The Unskilled Directors Handling CSR - Case From Nayara Energy Limited.

Impact Assessment Study - On Planning & Implementation of CSR Projects  By HR LAB. 

Nayara Energy Limited has jetty location  in Ocean, where this company unloads crude imported petroleum. Since, the company is using Ocean,  hence, it has "Social Responsibility" to protect the "Ocean Environment"  including the submerged heritage sites here. The crude petroleum products are transported to Vadinar Refinery, situated near the Ocean. In Nayara Energy Limited's Case Study two photographs have been given as audit evidence   of large scale oil spill . The oil spill  has damaged the "Ocean Environment". The CSR is needed towards the "Ocean Environment Protection". This is missing here! The CSR Projects were selected without conducting "CSR Need Analysis". This is skill gap of the Directors of the Nayara Energy Limited. 

Most of the CSR Committee do not know where the CSR Funds needed to be used. There is absolute "Lack of Skill" of the Directors in conducting "Proper Planning" in CSR. The "Planning" factor gives the necessity to conduct the "CSR Need Analysis" - "Base Line Survey". So far the CSR has remained only a cover-up activity. The Directors have fiduciary duty under Section 166 (2) of the Companies Act towards "Social Responsibility". This includes "Environment Protection", in priority where business "hits endangered marine life". 

CSR Projects of business companies using Ocean have inherent responsibility towards the "Ocean Environment Protection". The unloading of crude petroleum product, spills on the ocean surface. This pollution generates "Tar Ball." A representation photograph of  "Tar Balls" how has impacted the Ocean Environment  is some where here. What is missing ? Good quality of Directors are missing here. They fail to drive CSR in right direction. They do not know planning. They do not know monitoring evaluation. Ultimately they fail in implementing CSR. The Nayara Energy Limited is an important case here. 

Case Study of CSR In Nayara Energy Limited:

The Missing CSR Need Analysis 

First two photographs needed to be studied. These two photographs are  presented here as the piece of audit evidence and observation. The photographs say clearly where CSR fund is needed to be invested? This is CSR project on the preservation of the "Ocean Environment"; CSR project on the protection of the "Marine Species" and so on. One will be surprised that the CSR funds are misused in the Nayara Energy Limited. Without "CSR Need Analysis", the funds were invested blindly  in non priority areas.    

Nayara Energy Limited has jetty location at Vadinar, identified as Berth A and Berth B. Oil is seen spilled at Nayara Energy Limited - Near Berth B location, which moves on to the top area marked in broken yellow circle. This is the common problem of unloading of petroleum products at the site. This oil spill has killed largely marine species and have damaged the Ocean Environment. The "CSR Need Analysis" was not conducted completely or poorly driven.   The result is that the CSR funds of Nayara India Limited were misused. The funds were not   used for protecting the Marine Environment.( Audited by Satellite on 3rd October 2020 ).   

Nayara Energy Limited  jetty location, shows another piece of evidence for Audit. Large oil spill is seen at Nayara Energy Limited's Berth B. This is seen in 2013. From 2013 to 2020, the oil spill is continuous. Even after 2020 this is continuous. Certainly the Directors of the Nayara Energy Limited failed to control the oil pollution in the Ocean. They are responsible for damaging Ocean Environment and large scale marine life killing. This is skill issues. The Directors are only just show piece in a show case. They are not working! Overall change is needed in the Directors composition.  CSR should be taken seriously. This is completely missing in the Nayara Energy Limited. 

The Ocean current, converts oil-spill into "Black Tar Ball". A deadly marine pollution. The "Black Tar Balls" kill "marine species including endangered species",  "mangroves" and damages the under water heritage. The Nayara  Energy Limited shall focus attention in preventing the oil spill to zero target. 
  

Environment Impact : The entire Gulf of Kuttch including Vadinar - Jamnagar pocket,   has threatening formation of the "Tar-Balls". The "Tar-Balls" are damaging the marine life and ancient submerged sites, including the mangroves and the ancient corals. A separate Government of India report says, almost 50% mangroves have died here. This is poor "Business Practice" and negligence towards the "Social  & Environment Responsibility". The  "Tar Balls" are formed due to heavy oil spill in the Ocean. Above image demonstrates the threatening impact, where a person with a stick is touching the black "Tar Ball" carried away at the coastal area of the Gulf of Kuttch at Gujarat during heavy tide.   ( Photo source: Gaurang Joshi, TOI)    

CSR Funds Diverted In Non-Priority Areas

Nayara Energy Limited is into petroleum refinery business at Gujarat, with large unloading points developed at the Gulf of Kutch. Nayara Energy’s CSR has footfall presence in the CSR projects mostly range  across three broad thematic areas –

• Health and Sanitation

• Sustainable Livelihoods

• Education and Skilling

The above listed  CSR Projects are developed randomly. There is no "CSR Need Analysis." The above listed three CSR Projects, though "Not Illegal" but "Non-Priority" areas. The priority area is "Ocean Environment Preservation". This  project is completely missing in Nayara Energy Limited.  

CSR Funds Not Monitored Properly: 

So far, total CSR amount spent for the Financial Year 21-22 in CSR is Rs 11,11,74,408. In 21-22 Rs 6,66,68,514 has been spent in CSR and an amount of Rs. 58.43 million remained unspent. The major reasons for the underspent of CSR is lack of proper planning. Delays in approvals of Memorandum of Understanding (MoU) with the Government of Gujarat for Project Tushti 2.0 and MoU with implementing partner for Gram Samruddhi are all planning failure.  

Company Vision Missing - Further On "CSR Need Analysis"- Urgent Need of Base Line Survey For CSR Projects: 

As stated eralier, the "CSR Need Analysis is needed for business survival." As the Company vision is to "be among the most respected organizations in India by doing what is right and rightful for the communities and nation at large". 

This "vision" is missing completely here in the company "CSR Projects". The various CSR Projects are not calibrated numerically with proper KPI. For example, under "Health and Sanitation" it provided 63,700 Consultations annually under Community Health Initiative. What was the KPI Plan, 70,000, 75000 or what? That is missing. 

In "Lean Management" we have fortunately been trained while working in South Korean Organization. We learnt quickly that any project shall fail, if the same  is not converted into numerical target. 

Social Auditor, with strong HR experience, do not do mistakes in measuring KPI.  While measuring people and projects they measure "Target" and "Current Status".  Thus, the entire KPI Numerical Target is "missing here" in the CSR Projects of the Nayara Energy Limited.  

The Nayara Energy Limited is operating in the Gulf of Kutch.  A good experienced Social Auditor, while auditing "CSR Need Analysis" and  "Social Impact Assessment" of CSR Projects, shall first examine "element of business strategy  in surrounding environment" and what is the "responsibility towards the environment, from where the company is getting business". 

This company has jetty point in  Gulf of Kutch, at Vadinar. At this Vadinar site imported crude petroleum products are unloaded from Russia. During unloading, threat of petroleum spills here.  This pollutes ocean at the threatening level and kills the marine life. 

Vast and huge petroleum oil surfacing on the ocean is big evidence on this problem.  

Apart from that, the Vadinar site is surrounded with "Ancient Submerged Heritage Sites of 5200 years old" and covered with "Ancient Corals of Rare Species". 

At Vadinar near the jetty location of the Nayara Energy Limited, ancient heritage sites are submerged. We see here pale white stone (Under Sea  Picture). All this human made white stones are of ancient port. This ancient port, which is submerged is carbon dated at 3200 BCE. That is almost 5200 years before,  from the current date this ancient port was existing here. This is not visible from the top of the sea (Above sea picture). But when site is audited through a high resolution satellite, this site reveals ancient heritage submerged structure. Law in India is very strict and tough. As per Ancient Monument Act and Wild Life Act, no business activity or human activity is permitted. Thus we see, a missing CSR approach on "Pro-Thinking". As to remain in business, company has no any plan or CSR activity towards protecting the submerged heritage sites, ocean assets and environment.          

Most of the corals and mangroves have recently died in this area, due to threatening factors of petroleum spill coming from the unloading jetty points and vessels carrying imported crude petroleum for such jetty points. This has formed "Tar Balls" killing largely "Marine Life". An evidence photograph is given at the end.  

So prime area of "Social & Environment Responsibility" of the Nayara Energy Limited,  is to protect the "Marine Life" & "Submerged Heritage Site  of Ocean." Because, this factor is linked with the Company Business Survival. 

According to the  Ancient Monument Act and the  Wildlife Act, any business activity or human activity is not permitted on "any submerged heritage sites" or "submerged wet lands". If Company is taking Pro-Activity measures in this area, then it shall give positive impression to the Government as well as common people. Health and Sanitation, Sustainable Livelihoods and Education and Skilling are also important, but not at the cost of damaging the Company business strategy, which is essential to survive in the business. 

Hence, CSR Funds are needed to be used in the above two mentioned problems.  This is needed for the survival  of the business. Now on this missing point, one can measure company vision, mentioned above. Is this Vision achieved by the Nayara Energy Limited ? This is clear - No.   

In this  vast spread area in the Gulf of Kuttch, important heritage sites are submerged. Here the site has been audited with one satellite photograph, where ancient white stone constructed fish motif is shown. These are ancient heritage property where company has social responsibility to protect.   
  

A vast spread of marine life is seen here.  "Tar Ball" kills the marine species.  The Nayara Energy Limited has prime responsibility to protect immediately this marine species under the CSR. But, this was not done. 

In CSR Best Business Practice is Missing: 

"The Best Business Practice" is missing here, where neither "CSR Need Analysis" had been conducted nor  "SWOT Analysis" had been used by the Directors. The Directors apparently do not know  the "Fish Bone Skeleton Analysis". This is sufficient to fail the CSR Project.  

Had these tools been known to the Directors, they could have diverted and guided Company business in more fruitful and positive direction. But all wasted ! This is nothing but poor quality of Directors sitting on the board

Unqualified Auditors In Impact Assessment Audit Business: 

Another problem in the Nayara Energy Limited is that the Impact Assessment Audit of CSR Funds are audited by more or less unqualified people.  Recently SEBI has changed Law on the Impact Assessment Audit for its SEBI listed entities. The SEBI has defined the "Social Impact Assessment" Audit. This is mandatorily conducted by SEBI qualified Social Impact Assessment Assessors in the SEBI listed entity. They bring the Social Impact Assessment Audit from the standards drawn by the Institute of Chartered Accountants of India. This is missing. The auditors have failed to draw the importance of "Ocean Environment Protection". They have failed to advise  the company in its audit report. 

The "Ocean Environment" has been damaged completely by the Nayara Energy Limited. The CSR is completely broken here. The ESG has broken. What is the CRISIL ESG Rating?  An excellent rating  by the CRISIL. The CRISIL has based the ESG Rating on the Directors report. The CRISIL report and the Directors report both are  bogus. As both ignore,  the evidence of damage to the "Ocean Environment".   

                                           

   

About Birendra K Jha:

A Pan India practitioner on: Social Impact Assessment Audit; BRSR Assurance; ESG Assurance & CSR Audit. He has  long standing expertise in Social Safeguard ; Environmental Safeguard & CSR Projects with Planning - Implementation - Audit - Consultation & Training. Besides that he is  a stand alone expert on OD - HR- IR Consultation & Assessment. He is also   a Certified Auditor of ISO 14001: 2015 - OHSAS 18001: 2007. He has earned more than 50 certificates on Social Safeguard; Environmental Safeguard ; Labour Law & CSR from International Organization including ILO Geneva (Switzerland ). He overlooked at senior position as General Manager and Deputy General Manager in HR in foreign and Indian MNCs. He may be approached at: birendrajha03@yahoo.com 

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