"If you make lots of money you must give it back to society as you have received so much love from it," said JRD Tata to Sudha Murty, when she was young.
JRD words became the source of inspiration for Infosys Foundation, of which she is thd chairperson, and runs in Karnataka, Andhra Pradesh, Tamil Nadu, and Odisha.The company has topped the list of CSR this year, prepared annually by the CSR Journal, a digital and print news publication headquartered out of Mumbai. Infosys spent nearly Rs. 360 crore towards various CSR schemes this year. Covid-19 relief work dominated the activities, followed by education and health-related programmes.
Back to JRD; he believed in his words and while expanding his empire, he advocated a holistic approach encompassing social changes. He fought for issues critical for young India – women's education and spread of literacy. JRD was joined by other corporate doyens such as Birlas, Godrej, Sarabhai, Mahindra and Ambanis, to name a few.
As corporate India grew with time, their contribution to social causes grew. But there was no systematic or pre-designed cohesive approach. There was no legal obligation until 2014. With the enforcement of the Companies Act, India became the first country to make corporate social responsibility (CSR) mandatory.
The Act requires all the companies with a minimum net worth of Rs 500 crore, turnover of Rs 1,000 crore or net profit of Rs 5 crore to spend at least 2% of their average profit for the previous three years on CSR activities.
A large number of companies have acted upon the new regulations and have collectively spent crores of rupees over the years on programmes related to spread of education, healthcare, poverty eradication and rural development. These CSR agendas, however, are being largely undertaken in an isolated and uncoordinated fashion and lack any unified or long-term goal.
The coronavirus pandemic that shattered the economy and left a huge number of people jobless has, however, demanded a paradigm shift in CSR approach. The companies now need to take a medium or long-term approach, by investing, for instance in food and agriculture supply chains, or livelihoods support post-Covid.
But then, the policy change by the government to allow spending of CSR funds on Covid-related activities has changed the dynamic of CSR itself. Apart from contribution to the PM CARES Fund and to the State Disaster Management Authority, expenditure incurred on preventive healthcare and sanitation, ex-gratia to temporary/casual workers over and above daily wages, providing quarantine facilities to those affected, amongst others, are now considered as CSR spend.
According to a report, India Inc. spent ₹7,537 crore as CSR obligations in two months on Covid-related concerns. This included ₹4,316 crore in donations to the PM CARES Fund. The remaining ₹3,221 crore was spent on other relief funds, food and ration donation, masks, sanitisers and protective gear kits.
The coronavirus pandemic is likely to exhaust most of the funds kept aside for corporate social responsibility activities by companies for this fiscal year. India Inc. has already allocated over an estimated 80% of the annual CSR funds to address the pandemic, which could impact spending on other areas this year, according to Crisil Foundation. That is, the onus of managing CSR funds this year is shifted to the government from the corporate.
What is CSR?
Corporate social responsibility has become a world-wide concept whereby organisations consider the interests of society by taking responsibility for the impact of their activities on customers, employees, shareholders, communities and the environment in all aspects of their operations. It is one of the most important global issues with serious challenges and implications on almost all sectors. Developing economies, like India, are coping with issues related to poverty, child rights, community welfare etc and are a hotbed for an innovative CSR scenario which is still shaping up.
The role of corporates, by and large, has been understood in terms of a commercial business paradigm of thinking that focuses purely on economic parameters of success. However, over the past few years, as a consequence of rising globalisation and pressing ecological issues, the perception of the role of corporates in the broader societal context within which it operates, has changed.
In the new environment, CSR is as important for the community as for the company. CSR activities help to forge a strong bond between employees and corporations; boost morale and help both employees and employers feel more connected with the world around them.
The widely accepted idea of CSR is to pursue ‘shared value’ to create economic value that also creates value for the society. Most companies practice a multi-dimensional version of CSR that runs the gamut from pure philanthropy to environmental sustainability.
Progress of CSR in India
In the five years of the mandated CSR era, Corporate India has made significant progress – from adoption to application of the law, and now from alignment to Sustainable Development Goals (SDGs).
Four years after its enforcement, when the implementation of the Act had gained enough traction, a High Level Committee (HLC-CSR) was set up by the government to review the CSR Framework and reconcile stakeholders’ concerns with overarching national priorities to leverage its potential for social development.
According to a government report ‘India CSR: Five Years and 100,000 cr’ the prescribed CSR fund crossed Rs 100,000 crore in five years, between 2014-15 and 2018-19. In fact, with the entry of new companies, the prescribed CSR amount has increased steadily over the years – up nearly 50% during 2014-5 to 2018-19. The actual amount spent has increased from Rs 10,066 crore in 2014-15 to Rs 17,549 crore in 2018-19. As the prescribed CSR amount is calculated on the basis of the net profit earned by the companies, corporate financial performance plays a big role in deciding the CSR prescribed kitty.
CSR spending (Rs crore))
Source: India CSR: Five Years and 100,000 cr, GoI.
However, the rise in prescribed amount itself is not a guarantee of actual CSR spent as many of the companies do not spend the full amount. In fact, during 2014-15 to 2018-19 only Rs 69,758 crore or less than 70% of the prescribed amount was actually spent.
The report shows that on an average 36% companies, falling under the ambit of the mandatory CSR, did not report any data on CSR. In FY17-18 there were 9,753 companies that did not report any data on CSR despite the fact that they were covered under the Section 135 of the Companies Act.
Liable companies in number
Liable cos reporting
Cos not liable but reporting
Cos liable but not reporting
Source: India CSR: Five Years and 100,000 cr, GoI.
In terms of CSR compliance (expenditure-wise), 2015-16 was the best year where companies were (out of companies that were reporting) able to spend 85% of the prescribed CSR fund. According to this report top 2% companies contribute almost 53% of the total actual CSR spend (FY17-18). 43% of the CSR projects were implemented by implementing partners (NGOs/Societies) while 34% of the projects are implemented by companies directly.
As expected, companies are increasingly focusing on their core geographies or local areas near the plants or operations sites. Local areas received over 50% of the actual CSR spend in 2017-18. The PM Relief Fund received Rs 757 crore between FY 14-15 to FY 17-18 from CSR fund while SwachBhaartKosh received another Rs 835 crore during the same period.
Another significant thing is that most of the companies have preferred to concentrate their CSR activities on socio-economic issues, which connect the beneficiaries with the companies instantly. About three-fourths of the actual CSR spending between 2014-15 and 2017-18 was accounted for by five sectors with education alone had a share of 30%
CSR fund in major social sector (Rs crore)
Total CSR spent
Source: India CSR: Five Years and 100,000 cr, GoI.
Missing links in monitoring and accountability
The government is happy that the CSR contributions have jumped nearly 50% in four years and the cumulative amount has crossed Rs 100,000 crore-mark. A big achievement when one looks at the figure. But when one scratches those figures what comes out is a complete disregard of mandatory norms the government set in 2014.
First, only 69% of the prescribed amount of CSR was actually spent during 2014-15 to 2018-19. What happened to the other 31%? The number of companies liable for CSR but not reporting has increased from just 1,000 in 2014-15 to a huge 9,753 – up more than nine times, almost the same of those reported for CSR during this period.
As per the Act CSR eligible companies have to constitute a CSR committee of three or more directors, with at least one independent director. The said committee has to formulate and recommend to the board a CSR Policy indicative of the activities to be undertaken as per Schedule VII of the Act, recommend the expenditure to be incurred on activities and monitor the CSR policy.
The question is: How many companies have adhered to this mandate? A pathetic 1,036 companies reported having a CSR committee in 2017-18 against a mind-boggling 20,187 not having any such committee. Interestingly, in 2014-15 some four times more companies had CSR committees.
The list of missing links goes on suggesting that there is a complete lack of accountability from both law enforcing authority and from within Corporate India. The government is happy that the total CSR amount is rising but ignoring the amount which it is losing for not monitoring the process.
Top listed CSR companies in 2020
The CSR Journal prepares a list of top ranking CSR companies annually based on impact assessment, compliance, funding and implementation on ground. Preparing such a ranking for 2020 was a difficult task due to Covid-19 and the list was prepared based on FY 2019-20 CSR projects which have been running since the previous year.
The implementation of CSR schemes was a difficult task in 2020 with Covid-19 induced lockdown bringing activities to a near standstill. Even otherwise Covid-19 related activities took up the biggest chunk of funding. Corporate India allocated nearly four-fifths of the annual CSR funds to address the according to Crisil Foundation
Infosys has topped the list this time pushing down Tata Chemicals to the third position after being number one for the past three years. Mahindra & Mahindra has climbed two spots to claim the second rank in the top 10 Indian companies. ITC has also climbed up from fifth spot to the fourth position this year. The Vedanta Group has outdone itself in the corporate citizenship realm, making it to the top five, from its previous 8th rank. A new entry on the top ten charts was Grasim Industries. The part of the Aditya Birla Group, Grasim won numerous awards for its flagship programmes. The IT major Wipro was placed sixth while FMCG giant Hindustan Unilever was seventh in the list. Godrej Consumer Products and the public sector BPCL completed the top ten lists with the ninth and tenth position, respectively.
CSR ecosystem post-pandemic
With the pandemic shattering the world economy and taking more time to recover than anticipated, the companies now need to revisit their priorities, need to operate differently and utilise resources with utmost pragmatism. These trends, approaches and perspectives are important as corporate social responsibility takes a new turn in the post Covid-19 world.
Important issues, which have surfaced during the pandemic are migration, poverty, inequality, mental well-being, and sustainable tourism. The need to invest in the healthcare system and train caregivers served as a catalyst for most of the funding from corporates during the start of the pandemic.