/18/2013-CL-V] • AMARDEEP SINGH BHATIA. Jt. Secy.

22. ESTABLISHING LINKAGE BETWEEN CSR & AA

23. Understanding Affirmative Action - Globally Known as: Employment Equity in Canada Affirmative Action in USA Positive Action in UK • Requires employers to engage in proactive employment practices to increase the representation of four designated groups: women, people with disabilities, Aboriginal peoples, and visible minorities • focus on issues such as education and employment, specifically granting special consideration to racial minorities and women who have been historically excluded groups • promotion of people based on belonging to non majority identity groups in the workplace, educational institutions and positions in society

24. Understanding Affirmative Action - Globally An action favouring those who tend to suffer from discrimination; positive discrimination • AA reverses longstanding discriminatory tendencies in the society • For people of a certain caste, gender, sexual orientation, race, or ethnicbackground • AA provides supposedly fairer conditions and corrects past injustices

25. Different Approaches to AA Affirmative Action Affirmative action Through CSR • Recruiting employees or providing opportunities in the recruitment process for SC/ST communities • Procuring from SC/ST Vendors • Offering solutions to address the needs and challenges of the SC/ST communities • Implementing CSR Activities as per Schedule VII of The Companies Act, 2013 • Targeting SC/ST communities

26. Affirmative Action in India • Reservations specify that a proportion of a minority group must be selected for education or job or other benefits • Regardless of them being under-qualified • Reverse discrimination • Justification for reverse discrimination is somewhat ambiguous • Based on retributive justice (past injustices must be paid for) • Constitution makers have proclaimed by incorporating various provisions in the Constitution of India indicating that “Scheduled Caste and Scheduled Tribe” are by and large backward in comparison with other communities in the country

27. Case Study – Swabhimaan • Should Have Benefitted From: • Self-Employment Scheme of Liberation and Rehabilitation for Scavengers • IndiraAwasYojna • MGNREGA, Swaranjayanti Gram SwarozgarYojana • Atal Pension Yojana • Jan DhanYojna • PradhanMantriJeevanJyotiBimaYojana • RashtriyaSwasthyaBimaYojana • Indira Gandhi MatritvaSahyogYojana • Integrated Child Development Services • And Swavalamban among others • Background: • Belongs to SC Community • Occupation: Manual Scavenger • Education: Illiterate • House: Not Concrete • Children: 2 She couldn’t benefit because?

28. Challenges of SC/STs • Lack of awareness of welfare schemes • Discrimination continues to occur in many different open, covert and subtle ways today despite the Constitution abolishing it under Article 17 • Increased atrocities against SCs & STs compared to others • Lack of political will to convert provisions into fundamental rights • Lack of opportunities for education and employment • Low Representation in Public Services and the Higher Judiciary • Increase in backlog vacancies due to lack of proper mechanism for overall human development

29. Contd… • Small land holding, landless labourers, low productivity in agriculture, lack of alternative livelihood opportunities • High incidence of migration • Lack of vocational skills and adequate infrastructure • Financial constraints for entrepreneurship • Complicated nature of Financial Institutions • Low impact of Affirmative Action by private and public sector undertakings

30. Population Classification

31. Concentration - SCs

32. Concentration - SCs

33. Poverty Ratio for Social Groups • In rural areas, Scheduled Tribes exhibit the highest level of poverty (47.4%), followed by Scheduled Castes (SCs), (42.3%), and Other Backward Castes (OBC), (31.9%), against 33.8% for all classes. • In urban areas, SCs have HCR of 34.1% followed by STs (30.4%) and OBC (24.3%) against 20.9% for all classes. • In rural Bihar and Chhattisgarh, nearly two-third of SCs and STs are poor, whereas in states such as Manipur, Orissa and Uttar Pradesh the poverty ratio for these groups is more than half. Source: Press Note on Poverty Estimates, 2009-10 - GOI, Planning Commission, March 2012

34. Poverty Percentage among Social Groups Rural Urban --- Data not available in the official estimates for 1993-94 Source: Planning Commission

35. Total SC & ST Population – Top 5 & Bottom 5 (Census, 2011) Total SC Population Total ST Population Top 5 States/UTs Bottom 5 States/UTs

36. Total SC & ST Population – Top 5 & Bottom 5 (Census, 2011) (Major States: States having Population 10 million and above) Total SC Population Total ST Population Top 5 States/UTs Bottom 5 States/UTs

37. Affirmative Action - Indian Perspective

38. Affirmative Action - GOI Category as perGoI Reservation Percentage as per GOI Source: Ministry of Personnel & Public Grievances & Pension, GOI It was this consciousness and awareness of the Constitution-makers about the neglected position of certain section of Indian Society which inspired them to make provisions of reservation in favour of Backward Classes, Scheduled Caste and Schedule Tribe citizens

39. Govt. Schemes for SCs/STs • Self-Employment Scheme of Liberation and Rehabilitation for Scavengers • Scholarship/stipend to aspiring SC/ST Pilot Trainees • Special Central Assistance for Scheduled Castes Component Plan • Pre and Post Matric Scholarship Scheme • Machinery for implementation of Protection for Civil Rights Act, 1955 and Protection for Civil Right Act, 1989 • Girls Hostels for SCs, Boys Hostels for SCs • Assistance to Voluntary Organisations for welfare of Scheduled Castes • National Scheduled Castes Finance and Development Corporation - Credit Based/Self-Employment Loan Schemes , Non-Credit Based/Skill & Entrepreneurial Development Training Programmes • National Vector Borne Disease Control Programme

40. Contd… • National Programme for Control of Blindness • Vocational Training in Tribal Areas • Investment/Price support to TRIFED/ Market Development of Tribal Products/ Produce • Support to National/State Scheduled Tribes Finance & Development Corporations • Swaranjayanti Gram SwarozgarYojana • IndiraAwasYojana

41. Challenges • Lack of awareness • Lack of accessibility to schemes • Lack of monitoring & evaluation • Decentralization of policies, schemes • Addressing concerns of financial institutions for implementation of the provisions • Lack of social capital

42. Affirmative Action – Public Sector Percentage of Reservation in Vacancies (A) Direct Recruitment

43. Contd… Percentage of Reservation in Vacancies (B) Promotion

44. Contd… • A comprehensive Presidential Directive incorporating all important instructions on reservation for SCs and STs was issued by DPE to all the administrative Ministries/Departments concerned on 25th April, 1991 for formal issuance of the same to CPSEs. • Reservation for OBCs was made effective w.e.f. 8.9.1993.

45. Affirmative Action - Private Sector A policy or action by Indian companies to help in the national endeavour for ensuring equal opportunity to members of the Scheduled Castes, Scheduled Tribes and other marginalized communities • In 2006, PM Manmohan Singh appealed to India Inc to incorporate Affirmative Action policies to diversify workforce • Industry bodies responded to PM’s call & outlined basic criteria for Affirmative Action • DPE guidelines on CSR and Human Resources for CPSEs were released in 2010 • NVGs were established by Ministry of Corporate Affairs in 2011 which was later adopted by SEBI

46. Contd… • According to Partners in Change Survey 2011 • Only 9.5% companies have Affirmative Action policy • 67% doesn’t have a formalized policy • 23.8% did not have a policy • Tata Conglomerate incorporated Affirmative Action focusing on four areas of development: employment, employability, entrepreneurship and education • Believed to be highest CSR spenders (Rs. 1000 Crores) for the year 2013-2014 • CII initiatives for SC/ST includes: • Trained 32922 candidates from SC/ST community • Provided scholarships • Established skill development centres • Contributed to improvement of Government Primary Schools in 104 districts • Provided employment (24% eastern region, 16% western region, 22% northern region, 16.2% southern region) • Offered training in entrepreneurship development programmes

47. Contd… • The Infosys-STP programme, CII-Finishing School & LABS training programme • Approximately 800 SC/ST candidates have been imparted training in English, communications, basic IT, hospitality, customer relations & sales, bed side patient assistance etc. • CII and Tata Communications, have partnered with Ahmedabad’s Entrepreneurship Development Institute to train 270 SC/ST youth in the fundamentals of entrepreneurship; • HUL has a written policy statement on Affirmative Action in the workplace • Also focus on upskilling and continual training of employees apart from partnering with educational institutions to support and aid students from socially disadvantaged sections of society • ITC engagees in affirmative action interventions such as skill building and vocational training, to enhance employability and generate livelihoods for persons from disadvantaged sections of society

48. Challenges of Private Sector to AA • Lack of formalized policies • Lack of participation • Risk of unionization • Lack of will to conduct census within the organization • No incentivisation for vendors • No entrepreneurship support • Limited progress on ‘What is Said’ and ‘What is Incentivised’

49. Affirmative Action & CSR – The Backdrop Challenges at present: • Prevalence of economic inequality due to lack of inclusive development • Rising disparity between the upper strata and the economically weaker sections of the society • Constant friction between the socio-economically empowered and left out sections of the society • Absolute top down approach Solutions: • Affirm Action to address challenges of marginalized communities • Rational, feasible, justifiable action/initiatives • Incorporating AA within the CSR policy itself • CSR – Implementing affirm actions leading to improved standard of living

50. Linking Affirmative Action with CSR • Generating awareness among the members of historically marginalized communities in a geographical area. • Providing educational facilities for children from these communities. Rewarding Scholarships to meritorious children. • Providing assistance on health and sanitation issues to historically marginalized communities. • Enhancing entrepreneurial and employability of eligible youth from the SC/ST communities. • Employing trained workforce from SCs/STs communities at various levels to carry out operations in the organization. For example - Deciding on a sourcing a minimal specified percentage of material from a SC/ST vendor without compromising on quality of the product.