Business Responsibility in the Pharmaceutical Sector of India Workshop Overview

IDENTIFYING ELEMENTS OF BUSINESS RESPONSIBILITY IN IDENTIFYING ELEMENTS OF BUSINESS RESPONSIBILITY IN THE PHARMACEUTICAL SECTOR IN INDIA THE PHARMACEUTICAL SECTOR IN INDIA (TRAINING WORKSHOP FOR PHARMACEUTICAL MANAGERS) (TRAINING WORKSHOP FOR PHARMACEUTICAL MANAGERS) Business Responsibility in India: An Overview Rijit Sengupta CUTS International BRCC Project 4-5 April 2013, Ahmedabad

SETTING THE STAGE A short message from A short message from Shri Shri N R Narayan Murthy N R Narayan Murthy Founder & Founder & C Chief Mentor, Infosys Technologies hief Mentor, Infosys Technologies BRCC PROJECT BRCC PROJECT 2

OUTLINE OUTLINE Introduction Introduction Definition & Conceptual Clarity Definition & Conceptual Clarity History of CSR in India History of CSR in India Policies and Measures Policies and Measures Delivery Mechanisms Delivery Mechanisms Role of Government Role of Government Current State Current State of of Play Play BRCC PROJECT BRCC PROJECT 3

INTRODUCTION INTRODUCTION Promoting responsible business is ingrained in the Indian Promoting responsible business is ingrained in the Indian tradition of doing business tradition of doing business - - Sukhasya Stalwarts of responsible and ethical business practices: Stalwarts of responsible and ethical business practices: - - Kautilya Kautilya (4 (4th th Century B.C.) Century B.C.) - - Mahatma Gandhi (late 19 Mahatma Gandhi (late 19th th & early 20 - - Jamshetji Jamshetji N Tata (Independent India) N Tata (Independent India) - - N R Narayan Murthy (new millennium) N R Narayan Murthy (new millennium) Corporate Social Responsibility Corporate Social Responsibility definition incorporating all three elements of sustainable development: three elements of sustainable development: economy, equity & environment & environment Sukhasya Moolam Moolam Dharma Dharma & early 20th th Century) Century) definition incorporating all economy, equity BRCC PROJECT BRCC PROJECT 4

DEFINITION & CONCEPTUAL CLARITY DEFINITION & CONCEPTUAL CLARITY CSR is the CSR is the continuing commitment by business continuing commitment by business to behave ethically and contribute to economic development while improving the quality and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local of life of the workforce and their families as well as of the local community and society at large community and society at large (WBCSD, 1998) (WBCSD, 1998) to behave ethically CSR is the CSR is the responsibility of enterprises responsibility of enterprises for their impacts on society (EU, 2011) (EU, 2011) for their impacts on society CSR is about ensuring that CSR is about ensuring that companies can grow on a sustainable companies can grow on a sustainable basis basis, while ensuring fairness to all stakeholders , while ensuring fairness to all stakeholders (N R Murthy) Murthy) (N R Narayana Narayana BRCC PROJECT BRCC PROJECT 5

HISTORY OF HISTORY OF CSR CSR IN INDIA IN INDIA First Phase: First Phase: Vedic philosophy and thoughts enshrined in Vedic philosophy and thoughts enshrined in Arthashashtra Arthashashtra Second Phase: Second Phase: Characterised Characterised by altruistic activities mainly by wealthy merchants wealthy merchants Third Phase: Third Phase: Stress on Indian industrialists to provide Stress on Indian industrialists to provide support for building a new India . Idea of support for building a new India . Idea of Trusteeship Fourth Phase: Fourth Phase: Characterised Characterised by enactment of legislations by enactment of legislations towards towards labour labour and environmental protection and environmental protection Fifth Phase: Fifth Phase: Businesses have started incorporating elements Businesses have started incorporating elements of CSR in their core business strategy/model of CSR in their core business strategy/model by altruistic activities mainly by Trusteeship BRCC PROJECT BRCC PROJECT 6

POLICIES & MEASURES POLICIES & MEASURES PM s Ten Point Social Charter (2007) PM s Ten Point Social Charter (2007) Voluntary Guidelines on CSR ( Voluntary Guidelines on CSR (MoCA National Voluntary Guidelines on Social, Economic & National Voluntary Guidelines on Social, Economic & Environmental Responsibilities of Business (2011) Environmental Responsibilities of Business (2011) Expert Group for implementation of NVGs (2012) Expert Group for implementation of NVGs (2012) Section 135 in Companies Bill (passed by Section 135 in Companies Bill (passed by Lok 2012 and to travel to 2012 and to travel to Rajya Rajya Sabha 2% CSR expenditure mandatory for certain sized firms 2% CSR expenditure mandatory for certain sized firms CSR expenditure or CSR Investment? (Tax benefits?) CSR expenditure or CSR Investment? (Tax benefits?) MoCA, 2009) , 2009) Lok Sabha Sabha, , Sabha) ) BRCC PROJECT BRCC PROJECT 7

DELIVERY MECHANISMS DELIVERY MECHANISMS Individual Philanthropy: Individual Philanthropy: The idea of giving is part of the The idea of giving is part of the Indian tradition and is practiced by firms donating to NGOs Indian tradition and is practiced by firms donating to NGOs or Trusts to undertake community services or Trusts to undertake community services BRCC PROJECT BRCC PROJECT 8

DELIVERY MECHANISMS DELIVERY MECHANISMS Corporate Social Responsibility/Corporate Philanthropy: Corporate Social Responsibility/Corporate Philanthropy: allocates a certain amount of its funds either to a department allocates a certain amount of its funds either to a department within the business entity, or creates another organisation within the business entity, or creates another organisation (e.g., a foundation) for undertaking such (e.g., a foundation) for undertaking such activities activities BRCC PROJECT BRCC PROJECT 9

DELIVERY MECHANISMS DELIVERY MECHANISMS Business Responsibility: Business Responsibility: According to this approach, the According to this approach, the business entity refines/readjusts its model of doing business business entity refines/readjusts its model of doing business from within and in the process makes greater positive from within and in the process makes greater positive contribution to societal development. contribution to societal development. BRCC PROJECT BRCC PROJECT 10

ROLE OF GOVERNMENT ROLE OF GOVERNMENT i. i. Mandating: Mandating: formulating laws, regulations, norms to formulating laws, regulations, norms to control/monitor business control/monitor business behaviour ii. ii. Facilitating: Facilitating: developing policies and conditions to developing policies and conditions to enable investment in CSR activities enable investment in CSR activities iii. iii. Partnering: Partnering: combining skills of the public sector with combining skills of the public sector with that of the private sector to undertake CSR activities that of the private sector to undertake CSR activities iv. iv. Endorsing: Endorsing: recognising recognising CSR activities through award CSR activities through award schemes and other incentive measures schemes and other incentive measures v. v. Demonstrating: Demonstrating: leading the way by ensuring that public leading the way by ensuring that public sector firms are pioneers in undertaking CSR activities sector firms are pioneers in undertaking CSR activities behaviour BRCC PROJECT BRCC PROJECT 11

CURRENT STATE OF PLAY CURRENT STATE OF PLAY NVGs NVGs provide a framework to guide eligible firms for provide a framework to guide eligible firms for investing in CSR activities investing in CSR activities Eligible firms need to make investments in CSR activities Eligible firms need to make investments in CSR activities as per Section 135 of Companies Bill as per Section 135 of Companies Bill Reports to be submitted in a specific format (ABRR; SEBI Reports to be submitted in a specific format (ABRR; SEBI has made it mandatory for top 100 listed firms) has made it mandatory for top 100 listed firms) Can firms claim tax relief for their CSR investments? Can firms claim tax relief for their CSR investments? Firms are unlikely Firms are unlikely to to meet their 2% targets early on; it meet their 2% targets early on; it might be possible for them to carry over unspent amounts might be possible for them to carry over unspent amounts Need to align the NVGs with the Companies Bill Need to align the NVGs with the Companies Bill (amendment of Schedule VII and/or (amendment of Schedule VII and/or Regulations Regulations) ) BRCC PROJECT BRCC PROJECT 12

Thank You Thank You rsg@cuts.org rsg@cuts.org c c- -cier@cuts.org cier@cuts.org www.cuts www.cuts- -ccier.org/BRCC ccier.org/BRCC BRCC PROJECT BRCC PROJECT 13