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Institutional EYE

Commentary on Corporate Governance Issues

Corporate Social Responsibility: Sustainable Progress

Overall spends of S&P BSE 100 companies increased 25% to Rs.65.5bn, or 1.7% of their three-year average profits. The largest increase in overall spends have been from public sector companies (PSUs): PSUs have increased their spends by 41% to race upto 1.8% of three-year average profits. This year, PSU spends are higher at 1.8% are higher than those of non-PSUs (which are at 1.7%).

IiAS studied the FY16 Corporate Social Responsibility (CSR) initiatives and disclosures of the S&P BSE 100 companies. The data reveals that companies are taking their CSR initiative seriously. Over 60% of the aggregate FY16 spend was made towards the causes of education, and hunger, healthcare and poverty alleviation. Contributions to the Prime Minister’s Relief Fund, and to the Swachh Bharat Campaign aggregated a little less than Rs. 4 bn. 48 companies undertook CSR initiatives that were strategically positioned to the core business.

Corporate India has, as is innate to its functioning, also begun a serious effort to measure the impact of its spend. 59 of the 100 companies disclosed their they had undertaken an impact assessment, up from 47 companies in FY15. Kotak Mahindra Bank and Federal Bank, for example, run financial literacy programmes. Others, like HDFC Mutual Fund, have a Cancer Cure Fund that uses invests the fund’s capital to generate returns: these returns are matched by the mutual fund and donated to the Indian Cancer Society.

Despite the initial push-back on the mandatory spend, companies have been responsible about their corporate social responsibilities. Several companies were spending on CSR initiatives well before the regulation came into place – the regulation seems to have allowed more structure and focus towards the agenda

Some companies like ITC Limited, HDFC Bank, Wipro Limited, and Tata Power Limited, have also adopted more stringent disclosure standards, following the G4 Sustainability Reporting Guidelines and publishing a separate sustainability report. IiAS believes more companies must emulate this initiative and improve overall disclosure levels

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