Social Impact Assessment - CSR Project




Many CSR Professionals, Company Secretaries misunderstood the term "Social Impact Assessment" in the Company Act. This has arisen serious compliance error. This  article gives a clear perception on that: 

1.The Sustainable Development Goals (SDGs) of the United Nations in many of its regulatory schemes internally such as introduction of the Business Responsibility and Sustainability Reporting (BRSR) by SEBI in 2021 and the sustainability reporting format is based on the nine principles of National Guidelines for Responsible Business Conduct (NGRBC) introduced by SEBI. The disclosures intertwined  the BRSR report, which is published alongside the  annual report as an integral part. This is a standardized alignment practice of  non-financial disclosures of " Social Impact Assessment" carried on various CSR Projects conducted by a company to truly represent the  business operations in a transparent form.

2. The SEBI Law outlines the applicability of the BRSR  disclosure and assurance requirements. These  mandatorily disclosures need under Principle 8 two indicators. The first indicator is "Essential Indicator"  disclosing "details of social impact assessment of projects undertaken by the entity"  and another under the "Leadership Indicator" disclosing   "social impact assessment" details of the  "CSR Projects".  This SEBI Law on BRSR  is important in many respects. Under the  "Leadership Indicator" and  the "Social Impact Assessment" details are given of the  "CSR Projects".

3. Under the Company Act 2013,  The "Social Audit" and "Social Impact Assessment" is not defined. The Company Act says only "Impact Assessment" of CSR Projects. Then what is the meaning of "Impact Assessment". This is whether "Financial Impact Assessment" or "Social Impact Assessment"? This is required to be tested with the principle given by Hon'ble Supreme Court of India recently in the case of Renaissance Hotel Holdings INC Vs B Vijaya Sai (2022). The Hon'ble Supreme Court of India has ruled "that while interpreting the provisions of a statute, it is necessary that the textual interpretation should be matched with the contextual one.  The Act must be looked at as a whole and it must be discovered what each section, each clause, each phrase and each word is meant and designed to say as to fit into the scheme of the entire Act." 

4. That is the exact principle of the Hon'ble Supreme Court of India interpretation. The meaning of "Impact Assessment" for The CSR Project is not "Financial Impact Assessment". This  is clearly the  "Social Impact Assessment". This point becomes more clear when SEBI Law with the BRSR report is tested. The SEBI Law in the BRSR Report demands "Social Impact Assessment" of the  "CSR Projects" under the "Essential and Leadership Indicator". These indicators link clearly "Social Impact Assessment" with the "CSR Projects".  

5. Thus, the CSR Audit is clearly "Social Audit" and the full meaning of "Impact Assessment"  is "Social Impact Assessment." The "Social Impact Assessment" is addressed clearly in The SEBI ( ICDR) 2022 and The SEBI (LODR) 2015. These two laws are applicable on the listed entities under the SEBI Law. The Company Act 2013,  is required to be read with the SEBI Law, where   "Social Impact Assessment" is related with   the "CSR Projects". 

6. Further, under SEBI (LODR) 2015, Reg 4 (1) (2) (f) ( iii ) (3): This is the responsibility of the Board of Directors  to act on "fully informed basis", "in good faith", "with due diligence and care" and "best interest of the listed entity and the shareholders". The shareholders wish to know where their CSR money has been invested in "Social Projects" and what is the "Social Output". The discretion of the Board of Directors to choose a "Social Audit Firm" as available in the MCA FAQ is mandatorily required to be read with The SEBI (LODR) 2015 in " "fully informed basis" and "good faith". The "fully informed basis" condition as mandated under the SEBI (LODR) 2015, Reg 4 (1) (2) (f) ( iii ) (3), puts liability on the Board of Directors to be informed fully and  clearly that "new class"  of "Social Auditor" is existing, which is only eligible to conduct "Social Audit" on the "Social Projects", "CSR Projects" and "Social Enterprises". The CSR Projects are necessarily "social projects".  

7.  The SEBI (LODR) 2015, Regulation 2(1)(zo), states that "Social Auditor" and "Social Audit Firm" shall be read and mandated as per provision maintained in The SEBI ( ICDR) 2022. The SEBI ( ICDR) 2022, Regulation 292 A (g ), which  mandates that  the "Social Audit Firm" with Qualified "Social Auditor" can only conduct the "Social Impact Assessment". The term Qualified "Social Auditor", removes all unqualified people engaged in the  "Social Audit". Even "Auditor" coming from the APSCA or basic Chartered Accountants as financial auditor are not eligible. They are unqualified people. The Qualified "Social Auditor", under the new law,  is one,  who is  a registered Member of the Institute of Social Auditors of India and has completed qualified course on the Social Auditor  from the NISM Mumbai.    

8. There shall be serious violation of the provisions of the SEBI Laws, which are applicable to the listed company, if technical terms and provisions are not understood correctly. Apart from Company Act violation, this is also childish mistake and violation of the SEBI Guideline. This  attracts punishment to the Board of Directors and  Company Secretary responsible for filing wrong and unqualified report on the "Social Impact Assessment".    

The writer is a Qualified Social Auditor, from the Institute of Social Auditors of India, Mumbai. He is qualified from the NISM, Mumbai in "Social Auditors". He brings a vast set of knowledge and expertise in handling the "Social Impact Assessment",  "Social Audit" & providing expert consultation on the CSR Projects. He may be contacted at mail ID: birendrajha03@yahoo.com 

 #CompanySecretary #BoardDirectors #SocialAudit #CSR #SocialImpactAssessment

Comments

Post a Comment

Popular posts from this blog

Evidence Based Impact Assessment Audit of Safeguard Policy Violation by ADB Bank Financed MSEDCL Project at Maharashtra - Issues of non-compliance on Indigenous People & social environmental safeguard violation.

Image
Tribal belts of Maharashtra are using from very ancient times "Water Pit" and small accumulated pond. This is surface water. This surface water is disturbed or quality of water on the surface is spoiled if  groundwaters are extracted without mind. The Water Pits are lifeline for the tribal population. The tribal people (Indigenous People) are more at risk in Vidarbh and other region of Maharashtra. They are completely dependent on such "Water Pits". The ADB Bank project at Maharashtra, giving free license to the electrical water pump owners to remove as much as underground water, they  desired,  shall disturb the water level chart with severe threat on the environmental and social issues. This risk threat is completely missing from the three safeguard monitoring audit conducted by the MSEDCL and submitted to the ADB Bank in the project of "Maharashtra Rural High Voltage Distribution System Expansion Program". The consultation process with the "Indigen
Read more

CRISIL "Leadership Rating" In ESG - Lessons From Axis Bank

Image
  I have demonstrated earlier,  the ESG rating, by agency like  CRISIL needs, more  good practice of inducting the third party "Social Audit" before publishing the ESG rating, when there is past history of ESG practice violation.   Any poor or exaggerated ESG rating shall alter the share market price. Now a days this is the perception of the investors that strong ESG compliance of company, is  good indicator of safe investment and excellent return. This is also the target of the Government of India to achieve the Sustainable Development Goal ( SDG Goal ). This SDG Goal mandate, mostly is achieved through  the regulatory authority SEBI.  The SEBI has mandatorily implemented the ESG evaluation of various companies. This rating evaluation now is not matured. The rating agency like the  CRISIL so far has been rating the ESG parameter of the various companies.    CRISIL mostly captures ESG compliance through the document disclosures by company in the public domain. This has been e
Read more

Safeguard Compliance Failure In ADB Bank & World Bank Funded Tata Power Project At Mundra, India - A Violation Towards Ocean Submerged Ancient Cultural Heritage Town Of Bhagwan Krishna.

Image
  Image One: The Sentinal -2 Satellite, took the photograph of the Gulf of Kutch scenario.  The Ancient Ocean submerged Dwarka Town of Bhagwan Krishna is shown here  in 3 yellow broken line circles. These three sites remain submerged under Ocean water. Just top of it in red circle broken line is the Tata Power Project, funded by the ADB Bank & the World Bank. The project,   facility station of water discharge and pumping station are both here. The red arrow  mark in the Ocean is showing the patch of "Dead Phytoplankton" and the green arrow is showing the volume of the  "Healthy Phytoplankton". The "Dead Phytoplankton" originates from the Tata Power  and moves down to the  ancient Submerged Dwarka City of Bhagwan Krishna. The first yellow circle edge line is almost covered by the "Dead Phytoplankton." There is also second cluster group of  "Dead Phytoplankton" at the extreme right side. This is coming from other source, which needs f
Read more