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India Inc’s CSR spending rises 22%, bulk of it on education, health

Average spending up 29 basis points to 1.64% in fiscal 2016 against mandate of 2%

India CSR Network

MUMBAI: CRISIL Foundation’s analysis of India Inc’s CSR activity last fiscal shows overall spending increased a significant 22%, with bulk of the money going into education, skills development, healthcare and sanitation initiatives.

The Companies Act, 2013, encourages corporates to spend at least 2% of their average net profit of the past three years on CSR activities.

In fiscal 2016, the second year of the CSR mandate, 1,505 companies, or 30% of the 4,887 listed on the Bombay Stock Exchange, met the criteria for mandatory spending. Of these, 77%, or 1,158 companies, reported on their CSR activity, compared with 1,024 companies, or 75% of the 1,300 eligible in fiscal 2015.

These 1,158 companies also spent a lot more money compared with fiscal 2015, which led to a 29 basis points improvement in average spending to 1.64% compared with 1.35% in fiscal 2015, moving closer to the 2% mandate.

Says Ashu Suyash, Managing Director and CEO, CRISIL, “A standout feature last fiscal was about focus shifting to CSR outcomes. This is indeed the way to go, as underlined by the ‘Effective Altruism’ movement worldwide where, instead of doing what feels right, find the best causes to work on by using empirical evidence and analysis.”

A quick survey of corporates and implementing agencies threw up some interesting pointers to this end. Majority of the companies said they were open to collaboration for CSR activity, but finding the right partner, and structuring and reporting on such partnerships, were among the challenges. In absolute terms, the total money spent rose by Rs 2,500 crore to Rs 8,300 crore in fiscal 2016. Another Rs 1,835 crore needed to be spent for the average to achieve the mandated 2%. Of this, as much as Rs 5,300 crore – or Rs 1,175 crore more than fiscal 2015 – were spent on CSR activities linked to education, skills development, healthcare and sanitation, which are also the government’s priority areas.

Says Ramraj Pai, President, CRISIL Foundation, “This public-private complementarity is great to see because, as a percentage of total government expenditure, India spends significantly less than what other BRICS nations do. So the private sector ramping up where government spending is low is truly synergistic CSR.”

There were 133 companies that either didn’t spend a dime, or were still freezing their CSR agenda. But even that is an improvement given that 200 companies were in the same boat in fiscal 2015. Of the 1,024 companies that figured in our analysis last year, 917 continued to meet the CSR criteria in 2016. Nearly two-thirds of them increased their CSR spend, while one-third reduced. Encouragingly, 56% of them spent 2% or more compared with 50% in fiscal 2015.

In fiscal 2015, smaller companies had spent relatively more, but in fiscal 2016, the larger ones have done well with more than half of them adhering to the 2% mandate versus approximately a third previously.

There were two reasons for the 22 percentage point jump in adherence by the larger companies: one, they are overcoming the challenge of large-scale interventions, which takes more time and effort. And two, they are using implementing agencies, mainly non-governmental organisations, for execution. Somewhat counterintuitively, many smaller ones preferred going solo.

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