CSR spending on the rise but not equitable, skewed towards three sectors

Six states account for a third of total CSR spending; three sectors account for 59.9 per cent of funding.

The government has mandated a new disclosure framework for corporate social responsibility from this year onwards. Companies shall have to file a detailed report for 2020-21 highlighting expenditure on ongoing projects and new projects, creation of capital assets, details of the impact assessment reports, among other things.

While the new norms aim to increase contributions from companies and make them more compliant, a Business Standard analysis shows that CSR contributions were on a steady rise before the pandemic.

Analysis of data from the government’s CSR dashboard shows that in 2020-21, companies spent a total of Rs 20,360 crore on CSR commitments. The year before, they spent Rs 24,864 crore, a 24 per cent rise over the previous year. In the last six years, the growth in CSR contributions has averaged 14 per cent.

While the new framework is expected to increase this further as corporate contributions are nowhere near the 2 per cent net profit mark as mandated by the law, analysis reveals that a more significant issue pertains to rechanneling of investments.

The investments by companies are skewed towards three sectors, and contributions to these sectors have been increasing.

Education, healthcare and rural development accounted for 59.9 per cent of total spending on CSR in 2020-21; in 2014-15, their share in total CSR spending was just 54.6 per cent.

While education's share has declined, health care has assumed importance in CSR spending. Education spending accounted for 25.7 per cent of total CSR spending in 2014-15, which increased to 33.7 per cent in 2017-18. It has since fallen to 24.8 per cent in 2020-21. In contrast, health care spending has increased from 16.2 per cent in 2017-18 to 26.9 per cent in 2020-21.

Moreover, most of the funds are flowing to the developed states rather than states that require funding for development. Maharashtra, for instance, accounts for 13 per cent of the total spending. Six states—Andhra Pradesh, Delhi, Gujarat, Karnataka, Maharashtra and Tamil Nadu—accounted for over one-third of total CSR spending in 2020-21.

The share of 6 states has declined from 42.4 per cent in 2016-17. But the share of more populous and poor states like UP, Bihar, Chhattisgarh and Jharkhand has remained negligible. These four states accounted for just 6 per cent of total CSR spending in 2020-21.