Opinion: Decade of Transformational Changes In India's CSR Landscape

Charity and philanthropy have been integral to Indian philosophy and tradition since time immemorial. Apart from individuals and religious institutions, the business community has long been recognised for its contributions to social and economic development since the 19th century. The JN Tata Endowment Scheme, established in 1892, marked the first known Indian corporate donation in the field of education and continues to drive the philanthropic activities of the Tata Group.

In 2013, the central government made Corporate Social Responsibility (CSR) mandatory, making it mandatory for companies to allocate a portion of their profits to India's social development. Initially, sceptics doubted their commitment, viewing their compliance as a mere tick-box exercise to evade legal repercussions.

Following the government's directive, corporate philanthropy gained a structured framework. As a decade has passed since the implementation of this mandate, it warrants an examination of its journey: Has it fostered greater responsibility and accountability among companies toward society and the environment in which they operate, leveraging their resources and influence to effect positive change in the world?

Legislative Mandate

India became the world's first country to mandate CSR with the addition of Section 135 to the Companies Act 2013. This required companies to allocate a minimum of 2% of their net profit over the preceding three financial years toward CSR initiatives. The provision applied to companies meeting specific criteria, including a net worth of Rs. 500 crore or more, a turnover of Rs. 1,000 crore or more, or a net profit of over Rs. 5 crore.

During the COVID-19 crisis, companies expanded their CSR activities to support government COVID relief efforts, including awareness campaigns and vaccination drives, as part of their ongoing CSR commitments.

In 2020, the Ministry of Corporate Affairs broadened the scope of CSR by allowing companies to undertake COVID-19 relief measures, such as establishing healthcare facilities or contributing to the Prime Minister's Citizen Assistance and Relief in Emergency Situations (PM CARES) Fund, under CSR.

"The pandemic compelled corporates to look beyond their neighbouring communities when it came to giving back. It also strengthened the relationship between NGOs and funders as the need for a symbiotic ecosystem became evident," says Chetan Kapoor, CEO, Tech Mahindra Foundation.

Partners In Action

The legislation fostered partnerships between the private sector, government agencies, NGOs, trade associations, and local communities, enhancing government initiatives and promoting sustainable development. Under the legislation, implementing agencies or NGOs were tasked with conducting CSR programmes on behalf of corporations.

Major corporations such as Tata, Reliance, Adani, Mahindra, Infosys, and Wipro, among others, manage their CSR initiatives through their respective foundations. Meanwhile, midsize companies have established internal teams to oversee projects executed by implementing partners or NGOs.

Growth of the Social Sector

Over the past decade, a significant portion (53% of total CSR spending) has continued to be allocated to education and skill development, as well as healthcare and sanitation.

According to the India Philanthropy Report 2024, prepared in collaboration with Bain & Company and Dasra, India's social sector spending has experienced robust annual growth of 13% over the last five years, reaching approximately Rs 23 lakh crore in FY 2023 (equivalent to 8.3% of GDP). However, India still falls short of NITI Aayog's estimated spending (13% of GDP) required to fulfil the commitments of the 17 UN Sustainable Development Goals (SDGs) by 2030, including poverty eradication, quality education and healthcare, gender equality, and climate action.

The report also notes a significant increase in corporate contributors, rising from around 30% in FY 2018 to over 60% in FY 2022. Moreover, the percentage of non-BSE 200 companies engaged in CSR initiatives increased from 50% in FY 2018 to 59% in FY 2022. However, CSR spending saw moderate growth of 7% in FY 2023.

"The post-pandemic phase has seen many companies actively step up their CSR towards more impactful and scalable projects. They have also started looking beyond the traditional areas of education and livelihoods as causes to be funded," says Mr Kapoor.

Persisting Challenges

One drawback of the legislation was the requirement for companies to prioritise the local areas surrounding their operations. Consequently, this led to geographical bias, with industrialised states receiving more funding, while rural and remote areas remained underdeveloped.

Subsequently, the government attempted to address this issue by instructing companies to balance local area preferences with national priorities. However, both the government and corporations must do more to foster overall development.

Another difficulty lies in ensuring that aid money reaches underrepresented sectors and geographical locations. According to data from FY21, states like Maharashtra, Tamil Nadu, Gujarat, Karnataka, and Andhra Pradesh received a significant portion of CSR funds, whereas northeastern states received only a fraction, highlighting a stark disparity.

Additionally, there is a challenge in emphasising corporate-NGO partnerships and identifying suitable projects for CSR initiatives. Big and well-known NGOs often receive an overwhelming proportion of CSR funds and projects from these corporations.

CSR and ESG

Some companies merely meet the statutory requirements and view CSR as a one-time donation rather than a programme-based initiative aimed at creating lasting change in society. Government entities or industry bodies should educate such companies about the benefits of long-term CSR initiatives.

With a focus on achieving India's goal of 'net-zero' by 2070, the government emphasises integrating Environmental, Social, and Governance (ESG) principles with sustainable and long-term CSR projects, aligning them with climate action and green technology.

"The CSR landscape is gradually changing with the arrival of the new generation or the next generation corporate leaders. They are more informed and conscious about addressing development challenges with a more holistic approach through incorporating ESG and Triple Bottom Line (People, Planet and Profit)," explains Shakeb Nabi, Country Director, Welthungerhilfe.

In fact, a company's performance on sustainability-related factors has become as crucial as reporting on financial and operational performance.

"We see more and more support around initiatives like skills and enterprise promotion, green development, climate change and gender and inclusion. We are also witnessing a transition with more corporate houses sharing their resources through angel and impact investing," adds Mr Nabi.

What initially appeared as a piece of legislation has, over a decade, transformed into a game-changing initiative. It has attracted participation from passionate employees of corporations who contribute their time to positively impact people's lives. CSR is no longer a mere 'tick-in-the-box' for credible corporations, listed or unlisted, but an opportunity to be part of transformational changes.

(Bharti Mishra Nath is a senior journalist)

Disclaimer: These are the personal opinions of the author