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Most companies preferred to implement their CSR mandate through non-government organisations or trusts

The ministry of corporate affairs made it mandatory for Indian companies to allocate 2% of their profits for corporate social responsibility (CSR) spending with effect from the financial year 2015. The total expenditure on CSR projects by Indian companies so far is expected to have crossed Rs 1 trillion from the time the law was put into effect, according to an estimate by rating agency CRISIL. The CSR spending of Indian companies for FY21 reached Rs 22,000 crore, the CRISIL report added. Most of the expenses were on Covid-19 related facilities.

“In fiscal 2021, again, assuming the spend was around the mandated mark of 2% of average profit of the preceding three fiscals, eligible companies would have spent Rs 22,000 crore on CSR, including Rs 14,986 crore by more than 1,700 listed ones and Rs 7,072 crore by unlisted entities,” said the report by CRISIL.

Breakdown

As per CRISIL’s estimates, two-thirds of the amount spent so far this year has come from listed companies and the remaining from unlisted ones. The agency further added that as much as 40% of the expenditure was over the last three years and the Covid-19 pandemic became a major focus area in the last two years.

“The successive waves of Covid-19 have been a litmus test of corporate altruism, with companies having to balance employee well-being initiatives, business imperatives and their social contract. Given the apprehensions of a third wave, the probability of diverting more funds during this fiscal year seems imminent. Thus, it remains to be seen how long the momentum holds,” said Maya Vengurlekar, chief operating officer of CRISIL Foundation.

Sector-wise spending

Education, skill development, healthcare and sanitation were the top priority sectors which received almost 53% of the total CSR spending in the FY21. Over 60% of the spending came from sectors of manufacturing, energy and financial services. PSUs accounted for 7% of the eligible companies but contributed around 32% of the total expenditure.

“Among sectors, manufacturing, energy and financial services accounted for over 60% of the spending. Public sector companies, accounting for 7% of the total eligible companies, contributed 32% of the total CSR spending, while private ones, accounting for 87% of total eligible companies, spent 63%. In both, around two-thirds met the mandate of spending 2% or more of their net profits for the preceding three fiscals. Also, in keeping with recent trends, most companies preferred to implement their CSR mandate through non-government organisations or trusts,” said CRISIL.