Corporates and Environment

CSR Obligations mandated by Section 135 of Companies Act 2013

CSR Obligations mandated by Section 135 of Companies Act 2013 –Rules governing implementation by eligible companies
All eligible Companies incorporated in India are mandated to take up CSR Obligations. Foreign Companies with operations in India will also need to fulfill CSR Obligations.
1.All Indian Companies and Offices/Projects of Foreign Companies that qualify on the undernoted criteria will need to take on CSR Obligations as mandated under Section 135 of the Companies Act 2013. These criteria are:
Turnover     > INR 1000 cr                       
Net Worth > INR    500 cr
PAT            > INR 5 cr
2.Eligible Businesses will need to earmark and spend 2% equivalent of average PAT earned over the last 3 years (including the current financial year) on eligible CSR activities (defined in Schedule VII)
The Obligation kicks in beginning FY 2014-15
3.In the case of Foreign incorporated Companies, balance sheets of India based operations, offices alone will be taken into account while determining requirement for CSR Rules compliance
4.In case of India incorporated companies, Dividend Income derived from their offices, associate
Companies abroad may be excluded while computing PAT for the purposes of CSR Compliance requirements.                           Similarly any dividend received by Indian Companies from their subsidiaries/sister concerns in India may also be excluded while computing PAT for the purposes of CSR spend obligation if such associate/sister/subsidiary companies are themselves CSR compliant 
5.Any company which has been subject to CSR spend obligation under Section 135 if going forward, its average PAT over the previous 3 years has been less than Rs.5 crores will not be mandated to comply with CSR spend obligation
6.All eligible companies are mandated to have a 3 Member Board Committee (with 1 Independent Director as a Member in the case of Public limited companies) to frame CSR Policy and oversee implementation of the same.  The Companies will be required to provide details of CSR Activity and outcomes in their balance sheets.
7.Companies may implement CSR Activity (as approved by the respective Boards) either on their own, through a Trust or Foundation floated by the Company itself or through an Implementation Partner who has been involved with the related activity for at least the previous 3 years. The Act permits 5% of the CSR allocation to be used by the Company concerned for capacity building either within or at the partner-implementing agency

5 Steps to Institutionalizing a CSR Regime – For a sure-footed Start
To meet the requirements of Section 135 of Companies Act 2013 and ensuring desired outcomes in terms of compliance and long term Impact on Society

1.Developing CSR Strategy & Policy  ---------Setting up  Institutional Mechanism and
                 Operationalizing it 
2.Selecting an Implementing Agency--------Formulation/Development of a Project to take up

3.Project Approval   -------- Finalizing arrangement with the Implementing Agency
                                                    Relating to Processes, Fund Deployment, check points 
4.Implementation takes off  --------- Monitoring of Progress  and periodical reporting

5.Impact/Outcome Evaluation --------- Benchmarking, Consolidated Reporting/    
                              Corporate Communication

Our Role
We have the resources, reach and resource persons to provide customized assistance to your Organization at any one of the stages beginning with drawing up a CSR Policy and Strategy, Project conceptualization, Process engineering for keeping a tab on fund utilization, right through implementation, program evaluation and outcome reporting
Our Experience has been functioning as a Social Enterprise, fully immersed in Nature/Environment Conservation and Education. It has over the last 12 years grown into a Community of Practice with 7000+ registered members. Our Membership includes a large number of NGOs working on Environment and livelihood improvement projects all over the country. We also have a highly committed Member – Volunteers who wish to be involved in implementing on-ground projects for Environment Conservation. Many of our Members have been through reputed Environment Conservation Leadership Programs. 
At IWC we are geared to assist Companies having CSR Obligations at all stages of CSR Program implementation, including help in identification of Implementation Partner Agencies, Suitable Projects, helping Companies build capacity within (attuned to CSR/Social Enterprise mindset) and also in providing appropriate oversight through project implementation and Outcome Evaluation and Reporting
(Shashi Sharma is a business consultant associated with IWC from inception)

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