A billion dollar story of CSR spends in FY15

31 Dec 2015

In the most comprehensive and extensive analysis yet of CSR performance of companies in FY15, more than 90% of companies have complied with provisions of Section 135 of Companies Act 2013. The analysis conducted by CII-ITC Centre of Excellence for Sustainable Development, includes disclosures of 1181 listed companies on the Bombay Stock Exchange.

By 31 March 2015, 97% of the companies had board-level CSR Committee and 94% of the companies had CSR policy, of which 91% had disclosed it on company’s website. It is important to note that Section 135 ensures engagement of boards via mandatory Board-level CSR Committee with at least one independent director as a member. Almost 50% of the chairs of CSR Committees are independent directors. Companies are serious about CSR and therefore they’ve put in these governance measures.

CESD analysis reveals that 87% of the eligible listed companies have actually spent on CSR, though around 52% spent less than 2%. 83% of those 52% of the companies have given reasons for underspend. Most of the companies lost time in the beginning to understand a fairly complex piece of legislation and then setting the governance structure, drafting a policy, and identifying projects or aligning ongoing projects to Schedule VII of the Companies Act. The other reasons for underspend are projects being multi-year, or companies couldn’t find right projects or implementing agencies.

Chandrajit Banerjee, Director General of CII, said “this comprehensive analysis corrects all distorted perceptions that compliance on Section 135 was abysmal. For thousands of crores of rupees to be spent every year, it is important to get the fundamentals correct, have processes and governance in place, and identify the right partners and projects to engage with. These are bound to have created gaps in the first year. We should now wait for results of FY16; compliance on all fronts is anticipated to be better than FY15.”

In the first financial year, around INR 6,400 crore has been spent. Almost 55% of that has been channelled to education, skills, livelihoods, health and sanitation. Most of the companies have projects in industrialised parts of the country, Maharashtra and Gujarat leading the pack. Only about 2% of INR 6,400 cr have gone to PM’s relief fund.

Mukund Rajan, Co-chair, CII’s National Committee on CSR said, “the results of the analysis should put many discussions on the subject in perspective. Corporate India has clearly attempted to contribute to nation building which was Government's and Parliament's purpose of legislating CSR. The participation of businesses will scale and will be assisted by the results outlined by this report."

The purpose of the study has been for key stakeholders to reflect on the first year of the legislation. As the results show, it hasn’t been easy for companies to interpret various aspects of CSR legislation. Many clarifications came throughout the year. Just as the Anil Baijal’s High Level Committee has recommended, the government should allow a few years for the legislation to mature and stabilise.

CII via its members has been one of most active business-led organisation engaged in development activities. CII Foundation and CII-ITC Centre of Excellence for Sustainable Development, have been contributing to improving the CSR legislation, building capacities of companies on various subject matters, and enabling collaborations and partnerships between business, governments and NGOs. It launched Sammaan, a platform in partnership with IICA and BSE to facilitate companies to find relevant NGO partners.