Are companies going beyond CSR?

Published on :- November 4th, 2023

8 years of CSR - Impact Over Compliance.

With more than INR 1.53 Lakh Crore spent in eight years, today, CSR is recognised as a credible source of development finance. Where are these funds being deployed? Who are the funders? What do the trends look like?

In 2014, India became the first country in the world to mandate CSR spend through legislative action. The legal mandate on CSR applies to companies that have:

Net worth of INR 500 Crore or more, OR
Annual turnover of INR 1000 Crore or more, OR
Net profit of INR 5 Crore or more.

Companies, thus coming under the CSR mandate, have to spend at least 2% of their average net profits of the preceding three years on social impact programmes in every financial year.

While the CSR spending has increased by more than 1.5 times since its inception in 2014, the yearly spend for the last three years has remained relatively constant - in the range of INR 25-26 Thousand Crore.

The spending patterns of companies, the recipient sectors and regions also continue to remain unchanged. While the overall spending pattern continue to remain sticky, CSR spend in aspirational districts has increased. Aspirational distaricts received 50% more funds in FY 2021-22 from its previous year, FY 2020-21. Here is an overview of the top trends (as per the MCA portal as of August 2023):

This spending pattern has led to an unfavourably skewed distribution of CSR funds, where the states with lower SDG scores and lower per capita GDP receive the least CSR support. States like Bihar, Uttar Pradesh, Jharkhand, Madhya Pradesh, and West Bengal receive very low per capita CSR investments per year.

States highlighted in the insight above, have low per capita GDP, high scores on the multidimensional poverty index, low scores on the Niti Aayog’s SDG index, and a very low per capita CSR investments per year.

Region-wise CSR Spend

We see a similar spending pattern across regions, with the regional share of CSR spend remaining relatively consistent for the last eight years.

Eastern, Central and North-Eastern regions receive lower CSR investments than other regions. Central and North-East regions together receive 4% of CSR funding (1.53%). More than 1/3rd of the total CSR spend goes to PAN India (projects across multiple states). And nearly 1/4th of CSR spend is in the Western region!

Mode of Implementation

Different modes are popular across different states. More than half of the implementation in the states of Maharashtra, Karnataka, Gujarat and Delhi is through an implementing agency. However, majority of the implementation in the states of Odisha, Tamil Nadu is directly by company.

Sector-wise CSR Trends

Overall Education sector received INR ~43.5 thousand crore between 2014-22. However, the yearly spend in education has been on a decline since 2019-20. Rural development projects is yet another sector which has been declining over the last four years.

More than 2/3rd of total CSR spend is in the top four development sectors: Education (28%), Healthcare (22%), Rural Development projects (9%) and Environment and Sustainability (7%). In FY 2021-22, among the top sectors, Environmental Sustainability saw the highest increase in funds (130%).

CSR compliance

In FY 2021-22, more than 50% of the companies spent more than their prescribed amount and only 1/5th of the companies have their CSR spend amount as zero (either their prescribed CSR amount is zero or they have spent zero amount with positive prescribed CSR).

Over the years, a larger number of companies seem to be spending more than their prescribed CSR mandate. Number of companies spending more than their prescribed amount has been increasing every year. At the same time the number of companies with zero spend has been reducing indicating companies are going beyond legal compliance towards a strategic and long-term CSR vision for their company.

Though the spending patterns seem to be constant, new spending trends are emerging – especially companies spending in emerging sectors like environment sustainability, increasing focus towards aspirational districts to maximise impact.

More insights on CSR funding are covered in the latest edition of our ‘The State of CSR in India’ data guide report. To access additional data assets concerning CSR Funding, explore our assets on India Data Insights.

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