THE IMPACT OF COVID-19 ON COPORATE SOCIAL BEHAVIOUR- How Companies and Governments responded to the pandemic in terms of social responsibility PART-II
IN INDIA
?In 2009, MCA issued the 'Voluntary Guidelines on Corporate Social Responsibility’ as a step towards mainstreaming the concept of business responsibility. In June 2011, the United Nations Human Rights Council adopted the United Nations Guiding Principles on Business and Human Rights which India endorsed. In July 2011, MCA issued the 'National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business, 2011 and contained a Business Responsibility Reporting framework.
In 2012, the SEBI mandated the top 100 listed companies by market capitalisation to file Business Responsibility Reports th1970rough the Listing Agreement, in an attempt to enable businesses to engage more meaningfully with their stakeholders, and encourage them to go beyond regulatory financial compliance and report on their social and environmental impacts. The requirement for filing BRRs was extended to the top 500 listed companies by market capitalisation from the financial year 2015- 16.
In March 2019, the updated NVGs were released as the ‘National Guidelines for Responsible Business Conduct’ (NGRBCs). In December 2019, SEBI extended the BRR requirement to the top 1000 listed companies by market capitalisation, from the financial year 2019-20.
CSR Law in India
Section 135 of Companies (CSR) Rules 2014 and Schedule VII of Companies Act 2013 mandates and regulates for companies to have a CSR committee, and spend at least 2% of the average net profits earned during three immediate preceding financial years to CSR activities. This is to be ensured by the CSR committee.
Section 13513 applies on any Indian or foreign company having its branch office or project office in India; or with a holding or subsidiary, which fulfils the following criteria in the immediate preceding financial year-
·??????Net worth of 500 crore or more
·??????Turnover of 1,000 crore or more
·??????Net profit 5 crore or more
?Every such company is to constitute a CSR Committee with at least 3 directors, of which at least one is to be an independent director. The Corporate Social Responsibility Committee shall formulate and recommend CSR policies to the Board, the expenditure to be incurred on such activities, and review the policies from time to time. On failure to do so, the board shall make a report as to the reasons for such default.
According to rule 5 of the CSR rules, a company which is not required to appoint an independent director may have its CSR Committee without such director. A private company having only two directors on its Board shall constitute its CSR Committee with two such directors. The CSR Committee of a Foreign Company shall comprise of at least two persons, of which one person shall be as specified under clause (d) of sub-section (1) of section 380 of the Act; and another person shall be nominated by the foreign company.
Rule 4 highlights that the CSR activity is to be undertaken as a project or program by the company, and must exclude any activity taken up in the ordinary course of business, and any operation undertaken only to the benefit of the employees and their families. Only programs undertaken in India will be included, and any contribution to a political party will be excluded.
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If a company fails to spend the unspent amount accumulated in its unspent CSR account within three years, then the unspent amount is to be transferred to the National Unspent Corporate Social Responsibility Fund.
In a report drawn by CRISIL of a list of top 100 companies by revenue and CSR spend each in fiscal 2019, and to verify if they would respond similarly during the pandemic. About 70 out of 200 appeared in both lists. 113 out of 130 companies spent on pandemic-related mitigation. Of this, about 84 companies Rs 7,537 crore during March-May 2020, which can be classified as CSR expenditure. The remaining 29 either contributed to other funds (Rs 373 crore), and/or facilitated voluntary employee donations (Rs 84 crore) that cannot be classified as CSR spend, or donated solely in kind (food and masks), for which assigning a monetary value was difficult.
Private sector and foreign companies, and public sector undertakings (PSUs) have contributed proportionately to their share of the sample.
OTHER COUNTRIES’ POLICIES
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Denmark
In 2008 the Danish Parliament with overwhelming majority passed a bill amending the Danish Financial Statements Act making it mandatory for the approximately 1100 largest companies in Denmark to report on any CSR policies that they may have. The annual reports of the companies must include the content of their CSR policies, including any standards, guidelines and principles for CSR used by the company; their plans and procedures to implement the CSR policies; and the company’s evaluation of what has been achieved by and future expectations of CSR initiatives. However, having a CSR policy remains a voluntary decision by the companies; and the absence of any such policy, it must be explicitly declared in the management review.
China
China is infamous for sweatshops and environmental pollution problems; and often scandalized for substandard products and the recurrently confirmed unscrupulous about making money at the expense of human lives. Chinese products being of low price and quality throw light on the irresponsible corporate processes, which may have prompted the development of efficient CSR. Since 2004 CSR has become a prominent issue in Chinese academic and policy forums. The Article 5 of the 2006 Chinese Company Law requires companies to "undertake social responsibility" in the course of business. Another important state-led measure is the promulgation of the CSR principles for the Chinese central-government-controlled companies to follow.
The Group Of Friends Of Paragraph 47 (Gof47)
?It is a government-led initiative that was formed by Brazil, Denmark, France and South Africa in?June 2012 during the United Nations Conference on Sustainable Development to acknowledge the importance of corporate sustainability reporting in Paragraph 47 of the outcome document ‘The Future We Want’. The Group which now also counts Argentina, Chile, Colombia, Norway and Switzerland among its members represents a range of developing and developed countries, bringing together governments with a variety of different experiences and approaches to promoting sustainability reporting, and creating rich environment in which to exchange information and best practice. Its goals are to exchange the experience on sustainability reporting policies and initiatives to enhance their effectiveness, leading to more widespread and higher quality sustainability reporting; and to increase the number of governments with policies that promote CSR reporting.
RESPONSE TO COVID-19
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INDIA’S RESPONSE
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The government took these unprecedented times as an opportunity to promote and motivate this practice vide General Circular No. 10/2020 dated 23rd March, 2020 has clarified that spending of CSR funds for COVID-19 shall be considered as an eligible CSR activity. It further clarified that contributing to PM Cares Fund can also be accounted as CSR. By way of General Circular No. 15/2020 issued on 10th April 2020 by the MCA it was announced contribution to PM Cares Fund, State Disaster Management Authority and spending CSR funds for COVID-19 related activities relating to promotion of health care including preventive health care and sanitation, and disaster management would also be eligible for CSR. Ex-gratia payment made to temporary/casual workers/ daily wage workers over and above the disbursement of wages is also included in acceptable CSR practices.
...Continued in Part-III
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