The Confederation of Indian Industry (CII) recently brought out the third edition of the Annual CSR Tracker 2017. Similar to the last two editions, this is the most comprehensive analysis of CSR disclosures of Bombay Stock Exchange (BSE) listed on the companies obligated to practice CSR as per the Companies Act, 2013.
The CSR Tracker aims to evaluate CSR spends related to business operations of companies that seek to be sustainable in the long run. The nature and amount of spends reflect alignment of business interests through the development areas. Through this Tracker, CII strives to put in perspective, the industry trend in terms of their spends towards this mandate.
“From Commitment to Impact” is the theme for Annual CSR Tracker 2017. Like previous years, this year too the trend towards better planning and implementation continued and CSR spends went up by about 9% in FY17 as compared to the previous year despite industrial slowdown reflected through profit before tax (PBT) numbers. In three years of the legislation, things have stabilised, organisational structures and processes have been designed, tested and put in place, CSR strategies and plans rolled out, and implementation partners identified. We find that in 2017, companies are moving beyond compliance to focus on creating a long-term impact for the beneficiaries.
Annual CSR Tracker 2017
The Annual CSR Tracker 2017 is based on disclosures of 1,522 companies as compared to 1,270 companies in 2016 and 1,181 in 2015. Disclosures are broken into 41 indicators spread across six aspects of CSR legislation: governance, policy, financials, spends as per Schedule VII, spend channels, and spend locations. Also included is beneficiary data that companies voluntarily disclose in their annual reports.
Based on average net profit of last three years (FY14-16 to be used for arriving at the applicable two per cent budget), Rs 9,680 crore was the required CSR budget for FY17. The companies have collectively spent Rs 8,897 crore or 92% of the two per cent requirement in FY17. This is an increase of about nine per cent in CSR spends in FY17 as compared to FY16.
The 2017 edition draws from earlier Trackers of 2015 and 2016, and presents the changing pattern in the spends of last two years vis-à-vis FY17. It is a reflection of how CSR has emerged from the periphery; practiced by small companies (in the initial stages of the law being implemented) to becoming part of the mainstream businesses. This is primarily because companies are now obligated to follow CSR as per law.
In FY17, health and sanitation received about 25% of the total CSR spends, whereas, one-third was received by education and skill development. FY17 had a substantial increase in CSR spends as against FY16 in the areas of environment (66%), gender equality (115%), national heritage (153%) and sports development (192%).
There was a noteworthy increase in the spends with respect to armed forces and veterans in FY17 amounting to Rs 33 crore in comparison to FY16, where less than Rs 1 crore was spent.
With respect to development activities, in all three years, about 26% of the companies preferred to invest in one activity and about 11% in five or more.
Public Sector Enterprises’ (PSEs) contribution has been consistent over the past three years at an average of about 30% of the total CSR spends. In FY17 as against the previous year, national heritage and sports development have seen a significant rise of 1,100% and 390%, respectively.
There was a drop in the contributions made to the Prime Minister’s Relief Fund as compared to previous years when 79 companies contributed Rs 80.55 crore in 2016 and 120 companies contributed Rs 107.43 crore in 2015. In 2017, only 45 companies are reported to have invested about Rs 23 crore. Moreover, four PSEs reported contributions of Rs 3.6 crore in Prime Minister’s National Relief Fund in FY17.
The number of companies spending exclusively through corporate foundations as a channel for programme and project implementation increased by about 83% in FY17 as against FY16.
Across all three years of FY15-17, the industrialised states of Maharashtra, Gujarat and Tamil Nadu remained favoured destinations for CSR investment. It appears that, over a span of three years, about 40% of the companies preferred investing in one state/UT and about four per cent in more than 10 States/UTs. Moreover, of Northeast India’s CSR receipts, 35% came from PSEs and 65% from non-PSEs.
Out of the 32 industry categories, the major contributors to CSR spends in all three financial years were oil and gas, software and services; utilities; and metals and mining. Big increases in CSR spends in FY17 in comparison to FY15 are reported in automobiles and auto components, construction materials, consumer durables, coal and other financial services.
CII Initiatives in CSR and Community Development
As part of its social development agenda, CII is actively involved in promoting CSR activities to promote sustained inclusiveness of companies. The CII National Committee on CSR and community development was constituted in 2001. The committee is responsible for developing CSR guidelines and promotes sharing of CSR experience and best practises. To involve and enable stakeholders to review and strengthen the CSR movement, CII also organizes the annual CSR Summit.
CII in collaboration with Bombay Stock Exchange (BSE) and Indian Institute of Corporate Affairs has created an online platform, “Samman”, a first of its kind initiative, to bridge the gap between corporates and NGOs. Through Samman, NGOs and projects across India are listed through a rigorous process online, from which the corporates can choose to fund and monitor their CSR grants.
To strengthen its social development efforts and lead industry involvement in CSR, CII established the CII Foundation in 2001. The CII Foundation is involved in designing, developing and managing customized and high impact CSR development projects with member companies.
Annual CSR Tracker continues to be a resourceful and unique compilation, setting the benchmark in guiding and encouraging companies as well as government to meet their CSR requirement. Analysis in the Tracker is representative of the cumulative efforts of companies towards the mandated CSR legislation that, in its implementation, has proved a social and economic obligation more than the originally conceived philosophy of philanthropy in India.
However, need of the hour suggests developing a culture of ‘Corporate Conscience’ among companies and in their business operations towards better CSR, signifying a responsible and willing acceptance of the mandate.