New Delhi: Corporate social responsibility (CSR) spending by Indian companies saw a sharp increase in FY16, according to a report released on Monday by CRISIL Foundation—the philanthropic arm of credit-rating company CRISIL.
The report analysed 1,505 companies out of the 4,887 BSE-listed firms that qualify for CSR spending under the CSR Rules, which came into force on 1 April 2014. The rules direct all companies with a net worth of Rs500 crore or revenue of Rs1,000 crore or net profit of Rs5 crore to spend 2% of their average profit in the past three years on social development.
The report shows an increase in the number of firms that are in compliance with CSR Rules and thus the rise in spending, as Mint reported earlier.
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The report states that the key focus areas of CSR spending in FY16 were education, skill development, healthcare and sanitation—similar to those seen among the top 100 National Stock Exchange firms last year in September.
CRISIL Foundation’s analysis shows overall spending increased by a significant 22%, with the bulk of the funds going to education, skill development, healthcare and sanitation initiatives. Average spending rose 29 basis points to 1.64% as compared with 1.35% in FY15, the report said.
In absolute terms, the total money spent rose by Rs2,500 crore to Rs8,300 crore in FY16.
There were two reasons for the 22% jump in adherence by the larger companies—firms are overcoming the challenge of large-scale interventions, which takes more time and effort, and they are using implementing agencies, mainly non-governmental organisations, for execution, suggests the report.
Among the trend shifts between FY15 and FY16 is the focus of firms on ensuring impact. Ashu Suyash, managing director and CEO, CRISIL suggests that firms are looking to make a difference as a shift was seen towards outcome-based projects in FY16.
“This is indeed the way to go, as underlined by the ‘Effective Altruism’ movement worldwide where, instead of doing what feels right, (companies) find the best causes to work on by using empirical evidence and analysis," he says.
FY16 was the second year of the CSR Rules being in force and 1,505 companies of the 4,887 listed on the BSE, qualified for CSR spending. Of these, 77%, or 1,158 companies, reported their CSR activities, compared with 1,024 companies, or 75% of the 1,300 eligible in FY15.
The higher spend is being seen as a positive step towards increasing private sector involvement in social development.
Ramraj Pai, president, CRISIL Foundation, says, “The public-private complementarity is great to see because, as a percentage of total government expenditure, India spends significantly less than what other BRICS nations do. So the private sector ramping up where government spending is low is truly synergistic CSR."