Social Impact Assessment Audit of CSR & Learning Experience With Case Study From Nayara Energy Limited
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 environment of the ocean including the submerged heritage sites here. These crude petroleum products are transported to Vadinar Refinery, situated near the Ocean.
Most of the CSR Department in India do not do proper home-work in identifying proper CSR Projects, where company should invest CSR Funds. This is the "lack of skill" as well as "lack of business related experience" of the CSR Department. Another problem is that the CSR Team is not aware with the latest law on the SEBI Provision, where the qualification of the Social Auditor is provided. Many unqualified people are silently working in the market which are engaged in conducting the Social Impact Assessment Audit. This is highly objectionable and against the SEBI Provision. Entire Board of Directors and company officers are on the ambit of punishment, who has ever violated the SEBI Law.
Most of the CSR Team at present, has no any priority on the CSR Need Analysis. Most of the team members do not have skill. This is poor business practice. Qualified Social Auditor, have strong vision for calculating and evaluating the "CSR Need Analysis", based on the "Numerical Converted KPI on the CSR Projects" are assets. Capacity development is required in aggressive way for the CSR Team in various CSR Project Management and areas involving the "CSR Need Analysis".
Now Social Audit Standards, are enforced from 2023 by the Indian Regulation. This Indian Regulation is mandatory in entire SEBI listed companies and is on the way by the Ministry of Corporate Affairs for other entities. In this Indian Regulation, now Social Impact Assessment Audit can only be conducted by a "Certified Social Auditor", who is a Registered Member of the Institute of Social Auditors of India. Such Members are trained and responsible for implementing the Social Audit Standards developed by the Institute of Chartered Accountants of India. So far, In Indian Social Audit, mandatory "Audits" were there, but "Standards" were almost missing.
In this blog, I shall demonstrate the above mentioned problems through a "Case Study" from the Nayara Energy Limited. This demonstration should must be taken in positive. This is excellent learning lesson to improve for the Nayara Energy Limited as well as other SEBI Listed companies.
When you do not conduct "CSR Need Analysis", you do mistake in CSR Management. The Nayara Energy Limited, did almost the same thing. Without CSR Need Analysis, CSR projects were selected. There may be some commitments, no doubt, but absolute "need analysis synchronized with company business" is almost missing here. This can be examined here in following case study.
Case Study:
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 states of Gujarat (Jamnagar and Devbhoomi Dwarka districts), and Maharashtra (Wardha). The CSR projects mostly range across three broad thematic areas –
• Health and Sanitation
• Sustainable Livelihoods
• Education and Skilling
CSR Projects, like, Gram Samruddhi – Livelihood and Water Resource Development are running here. The Company’s "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". So far, total CSR amount spent for the Current Financial Year 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 included 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. Likewise, land clearance for the construction of a health and multi-utility training center took longer than expected.
This is seen here, Company can have done better, if "CSR Need Analysis" is there in its position. Simply Annexure VII CSR theme area has been selected in random or some previous commitments. This is not matching with the business need where "CSR need analysis is required 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 "CSR Need Analysis". Further, apart from missing "Need Analysis", 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", any project or programmes shall fail, if the same KPI is not converted into numerical target. Social Auditor, with strong HR experience, do not do mistakes in KPI Measurement. While measuring people, programmes and projects they give target in clear numbers. During Audit the same target is measured. Thus, the entire KPI Numerical Target is "missing here" in CSR Projects of the Nayara Energy Limited.
The Nayara Energy Limited's Social Impact Assessment Audit of the CSR Project, needs improvement in endorsing standards. This is missing here. Now in all the SEBI listed entities, the SEBI Law is required to be followed strictly. The qualification of the "Social Auditor" for conducting the "Social Impact Assessment Audit" is endorsed clearly in the SEBI ( ICDR) 2018 and the SEBI (LODR) 2015 with latest amendment in 2022 and 2023. These two laws are applicable on the SEBI listed entities under the SEBI Law, with immediate effect.
Since, the Nayara Energy Limited is a SEBI Registered entity, where it has to engage only qualified Social Auditor as defined in the SEBI Law amendment in the year 2023. Currently only and only, the Certified Qualified Social Auditor, who is Registered Member of the Institute of Social Auditors of India, can only conduct Social Impact Assessment Audit. This standard appears missing here.
No doubt such Qualified Social Auditor, implement Standards and recommend best business practice what is required for conducting the social responsibility business.
The Nayara Energy Limited is operating in the Gulf of Kutch. A good experienced Social Auditor, while auditing "Need Analysis" as well as "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. During unloading, threat of petroleum spill is there. This pollutes ocean at the threatening level. Vast and huge petroleum oil surfacing on the ocean is big evidence on this problem. This 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.
This is demonstrated earlier that petroleum spill have damaged submerged heritage sites as well as the ancient corals in the Gulf of Kuttch.
Most of the corals and mangroves have recently died in this area, due to threatening factors. One major factor is petroleum spill coming from the unloading jetty points and vessels carrying imported crude petroleum for such jetty points for unloading. So prime area of "Social Responsibility" of the Nayara Energy Limited, is to protect the "Submerged Heritage Site and Environment 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 Strategy, which is essential to survive in the business.
Hence, protection of ancient heritage sites and the ocean environment at the Gulf of Kutch is essential "need" for the company existence. This is the Major "Missing Social Responsibility Need". This is not highlighted as advisory in the past Social Impact Assessment Audit.
Now on this missing point, one can measure company vision, mentioned above. Is this Vision achieved by the Company? One can answer definitely - No.
A vast spread of human settlement in this area shows rows of ancient house submerged in the Gulf of Kuttch filled with marine corals on top. The ancient heritage property as well as marine corals and mangroves have damaged due to petroleum spill. The Nayara Energy Limited has prime responsibility to protect immediately this area under the CSR. But, this was not done.
As stated, the Nayara Energy Limited, past "Social Impact Assessment Report" so far is missing with the important advisory of the Social Auditor. This is missing because " Various Standard Matrix" have not been implemented. The one more advisory which is missing in the Audit Report is that, the "Social Auditor" has not advised for implementing the "Best Business Practice", where "Need Analysis" are developed using the standard tools through the "SWOT Analysis" and the "Fish Bone Skeleton Analysis". Had these tools have been used. The Social Impact Assessment Audit Report, could have advised in better way the company's Social Responsibility Impact and future course of action towards the submerged heritage sites and the environment. This is almost missing.
The Social Audit Standards, now enforced in Indian Regulation in the SEBI listed Companies, are required to adopt "Standards". This is the duty of the CSR Team, Board of Directors and Company Secretary to implement the SEBI Law and hire only Qualified Social Auditors for conducting the Social Impact Assessment Audit. Any violation of the SEBI Law shall not only punish the officers and Board of Directors but shall "disqualify" such Social Impact Assessment Audit Report.
( The writer is a Pan India Practitioner on the "Social Impact Assessment Audit". He is a "Qualified Social Auditor" from the ISAI (ICAI). He is Director of HR Lab, a "Social Impact Assessment Audit" firm. Apart from Social Audit, he provides consultation on the CSR funds, CSR Programs, CSR Need Assessment; CSR Program Measurement; Entry & Registration- Social Stock Exchange & provides Capacity Development Training to industries on the CSR. He is based at Delhi-NCR. He overlooked at senior position as General Manager and Deputy General Manager in the previous MNC Company in India for more than a decade. He may be approached at: birendrajha03@yahoo.com )
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