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Karmayog Corporate Social Responsibility Ratings 2007-2008 of the largest 1000 Indian Companies

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Presentation on theme: "Karmayog Corporate Social Responsibility Ratings 2007-2008 of the largest 1000 Indian Companies"— Presentation transcript:

1 Karmayog Corporate Social Responsibility Ratings 2007-2008 of the largest 1000 Indian Companies

2 Summary of the Presentation What is Corporate Social Responsibility? Importance of CSR Ratings for Stakeholders Results of the CSR Ratings of 1000 largest Indian Companies CSR Reporting Parameters of Karmayog CSR Ratings 2008 Sector Analysis Observations Mandatory and Non Mandatory Recommendations View on CSR by Group companies Recent Trends and Developments Closing Statement

3 What is Corporate Social Responsibility?

4 “ 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 by a company using its resources, core competence, skills, location and funds for the benefit of people and the environment

5 Triple Bottom Line and CSR TBL is a concept whereby a company will have to look at not just where the company should deploy its profits but how it made its profits in the first place.This implies looking at impacts on all its stakeholders which in essence is the base of CSR

6 Did you know that…. A paper company manufactures paper from waste cloth to reduce the use of pulp from trees A Chemical manufacturer has protected the largest stretch of mangroves along Mumbai’s coast A software company has developed a special call receiving software for 1098- Childline, India’s national helpline for children in distress An FMCG company is working to protect and conserve endangered plant species in India through re-forestation programmes A construction company (in Mumbai) posted a 60 % profit in 2008 amounting to Rs.1400 cr. and did not do any activity to benefit society Don’t Drink and Drive is the CSR campaign of a leading company that makes alcoholic beverages A drug manufacturer in India provides gifts and vacations abroad to doctors who prescribe its products. A power generating company is the highest CO2 emitter in India

7 Importance of the CSR Ratings for different stakeholders


9 Importance of the CSR Ratings for different stakeholders Some examples of each Board of Directors To sensitise employees about the value of CSR Industry and Trade Associations To understand the huge scale and magnitude of the benefits that are possible if an entire sector spends even 0.2% of turnover on CSR. Government Bodies To develop industry-wise guidelines for CSR continued…

10 Importance of the CSR Ratings for different stakeholders Media To highlight companies practising good CSR, and to negate those companies which are actually engaged in marketing of their products under the guise of CSR NGOs To know about the areas of CSR work undertaken by companies, thus enabling partnerships with them Citizens, Investors, Shareholders To ensure that our purchase choices align companies to do business in a way that reflect our desirable values for society Students To join a company that is working to benefit society and not one that is harming it

11 Results of the Karmayog CSR Rating 2008 of the 1000 largest Indian companies

12 Results of CSR Ratings 2008 of 1000 largest Indian Companies Karmayog CSR Rating Number of Companies% of Companies Level 5 (highest) 00% 4101% 3455% 2 22122% 1 23223% 0 (lowest) 492 (no CSR)49% Total 1000100%

13 CSR Ratings BAR Chart

14 * Indicates companies that received a Level 4 rating in the Karmayog CSR Ratings 2007 No.CompanySector 1ACC Ltd.Cement 2Ballarpur Industries Ltd.Paper 3HDFC Ltd. *Finance 4Infosys Technologies Ltd. *Software and ITES 5Jubilant Organosys Ltd.Pharmaceuticals 6Kansai Nerolac Paints Ltd.Paints 7Moser Baer Ltd.Hardware 8Tata Consultancy Services Ltd.Software and ITES 9Tata Steel Ltd. *Steel 10Titan Industries Ltd. *Watches & Jewelry Companies with the highest rating of Level 4

15 Parameters of the Karmayog CSR Ratings 2008

16 Note: - Companies that manufacture liquor, tobacco, genetically modified crops have been given a Level 0 rating The criteria stated above are only the minimum criteria needed to qualify for a particular rating; apart from this, there are other negative and positive criteria that are also applicable, and a combination of these determines the final rating. If undertaking any CSR ActivityLevel 1 If CSR is linked to reducing the negative impacts of company’s own products or processes Level 2 If CSR initiatives are for the local communityLevel 3 If CSR is embedded in the business operationsLevel 4 If innovative ideas and practices are developed for CSRLevel 5 Minimum necessary parameters for different rating levels

17 Sector–wise analysis of the CSR activities of the largest 1000 Indian companies

18 Sector Analysis 35 industry sectors were studied Best Sectors in CSR- Banking, Software,FMCG, Paper Poor performing sectors in CSR-Retail, Entertainment and Media, Mining, Construction Each sector shows the the possible impact with the recommended CSR expenditure of 0.2% of Sales.

19 CSR in 35 Industry Sectors Auto Ancillaries (48) Automobiles (13) Banking (40) Cement (30) Chemicals (63) Construction (56) Computers (7) Diversified (13) Electronics (18) Engineering (44) Entertainment and Media (15) Fertilizers (19) Financial Services (32) FMCG and Consumer Durables (60) Heavy Engineering (10) Hotels (9) Iron and Steel (93) Jewelry (11) Logistics (17) Metal (14) Mining (6) Miscellaneous (42) Oil and Gas (19) Packaging (10) Paper (13) Petroleum and Petrochemicals (8) Pharmaceuticals (48) Polymers and Plastics (10) Power (46) Retail (5) Software and ITES (40) Sugar (25) Telecommunications (20) Textiles (78) Trading (18) An analysis of 35 sectors has been done for the 1000 companies (Number of companies in each sector is in brackets)

20 Importance of the Sector-wise analysis Snapshot of sectorIt presents a picture of an entire industry, their CSR initiatives, including examples of companies doing good CSR Potential CSR impactIt presents sales of the entire sector, and possible impact with the recommended CSR expenditure Sector-specific guidelines Uniform norms can 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 Comparison between sectors It presents a comparison between industry sectors with low and high CSR

21 Example of Poor Performing Industry sector Total of 57 companies were analyzed 36 Companies are doing no CSR Only 3 Companies have disclosed the amount spent Two Level 3 companies are DLF and GMR Infrastructure Total Sales of 57 Companies is Rs.65000 cr. As per Karmayog’s recommendation CSR expenditure amounts to Rs.130 cr.

22 Example of an industry sector with good CSR 40 out of 1000 companies are in the banking industry 57% of these companies do CSR 60% of the companies are working in the area of Rural development There are 6 Level 3 companies: (Andhra Bank, Canara Bank, ICICI Bank, PNB, Union Bank of India, Yes Bank) Mandatory regulations on CSR for PSU banks makes this sector high performance Total Sales of 40 companies is Rs.2,60,000 cr. If 0.2% of sales is spent on CSR (as per Karmayog’s recommendation), then annual CSR expenditure would amount to Rs.520 cr.

23 Some sector specific best CSR practices No.SectorExpected CSRCompany that is undertaking this 1CementQuarry RehabilitationACC Ltd 2PaperFarm Forestry programme generating rural employment Ballarpur Industries Ltd. 3FinanceEnabling access to affordable housingHDFC Ltd. 4SoftwareDeveloping software to improve public systems Infosys Technologies Ltd., TCS Ltd. 5PharmaceuticalReducing environment pollution through process improvement Jubliant Organosys Ltd. 6PaintsDevelopment of environmentally-friendly paints Kansai Nerolac Paints Ltd. 7HardwareImprovement in product design and use to benefit society Moser Baer Ltd. 8SteelMitigating impact on the natural and human environment Tata Steel Ltd. 9Watches and Jewellery Employment of handicapped and village artisans Titan Industries Ltd.

24 Observations from the Karmayog CSR Ratings

25 Observations 51%509 Companies reporting their CSR activities in either the Annual Report or Website 2%21 Companies have published a separate Sustainability Report 3%30 out of 1000 companies have reported the amount spent on CSR 10%107 out of 1000 companies are doing CSR through a trust or foundation 90%More than 90% high impact companies have no separate environment report 40%Widely done CSR area is Education followed by Healthcare and Rural upliftment.

26 Observations…. All PSU’s undertake a basic minimum level of CSR based on mandatory regulations (e.g. relating to employment) Individual companies that are part of a larger group do not list their individual CSR activities; the same CSR activities are listed for all companies of a Group Poor performing Sectors- Construction, Entertainment and Media, Mining,Retail Best Sectors- Banking, Software, FMCG, Paper

27 Mandatory CSR: our 5 Recommendations

28 Mandatory CSR:- Our 3 Recommendations 1) 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 1 Indian Oil Corp.2260007000452 200 Indian Hotels18003703.6 400 Ahluwalia Contracts880511.8 600Trent500301.0 800 Technocraft Industries310300.6 1000 Marathon NextGen Realty100600.2 Total sales of 1000 companies: Rs. 25,00,000 crores If recommended minimum CSR is spent @ 0.2% of sales, this = Rs. 5000 crores Every Company must do CSR

29 Mandatory CSR: Our 3 Recommendations… 2) ReportingSustainability Reporting in the Annual Report A Corporate Sustainability section to be included in the Annual Report and preferably a separate Corporate Sustainability Report (as per the Global Reporting Initiative framework) to be published. 3) Process for CSR a) Adoption of industry guidelines for processes Common guidelines on Environment, Health and Safety (EHS) applicable to most industries Industry-specific guidelines linked to the processes of that sector. b) CSR linked to the skills of a company Companies must use their core competence, skills and strengths while undertaking CSR activities c) CSR linked to the location of a company Companies must first undertake CSR activities in the areas they are located in. (factories, plants, offices, etc.) and focus on improving conditions in the communities in which they operate.

30 Non Mandatory CSR: Our Recommendations

31 Some of our Voluntary Recommendations Define the company’s vision and mission Define the company’s Vision and Mission: as this leads to the company’s CSR philosophy being defined Create inclusive employment Create Inclusive Employment - for marginalised groups such as the physically-challenged, with a special emphasis on the local community Ensure responsible behavior in supply chain Every company should make efforts towards ensuring responsible behavior for their supply chain Use core competence A company’s unique skills and resources should be utilised to benefit its stakeholders & society for e.g.: financial education program by banks Link CSR to government’s development plans Link CSR activities to government’s development plans -It is important that companies CSR efforts are connected to and supplement the government’s social & development goals and plans. e.g. Sarva Shiksha Abhiyan

32 Some of our Voluntary Recommendations… All employees to be involved in CSR A company should involve their employees in its social responsibility efforts. This ensures sustainability of CSR initiatives, as there is a commitment to CSR throughout the organisation CSR activity linked to industry sector Companies, through the CSR activities that they undertake, work towards raising standards and setting benchmarks for their specific sectors Expand Reach to benefit society Companies must extend their products and process to markets and areas that may not be as profitable to the company Support areas and issues that are neglected Companies must come forward to take up these. E.g. Sports such as chess, endangered species of wildlife, heritage, etc

33 Karmayog’s views on Group Companies CSR

34 CSR by Group companies While there are synergies and various managerial reasons for companies to do CSR activities at a group level, it is necessary for each company to undertake its own CSR activities (linked to its processes and skills), while also contributing to the group’s CSR work No. of Groups in this study Of the 1000 companies studied there are 30 groups with individual companies ranging from 2 to 24 The 5 largest groups in this study are: Tata Group, Aditya Birla Group, Mahindra Group, Reliance (ADAG), and Essar Group. Same CSR reported Most of the companies under the group report the same CSR activities across the group PhilanthropySome Group companies contribute money to the group Foundation/ Trust as a part of their CSR CSR Expenditure Individual companies do not mention the amount spent by the company; instead the group expenditure is listed Group Foundation The common Foundation of the group undertakes all the CSR activities, as a result of which CSR is often not connected to the processes & core competence of the individual companies

35 Recent Trends and Developments in CSR in India

36 Recent Trends in CSR-2008 Expectations of the stakeholders There are vast majority of stakeholders that have come to expect more from corporates which would extend beyond their profits. Government’s RoleThe government has become sensitive towards the CSR issue for eg: RBI notification for non financial reporting. Increasing awareness amongst consumers, management colleges and students There is an increasing awareness and interest among the consumers towards CSR. More seminars and discussions are being held in management colleges to sensitize the CSR issue among the students Suppliers ResponsibilityCompanies are encouraging suppliers to adopt socially responsible business practice. Disclosure of social and environmental performance Almost every stakeholder is asking for more information on companies social and environmental performance. As a part of this move 2% of the companies have Sustainability Report and 5% have information on CSR on website or Annual report.

37 Some developments in CSR in India since the first Karmayog CSR Ratings – 2007 Dec. 2007RBI Notification to all Banks & Financial Institutions recommending that Non Financial Reporting (NFR) be undertaken as a step towards ‘Responsible Banking’ June 2008Ministry of Corporate Affairs has stated that it would like to encourage all companies to “disclose on their balance sheets the social work that they do” Sep. 2008Government of Gujarat: mandates CSR expenditure - directs 6 PSUs to set aside 30% of their profit before tax to carry out welfare activities across Gujarat. Draft industrial policy of Gujarat Govt. mandates CSR for industry associations and corporate houses in the state Feb. 2009Petroleum Ministry says that it will be mandatory for public sector oil companies to spend a minimum of 2% of their net profits on CSR activities

38 Closing Statement… Enlightened businesses worldwide, small and large, have begun to realise that responsible practices enhance profitability and 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. …..

39 “We believe that Corporate Social Responsibility is not an externalised activity nor is it only philanthropy. It is an internal process reflecting the soul of the Company.” Titan Industries Ltd. Corporate Social Responsibility Report 2008

40 Karmayog Corporate Social Responsibility Ratings 2007-2008 of the largest 1000 Indian Companies

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