CSR: A Catalyst for Systemic Change

Published on :- October 21st, 2024

It’s been a decade since the CSR mandate came into effect and it's clear that the role of CSR has expanded significantly. With more than ₹1.84 lakh crore in CSR since its inception, companies are increasingly adopting a problem-first approach, going beyond the transactional nature of funding programmes to create a more enduring impact.

India’s corporate sector has experienced an unprecedented surge in profitability over the past few years, with over 33,000 companies witnessing nearly a fourfold increase in profit before taxes between FY20 and FY23. This financial growth has been mirrored by a significant rise in CSR expenditures, with more than ₹29,700 crore allocated in FY 2022-23 alone — a 13% increase over the previous fiscal year.

In FY 2022-23, an impressive 56% of companies not only fulfilled their legal CSR obligations but went above and beyond, highlighting a significant shift toward using corporate social responsibility as a powerful tool for driving real social impact.

While there has been an increasing trend in unspent funds. In FY 2022-23, 4.86K (~20%) companies failed to meet the mandated 2% CSR expenditure — an increase of 1.5K from the previous year. However, our analysis of listed companies shows that these unspent funds are not abandoned but rather delayed, with plans for utilisation in the coming years.

As per the CSR law provision: “The company needs to give preference to the local area and areas around where it operates, for spending the amount earmarked for Corporate Social Responsibility activities.”

Companies headquartered in Western and Northern regions tend to contribute an equal or greater share of CSR amounts in PAN India projects. On the other hand, CSR spending by companies in other regions has been predominantly in their headquartered regions.

Cumulatively, over the last nine years (2014-23) more than 1/3rd (35%) of the CSR has been in projects with PAN-India scope (project spanning more than one state). However, CSR spend in PAN-India projects has been declining. In FY 2022-23, only 23% of the CSR amount was in PAN-India projects.

CSR flow is least in the Central, Eastern, and North-Eastern regions — together constituting only 10% of the total CSR amount. These are also the regions that host many states that have lower per capita GDP, have low SDG scores on NITI Aayog’s SDG Index, and also receive very low per capita CSR investments per year.

Education and healthcare have consistently been top CSR priorities, with education maintaining its lead as the largest recipient of CSR funds between FY 2014-23, securing 29.07% of the total allocation, followed by healthcare at 21.83%. However, a notable shift is emerging as companies increasingly direct funds toward sectors like sports promotion and natural resource conservation, spurred by growing concerns over climate risk and environmental sustainability.

CSR spending in areas of livelihood enhancement and conservation of natural resources-related projects has surged nearly twofold in FY 2022-23 compared to the previous year.

Since the inception of CSR in 2014, the channels adopted for CSR project implementations have also evolved.

Cumulatively (2014-23), more than half (51%) of CSR project amount was implemented through the agencies; this share has been increasing year-on-year. In FY 2022-23, more than 19K crore (65%) was channeled through the implementation agency — an increase of six percent points.

On the other hand, the share of implementation directly by the company has almost remained consistent — approximately one-third of the annual CSR amount.

While overall spending patterns remain relatively stable, new trends are emerging, with companies increasingly focusing on sectors like environmental sustainability, natural resource conservation, and livelihood enhancement projects. Additionally, more companies are choosing to execute their CSR initiatives through specialised implementing agencies, signaling a shift in how these efforts are being managed and deployed.

As India continues to grow as the world's fifth-largest economy, it is crucial to align CSR efforts with the nation's economic and social ambitions. Moving forward, it will be essential for companies to synchronise their CSR strategies with evolving sustainability compliance and channeling their resources towards regions with significant social gaps — particularly where public capital has been insufficient and also directing their resources to areas where they can make the most measurable impact.

Detailed analysis and data insights on CSR funding are covered in the 2024 edition of our ‘The State of CSR in India’ data guide. Key insights from the detailed analysis are covered in this short report.

For more analysis and insights on CSR funding, explore our assets on India Data Insights.

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