BackFMCG firms’ CSR spend up by 57%, Nestle misses target
Consumer goods companies' share to CSR rose by 57% in 2014-15, in its first year of implementation as under Companies Act 2013
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Bengaluru: As more and more companies publish their annual reports, the gradual swelling of the Corporate Social Responsibility (CSR) kitty is evident from the numbers. Consumer goods companies’ share to CSR rose by 57% in 2014-15, in its first year of implementation as under Companies Act 2013.
Six major companies ITC Ltd, Hindustan Unilever Ltd, Nestle India Ltd, Godrej Consumer Products Ltd, Dabur Ltd, Emami Ltd spent ₹ 343.2 crore during the year, mostly in health, nutrition, livelihoods and sanitation initiatives.
Leading the pack, the largest company by revenue, ITC Ltd had to double its CSR spending to ₹ 214 crore to comply with the law. ITC’s CSR itself accounted for 60% of the sector’s total spending.
The cigarette maker spent largely on soil conservation ( ₹ 31.45 crore) and livelihood initiatives ( ₹ 28.53 crore) where it trains dairy farmers and help set up of modern milk collection networks, which lead to increase in income of farmers through enhanced productivity.
The CSR rules, came into force on 1 April last year under the Companies Act 2013 and companies with a net worth of ₹ 500 crore or more or revenue of at least ₹ 1,000 crore or a net profit of ₹ 5 crore in a given fiscal year should spend 2% of the profit of the last three years on CSR activities.
While most of the six firms were able to meet the 2% mandate and in fact spent a few lakhs more than needed, Swiss multinational, Nestle which is in eye of the Maggi-ban storm, not only missed meeting the 2% CSR spend by a wide margin, but also saw its CSR spend fall in 2014. (The company follows a calendar year of reporting).
According to its annual report, Nestle India had to spend ₹ 30.7 crore in 2014, but it spent only ₹ 8.5 crore in the year ended 31 December 2014. Its CSR spend fell by 64% from ₹ 23.9 crore in 2013.
Of the ₹ 8.5 crore it spent, ₹ 5 crore went to the Swach Bharat Kosh set up by the Central Government for the promotion of sanitation and making available safe drinking water. It spent ₹ 1.5 crore on raising nutritional awareness among government school children around its eight manufacturing units in Haryana, Tamil Nadu, Goa among others.
“Nestle would do well to focus on good nutrition practices for CSR especially given the controversy they are facing and the fact that 60% of Indian children are wasted, stunted, underweight or a combination of the above," says Priya Naik , founder of Samhita Social Ventures, a CSR consulting firm. Initially, they may face backlash for it because of the Maggi controversy, but given their core competencies, they could make a very valuable contribution to the malnutrition challenges that we are facing as a country, adds Naik.
As a way of explanation of why Nestle did not meet the mandate, in its annual report it said: “The company has been implementing societal activities since many decades. As per the strict interpretation of the new CSR rules, some of these initiatives may not be eligible under the 2% CSR spend."
It also said it has ensured that the cumulative spend on societal activities is over 2%
“Over the years in accordance with Nestlé’s way of doing business, the Company has spent on the welfare of society in activities including ‘Water’,’ Nutrition’, and ‘Rural Development’. Cumulative spend on welfare of society and CSR during 2014 was above that prescribed under Companies Act 2013. With the applicability of the Companies Act 2013 from April, 2014, the spends during the year 2014 which qualify as CSR together with commitments already made during 2014 was around 1%. It is planned to step up this spend in a staggered manner in the coming years.," said a Nestle spokesperson adding that the details are disclosed Director’s Report annexed in the Annual Report 2014.
The other multinational Hindustan Unilever Ltd, which is also facing flak from local communities in Kodaikanal over dumping mercury at the site of a thermometer plant, which it shut down 14 years ago, spent ₹ 82.3 crore in fiscal 2015. HUL’s CSR spend grew 40% over a year ago, and spent ₹ 2.5 crore more than the 2% limit.
HUL has various CSR initiatives from water conservation programmes to skill building initiatives, and some of its initiatives are also closely tied to its businesses be it the Lifebuoy hand washing programme which creates awareness about handwashing to prevent diseases, or giving micro-loans to the poor to be able to buy their water purifiers, Pureit, according to its annual report.
HUL’s highest spend was in fact towards its Project Shakti. It spent ₹ 46.5 crore during the year to train rural men and women called Shaktimaan and Shakti ammas to sell the company’s products and in turn become entrepreneurs. For that, the company trains them in basic accounting, selling skills and relevant IT skills.
An HUL spokesperson clarified that the cost attributed to capability building and training of Shakti entrepreneurs is the only cost accounted for CSR by the company. “The cost associated with selling of goods is not attributed as CSR."
Moreover, the company spokesperson also said all its activities are reviewed by its CSR Committee which has independent directors as majority members. “HUL is committed to operate and grow its business in a socially responsible way," said the spokesperson adding that that all it’s initiatives qualify for activities listed in Schedule VII of Section 135 of the Companies Act, 2013.
But consultants say there are better ways to do CSR.
“Since Project Shakti is involved in livelihood creation, it is still CSR. But I dont think it is good CSR. How different is what they are doing from training their sales force?. They are creating a rural salesforce under the garb of CSR," says Noshir Dadrawala, CEO, Centre for Advancement of Philanthropy, Mumbai.
Companies like Dabur, which met its 2% target by spending ₹ 14.7 crore, showed a 29% drop in CSR spend versus last year. The new CSR Policy, saw us moving out of some activities as they did not fall under the purview of the new CSR guidelines. As a result, the total spend shows a drop, said A. Sudhakar, head of CSR and Global Human Capital, Dabur.
Many companies’ CSR spends will fall because much of what they were doing as CSR earlier won’t be considered as CSR under the new guidelines, points out Naik.
The highest increase in CSR spend among the six firms was seen in Godrej, as its spending rose four times to ₹ 16 crore during the year. Their CSR activities include development of renewable energy and livelihood creation.
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