Data as of August 2023 indicates that more than Rs. 1.5 lakh crores have been spent under CSR since 2014-15. Between 2018-19 and 2021-22, expenditure on healthcare more than doubled. Majority of the expenditure is industrialized states.
The role of corporations in society has come under increasing scrutiny in the aftermath of tremendous economic expansion and integration into the global economy. This economic progress has not, however, spread evenly throughout society, and there is a substantial rural-urban gap, poverty, malnutrition, and difficulties in the areas of education and health. The concept of corporate social responsibility (CSR) was developed with the intention of making businesses more accountable for their social and environmental responsibilities.
From initially being a voluntary sustainability reporting mechanism to a legislative mandate, the concept of CSR has undergone various reforms, from reporting requirements to enhanced disclosures wherein penalties deter rather than punish.
In this story, we look at the pattern of CSR expenditures post-COVID-19 and analyse if there has been any deviation from the earlier years. Read our earlier story on CSR expenditure here. The data used for the analysis has been obtained from Dataful, wherein the statistics related to CSR are maintained in a clean and standardized format. The primary source of the data is the National CSR Portal.
CSR expenditure crosses the 1.5 trillion Rupees milestone in Eight years from 2014-15 to 2021-22.
The primary goal of CSR is to promote ethical and sustainable business philosophy on a broad scale and to inspire enterprises to come up with innovative ideas and strong management strategies for resolving social and environmental problems. In the past eight years, there has been decent progress in creating sustainable projects with long-term benefits.
It is observed that over the past eight years, there has been an incremental growth in the CSR expenditure. From Rs. 10,065 crores in 2014-15, the CSR expenditure rose to Rs. 26,211 crores in 2020-21, the highest since the enactment. Thereafter, it reduced marginally to Rs. 25,932 Crore in 2021-22, as per data available on the CSR portal as of August 2023. Overall, the cumulative CSR expenditure has crossed 1.5 lakh crores since it was made mandatory.
Despite such impressive figures, there are shortcomings too. Before the onset of COVID-19, between 2017-18 to 2019-20, the average annual growth rate of CSR expenditure had been nearly 20%. However, for 2020-21, the average annual growth rate was merely 5%, whereas 2021-22 registered a negative growth rate of 1%. The number of companies filing in the MCA21 registry also fell from 25,179 in 2018-19 to 18,012 in 2020-21.
CSR expenditure on Health Care grew by 50% post COVID-19
The COVID-19 pandemic has posed challenges to firms and organizations with regard to CSR. The successive waves of COVID-19 have inevitably put brakes on regular activities. This has required businesses to balance efforts for employee welfare, operational necessities, and their societal commitments.
The Ministry of Corporate Affairs (MCA) had issued a slew of notifications indicating the eligibility of spending on COVID-19 relief and prevention under CSR. The numbers from the CRISIL CSR Yearbook 2021, indicate that during the first wave, there was a significant increase in cash donations, mostly through the PM CARES Fund. In the second wave, owing to its severity, support largely came in the form of healthcare infrastructure such as PPE Kits, Ventilators, and Oxygen cylinders among others.
While the CSR portal does not maintain specific data on COVID-19, it is clear that there has been a shift in spending towards healthcare post-COVID-19. The sectoral data on CSR expenditure indicate that healthcare spending rose from Rs. 4,905 Crores in 2019-20 to Rs. 7,325 Crores in 2020-21, marking a 50% growth. As mentioned above, the PM National Relief Fund had also witnessed almost 100% growth, from Rs. 7,98 Crores in 2019-20 to Rs.1,698 Crores in 2020-21. In 2021-22, the contributions to PMNRF fell to Rs. 1,191 Crores. The expenditure on other central government funds grew from Rs. 932 Crores in 2019-20 to Rs. 1,618 Crores in 2020-21. In 2021-22, it fell to Rs. 303 Crores.
Flow of CSR funds is highly skewed towards few states (mostly industrialized states).
A state-by-state examination of CSR expenditure finds that some states have the highest concentration of CSR-led activity, which is increasing over time. In terms of total CSR spending from 2014–15 to 2021-22, states like Maharashtra, Karnataka, Andhra Pradesh, Gujarat, Tamil Nadu, and Delhi received about 40% of the total expenditure.
Out of the total districts in India, NITI Aayog categorized 112 districts as aspirational (112 most under-developed districts across the country). More than half of these districts are spread across five states namely- Jharkhand (19), Bihar (13), Chhattisgarh (10), Madhya Pradesh (8), and Uttar Pradesh (8). The flow of CSR funds to these states over the past eight years has been merely 6% of the total CSR expenditure.
It is important to note that the states that receive 40% of the CSR funds constitute only 10% of the 112 aspirational districts, whereas states that have a higher number of aspirational districts receive only a miniscule share (6%) of CSR funds, indicating the heavy skewness towards some selected states. There is a skew in favour of industrialised states such that the least developed states receive the least funds. While operational areas of companies have a major role to play in the location of CSR expenditure, such a heavy skew indicates that the funds may not be spent in the most needed areas.
Need a robust database and compliance mechanism on CSR expenditure.
On multiple occasions during the Parliament sessions, the Government pointed out to the existing corporate governance framework and legal provisions to check for compliance of CSR activity. However, there is no oversight mechanism to check on the CSR compliance. The High-Level Committee on CSR in 2018 also called out the need to have a statutory auditing of CSR funds.
The report also highlighted the low compliance in CSR expenditure. The report also highlighted the skewness of the flow of CSR funds. It recommended companies need to balance CSR spending between local areas/areas around where it operates, and less developed regions such as aspirational districts. Further, it was observed that a majority chunk of CSR funds was spent by implementing agencies, and fund transfer by companies to these agencies was counted as CSR spending. The committee recommended that such disbursal is not misconstrued as CSR Spending.
The Committee further recommended that an independent third party may undertake an assessment of CSR Projects to identify best practices and showcase them as role-model projects for the benefit of all.