The average spending on Corporate Social Responsibility(CSR) by the companies in fiscal 2015 stood at 1.35 percent of net profit against the mandated 2 percent and total spending was Rs 6,800 crore in fiscal 2015 instead of Rs 12,000 crore, according to a comprehensive study by CRISIL Foundation.
The CSR spending has been the topic of many a public discussion after being made obligatory under Schedule VII of the new Companies’ Act, 2013.To be sure, there has been considerable scepticism about India Inc’s proclivity to look beyond profit and towards altruism. And analysis of CSR spending done in the past tended to focus on the top 50 or 100 corporates, most of which already have had a culture of philanthropy and public service.
CRISIL Foundation decided to conduct a comprehensive analysis of the listed universe of 3,855 listed companies to find out whether India Inc has indeed embraced its CSR mandate. It was an opportune moment to do so because fiscal 2015 was the first financial year for which data on such spending could be captured. Spending by unlisted companies could not be analysed because of lack of availability of data, the Foundation said.
According to the Study, about 1,300 listed companies in India fell under the ‘mandatory 2 percent CSR spend’ ambit of which, as many as 75 percent have formally reported CSR activity, spending on average 1.35 percent of their net profit – or well below the mandatory 2 percent.
Ramraj Pai, President, CRISIL Foundation said, “Compliance towards CSR in fiscal 2015 seems to be inversely proportional to size of the company – those with high turnover were short on the 2 percent mandatory spending.”
“The flow of money was skewed with 4 sectors – education and skills development, healthcare and sanitation, rural development projects, and environment — accounting for 82 percent of CSR spending despite a wide swathe of sectors being allowed under Schedule VII. Investments in incubation centres for technology development, and support for armed forces veterans/families were the least preferred segments,” he added.
Interestingly, despite a 50 percent tax break on donations to the Prime Minister’s Relief Fund, more than 90 percent of the companies that spent on CSR chose to do so directly, thus preferring to forego the benefit.
Private sector companies have been as socially responsive as their public sector peers, and ended up spending marginally more than the latter. Another Rs 5,200 crore could have been spent had all companies met the 2 percent norm, which would have taken the cumulative expenditure to Rs 12,000 crore for fiscal 2015.