India Inc.’s CSR spends are increasingly project driven

Corporate Social Responsibility (CSR) spend by companies listed on BSE-100 witnessed an increase of 15 per cent to Rs. 85.4 bn in 2018-19 from Rs. 74.6 bn in 2017-18. Over a five-year period, the CSR Spend of BSE 100 companies increased 12.8% while net profits increased by 5.2%. While this can be explained by the fact that these 100 companies were in the aggregate spending less than 2% of profits on CSR five years ago, there is also no doubt that Indian companies are taking active ownership of their CSR endeavors.

Data also suggests that most spends are project driven and, in a sense, not linked to company profitability. Impact assessment studies are now an important part of the CSR toolkit. Further companies are increasingly aligning CSR spend on defined social objectives.

CSR spends now often exceed the mandatory requirement of 2% of their average 3-year net profit: 75 out of the 100 BSE companies spent 2% or more of their average 3-year net profit. And in line with regulations, many loss-making companies continue to spend on CSR.

MNC’s, PSU’s and promoter driven companies continued to outspend their prescribed spend at 109%, 106% and 101% respectively, while widely held companies spent in line with the prescribed limits at 99%.

Energy companies continued to be the largest spenders (28.6% of the total), followed by financials (15.6% of the total) and information technology (13.8% of the total). The top ten CSR spenders account for 50% of the spends of the BSE 100 companies while the top 20 CSR spenders account for 68% of the spends of the BSE 100 companies: suggesting that the CSR spending pattern is falling short of the pareto principle.

A few companies that did not spend the stipulated amount attribute this to implementation issues (such as technical complexities, stringent procurement process, requirement of land from the government and community participation issues). Others that were unable to meet the target linked their disbursement of funds to deliverable targets that could not be met due to a dynamic implementation environment. Companies that do not spend the prescribed amount should be provided support and encouragement in the form of addressing any implementation issues over punitive action.

Recognizing that corporate India has embraced the CSR spends beyond the in principal requirement, the President of India, Shri Ram Nath Kovind, presented the first National Corporate Social Responsibility (CSR) Awards to companies across two categories namely, “Corporate Award for Excellence in CSR” and “Contribution of CSR in Challenging Circumstances”. Seven companies in the BSE-100 companies received awards across different categories, while ten of the BSE-100 companies received honourable mentions.

While companies continue to increase their CSR spending, there is a need to think about these spends at a more strategical level. Consequently, companies are aligning the CSR spends within the gamut of existing business domains/areas and geographic reach. When the spend is in line with the company’s business, it gets more focus from the board and senior management.

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