Planning and Strategizing

CSR Planning and Strategizing

The first step towards formalising CSR projects in a corporate structure is the constitution of a CSR committee as per the specifications in the Companies Act, 2013, clause 135.

Clause 135 of the Companies Act, 2013 requires a CSR committee to be constituted by the board of directors. They have to be responsible for preparing a detailed plan of the CSR activities including, decisions regarding the expenditure, the type of activities to be undertaken, roles and responsibilities of the concerned individuals and a monitoring and reporting mechanism. The CSR committee will also be required to ensure that all the income accrued to the company by way of CSR activities is credited back to the CSR corpus.

Constitution of the committee is an excellent starting point for any company new to CSR and in case a company already practices CSR, this committee has to be set up at the earliest so that it can guide the alignment of the company’s activities with the requirements of the Act. For effective implementation, the CSR committee must also oversee the systematic development of a set of processes and guidelines for CSR to deliver its proposed value to the company, including:

  • One-time processes such as developing the CSR strategy and operationalising the institutional mechanism

  • Repetitive processes such as the annual CSR policy, due diligence of the implementation partner, project development, project approval, contracting, budgeting and payments, monitoring, impact measurement and reporting and communication.

CSR process

A set of such enabling processes, their inter-relationships and the sequence in which they need to be developed have been identified below:


Step by step explanation of CSR planning and strategy process(Purpose, process and activities)

While developing these processes, no standard set of recommendations exist for all companies. However, an overview of the required details, the activities required to be completed for each of these processes along with some additional guidance on critical issues has been provided below:

Step one: Developing a CSR strategy and policy

CSR strategy refers to what the company expects to achieve in the next three to five years and incorporates the vision, mission and goals on a broader level. It also entails how it plans to achieve these in terms of organisation and approach.

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CSR Strategy


  • The Companies Act, 2013 requires every company to put out its CSR policy in the public domain.

  • Exclude normal business activities of the company.

  • Contain a list of the CSR projects or programmes which the company plans to undertake during the implementation year.

The company has to provide:

  • A brief outline of its CSR policy including ‘the statement of intent'.

  • A web link to the CSR policy including ‘the full list of projects, activities and programmes proposed to be undertaken by the company’.

Frame working CSR Strategy An effective CSR strategy should articulate:

  • A good CSR practice requires that a company that is serious about its CSR should develop a long-term (three to five years) vision and strategy which is reviewed annually and the activities and budgets are planned on an annual basis.

  • Who it wishes to address i.e. the target group.

  • Where it wishes to work i.e. the geography.

  • What sectors or issues it wishes to address.


  • Inputs for this process include

  • Guidance from the board.

  • Companies Act requirements.

  • Corporate business strategy, plan and supply chain.

  • Development priorities: both, national and wherever the company has business interests.

All this will lead to: the CSR policy document and an indication of sectors and issues, geographies and a profile of the beneficiaries.

Annually developing a CSR policy in line with the Companies Act, 2013 rules that defines programmes, geographies and budgets for the following financial year, aligned with the strategy and ensuring that the 2% requirement of funds allocation is met besides establishing methods for monitoring and reporting.

Step two: Operationalising the institutional mechanism

In order for a corporate to gain the greatest leverage and a strategic advantage through the investment of intellectual and financial resources, they are required to select their implementation mechanism.

Types of implementation Mechanism:

  • Inputs for this process include

  • Self-execution.

  • Making grants to an independent implementation partner. The grants can be made through two options: - directly by an in-house CSR department or through the company’s grant-making foundation.

Both the methods have their individual positive and negative aspects:

  • Grant making can be preferred when there is an easy availability and access to the implementation partners otherwise self-execution is a better option.

  • In self-execution the flexibility of customising a CSR project to suit the company needs is high as compared to grant making.

  • Implementation partners are more likely to have lower costs when compared with self-execution due to their concentrated focus in pursuing development activities, cumulative time spent on the field, cost of human resources deployed and in general operational efficiencies.

  • Self-execution offers higher levels of control over day to day activities, efficiencies and outputs than implementation partners.

  • In Grant making Project management know-how is sufficient and indepth domain knowledge of development issues is not expected while in self-execution you will need both.

Another challenge for Operationalising the institutional mechanism is Selecting legal structure of the company foundation.

Many companies have set up their own foundations to implement their CSR activities.

Under the draft CSR rules, an entity that a company sets up to facilitate the implementation of its CSR activities is to be registered in India as:

  • A trust.

  • Society.

  • A non-profit company under section 8 of the Companies Act, 2013.

So in short the companies establish a legal entity and align the accounting, tax, finance, administration, HR and IT systems of this foundation to deliver the commitments made in the CSR policy.

Step three: Due diligence of the implementation partner

Due diligence refers to the process a company undertakes to determine the risks as well as the benefits of working with a potential implementation partner. This process has to be sufficiently robust to ensure that a company’s implementation partners have the reputation, competence and integrity to deliver effective programmes on the ground.

The due diligence process consists of five primary areas for investigation:

  • Competence of the implementation partner.

  • Identity.

  • Management.

  • Accountability.

  • Transparency.

  • Financial capability.

  • So in the CSR process at Step 3 a company has to establish a due diligence criteria to evaluate the implementation or concept development agency including its incorporation, permits and licenses, systems, processes, public image, management, team deployment, track record, financial soundness, competence level, presence in desired geography, compatibility with company CSR policy and any conflicts of interest.

  • Self-execution.

  • Evaluating the partnership opportunities for its risks and benefits.

Step four: Project development

The CSR strategy of a company will be implemented through a series of projects which will have definite beginnings, ends, expected outputs and outcomes as well as budgets associated with it. These projects may be of a short duration (a few months) or multi-year. A company may choose to implement projects through its in-house teams or in partnership with other agencies or a combination of both. Whatever path it takes, it is important for the project to be developed clearly with distinct baselines, defined activities, ‘monitorable’ targets and budgets.

So on the step 4 the company has to prepare a project proposal that details:

  • Competence of the implementation partner.

  • Key needs of the target beneficiaries.

  • project goals, KPIs, baselines and expected end lines.

  • Project milestones for progress monitoring purposes.

  • Activities and timeline as to achieve the stated project goals.

  • Budgets along with the basis for estimation.

  • Risks and mitigation strategies.

  • Progress reporting: content, frequency.

Step five: Project approval

Every project, whether developed by the in-house team or an external agency, must be formally examined and approved. This is to ensure that each project is in line with the CSR strategy and policy, the monitoring indicators are clearly defined and relevant and there is an adequate budget available. Projects that go on for longer durations or demand a larger amount of resources must be scrutinised more carefully than the others.

Now at the step 5 the company will have an approved project proposal which will include a monitoring process involving proper reporting and responsibility.

Step six: Finalising the arrangement with the implementing agency

While working with an external agency, it is very important to enter into a formal arrangement which is referred to here as a Memorandum of Understanding or MoU. It defines the roles, responsibilities, deliverables, commitments and consequences in case of any breach. This is essentially a formal acknowledgement that all the partners have voluntarily consented to work together to achieve an agreed outcome that requires each one to play their respective roles.

Disbursement Scheduling

For a project to deliver the desired results, it should have sufficient funds to carry out the planned activities. At the same time, having excess funds in the bank account is not prudent financial management. Thus, the scheduling of disbursements is important both for the company (to plan its cash flows from the CSR budget) and the implementing agency and hence needs to be detailed in the MOU.

The MoU should also specify the conditions that the implementing agency should fulfil and the documentation it should provide in support of a disbursement request. Typically, these include the status of:

  • Activities originally planned in the period.

  • Changes and the reasons thereof.

  • Planned and required funds for the period.

  • Utilised funds and bank balances.

  • Net funds required.

Step seven: Progress monitoring and reporting

Routine progress monitoring serves the following three important purposes:

  • It highlights any slippages and helps to determine a corrective action that must be taken if need be.

  • It provides an excellent opportunity for learning what worked and what did not. This can then be immediately applied to other projects.

  • This is an essential part of the directors’ report as per the CSR clause of the Companies Act, 2013.

  • To ensure objectivity, it is critical that the monitoring is done by someone other than the people directly engaged in the project implementation.

Step eight: Impact measurement

Impacts of the development projects typically take a while to manifest. For instance, a girl child education programme can show an increased enrolment and retention of girls on a monthly basis, but further impacts such as improved learning levels will take at least a year. So, impact measurement studies have different objectives from project monitoring and typically have to be undertaken after providing sufficient time for them to manifest.

There are several tools and frameworks for measuring impact. Each has its pros and cons depending upon the nature of interventions, time and budgets available for the study and the availability of people. Thus, selecting the impact measurement methodology is important.

Step nine: Report consolidation and communication

Reporting and communication closes the loop between intent and achievement and is hence a crucial element of the CSR process. In the context of the Companies Act, 2013 this is also a mandatory requirement as it provides crucial inputs in preparing the directors’ report. Project-level reporting forms the base and hence getting it right is critical. Project reports have to be consolidated in programme related reports, aligned with the CSR policy stated by the company as a requirement under the Companies Act, 2013.

This report is to form a key input into the company’s SEBI Business Responsibility Report and sustainability report. The CSR committee may choose to go beyond the requirements of the Companies Act, 2013 and issue a standalone CSR report.