Corporate social responsibility (CSR) spending in India for the financial year 2021-22 remained stagnant at Rs. 14.6k crore, which is the same as the previous year. The country has significant social and environmental issues that require attention, making the lack of increase in spending surprising. According to a recent study, companies have also failed to fully utilise their CSR funds, with over 25% of the allocated funds remaining unspent.
Under-utilisation of CSR Funds
The Companies Act of 2013 made it mandatory for companies to allocate 2% of their average net profits from the previous three years towards CSR activities. Despite the law being in place for almost a decade, the study reveals that only 27% of the companies analysed fully utilised their CSR funds. Additionally, 25% of the total amount allocated remained unspent, and 48% of companies were unable to spend the entire amount. Several factors contribute to the underutilisation of funds, including a lack of clarity on the selection of CSR activities, inadequate planning, and a lack of partnerships with stakeholders.
The underutilisation of CSR funds is concerning, given the pressing social and environmental challenges facing India. The country has a high poverty rate, with over 176 million people living below the poverty line. Moreover, India has the highest number of deaths due to air pollution in the world, with 1.67 million deaths per year. These challenges require immediate attention and investment, and CSR funds can play a significant role in addressing them.
Re-evaluating CSR Strategies
The study suggests that companies need to reevaluate their CSR strategies to ensure the full utilisation of funds. A comprehensive needs assessment can help identify the most pressing social and environmental issues, develop a robust implementation plan, and establish partnerships with stakeholders. By doing so, companies can ensure that their CSR initiatives are impactful and contribute towards the country’s development.
Moreover, companies should consider investing in long-term initiatives that can bring about sustained change. Many companies tend to focus on short-term initiatives that yield immediate results. While these initiatives are essential, long-term initiatives can bring about lasting change and have a more significant impact on the community and the environment.
In addition, companies should focus on building partnerships with NGOs, community-based organisations, and government agencies. The study suggests that companies that collaborate with stakeholders tend to have more successful CSR initiatives. Partnerships can provide valuable insights into the needs of the community and help companies develop targeted initiatives that address these needs.
The study has also suggested that companies should consider investing in the development of their employees. A well-trained and skilled workforce can bring about innovative solutions to social and environmental challenges. Companies can invest in training programs that equip employees with the necessary skills to develop impactful CSR initiatives. This can also foster a culture of corporate social responsibility, where employees are encouraged to contribute towards the company’s CSR initiatives.
Conclusion
In conclusion, the stagnant CSR spending in India is concerning, given the pressing social and environmental challenges facing the country. Companies need to reevaluate their CSR strategies to ensure the full utilisation of funds and invest in long-term initiatives that can bring about sustained change. Building partnerships with stakeholders and investing in the development of employees can also contribute towards the success of CSR initiatives. By doing so, companies can fulfil their social and environmental responsibilities and contribute towards the country’s development.
