CSR In India & All You Need To Know About It

2019 is proving to be an active year in Corporate Social Responsibility in India. CSR in India tackles with issues related to sustainability, globalization, advocacy on social issues and multiple natural disasters in the forefront. Some of these issues and CSR trends will continue, but leaders across industries must now move on from- fewer stands, more dialogue. India needs more work on prevention, than relief.

The Companies Act of 2013 mandates publicly traded companies with Rs 100 crore in annual profit or Rs 500 crore in annual turnover to set aside 2 percent of their profits for affirmative/inclusive social action. Only half of the 1,708 companies listed on NSE have a CSR committee in place despite the CSR Act mandating the same. The Act mandates publicly traded companies with Rs 100 crore in annual profit or 500 crores in annual turnover to set aside 2% of their profits for affirmative/inclusive social action. Under the 2% mandatory CSR spends category, NSE-listed companies spent Rs 10,030 crore in fiscal 2018 in the country. The unspent component of CSR funds rose to Rs 1,717 crore in 2018, as against Rs 1,574 crore in 2017.

Indian corporations spent over Rs 50,000 crore towards corporate social responsibility- CSR in India between FY15 and FY18, according to a report by CRISIL Foundation, the CSR arm of credit rating agency CRISIL. Indian companies above a certain threshold are required to spend at least 2% of their net profit on social expenditure every year under the Companies Act of 2013. The report estimated the total CSR expenditure by Indian corporates in FY18 at Rs 15,010 crore, with listed companies spending Rs 10,000 crore and unlisted companies spending Rs 5,010 crore on CSR.

The CSR Tracker 2017 which tracked 1,522 companies, showed 92% spends, up from 80% in 2015. KPMG’s report of the top 100 listed companies showed 97% spends in the same year. In fact, the KPMG report indicates that 22 of the top 100 companies—twice as many as in the previous year—spent more than the 2%, suggesting perhaps that the underspending was coming from small and medium enterprises (SMEs). This seems logical as the latter is still new to CSR, and their amounts are so small that spending their funds effectively can pose a challenge.

Here is some analysis suggesting the concentration of CSR in India in FY18-

a) Five Indian states— Maharashtra, Uttar Pradesh, Tamil Nadu, Karnataka, and Odisha—received anywhere from 60-70% of total spend and these were not necessarily the ones that were most underdeveloped, a criticism of the ‘local area preference’ of Section 135.

b) The KPMG report observed that five states with 15% of underdeveloped districts received 70% of CSR funds, while six states—Bihar, Uttar Pradesh, Odisha, Karnataka, Himachal Pradesh and Chhattisgarh—while 60% of underdeveloped districts received only 15% of CSR funds.

c) In terms of sectors too, there was a definite preference of CSR in India. Education continues to be the focus area for companies ~30% of the aggregate FY18 spend was made towards education projects. Other areas were rural development (13.3%), hunger, poverty and healthcare projects (20.6 percent).

d) The IiAS study of the FY18 Corporate Social Responsibility (CSR) initiatives and disclosures of the S&P BSE 100 companies reveals that companies have spent Rs. 74.6 bn, an increase of 5.8% compared to the previous year.

e) In FY18, companies spent 1.9% of their three-year average profits. The aggregate spends by MNC’s and Institutionally owned entities were 2.0%, while it was 1.9% for promoter owned entities and 1.8% for PSUs.

Interestingly, data suggest that more and more companies are disclosing the numbers, in some cases even project-wise. While useful, this is done in an aggregated way rather than by gender, ethnicity or disability, which many consider the three markers of social exclusion, and hence poverty. In the absence of this, it is very difficult to make even preliminary assessments to make an official record of benefits from CSR in India. The urge for being diapositive amongst corporates and companies shall soon make collecting actual data available for public consumption.

Achieving credibility as a socially responsible organisation requires companies to plan their CSR framework effectively and strategically. Identifying best-fit execution or implementing partners is a vital key in CSR to achieve measurable long term impact on society, in India.

This article has been contributed by SUBAH, an enabler of CSR in India.

SUBAH is an enabler of CSR in India rendering advisory and consultative services on CSR in India to industry, businesses and non-profit organizations. They enable alliances between organizations with corresponding social purposes. With a mission to build an enduring and sustainable culture for a better tomorrow, Subah is assembling an ever-growing diverse community of conscious stakeholders, groups, & citizens. Connect with them at SubahTeam@gmail.com.