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Karmayog Corporate Social Responsibility Ratings 2007 of the largest 500 Indian Companies A N N O U N C I N G.

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Presentation on theme: "Karmayog Corporate Social Responsibility Ratings 2007 of the largest 500 Indian Companies A N N O U N C I N G."— Presentation transcript:

1 Karmayog Corporate Social Responsibility Ratings 2007 of the largest 500 Indian Companies A N N O U N C I N G

2 Summary of Presentation 1Easy everyday examples of social responsibility 2What is Corporate Social Responsibility? 3Results of the Karmayog CSR Rating 4How we assigned the CSR Rating 5Inferences from the CSR rating exercise 6Our Recommendations for companies 7Importance of the CSR Ratings for different stakeholders

3 Easy everyday examples of Social Responsibility

4 Easy everyday examples of social responsibility… No.Type of OrganisationExamples of socially responsible activities 1Movie Theatres / Multiplexes / Malls -Screening of social message films -Special shows for underprivileged groups -Offering table space for NGOs -Adopting a nearby garden / open space and maintaining it 2Petrol Pumps-Promoting accident awareness, pedestrian safety -Checking and offering fuel efficiency tips 3Shops e.g.: Chemists -Awareness posters of symptoms of different diseases -Collecting & donating old medicines to charitable hospitals -Offering discounted medicines for poor patients 4Private Hospitals-Creating a Patients’ Information Centre & Library -Encouraging citizens to help accident victims by taking care of legal aspects of accidents / emergency cases -Displaying “Patients and Doctors Bill of Rights & Responsibilities”

5 Easy everyday examples of social responsibility No.Type of OrganisationExamples of socially responsible activities 5Private Schools & Colleges-Getting Alumni to institute scholarships & prizes -Offering space for training / classes / sports, etc. -Adopting a local garden -Encourage volunteering for topical causes 6Housing Societies-Suggesting solutions for local problems to govt & media -Maintaining nearby public spaces, including footpaths -Offering space in society (garage, etc.) for use for training / classes. etc. and as a material collection centre 7Hotels and Restaurants-Donating excess food responsibly -Composting food waste 8Media (TV, print, radio)-Featuring profiles and achievements of NGOs / citizens -Spreading social service messages -Dedicating sections on social & developmental issues

6 So what is Corporate Social Responsibility?

7 What is Corporate Social Responsibility? Karmayog, a networking organization for social & civic issues, undertook a study of the CSR activities of the largest publicly listed 500 Indian companies so as to understand: –what is CSR (as there are many definitions) –what companies are doing as CSR –how CSR activities could be linked to the work of government, NGOs and others in the social and developmental sector This is the first time that a CSR Rating for companies has been undertaken in India or anywhere in the world.

8 What is Corporate Social Responsibility? The Karmayog CSR study led to some very clear & simple insights, that: “Every company harms the environment!” (Just as an individual does) Corporate Social Responsibility is thus only about two aspects: 1) Reducing the Negative Effects: Steps taken by a company to neutralise, minimise or offset the harmful effects caused by its processes and product-usage 2) Increasing the Positive Contributions: Further steps taken using its resources, core competence, skills, location and funds for the benefit of people and the environment

9 Results of the Karmayog CSR Rating 2007

10 Karmayog CSR Rating No. of Companies% of Companies Level 5 (highest) 00% 4 41% 3408% 2 13828% 1 8918% 0 (lowest) 229 (no CSR)46% Total 500100% Results of the Karmayog CSR Rating of the largest 500 Indian companies

11 Basis of assignment of the CSR ratings… Level 5 Level 5 (highest) No Company has been assigned a Level 5 rating Level 4 Only 4 companies out of 500 in this study have been assigned a level 4 rating since they do the following Founding principles Philosophy of improving society through business Internalised CSRCSR is central to the business process and is planned and taken forward, rather than done alongside or in reverse steps Using core competence CSR activities are linked to the company’s unique resources CSR recommendations The company has adopted all or most of the 11 recommendations on CSR made in the Karmayog CSR study, Setting standardsThe company raises the standards in its sector Commitment to improvement The company is transparent about its business processes, monitors & reports these, including setting improvement targets Innovative CSR Strategies The company uses innovative ideas and strategy for its CSR activities similar to its business practices

12 Basis of assignment of the CSR ratings… Level 3 40 companies out of 500 in this study have been assigned a Level 3 rating since they do the following: CSR philosophy defined The company has a defined CSR philosophy and focused areas of work, that may or may not be related to their business processes. CSR alongside business CSR is in the process of being internalised into the operations of the company, and is at present being done alongside other operations CSR for local community CSR activities are connected with physical areas of operation of the company, but may not be using the core competence Measuring CSRCSR activities are listed and documented, though there may not be actual figures of amount spent by the company on CSR CSR recommendations The company has adopted some of the recommendations regarding CSR made in the Karmayog CSR study Upward CSR learning curve It is expected that many Level 3 companies will become Level 4 companies in due course.

13 Basis of assignment of the CSR ratings Level 2 138 companies out of 500 in this study have been assigned a Level 2 rating Business Process and product life cycle Degree of environmental damage caused during sourcing, manufacturing or delivery of the product or service is considered Companies engaged in the following extensively damage the environment: chemicals (fertilizers, paints, plastics), mining, aviation, thermal power generation, cement manufacture Hence their CSR rating is limited to 2 even if they are doing extensive work under CSR. Level 1 89 companies out of 500 in this study have been assigned a Level 1 rating Environmental impact Every Company must be working towards reducing environmental degradation, to get a Karmayog CSR rating of even Level 1

14 Basis of assignment of the CSR ratings Other criteria considered for assignment of the CSR rating CSR AmountAmount spent by a company on CSR relative to its sales Expanding markets to rural areas Considered as expansion of the business and not part of CSR Employee volunteerism Participation of employees in un-related volunteering is not considered to be part of the company’s CSR activities. Level 0 229 companies out of 500 in this study have been assigned a Level 0 rating Companies doing no CSR Companies producing cigarettes/tobacco products & liquor

15 Inferences from the Karmayog CSR rating exercise

16 Inferences from the Karmayog CSR rating exercise… 1) No CSRThe results of the CSR Rating exercise are extremely disappointing since almost half of the companies are not doing any CSR 2) Token GesturesMany are only making token gestures towards CSR in tangential ways such as donations to charitable trusts, NGOs, sponsorship of events, etc. 3) CSR as PRMost use CSR as a marketing tool 4) CSR Commitment Most seem reluctant to do CSR activities unless mandated by law 5) CSR Effectiveness Most spread their CSR funds thinly across many activities, thus reducing the effectiveness and seriousness

17 Inferences from the Karmayog CSR rating exercise 6) CSR Philosophy Very few have a clearly defined CSR philosophy. Most implement CSR in an ad-hoc manner, unconnected with their business process. 7) CSR Transparency Very few companies openly state the damage caused by their processes and the steps being taken to reduce this damage 8) CSR ReportingOnly 6 companies publish a Corporate Sustainability Report to measure and assess the impact of their business on the environment 9) CSR SpendVirtually no company states how much it spends on CSR

18 Industry Sector–wise analysis of the CSR activities of the largest 500 Indian companies

19 CSR in 28 Industry Sectors An industry analysis of 28 sectors has also been done for the 500 companies (Number of companies in each sector is in brackets) Automobiles (13) Auto-components (22) Banks (42) Cement (16) Chemicals (27) Construction & allied activities (13) Fertilizers (12) Financial Services (11) FMCG & Consumer Durables (20) Gas Processing (5) Glass & Ceramic (4) Heavy Engineering (19) Hotels (4) Iron & Steel (25) Metals (12) Mining (7) Oil (17) Paper (6) Petroleum & Petrochemicals (5) Pharmaceuticals (32) Polymers & Plastic Products (14) Power (16) Shipping & Logistics (9) Software & ITES (17) Sugar (12) Textiles (28) Trading (11) Tyres (7)

20 Importance of the Sector-wise analysis Snapshot of sectorIt presents a picture of an entire industry, their common processes and products, their CSR initiatives, including examples of companies doing good CSR Potential CSR impact It presents figures of the sales of the entire sector, the net profit, and possible impact with the recommended CSR expenditure Sector-specific guidelines Uniform norms get created for processes and CSR activities for different sectors, & also a level playing field Best practices for the sector Benchmarking of best practices internal to & externally by the companies

21 Sector Example - The Paper Industry Karmayog CSR Rating of Largest 500 Indian Companies - Extract of Paper Sector No Company (alphabetical) Sales Rs. Cr. Net Profit Rs. Cr. Min CSR Rs. Cr * Karmayog CSR RatingCSR Activities 1 Andhra Pradesh Paper Mills450250.92/5 education, healthcare 2Ballarpur Industries18001503.62/5 community, environment 3J K Paper650151.32/5education, health 4 Rama Newsprint & Papers300200.61/5 community development 5 Tamil Nadu Newsprint & Papers700351.41/5environment 6West Coast Paper Mills350300.71/5environment Total 42502758.5 * Note : Karmayog recommends that Companies spend a minimum of 0.2 % of sales on CSR activities annually

22 Compulsory CSR:- our 4 Recommendations

23 Compulsory CSR:- Our 4 Recommendations… 1) Adoption of industry guidelines for its processes Two types of international guidelines already exist: Common guidelines on Environment, Health and Safety (EHS) applicable to most industries Industry-specific guidelines linked to the processes of that sector. e.g.sector-specific guidelines that include technical reference documents for different sectors such as forestry, manufacturing, power, etc. 2) Sustainability Reporting in the Annual Report Every company must include a Corporate Sustainability section in its Annual Report (just as Technology Upgradation Report is included) (and preferably publish a separate Corporate Sustainability Report (as per the Global Reporting Initiative framework) also) 3) Protection and restoration of the environment Every company must be engaged in CSR activities that minimise its OWN harm to the environment

24 Compulsory CSR:- Our 4 Recommendations 4) Minimum annual CSR expenditure Every company must spend a minimum of 0.2% of its sales on CSR activities (i.e. Rs. 20 Lakhs per Rs. 100 Crores) Table showing Rupee impact of 0.2% of sales for CSR expenditure Size by Sales CompanySales in Rs. (cr.) Net Profit Rs. (cr.) Minimum CSR Rs. (cr.) at 0.2% of Sales 1st Indian Oil Corporation140,0005,000280.0 100th Vijaya Bank 2,500 350 5.0 200th Nagarjuna Construction Co. 1,000 50 2.0 300th Rico Auto Industries Ltd. 600 35 1.2 400th L.G. Balakrishna & Bros. 400 15 0.8 500th Wartsila India Ltd 250 25 0.5

25 Voluntary CSR:- Our 7 Recommendations

26 Voluntary CSR:- Our 7 Recommendations… 1) Define CSR philosophy The CSR philosophy and objectives should be clearly stated (starting with areas that directly concern the company’s own business processes) 2) Focus CSRA few CSR activities should be identified and worked upon for a sustained period 3) Create Inclusive Employment Inclusive employment opportunities, such as for the physically-challenged, should be created 4) Spur Community Development Projects to help its local communities and environment should be the starting point

27 Voluntary CSR:- Our 7 Recommendations 5) Use core competence Core competence should be utilised to benefit its stakeholders and society 6) Extend business scope A company should stretch its business reach to under-served groups and populations even at reduced profit or marginal losses 7) Develop CSR implementation systems A CSR committee should be set up including an external Director, an NGO and local stakeholders for selecting, monitoring and evaluating CSR activities

28 Importance of the CSR Ratings for different stakeholders Companies Industry & trade associations Govt. bodies NGOs Media Researchers, students Citizens, Investors shareholders Every stakeholder has a role to play to make CSR effective and sustainable Diagram showing various stakeholders of CSR

29 Importance of the CSR Ratings for the Board of Directors To sensitise directors & employees about the value of CSR To implement international CSR guidelines and norms To identify possible CSR activities To learn from others’ CSR initiatives

30 Importance of the CSR Ratings for Government bodies To develop industry-wise guidelines for CSR To introduce laws to get companies to work effectively towards reducing environmental damage, and restoring the damage done by them (e.g. polluter-pays’ principle) To introduce incentives to reward companies engaged in effective CSR To enable companies to partner with government in implementing social welfare and developmental schemes (e.g. adoption of ITI’s)

31 Importance of the CSR Ratings for Industry & Trade Associations To get a snapshot of the state of CSR & set benchmarks for companies to follow To understand the huge scale and magnitude of the benefits that are possible if an entire sector spends even the recommended minimum amount on CSR To work with Government and NGOs and international organisations to upgrade and improve CSR activities and to set milestones for companies To prepare case studies, highlight best practices & give awards To provide consultation on CSR

32 Importance of the CSR Ratings for NGOs To know about the areas of CSR work undertaken by companies, thus enabling partnerships with them To be able to identify companies which are not doing CSR or doing so in a token manner, so as to approach these companies to initiate meaningful projects To assist companies to formulate CSR objectives, implement CSR activities, and monitor and evaluate their CSR activities

33 Importance of the CSR Ratings for Media To stop eulogising corporate leaders whose companies are damaging the environment & harming lives To present a clear view of CSR that is separate from philanthropy, charity, marketing, advertising, or expanding business scope, and to sensitise the public about this To highlight companies practising good CSR, and to negate those companies which are actually engaged in marketing or advertising of their products or services under the guise of CSR To encourage and enable business publications to have a regular feature or column dedicated to CSR initiatives along with feedback from NGOs and other stakeholders

34 Importance of the CSR Ratings for Researchers & Students For researchers To study CSR practices & results To influence the shaping of CSR policy and regulations For students and colleges / institutions To be sensitised about the role and responsibility of companies To understand the impact and consequences of everyday processes and actions To develop a holistic view of life and living

35 Importance of the CSR Ratings for Citizens, Investors, Shareholders To understand that as consumers and stakeholders of companies, we can and must influence companies to change harmful polices and adopt proper CSR practices (due to the huge impact and power that companies have on people and the environment) To ensure that through our purchase choices, we get desirable values for society to be reflected in how companies do business

36 Closing Statement… Enlightened businesses worldwide, small and large, have begun to realise that responsible practices enhance profitability & ensure long-term survival. Companies not doing CSR will not survive – it’s only a question of when. For those companies which disrespect the environment or living beings, we, as responsible citizens, need to individually and collectively, reward or penalise them through our voices and our wallets

37 Jubilant Organosys, a pharmaceutical company, while acknowledging the harm caused in manufacturing its chemicals, actively works to minimise the damage. It is one of the 6 Indian companies that publish a Corporate Sustainability Report. “There are stakeholders who can voice their concerns today while we engage them. There is another category of stakeholders like flora, fauna and physical environment, whose voices we cannot hear, but who are affected by anthropogenic impacts of global population. The future generation is another important group of stakeholders that does not exist today but will be impacted by our activities………….” Jubilant Organosys Limited, Corporate Sustainability Report, FY 2007 Closing Statement

38 Karmayog Corporate Social Responsibility Ratings 2007 of the largest 500 Indian Companies

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