A Portfolio Approach to CSR: Balancing Local Needs and National Priorities

By Dr Basavaraju R Shreshta

NEW DELHI (India CSR): Corporate Social Responsibility (CSR) is a fundamental aspect of modern business, with companies expected to contribute positively to society beyond their profits. In India, Section 135 of the Companies Act, 2013, mandates a minimum CSR spend of 2% of a company’s average net profits. However, a significant challenge in CSR implementation is the geographic concentration of resources, which often leaves underserved regions without adequate attention. This article advocates for a structured, portfolio-based approach to CSR, arguing that a strategic allocation of funds across local, state, and national levels is essential for maximizing impact and aligning with India’s broader development goals.

The Challenge of Geographic Concentration

It’s common for companies, particularly in manufacturing, to focus CSR efforts in the immediate vicinity of their operations. This proximity-based logic is understandable, as these communities directly provide land and labor. However, this approach has created a significant imbalance.

According to a 2022 analysis by Prime Database, a well-regarded source for corporate data, a disproportionately high percentage of CSR funds are concentrated in states with high industrial and commercial activity. For instance, 65% of the total CSR spend in India is concentrated in just five states: Maharashtra, Karnataka, Tamil Nadu, Andhra Pradesh, and Gujarat. This leaves the most resource-deficient states, which often have higher poverty and lower human development indices, largely neglected.

The Ministry of Corporate Affairs (MCA) has acknowledged this issue, clarifying that while companies should give preference to local areas, they should also align CSR initiatives with national priorities and Sustainable Development Goals (SDGs). This guidance highlights a dual responsibility that the current location-centric model fails to fulfill.

The Case for a Portfolio-Based CSR Strategy

A balanced and effective CSR strategy must align with the national vision for sustainable development while addressing the unique needs of local communities. A flexible, portfolio-based approach offers a solution. In this model, companies can allocate CSR funds across different geographies and sectors to serve both local and national needs.

The key is to create a diversified portfolio where CSR resources are allocated across four primary categories:

Local Area (Proximity to Operations)
State-Level Needs
National-Level Needs
Innovation and Emergency Fund

This structured allocation allows for a more equitable and impactful distribution of resources, addressing both a company’s immediate social contract and its broader role in national development.

Proposed Resource Allocation Framework

For Manufacturing Companies: A 40:25:25:10 Model

Manufacturing companies, with their fixed, location-centric operations, can structure their CSR portfolio as follows:

40% to Local Areas / District of Operation: This portion is for direct community welfare, including education, healthcare, and infrastructure. This addresses the immediate needs of the workforce and the surrounding population.
25% to State-Level Needs: This allocation helps address broader state-level challenges, such as rural development, sanitation, or employment in underserved regions within the state.
25% to National-Level Needs: This portion is for contributions to national priorities. Areas like poverty alleviation, public health, and climate change can be addressed at a larger scale, helping to reduce national disparities.
10% for Innovation and Emergencies: This fund is for agility, reserved for disaster relief, unexpected emergencies that may arise anywhere in the country or supporting innovative social solutions for creating program prototypes to solve social problems effectively.

For Non-Manufacturing Companies: A 30:30:30:10 Model

For non-manufacturing companies, such as software firms or e-commerce businesses, which have a broad but less geographically tied workforce, a slightly modified approach is necessary:

30% to Local Ecosystem: This portion can focus on the local needs of the urban / peri-urban centers where their employees live and work, such as urban sanitation, green spaces, and digital literacy, civic engagement, environment and hygiene etc.
30% to a Focus State or a Cluster of Backward Districts: This allows companies to strategically concentrate their funds in a specific, high-need area, creating a more significant and measurable impact.
30% to National-Level Priorities: This ensures a significant contribution to national issues, with a focus on areas where these companies have a core competency, such as technology-enabled social solutions for health or education.
10% for Innovation and Emergencies: Similar to the manufacturing model, this fund allows for nimble responses to emerging social challenges and investments in scalable, technology-driven solutions.

Conclusion

A balanced CSR portfolio is not just about compliance; it is about maximizing social impact. By moving beyond a narrow, location-centric approach, companies can contribute to a more equitable and sustainable India. This strategic shift—from a focus on a company’s immediate surroundings to a more holistic view that includes state and national priorities—allows CSR to become a powerful engine of balanced, inclusive growth, supporting the achievement of the nation’s aspirations for overall development.