CSR strengthening its roots in corporate IndiaMegha | December 22, 2015
Within business circles, corporate social responsibility is a term that’s often misunderstood. However, since the Companies Act 2013 was passed, every major organisation in India has had to put CSR at the top of its priority list. Many argue that the act ‘forces’ organisations to set up a CSR budget and consequently goes against the ‘spirit of CSR.’ But the bottom line is this—it works.
Compared to 2013 and 2014, organisations have spent considerably more on CSR in the 2015 financial year. And whether this is voluntary or not, it’s actually happening.
At one point of time, most of the private sector wasn’t concerned about CSR. As for the companies that were, CSR didn’t really form a major part of their budget. But with the 2% rule, the Companies Act has ensured that any organisation liable to engage in CSR is spending enough money to make a tangible difference in society.
According to GayatriSubramaniam, convener and CPE at IICA, there has been a shift in the sands. From being an inconsequential part of anorganisation’s budget, CSR has become an important boardroom topic. With the regulations set by the government, the board needs to be actively involved in setting up CSR committees and approving the strategies conceived by them.
Another thing to note is that the Companies Act directs organisations to take any profits from their CSR activities and put them back into the CSR budget. This encourages businesses to engage in innovative CSR programs with high ROI, making it easier for them to meet the required CSR expenditure in the next financial year.
Most companies in India run their CSR activities through NGOs. This has has also managed to somewhat alleviate the funding problem faced by many of these institutions.
A majority of CSR expenditure in 2015 went towards education, skill development, and healthcare. The Bharti Group, for instance, has committed to spending close to INR 100 crore on building toilets in Punjab’s rural households.
Perhaps the most encouraging trend this year has been the exponential increase in the CSR budget of industry leaders. For example, Infosys has spent around 240 crores in 2015, compared to 9 crores in 2014. And Wipro has spent 132.7 crores, compared to 16 crores last year.
Another thing that’s worth mentioning is that even though there is no penalty for non-compliance of CSR rules, most SMEs and larger organisations have done their bit to meet the 2% requirement.
There’s still a lot of scope for innovation when it comes to CSR in India. However, it’s too early to gauge how companies will spend on CSR in the coming years. But one thing is for sure—CSR is no longer a vague corporate term. It’s a business priority, and it’s here to stay.