Need For Meaningful, Impactful CSR Spend: Sudhir Sinha, CEO, CSR Inc
In the fourth year since the Companies Act 2013, and the introduction of Section 135 notification, companies continue to measure their social and environmental performance along with their financial performance.
With India being one of the first countries to mandate Corporate Social Responsibility (CSR), there is a growing interest among various stakeholders to see how the scenario is progressing.
The Companies Act, 2013 and the CSR Rules (The Act) came into effect from 1 April 2014. The Ministry of Corporate Affairs is responsible for the enforcement of the Act and its regulation.
As per the Act, companies having a net worth of Rs 500 crore or more, or a turnover of Rs 1000 crore or more, or a net profit of Rs 5 crore or more in a given financial year are required to spend 2 per cent of their profits on CSR programmes. As CSR expenditure for 2017 is yet to be disclosed, we analyse the CSR trends from last year, in 2016.
In 2016, Reliance Industries Ltd continued to hold the top spot with respect to CSR expenditure, however decreasing its CSR expenditure from Rs 760.6 crore to Rs 652 crore.
NTPC Ltd rose up the ranking in terms of CSR expenditure, increasing it from Rs 205.2 crore to Rs 491.8 crore, holding the second spot in 2016 in terms of CSR expenditure.
The Oil and Natural Gas Corporation Ltd fell down one spot in CSR expenditure from 2015 to 2016, decreasing CSR expenditure from Rs 495.2 crore to Rs 421 crore. Tata Consultancy Services Ltd rose up one rank in CSR expenditure, increasing it from Rs 210.4 crore to Rs 294.2 crore.
Other companies in the top 10 CSR spenders in 2016 include South Eastern Coalfields Ltd (Rs 270.9 crore), ITC Ltd (Rs 247.5 crore), Central Coalfields Ltd (Rs 212.8 crore), NMDC Ltd (Rs 210.1 crore), Tata Steel Ltd (Rs 204.5 crore) and Infosys Ltd (Rs 202.3 crore).
As per the Act’s requirements and public disclosures of top 100 companies’ profits, they were required to spend Rs 7233 crore against which companies committed Rs 7355 crore (higher by Rs 122 crore) and had spent Rs 6518 crore (90 per cent) in 2016. This is higher as compared to 2015 wherein the companies had spent Rs 5115 crore (79 per cent) against the requirement of Rs 6490 crore. An increase of 11 per cent spends was observed during 2016 as compared to 2015. The average spending per company had also seen a nearly 15 per cent increase in 2016.
As per a report by KPMG, compliance to the requirements of the Act had improved in 2016. A positive trend in the availability of information can be seen as compared to 2015. Similarly, strengthening of governance mechanisms for CSR projects was also visible.
Overall CSR spending had increased and thematic areas of health, education and sanitation witnessed higher budget allocation from corporates and a few corporates had gone beyond the 2 per cent mandate and spent more on CSR.
However according to Sudhir Sinha, CEO of CSR Inc, “While it can be acknowledged that the cumulative CSR spend has seemingly increased with more numbers of companies joining the league under the laws, CSR in the current form of understanding and practice in India is unfortunately very 'transactional'. Approach to CSR is piecemeal and unstructured.”
“If these trends continue, CSR will fail to reach its purpose and objectives. There is, therefore, a need for the government, companies and civil societies to go for the meaningful and impactful CSR spend," added Sinha.
