CSR Guidelines, 2013 Securities and Exchange Commission of

CSR Guidelines, 2013 Securities and Exchange Commission of Pakistan

1. Introduction and Scope

1.1 In order to promote responsible business conduct that supports community growth for

public interest, eliminates adverse practices impacting the public sphere and ensures

corporate accountability, the Securities and Exchange Commission of Pakistan (“SECP”) is

pleased to issue the Guidelines for Corporate Social Responsibility (“the Guidelines”).

1.2 These Guidelines are voluntary in nature and businesses are encouraged to move beyond the

recommended minimum provisions articulated in this document.

1.1 The Guidelines are being published for all companies that have initiated or intend to initiate

corporate social responsibility (“CSR”) activities. Further, it is expected that all companies

may endeavor to adopt working models that complement the recommended guidelines with

a focus on fair, transparent and responsible business practices.

1.2 For the purpose of facilitation, companies are encouraged to use (self-assessment) CSR

governance benchmark and terms of reference of CSR committee, annexed to the guidelines.

1.3 The Guidelines are being issued in exercise of powers under section 506B of the Companies

Ordinance, 1984.

2. Objective

The objective of these Guidelines is to promote the development of a framework for CSR

initiatives by all companies. Companies are encouraged to strive and work in cooperation with

stakeholders for implementing a transparent and socially responsible strategy.

3. CSR governance

Companies are encouraged to have a CSR policy endorsed by the board of directors (“board”)

of the company, reflecting their understanding and commitment to CSR, thereby ensuring that:

a) CSR policy is incorporated into the vision, code of ethics and business plan/strategy of the

company.

b) CSR commitment statement is agreed through meetings/session by Board of Directors w.r.t

CSR definition, business value of CSR, vision and commitment (resources, time,

personnel).

c) Output of the CSR commitment is integrated into a board level CSR policy.

CSR Guidelines, 2013 Securities and Exchange Commission of Pakistan

d) CSR mandate is executed either through a pre-existing committee or by forming a new CSR

committee.

e) Hold education/orientation sessions to ensure that board members have adequate

understanding and expertise of CSR for making informed decisions.

f) Include CSR activities as part of agenda of the board meetings and incorporate CSR as part

of annual board evaluation.

g) Periodically review operations of the board to identify and implement measures to align the

board operations with CSR strategy of the company.

h) Ensure that CSR goals, objectives and targets are incorporated into business plans/strategy.

i) Board members determine CSR risks, opportunities and impact prior to any major business

decisions (acquisition, mergers, product variation, capital expenditures).

j) Review and approve CSR related communications to internal and external stakeholders

ensuring compliance with relevant reporting framework.

4. Consultative Committee

The Company is expected to adopt a focused approach towards CSR through formation of a CSR

Consultative Committee ideally led by a CSR expert. The committee members are expected to have

an understanding and experience of implementing CSR activities/projects. The committee may be

entrusted to ensure transparent, specialized supervision of CSR activities and periodic reporting to

Board of Directors in adoption of CSR policy and reporting its progress.

A sample term of reference of CSR Committee is annexed to these Guidelines.

5. CSR Management Systems

CSR policy of a company is expected to be formulated in a manner that serves as a guide to its

strategic plans, paves way for a systematic CSR management system and projects the roadmap

of CSR initiatives. The systems are expected to reflect following broad indicators:

a) Express commitment of the board and the top management to formulate and implement

CSR Policy

b) Ensure that policies, processes and systems exist and support the CSR policy. This is

measured by:

(i) Specifying the organizational approach towards CSR

(ii) Incorporating the CSR approach into code of ethics of company

CSR Guidelines, 2013 Securities and Exchange Commission of Pakistan

(iii) Defining objectives for carrying out CSR activities

(iv) Setting targets for achievement of CSR objectives

(v) Determining the working model and devising action plan (time, resources,

budget)

(vi) Delegating responsibility and management of resources with respect to CSR

policy

c) Sensitization and training of the board, senior management and employees for

implementation of CSR targets

d) Mechanism for stakeholder engagement prior, during and on conclusion of CSR plans

e) Periodic monitoring and evaluation of CSR activities

f) Disclosure and reporting of CSR achievements

g) Recognizing and documenting the shortfalls/failures

h) Incorporating improvement in future CSR policy/plans

6. Areas of Interest

CSR policy is expected to clearly determine the priority areas wherein the CSR projects are

currently being managed (ongoing projects) and are planned to be initiated (upcoming

projects). The areas may broadly cover:

a) Community investment (skill development, livelihood, health, education, infrastructure,

social enterprise development, safe drinking water, poverty alleviation, youth

development and environment conservation)

b) Governance (human rights, transparency, anti-corruption, business practices,

stakeholder relations, responsible marketing)

c) Product responsibility

d) Work life balance

e) Safety (risk management, disaster management)

f) Climate Change

7. Implementation Structure

7.1 The CSR policy is expected to be implemented through a systemized structure that

measures and reflects progress of CSR goals/targets. It is imperative that the system must

be able to identify the role of the company and the extent of involvement of internal and

external stakeholders for carrying out CSR plans.

7.2 The implementation system may indicate the following:

a) Specific goals, business plan and working model to be implemented

b) Resources aligned for implementation of CSR goals

c) Extent of implementation and completion of CSR activities

CSR Guidelines, 2013 Securities and Exchange Commission of Pakistan

d) Incorporating changes in its working model to changes in business/social needs

e) Specifying the role and resources of partnering agencies

f) Systemized periodic assessment of impact of CSR policy/goals

g) Define systematic reporting of implementation status to internal and external

stakeholders

8. Allocation of Resources

The company is expected to earmark specified resources (quantifiable), specific criteria (for e.g.

hours of service at partnering agency) or a proportion of their profit (preferably 1-2%) for selected

CSR initiatives. The method of allocation of resources or identified criteria must ideally be

predetermined, duly endorsed by the board and form part of CSR Policy.

9. External Assurance

9.1 The company may undertake arrangement for obtaining assurance by an external party.

The external assurance is expected to be implemented in a manner that is systematic,

documented, evidence-based, and characterized by defined procedures.

9.2 External assurance

1

:

 Be conducted by entities, groups or individuals external to the reporting organization,

who are demonstrably competent in the subject matter and assurance practices;

 Should utilize groups or individuals who are not unduly limited by their relationship

with the organization or its stakeholders to reach and publish an independent and

impartial conclusion on the report;

 Is implemented in a manner that is systematic, documented, evidence-based, and

characterized by defined procedures;

 Assesses whether the CSR report of the company provides a reasonable and balanced

presentation of performance, taking into consideration the veracity of report data and

the overall selection of content;

 Assesses the extent to which the report preparer has applied any Reporting Framework;

and

 Results in an opinion or set of conclusions that is publicly available in written form, and

a statement from the assurance provider on their relationship to the report preparer.

9.3 The assurance report may form part of its CSR Report.

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Derived from GRI’s key qualities for external assurance

CSR Guidelines, 2013 Securities and Exchange Commission of Pakistan

10. Disclosure and Reporting

10.1 Companies are expected to report concise and material information regarding their CSR

policy and activities that may be consolidated and reported in the form of a separate CSR

Report.

10.2 CSR report may prominently disclose the CSR objectives, working model, implementation

status, impact/achievements, risks, opportunities, challenges and working partners. This

may also include comparison drawn from previous year.

10.3 CSR reporting is expected to state the goals that the board has planned to set forth for the

next year. This may be descriptive narration of the areas of concentration or any specific

projects along with brief overview of source of generation of funds for said goals.

10.4 Companies are expected to prominently disclose CSR report (summarized or detailed

format). The said reports may be disseminated on its website (if any), annual reports,

separate report and other communication media.

10.5 Notwithstanding the preparation of CSR Report, the company shall provide descriptive as

well as monetary disclosures of the CSR activities undertaken by it during each financial

year in line with the requirements of Companies (Corporate Social Responsibility) Order,

2009. This may also include disclosure to the effect of compliance by companies with

relevant industry/regulator guidelines or standards.

CSR Guidelines, 2013 Securities and Exchange Commission of Pakistan

CSR Committee

Terms of Reference

a) Strategy and Policies:

Review and recommend to the board of the company in forming or refining the CSR vision,

strategy and policy of the company. This includes ensuring that appropriate management

systems, implementation model and regulatory compliance are in place.

b) Assessing indicators:

Monitor and recommend changes in working model of CSR in line with best practices,

economic indicators, social implications and stakeholder trends that may impact the

company.

c) Stakeholder Engagement:

Review and monitor stakeholder relations and devise mechanism to incorporate input of

partnering agencies/stakeholders into CSR plans/policies

d) Management of Risk:

Monitor, periodically review and document the major CSR risks, opportunities and impact

of CSR policy. It may also recommend to the board the appropriate changes in CSR

policy/management systems.

e) CSR Assessment:

Review and report impact of CSR plans/activities on business. Further review and

recommend impact of CSR policy on major business decisions.

f) CSR Report:

Determine the overall extent of reporting of CSR activities, provide input on CSR reports

and recommend to the board for adoption of CSR report. This includes ensuring CSR

reports are in accordance to relevant CSR reporting framework.

CSR Guidelines, 2013 Securities and Exchange Commission of Pakistan

Corporate Social Responsibility

Governance Benchmark

Board of Directors is expected to develop and evaluate their governance framework w.r.t corporate

social responsibility initiatives. Following is a self-assessment table that shall complement Board of

Directors in the evaluation process:

S.N.

Direction

Assessment (please tick)

Comments

Yes

No

Partial

Don’t

Know

Not

relevant

1.

Has Board developed a CSR

vision and strategy?

2.

Have Board and management

expressly declared its

commitment to CSR?

3.

Has board communicated the

company’s business case for CSR

to management?

4.

Do Board and management

share common CSR aspirations?

5.

Does CSR vision coincide with

the vision and Code of Ethics of

the Company?

6.

Does the Board have clear

understanding of CSR and

industry practices?

7.

Are CSR goals incorporated in

the business plans of the

business?

8.

Is there a specific CSR

committee?

9.

Does the CSR Committee

comprise of one or more CSR

experts? (Indicate the number in

comments section)

10.

Is there a designated CSR

committee member reporting to

Board?

11.

Does CSR committee seek

guidance with board approved

CSR policy?

12.

Does the CSR committee

periodically report the progress

of company on CSR goals,

objectives and targets?

CSR Guidelines, 2013 Securities and Exchange Commission of Pakistan

13.

Does the CSR committee review

and make recommendations in

the implementation model of the

Company?

14.

Is the CSR committee involved

in preparing implementation

model for CSR plans?

15.

Is management’s incentives

linked to CSR goals/ targets?

16.

Is CSR progress included as a

factor in remuneration/

recruitment of CEO?

17.

Does the CSR committee review

and recommend suggestion for

incorporating CSR risk in

Company’s risk management

policy?

18.

Is CSR committee entrusted

with the role of recommending

major CSR risk and its impact

prior to major business

decisions?

19.

Are CSR risk, opportunities,

impact and issues are considered

by Board and management in

approving major business

decisions?

20.

Is there a system of

implementation of CSR goals?

21.

Are there adequate measures in

place to determine the impact of

CSR policies by Board and

senior management?

22.

Does the internal audit process

include assessment of CSR

commitments?

23.

Does the board hold CSR

orientation session and

periodically review progress on

CSR commitment/goals?

24.

Does the CSR committee provide

its input in preparation of CSR

reports?

25.

Does the Board give its input in

extent of disclosure in the CSR

reports?

26.

Does the board review and

approve external reporting of

CSR issues in compliance of

relevant regulatory

requirements?

27.

Does the board consider CSR

CSR Guidelines, 2013 Securities and Exchange Commission of Pakistan

report as a record of company’s

performance on CSR goals for

disclosure to its stakeholders?

28.

Does the Board approve external

assurance of CSR activities?

29.

Does the Board approve the

external assurance report to be

made part of CSR report of the

Company?

30.

Does the Board approve of

placing the CSR report on

website of the Company?