Most CSR funds spent in the operational areas of companies; only 3% companies did CSR investments in north-eastern states: Report

BSE listed companies spent Rs 6400 crores for CSR

According to a report compiled by CII-ITC Centre of Excellence for Sustainable Development (CESD), companies chose to spend in areas where they operate. Maharashtra and Gujarat, the states which host many of these corporate companies saw majority of them spending there for CSR activities. Far flung areas with lesser corporate operations saw meager funds spent there.

“The western states of Maharashtra and Gujarat saw CSR investments from 50% of the companies. North-eastern region (Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Tripura) were at the lowest end of the spectrum with only 3% of the companies choosing CSR investments in those states,” the CESD report read. Stating one major reason behind CSR funds being mostly limited to their operational areas, Noshir Dadrawala, CEO, Centre for Advancement of Philanthropy (CAP) says, “The CSR rule says that preference should be given to local areas around the company’s establishment. Though the law doesn’t restrict activities in other areas but lays preference and so companies tend to work in surrounding areas. North-east as we know is under developed as far as industries are concerned except for some mining and other industries whereas states like Maharashtra and Gujarat have many industries.”

The report analysed 1181 companies listed on BSE index and totaled their CSR spent amounts at Rs 6400 crores. Though most companies spent on CSR, more than half of them failed to spend 2% of their profits as mandated by law. Going by figures 87% companies actually spent on CSR, while around 52% spent less than the mandated amount. 83% of the companies have given reasons for not spending the required amounts. According to the new Companies Act 2013, companies with profits above certain levels are mandated to spend 2% of their average net profits on social activities as mentioned in Schedule VII of the Companies Act 2013. According to the report, education and healthcare came up to be the favourite sectors of corporate firms with the highest number of funds being spent there. Rs 1800 crores were spent in the field of education and skills through construction and improvement of academic facilities, providing vocational skills and livelihoods training.

An amount Rs 1700 crores was spent towards healthcare and sanitation which included initiatives such as health camps, construction of medical facilities, building toilets, providing safe drinking water and similar. Toilet construction especially in rural areas and in public schools was observed to be a major thrust area keeping in mind the national level initiatives of Swachcha Bharat and Swachcha Vidyalaya.

About 1% companies invested in technology incubators and about 2% companies spent in activities for armed forces and veterans. These figures show a marginal difference from the pattern of Nifty companies. According to a recent report based on 50 Nifty companies, none of them invested in technology incubators and only one company invested in funds for armed force veterans. Divergent from the popular notion, the Prime Minister’s Relief Fund did not have many funders. Only 2% of Rs 6,400 crores went to PM’s relief fund and only 13.5% companies, or only 119 contributed to PM’s relief fund. The CESD report showed that the first year of CSR law implementation was pretty much on a good track as far as the governance is concerned.

About 97% companies constituted board level CSR Committees by March 31, 2015. Of these, 94% companies also had their CSR policy in place by March 2015. According to Section 135 of the new Companies Act 2013, companies are required to have at least three members in the CSR committee.

However the report states that 30% companies under the survey had more than three members in the committee and 68% of them had 3 members. About 2% companies did not mention the number of their members. Almost half the chairs of CSR Committees are independent directors though. Corporate India seems to be on the right track to begin with. “Though the CSR funds used are far less than what were supposed to be, the results are not completely unexpected given the fact that this is beginning of implementation.

It is not a great start but certainly a good start for the rule. Considering this is only the first year and many of the companies are first time practitioners of CSR, we can expect better results in the second year and stability in the third year,” adds a hopeful Dadrawala from CAP that provides guidance and advisory services to companies for CSR compliance.