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Institutional EYE

Commentary on Corporate Governance Issues

Corporate India Commits to its Social Responsibilities

The Companies Act 2013 expects businesses to spend 2% of their three-year average profits on social initiatives. Even before the Act was put in place companies recognized they need to think about more than just profits – and did so. But since CSR has become mandatory, companies have embraced social causes with a fervour. They now apply the same rigour to causes as diverse - as hunger, poverty, healthcare, education, environmental sustainability, and rural development, as they bring to their business.

IiAS has been tracking the developments in this sphere since 2013, and has most recently studied the spend by the S&P BSE 100 companies in FY17.

The IiAS study of the FY17 Corporate Social Responsibility (CSR) initiatives and disclosures of the S&P BSE 100 companies reveals that companies are taking their CSR initiative seriously and measuring and disclosing the impact they are having.

The key findings are:

  1. Companies have spent Rs.70.5 bn, an increase of 8% compared to the previous year.

a. This is higher as compared to last year wherein the companies had spent Rs.65.5 bn.

  1. This puts the CSR spend at 98% of the prescribed spend - based on the Act, the S&P BSE 100 companies were required to spend Rs.72.0 bn on CSR.

  2. Companies spent 1.9% of their three-year average profits.

a. PSUs met the 2% target spend. However, the actual spend at Rs.20.6 bn this year was lower by 13.8% following a 26% decline in their three-year average profits b.The private sector spent Rs.47.3 bn, at an average of 1.8%.

  1. Over 30% of the aggregate FY17 spend was made towards education projects while another 30% was spent on rural development and healthcare projects.

  2. Addressing hunger, poverty and malnutrition, and environment sustainability related projects are gaining new grounds as there seems to be substantial increase in CSR spend in these areas.

  3. Ticking the CSR box’ has come down. This is reflected in the contributions to the Prime Minister’s Relief Fund, and technology incubators have declined by 89% this year.

  4. A lacuna till now has been disclosures on impact assessment. This is changing. During the current year, 81 of the 100 companies disclosed they have undertaken an impact assessment, up from 59 companies in FY16

You can read the report ‘Corporate India Commits to its Social Responsibilities’ by clicking this link.

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