Thursday, 28 April 2016

CSR Picking Up Pace In India

CSR is picking up pace in India, but is still far from its target. Know more about the trends. Our CEO Noshir Dadrawala opines. 

While the initial response was slow and corporate India is still far away from the Rs 22,000 crore that was estimated to flow out of CSR budgets, the performance for the fiscal year (FY) 2015-16 seems to be better than that of FY 2014-15, the year in which the new Indian Companies Act, 2013 and the infamous Section 135 mandating CSR came into force.

Reportedly, 100 top companies spent around Rs 5,240 crore during the FY 2014-15, compared to around Rs 3,000 crore during FY 2013-14, indicating an increase of around 75% over the previous year. However, the amount was still around 26% lower than the prescribed amount. Even PSUs have spent only around 1.3% of the average of their 3-year profits on CSR.

While a large part of the expenditure was on welfare-related activities, including supporting government schemes, a few companies have invested in activities which are strategically aligned to their business activities.
Sector-wise spending is as follows:
·         Hunger, Poverty  and Healthcare – Rs 1,497 crore
·         Environmental Sustainability – Rs 540 crore
·         Rural Development – Rs  470 crore

Aligning CSR to Business Interests
All over the world, what truly drives CSR even without the law mandating it, is aligning CSR to one’s core business interests. Accordingly, several companies used CSR funds which were aligned to their business activities. For example, Tata Motors trains youth in technical and automotive trades. Similarly, Aditya Birla Nuvo runs a Skills Training Centre in collaboration with the Confederation of Indian Industry. It has trained and certified 1,036 youth in trades such as the handling and repair of electrical equipment, auto service, retailing, data entry, tailoring, and salon care.
Other companies that do likewise are Godrej Consumer Products, Kotak Mahindra Bank, Maruti Suzuki, Colgate Palmolive (India), Asian Paints and Dr Reddy’s Laboratories, to name a few.

The easy mode of CSR
Of course, some companies have taken the easy way out and contributed to the Prime Minister’s National Relief Fund (Rs. 61 crore by 19 companies) and the Swachh Bharat Kosh (Rs. 47 crores by seven companies).
Reasons for not implementing CSR
The most common reason for failing to meet the mandated spending limit appears to be, “Funds committed but not spent”. As many as 22 companies cited this as the reason for their inability to comply with spending limit norms. Another 18 companies have cited delays (in implementation, project identification, etc.) as the reason for not meeting with the spending limit.

The Future
Institutional Investor Advisory Services (IIAS) has projected spending of around Rs 8,500 crores during current FY 2015-16. According to IIAS, “There is a need for significant improvement in the quality of disclosure on CSR activities – particularly with regard to quantum of spending.” However, it is encouraging to see that most of the larger companies have committees to oversee their CSR activities, and also conduct independent audits of these. It does appear that the frequency of review/monitoring will need to be increased, to ensure adequate tracking of CSR-related activities by the board.

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