CSR – CONTRIBUTION OF CORPORATES FOR THE DEVELOPMENT OF THE NATION

[Mr. M. GOVINDARAJAN]

Charity to responsibility

The historical evolution of Corporate Social Responsibility (‘CSR’ for short) can be traced back to the early 20^th  century, where businesses first began to engage in philanthropy and charitable giving. However, it wasn't until the 1950s and 1960s that the concept of social responsibility began to emerge, with the rise of social and environmental movements.

During the 1970s and 1980s, the idea of ‘corporate citizenship’ began to gain prominence, emphasizing the social and ethical responsibilities of businesses. This led to a shift towards a focus on sustainability and creating shared value for all stakeholders during the 1990s and 2000s.

Today, CSR is a key consideration for businesses across all sectors, with companies seeking to build strong relationships with customers, employees, and communities by addressing their concerns and positively impacting society and the environment.

Development of CSR in India

The following is the journey undertaken by India in respect of CSR-

• 2007 – Adoption of inclusive Growth – 11^th Five Year Plan;
• 2009 – Guidelines on Corporate Social Responsibility, 2009;
• 2009 – Standing Committee on Finance – 21^st Report on Companies Bill, 2009;
• 2011 – Voluntary Guidelines (NVGs) on Social, Environmental & Economic Responsibilities of Business, 2011;
• 2012 – Business Responsibilities Reporting;
• 2014 – Mandatory provision of CSR under Section 135 of the Companies Act, 2013 that came effect from 01.04.2014.

In India complying with the provisions of CSR is made mandatory under the Companies Act, 2013 and India is first country in the world to make the CSR as mandatory provisions to comply with for the benefit of social sustainability.

CSR Legislation

Section 134 of the Companies Act, 2013 (‘Act’ for short) provides that the Board of Directors shall submit a report with the required statements before the shareholders in the annual general meeting.  This includes the details about the policy developed and implemented by the company on corporate social responsibility initiatives taken during the year.

Eligibility

Section 135 of the Act provides that every company having-

• net worth of Rs.500 crore or more; or
• turnover of Rs.1000 crore or more; or
• a net profit of Rs.500 crore or more

during the immediately preceding financial year.

CSR Activities

Schedule VII to the Act (as amended) provides the list of activities that shall be included in the CSR policies as detailed below-

1. eradicating hunger, poverty and malnutrition, promoting preventive health care and sanitation including contribution to the Swach Bharat Kosh set-up by the Central Government for the promotion of sanitation and making available safe drinking water;
2. promoting education, including special education and employment enhancing vocation skills especially among children, women, elderly, and the differently abled and livelihood enhancement projects;
3. promoting gender equality, empowering women, setting up homes and hostels for women and orphans; setting up old age homes, day care centers and such other facilities for senior citizens and measures for reducing inequalities faced by socially and economically backward groups;
4. ensuring environmental sustainability, ecological balance, protection of flora and fauna, animal welfare, agroforestry, conservation of natural resources and maintaining quality of soil, air and water including contribution to the Clean Ganga Fund set-up by the Central Government for rejuvenation of river Ganga;
5. protection of national heritage, art and culture including restoration of buildings and sites of historical importance and works of art; setting up public libraries; promotion and development of traditional arts and handicrafts;
6. measures for the benefit of armed forces veterans, war widows and their dependents Central Armed Police Forces and Central Para Military Forces veterans, and their dependents including widows;
7. training to promote rural sports, nationally recognized sports, paralympic sports and Olympic sports; 
8. contribution to the Prime Minister's National Relief Fund or Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund or any other-fund set up by the Central Government for socio-economic development and relief and welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women;
9. Contribution to incubators or research and development projects in the field of science, technology, engineering and medicine, funded by the Central Government or State Government or Public Sector Undertaking or any agency of the Central Government or State Government; and Contributions to-

• public funded Universities;
• Indian Institute of Technology;
• National Laboratories and autonomous bodies established under-

• Department of Atomic Energy;
• Department of Biotechnology;
• Department of Science and Technology;
•  Department of Pharmaceuticals;
• Ministry of Ayurveda, Yoga and Naturopathy, Unani, Siddha and Homoeopathy;
• Ministry of Electronics and Information Technology and other bodies, namely Defense Research and Development Organization;
•  Indian Council of Agricultural Research;
• Indian Council of Medical Research and Council of Scientific and Industrial Research,

engaged in conducting research in science, technology, engineering and medicine aimed at promoting Sustainable Development Goals.

10. Rural Development Projects;
11. Slum area Development;
12. Disaster management including relief, rehabilitation and reconstruction activities.

CSR Committee

Section 135(1) of the Act makes it obligatory on CSR eligible companies to constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director.  The CSR Committee shall-

• formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the company in areas or subject, specified in Schedule VII;
• recommend the amount of expenditure to be incurred on the activities to be undertaken by the company;
•  monitor the Corporate Social Responsibility Policy of the company from time to time;

The Board shall ensure that the company spends, in every financial year, at least 2% of the average net profits of the company made during the 3 immediately preceding financial years, or where the company has not completed the period of three financial years since its incorporation, during such immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy. The Company shall give preference to the local area and areas around it where it operates, for spending the amount earmarked for Corporate Social Responsibility activities.

If the company spends an amount in excess of the requirements provided under this sub-section, such company may set off such excess amount against the requirement to spend under this sub-section for such number of succeeding financial years and in such manner, as may be prescribed.

If the company fails to spend such amount, the Board shall, in its report made, specify the reasons for not spending the amount and, unless the unspent amount relates to any ongoing project, transfer such unspent amount to a Fund specified in Schedule VII, within a period of 6 months of the expiry of the financial year.

Rules and Circulars

The Central Government, for the purposes of implementing the provisions of CSR, framed the Companies (Corporate Social Responsibility) Rules, 2014 with effect from 01.04.2014.  The Ministry of Corporate Affairs look into the CSR policies, implementation etc.  The Ministry has issued 11 circulars on the CSR activities.

CSR – for development of Nation

Providing expenditure of CSR activities, a mandatory one, has made India the only country which has regulated and mandated CSR for some select categories of companies registered under the Act. This CSR Initiative will push the nation towards achievement of sustainable development goals and public-private partnership in transforming India.

Selection of activities under CSR may be made to ensure that the benefits reach the smallest unit i.e. village, panchayat, block or district depending upon the operations and resource capability of the company. The approach to CSR planning needs to be shifted from an ad-hoc charity to a long-term sustainable approach. The Project. Management and Monitoring skills available with the companies could be shared as far as possible, with the local administration by training and setting up required structures and systems. The long-term Corporate Social Responsibility Plan should match. with the long-term Business Plan. This should be broken down into medium term and short-term plans.  Each of these plans should clearly specify-

• Requirements relating to baseline survey;
• Activities to be undertaken;
• Budgets allocated;
• Time-lines prescribed;
• Responsibilities and authorities defined;
• Major results expected.

Such plans should also clearly specify the implementation guidelines and the involvement of the implementing agency. 

CSR EXPENDITURE- SUMMARY

Certain amount has been spent by the business entities towards CSR expenditure on various development sectors.  In this article the details of CSR expenditure made during the year 2021-22 (latest data available) are discussed.

Table - 1

NO. OF COMPANIES INCURRED CSR EXPENDITURE

Financial year	No. of companies	Total amount spent on CSR (in crore)	States and UTs covered	Total No. of CSR Projects (in crore)	No. of Development Sectors
2017 – 18	21525	17098.57	39	26585	14
2018 – 19	25181	20271.65	39	32071	14
2019 – 20	22985	24965.82	38	35290	14
2020 – 21	20840	26210.95	39	39324	14
2021 – 22	19043	26278.71	40	43388	14

Source: www.csr.gov.in.

The above table shows that even though the number of companies implementing CSR is on the decrease the amount spent on CSR is on the increase and also the total number of CSR project is on the increase which shows the progress of the national that has been achieved through CSR.

Table - 2

CSR SPENT – DEVELOPMENT SECTOR WISE DURING 2021 – 2022

SLAB OF CSR INDUSTRY	DEVELOPENT SECTOR	CONTRIBUTION (in crore)
0 – 100cr	Swachh Bharat Ghosh Clean Ganga Fund Slum Development Other sectors (Technology Incubator and benefits to Armed Forces Admin Overheads Others	33.47 55.31 58.14       55.42 00.59
100 – 500 cr	Encouraging Sports Heritage Art and Culture Any other fund	289.32 242.05 308.24
501 – 1000 cr	Gender equality, Women empowerment, Old Age Home, Reducing inequalities	718.69
Above 1000 cr	Prime Minister’s National Relief Fund Rural Development Environment, Animal Welfare, Conservation of Resources Education, Differently abled, livelihood Health, Eradicating hunger, poverty, malnutrition, safe drinking water, sanitation	1202.48 1821.71   2865.12   8524.32     10103.84

Source: www.csr.gov.in.

In this table the amount spent on various development sectors during the period 2021-2022 has been reported.  Among the development sectors, Rs.10104 crore has been spent to the health, eradicating hunger, poverty, malnutrition, safe drinking water and sanitation. 

Table – 3

LIST OF TOP 10 CSR CONTRIBUTED COMPANIES DURING 2021- 22

Sl. No.	Name of Company	Amount contributed
1	Reliance Industries Limited	812.33
2	HDFC Bank Limited	722.99
3	Tata Consultancy Services Limited	719.92
4	Oil and Natural Gas Corporation Limited	436.19
5	NTPC Limited	356.71
6	Infosys Limited	344.37
7	ITC Limited	333.38
8	NMDC Limited	287.33
9	Indian Oil Corporation Limited	284.03
10	ICICI Bank Limited	266.52

Source: www.csr.gov.in.

The above table depicts the amount spent by top 10 companies in Indian towards CSR in the year 2021-22.  It is hoped in the future also such companies will spent much more towards CSR.

Compliance by companies

During the period 2021 – 2022, 3984 companies did not spend any money towards CSR.  1251 companies having the threshold limit for complying with the provisions of the CSR incurred expenditure during 2021 – 2022.  3151 companies which are below the threshold limit of CSR, incurred CSR expenditure during 2021- 2022. 10567 companies having more than the threshold limit incurred CSR expenditure.

PSU v. Non-PSU              

During 2021 – 22 PSU incurred expenditure to the tune of Rs.4345.9 crores which amounts to 17% of total CSR spending in that year.   Non-PSU companies incurred Rs.21932.8 crore which amounts to 83% of total CSR spending in that year.  The contribution of amount to CSR by the PSUs is commendable since the partakes 20% of the total CSR expenditure.

Top States

Maharashtra, Karnataka, Gujarat, Tamil Nadu, Uttar Pradesh, Delhi, Rajasthan, Telangana and Haryana are the top States in India in incurring CSR activities in various welfare measures during the year 2021-22.

CSR – Covid 19

Despite financial pressures to act otherwise, many business firms have remained committed during the COVID-19 pandemic to their previously stated (e.g., through marketing materials or on their corporate websites) concerns for CSR. They have achieved this by engaging in practices and actions that can be considered continuing to fulfill not only their required economic and legal responsibilities, but also their expected ethical and desired philanthropic responsibilities as well.

With the announcement by the government that any amount donated by companies in support of the fight against COVID-19 will qualify as CSR, a majority of the companies either contributed to the PM CARES Fund or for various other purposes that contributed to protecting health and preventing hunger of the affected. CSR is taking some burden off frontline health workers by supplementing public health systems, supplying hygiene kits and supporting the establishment of temporary quarantine facilities. Companies have responded to the needs of frontline workers to stay safe and equipped to respond to the COVID-19.

The public sector companies contributed Rs.3249 crore and the private sector companies contributed Rs.5565 crores during the COVID – 19 period for the betterment of people’s health and livelihood.

CSR – a way forward

In the Financial year 2023 the CSR budgets of the listed companies grew much more slowly than their net profits.  The listed companies spent Rs.15524 crore just 5% more than Rs.14,816 crore spent in the previous year. 

In a survey conducted by Deloitte India, it is revealed that only 28% of organizations feel “very prepared” to navigate the complexities of impact investing, despite over 50% of them having strong interest in it, including engagements with India’s Social Stock Exchange and other innovative models, such as social bonds and pay-for-success.  The survey further highlights that 50% of organizations are re-evaluating their CSR strategies due to changing local and global regulatory landscapes and enhanced disclosure requirements. Interestingly, India’s CSR landscape is evolving from a compliance-driven activity to a strategic imperative as 80% of organizations recognize CSR as a critical part in shaping their organizations’ corporate strategy. 

CSR initiatives have emerged as powerful agents of change, extending beyond traditional philanthropy to address societal challenges. In the realm of sports, CSR-driven initiatives are not only fostering athletic talent but also promoting holistic development and social cohesion within communities.   While the current allocation of Rs.242 crores to sports CSR highlights a positive trend, it's just the beginning of what promises to be a burgeoning commitment to leveraging sports for educational and developmental objectives. 

Transworld Group, a leading global shipping and logistics conglomerate, celebrated its annual Corporate Responsibility Day with a nationwide tree plantation drive, reaffirming its commitment to environmental sustainability. The initiative marks the beginning of an ambitious journey to plant 500,000 trees by 2027, coinciding with the company’s 50th anniversary.

UST Global, the digital transformation solutions company with presence in Kerala, has installed and handed over two water treatment plants in Alappuzha as part of its flagship CSR program ‘Adopt a Village’. The new water treatment plants have been set up and handed over to the people of Kandankary and Vezhapra villages in Kuttanad where the non-availability of affordable potable water had been a cause for worry for decades.  One of the beneficiaries, Sobha Mohan, 50, said, “For over three decades, our community has been suffering due to the scarcity of clean water for drinking and cooking. Continuous use of polluted water from nearby water bodies has seriously impacted our health, leading to many diseases. The new treatment plants will solve a critical problem in our lives.”

Social responsibility is deeply entwined in the Bajaj Family's businesses and its philanthropic endeavors through generations.  The Bajaj Group's humanitarian efforts are channeled through several institutions   Bajaj Groups committed Rs.5000 crore for five years towards CSR initiatives with a focus on skill development under 'Bajaj Beyond' -- the Group's new identity for all its corporate social responsibility and charitable programs. The initiatives will benefit over two crore youth and enable them to take advantage of employment and entrepreneurial opportunities offered by India's growing economy.

Amidst a severe drinking water crisis, Bangalore Water Supply and Sewerage Board (BWSSB) has called for Expression of Interest (EOI) from corporates to take up projects with new cutting-edge technologies to alleviate the water situation in the city under their Corporate Social Responsibility (CSR) funds.

Conclusion

CSR is transforming the world by encouraging businesses to integrate social and environmental concerns into their operations. This shift leads to positive impacts on communities, the environment, and even the bottom line of companies. From promoting sustainability to supporting local communities, CSR initiatives are fostering a more responsible and ethical business landscape. Companies engage in CSR initiatives for multifaceted reasons deeply interwoven with their values, aspirations, and operational strategies. Primarily, many view CSR as an ethical responsibility, recognizing their role in contributing positively to society and the environment. This ethos aligns with broader societal expectations and fosters a sense of corporate citizenship. Internally, CSR initiatives play a pivotal role in enhancing employee engagement and satisfaction.

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