More companies spending beyond the CSR mandate

The number of companies reporting on CSR spending as well as total CSR spends by listed companies have increased every year since fiscal 2015, signifying improved compliance. Even as companies intensify their efforts to give back to society, total CSR spend as a percentage of average profit has increased beyond the mandated 2% mark, according to a new report by CRISIL, a leading, agile and innovative global analytics company.

A large majority of both public sector undertakings and private sector companies continued to focus on spending more than the stipulated 2% on CSR.

Compliance is increasing

On aggregate, companies continue to be on mandate with spends of 2.12% – an increase from 2.01% in the previous fiscal. Of the 1,387 listed companies, 918, or 66%, spent 2% or more of their profits – a tad higher than 64% the previous fiscal – while 10%, or 140 companies, spent 3% or more. This was a slight uptick from the 119 companies, or 9%, in the previous fiscal.

45% of the total spend came from companies that spent between 2.01% and 2.99% of their profits on CSR. At the other end, 468 companies, or 33.8%, did not meet their spending mandate in fiscal 2020. Of these, 233 companies spent less than 1%. Of the 1,387 companies, 1,210 had figured in the list of spenders in the previous fiscal as well. As many as 776, or 64%, of these increased their CSR spend on-year. While 422 or 35% reduced spend, 12 companies, or 1%, logged no change.

Except for the Rs. 500-999 crore sales bracket, more than half of the companies in other sales brackets spent 2% or more. The number of companies with net sales of more than Rs 1,000 crore increased from 552 in fiscal 2019 to 567 in fiscal 2020. Of these, as much as 59% spent 2% or more of their profits, marginally lower than in fiscal 2019. The number of companies with net sales of Rs. 10,000 crore fell slightly to 92 from 95 in the previous fiscal. However, 61% of these spent 2% or more of their profits on CSR, up from 59% the previous fiscal.

Of companies generating less than Rs 1,000 crore of net sales, 54% spent 2% or more – down from 64% the previous fiscal. At the bottom of the pyramid, 61% of the companies with sales below Rs. 99 crore spent 2% or more on CSR, less than 64% in the previous fiscal. While not every bucket also met the mark in terms of average CSR spend, companies in the below Rs. 500 crore sales bucket appeared to show more altruism than larger companies, according to the report.

Spending by public and private sectors

CSR spending for the fiscal was spurred by the private sector as compared with the previous fiscal. This was with respect to both the increase in number of companies (1,210) and spends (Rs. 9,027 crore).

Of the total, 100 public sector companies spent Rs. 4,650 crore, 1,210 private companies spent Rs. 9,027 crore, and 77 private (foreign) companies spent Rs. 754 crore. While public sector companies represented only about 7% of the companies engaged in CSR, they contributed to approx. 32% of the total spend. Of the total public sector companies, 65% spent more than 2% of their profits, a shade more than the previous year’s 64%.

The number of companies spending less than 1% fell 2 percentage points, while that of those spending 2% or more increased by 2%. Private companies, representing about 87% of the universe of eligible companies, contributed proportionately lower, at about 63% of the CSR spend. Also, 66% of these companies spent more than 2% of their profits on CSR activities. Of the private (foreign) companies, 77% spent more than 2% on CSR, though 23% spent less than 1%