Corporate Social Responsibility Helping You Manage The Process

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Corporate Social ResponsibilityHelping you manage the processPrivate and confidential2020Risk Advisory

CSR Legal RequirementsThe concept of Corporate Social Responsibility (CSR) is governed by section 135 of The Companies Act, 2013, which encouragescompanies to spend two percent of their average net profits in the previous three years on CSR activities. For CSR activities, thecompany should give preference to the local area and areas around it where it operates, for spending the amount earmarked forCorporate Social Responsibility activities.To manage CSR activities, the Board of the Company is required to form a CSR committee. The composition of the committee willbe disclosed in the board’s report as per sub-section (3) of section 134. The CSR committee will also be required to ensure that allthe income accrued to the company by way of CSR activities is credited back to the CSR corpus.As per section 135(4) of the Companies Act, 2013, the board of the Company shall, after taking into account the recommendationsmade by the CSR committee, approve the CSR policy for the company and disclose contents of such policy in its report and alsoplace it on the company’s website, if any, in such manner as may be prescribed; and ensure that the activities as are included in theCSR policy of the company are undertaken by the company.ApplicabilityApplicable to everycompany with a: Net worth of Rs. 500crore or more; or Turnover of Rs. 1000crore or more; or Net profit ofRs. 5 crore or moreImplication ofnon-complianceCSR The Board shall specify thereasons for not spendingthe amount in its reportto be made as per Section134(3)(o).The CSR committee shouldcomprise three or moredirectors with at least oneindependent director. It istheir responsibility to:The Board’s responsibilityis to: Formulate andrecommend a CSR policyto the board Recommend activitiesand the amount ofexpenditure to beincurred Monitor the CSR policyfrom time to time Form a CSR Committee Approve a CSR policy Ensure implementation ofthe activities under CSR Ensure 2% spend Disclose reasons for notspending the amount (ifapplicable) Business responsibilityreporting (BRR) as part ofannual report

CSR governance frameworkActivities eligible under CSROur CSR governance framework is key to a successful and impactful implementation of Corporate Social Responsibility, which isan obligation of the Board of Directors and organisation’s management team. A well-laid down governance framework improvestransparency and near real time visibility of social impact.A company may plan to perform CSR activities in the following ways: Self execution Execution with implementation partnersThe following is a list of all the activities that an organisation can undertake while conducting a CSR activity.*StrategyGovernancePromotionof educationReducing childmortality andimproving maternalhealthCombating HIVAIDS malaria andother diseasesContributionto PrimeMinister’srelief fund*This is not an exhaustive listEradication ofextreme hungerand povertyPromotion ofgender equalityand entenhancingvocational skillsSocial businessprojectsAnd suchmatters as maybe prescribedCSR strategy that defines the board’s and CSRCommittee’s role, program objectives and establishesstrategic roadmap for rendering CSROversight structure with well-defined roles andresponsibilities to manage risks pertinent to thepartner assessment and CSR projectsPolicies, standardsand proceduresCSR policy defining areas of concern and initiatives toimprove relations with the people and environmentsaffected by business operations.Risk managementprocessesOngoing oversight of CSR projects throughout the CSRlife cycle.Tools andtechnologyTools and technology that drive efficiency, andsupport data accuracy, availability and timelinessMetrics andreportingMetrics and reports that provide a comprehensiveview of ongoing CSR projects to the relevantstakeholders across the enterpriseCommunication,Training, and awarenessCoordinated communication channels and programsto educate stakeholders of responsibilities at all stagesof Corporate Social ResponsibilityPotential benefits Reduced gapsbetween planningand implementationof the programme Proper andsustainable utilisationof resources available Use of technologyfor effective CSRmonitoring andreporting Better transparencyand governance inthe process Better brandrecognition due toachieving CSR goals

Our end-to-end delivery frameworkPartner and project assessmentsOur framework depicts the stages of Corporate Social Responsibility life cycle where Deloitte India Risk Advisory cansupport organisations in meeting their objectives with respect to Corporate Social Responsibility.For most organisations, CSR is inherently a non-core activity. Therefore,both Partner and project assessments are necessary on an ongoingbasis. Our experience tells us that many pitfalls continue to exist duringexecution, some of which are set out through the illustrations below. OurCSR Governance Framework provides the necessary support at onboarding,selection and execution phases.Formulationof CSRpolicyCorporate SocialResponsibilityLife CycleSelf execution ofProject/ PartnerOnboardingFormulationof CSR eportingOrganisation will focuson core business andDeloitte India RiskAdvisory will assist inCSR monitoringIllustrative factors to be considered for assessmentof CSR implementation Partner Financial statements: Whether audited financial statements are available Adequacy of reserves: Whether there is a process of keeping reserves for future use andemergencyPartner SelectionCompliance MonitoringThe process of partner selection aims to identifythe risks, as well as the benefits, of working with apotential implementation partner. The objective is thatthe organisation’s implementation partners have thereputation, competence and integrity to deliver effectiveprogrammes.This refers to the process of regular monitoring of CSRprojects to identify areas where any corrective steps areneeded, and to have a bird’s eye view of CSR projects toensure its success. With the use of our tools there will bemultiple reports which can be accessed and extracted forthe purpose of management reporting: We perform assessments of potential implementationpartners Define monitoring schedule Provide assistance in selection and onboarding of credibleimplementation partners Visit the CSR PartnerFactors to be considered during partner selection: Financial capability Management Identification Section 12 A registration: Whether registration under Section 12A of the Income Tax Act, 1961was obtained to ensure that the CSR partner enjoys the exemption from paying taxesFinancialcapability FCRA registration: Whether FCRA registration obtained under Foreign Contribution RegulationAct 2010 to ensure compliance in case of receiving contribution from foreigners. Geography:Country of incorporation and geography which is being servedby implementation Partner Review progress reports Sector: Sectors being served by implementation partner Current and past partners: Existing and previous partners of implementation partnerin similar CSR project Verify records Comply with legal requirements with respect to theminimum amount to be spent on CSRExpertise Profile of board/ key management members: To check whether the management of theimplementation partner have expertise in the field of the CSR project TransparencyWith the use of our tool, there will be multiple reportsthat can be accessed and extracted for the purpose ofmanagement reporting, which will give the organisation anidea of CSR projects and enable them to take necessaryaction, wherever required, to achieve their CSR goals.Technology-enabled monitoring of CSR projects through: Clear vision, mission and strategy: To check whether the vision and mission of the CSR partnerare in line with that of the company, in order to ensure that the objectives of the organisation areachievable with the CSR partner supportImpact AssessmentWe provide the following services with regard toimpact assessment: Governance structureManagementand Governance Review management process of conductingperiodic impact assessment Implementation of recommendationidentified Workflow system for issue flagging/ management Conflicts of interest: To check if there is any conflict of interest between the board members,the advisors or the management personnel with the company and there is no conflict of interestwith the local governments. People infrastructure: To check if the CSR partner has the necessary people base which isrequired for the smooth functioning of the CSR project Centralised monitoring Classification and reporting Compliance monitoring Policies and procedures Technical infrastructure: To check if the CSR partner has the necessary technical infrastructurewhich is required for the smooth functioning of the CSR project Bulk upload of data related to CSR projects Automated assessment report generation Skills and competencies of the Partner Transfer the unspent amount to ‘Unspent CorporateSocial Responsibility Account’ CompetencyTech-enabledmanagement reporting Section 80 G registration: Whether registration under section 80G was obtained by the CSRimplementation partner to ensure that donors have benefit with respect to exemption underincome tax act 1961 for funding them.Infrastructure Reporting methods: To check whether the reporting structure is in place(manual / through system) to ensure better control and monitoring of projects

CSR as a managed serviceCommon pitfalls during project executionIn case of inadequate monitoring of CSR projects, the organisation may face difficulties in achieving their CSR objectives as planned.A few challenges (pitfalls) are described below for sample CSR projects categories:Health and sanitationWe have a deep Managed Services capability which can be leveraged to deliver CSR as a managed service. A high level programdesign is set out below:Education Gaps between project concept note and actual execution No student attendance record Project concept note not converted to ‘Ways of Working’ No teacher attendance record Medicine stock out MoU not adhered to High equipment downtime Low hygiene Poor maintenance process Centre not operated on all planned days Equipment bought and not used Inadequate number and type of teaching staff No/ poor attendance at health camps Geographical coverage different from planned Incorrect reporting of beneficiaries No blackboards and other materialFormulationof CSRCommitteeFormulationof CSRPolicySelf execution ofProject/ PartnerOnboardingDevelopmentof CSR Strategyand CSR PolicyDecide whetherCSR activities to beperformed throughCSR ReportingStartBoard ofDirectorsof thecompanyFormulationof CSRCommittee Incorrect reporting of completed projectsThe management personnel responsible for the day-to-day activities have the necessary depth of experience and skill set tomanage the current and future growth plans.DeloitteSuggestassessmentcriteria for partnerassessmentDefinemonitoringschedule andmethodologyDevelopmethodsfor mentCSR partnervisits, verificationof records anduse of analyticsDefine skillset requiredfor impactassessmentAssist in selectionand onboardingimplementationpartnerSupport inensuringcompliance withlegal requirementAssist teamto preparemethodologyEndReporting tomanagement

Technology-ledenablers forCSR programmemanagementCustomise your project for Workflows Automated notifications Risk MatrixMake your own questionnaires Using system question bank orBulk UploadEntityModuleClassification andReporting Clientsclassification Reporting onindustry sector levelClientModule Adopt fixed questionnairebased on standards.ProjectModuleManage voluminous datarelated to CSR projects Assign weightages acrossquestions and domainsQuestionnaireModuleA centralised andcomprehensive toolwith easy-to-useinterface and ModuleCentralised controlStandardisation in projectexecution and reporting.NotificationAssessmentModuleAutomatic remindersto internal andexternal assessmentstakeholders.Post Assessment Risk EvaluationReportingModuleAutomated assessmentreport generation Dashboards across projects Remediation for postassessment follow ups.

ContactsRohit MahajanAnthony CrastoVishal ChaturvediPresidentRisk edi@deloitte.comrmahajan@deloitte.comMukesh GuptaRudraksh AroraDirectorguptam@deloitte.comAssociate Directorrudarora@deloitte.comDeloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and theirrelated entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provideservices to clients. Please see www.deloitte.com/about for a more detailed description of DTTL and its member firms.This material is prepared by Deloitte Touche Tohmatsu India LLP (DTTILLP). This material (including any information contained in it) is intended to providegeneral information on a particular subject(s) and is not an exhaustive treatment of such subject(s) or a substitute to obtaining professional services or advice.This material may contain information sourced from publicly available information or other third party sources. DTTILLP does not independently verify any suchsources and is not responsible for any loss whatsoever caused due to reliance placed on information sourced from such sources. None of DTTILLP, DeloitteTouche Tohmatsu Limited, its member firms, or their related entities (collectively, the “Deloitte Network”) is, by means of this material, rendering any kind ofinvestment, legal or other professional advice or services. You should seek specific advice of the relevant professional(s) for these kind of services. This materialor information is not intended to be relied upon as the sole basis for any decision which may affect you or your business. Before making any decision or takingany action that might affect your personal finances or business, you should consult a qualified professional adviser.No entity in the Deloitte Network shall be responsible for any loss whatsoever sustained by any person or entity by reason of access to, use of or reliance on, thismaterial. By using this material or any information contained in it, the user accepts this entire notice and terms of use. 2020 Deloitte Touche Tohmatsu India LLP. Member of Deloitte Touche Tohmatsu Limited

The concept of Corporate Social Responsibility (CSR) is governed by section 135 of The Companies Act, 2013, which encourages companies to spend two percent of their average net profits in the previous three years on CSR activities. For CSR activities, the . CSR policy of the company are undertaken by the company.

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