NEW DELHI
:
India Inc. is displaying diverging trends in its charity: businesses overshoot their legally mandated corporate social responsibility (CSR) budget when the spending obligation is low, but struggle to deploy these funds when CSR budgets are high.
Businesses with small CSR budgets show “outsized intent” to do charity compared to their statutory obligation, while those with the largest budgets face challenges in the implementing agencies’ absorption capacity, according to a study of government data by private ESG and CSR advisory firm Sattva Consulting.
The findings of the study–‘CSR’s next Act: How the coming decade will redefine corporate impact’–are based on an analysis of the spending pattern of over 20,000 companies in each of the three years up to FY24. It also shows that while cities remain the focal point of companies’ CSR spending, smaller towns are gradually increasing their presence.
According to the study, 29% of companies that spent on CSR in all three years up to FY24 consistently deployed more than their prescribed budget. As per data available from the ministry of corporate affairs, over 27,000 companies spent nearly ₹35,000 crore on CSR in FY24.
In FY24, a little more than two-thirds of the 17,645 companies that spent less than ₹1 crore on CSR overshot their budgets, while a fifth underspent and close to 16% spent exactly as mandated.
The picture shifts dramatically for larger companies. Among the 35 businesses that spent between ₹50 crore and ₹100 crore in FY24, more than half underspent, while two-thirds of the 44 companies that spent over ₹100 crore in that year spent less than their statutory obligation.
“Businesses with large CSR budgets should start diversifying their project portfolios, utilise all available technology and expertise where needed, in order to successfully implement projects and deliver impact,” said Srikrishna Sridhar Murthy, co-founder and CEO, Sattva Consulting.
Challenges and opportunities
Experts also said the idea of giving back to society through philanthropy or corporate social responsibility is still finding its feet in India.
“Unlike in the Global North, where the culture of giving has grown over time, CSR here became more of a rule than a habit, something companies were told to do,” said Rajib Nandi, vice president, Sambodhi Research and Communications Pvt Ltd., a consulting firm which works across sectors, including CSR.
“While smaller organisations often find it easier to allocate funds and engage directly with communities or government initiatives, for big corporations, it is more complex,” said Nandi. “Big corporations do not always understand how the development sector works, who to trust to create real impact, how to identify credible partners, understand social impact, or build systems that ensure meaningful change.”
“This gap has led to the rise of intermediary organisations that bridge the two worlds—helping corporations channel their intent and helping social organisations access the support they need to create real impact,” said Nandi.
Murthy of Sattva Consulting said economic activity is growing in smaller towns, and as businesses expand their presence in smaller towns, CSR operations will also expand there. It is difficult for businesses to spend all their CSR budgets in large cities owing to their absorption capacity limits and increasing stakeholders in other cities, said Murthy. The study showed that smaller cities and industrial hubs are increasingly attracting more CSR funds.
The Companies Act mandates that every business with net worth of ₹500 crore or more, or a turnover of ₹1000 crore or more, or a net profit of ₹5 crore or more in the previous financial year, has to spend 2% of net profits on CSR.
