New Delhi: Six of the 11 areas identified under the Companies Act, 2013, for corporate social responsibility (CSR) expenditure have attracted little interest in 2014-15, the first year since the new CSR rules came into force.

According to the Act, effective April 2014, any company with profit after tax (PAT) of more than 5 crore annually or revenue of 1,000 crore will have to spend 2% of its PAT for the previous three financial years on CSR activities. The projection at the time of its enactment was that the rules would apply to some 8,000 companies, and inject up to 24,000 crore into development work over the year.

But CSR experts say companies have missed the spending target by a mile and this is evident from the data culled from the annual reports of 85 of the top 100 companies by market capitalization on the National Stock Exchange of India (NSE) by NextGen, a Bengaluru-based CSR management firm.

Only 85 companies’ reports were available by 14 September, the analysts’ cut-off date.

The six areas that failed to attract significant interest are slum development; technology incubators at academic institutions; promotion of rural as well as Paralympic and Olympic sports; the Prime Minister’s Relief Fund; preservation of national heritage, art and culture; and welfare of armed forces veterans and war widows.

Santhosh Jayaram, director, sustainability practice, at KPMG, a consultancy, said one reason for the lack of interest in areas like armed forces veterans’ welfare and technology incubators is their relative newness as a CSR activity compared with, say, poverty eradication or education.

“They will take time to sink in. This year anyway has been a rush brigade for many companies that had to put together CSR committees, decide which projects to support and what budgets to allocate to each," Jayaram said.

For instance, at 215.14 crore, the combined spending by the 85 companies in these six CSR activities is only about one-seventh the 1,571.10 crore spent on education and skill development.

Biren Bhuta, chief of corporate sustainable service at Tata Steel Ltd, which put money into both rural sports and heritage conservation, said part of the reason for this disparity is the sheer scale of problems like hunger and health. Once sports academies and stadia are built, the cost of running them are relatively low, he added.

Besides, said Bhuta, many companies have not had the time to develop holistic CSR strategies. “One can’t put a pecking order as to which interventions are better," he said, adding that he can see why some new entrants to CSR might be reluctant to spend on arts and culture or sports. “These areas are not ‘touch-and-feel’," he said.

Parul Soni, global managing partner at CSR and sustainable management consultancy Thin-kThrough Consulting Pvt. Ltd, said the uneven distribution of funds has everything to do with “the ease of doing business, or in this case, implementing CSR".

On the one hand, Soni said, schemes like building toilets and the Swachh Bharat Abhiyaan are “low-hanging fruit" for companies, many of whom want to tick the boxes with the fewest problems. Companies are also “scared to give money to construct stadiums and other infrastructure" for promoting rural sports, because they did not have much time to vet projects or gain expertise in social development ideas whose impact is difficult to measure at the end of a year.

Simply put, it is easier for companies to announce—and feel good about doing so—that they have built 1,000 toilets in a year than to demonstrate the impact of supporting an athlete whose training might start showing results in two to four years at competitions like the Asian Games and the Olympics.

Auto maker Maruti Suzuki Ltd, for example, spent 50 lakh to complete the first phase of a wrestling stadium in Manesar, Gurgaon, in 2014-15, but has not shown it as expenditure under the promotion of rural sports.

Ranjit Singh, general manager, CSR, Maruti Suzuki, said in 2014-15, the company put more than 36 crore into three CSR activities—skills development, community development, especially education and health initiatives, and road safety—because it has traditionally invested in these areas.

“These also came under Sche-dule VII activities, and we had developed expertise in these areas over the years, so we conti-nued to invest in them," he said.

Maruti Suzuki slotted the expenditure on the Manesar stadium under community development, on which it spent a total of 14.6 crore in 2014-15.

Differences in reporting standards of the companies may be underplaying CSR expenditure in areas like sports, which may easily be clubbed under education or community development.

Another reason for companies being unimaginative in their CSR spending, according to Soni, is a “trust deficit in the not-for-profit sector". Section 135 of the Companies Act allows companies to partner with non-profits to implement CSR initiatives. The idea is that non-profits can bring expertise in various fields of development and therefore increase the impact of CSR spending by companies.

The trouble, Soni said, is “there are 3.2 million non-profits, but you will be hard-pressed to name 20 prominent ones. There is no centralized registry for them".

Laura Quinn, founder of the south Delhi-based CSR consultancy Do One Thing, said many companies’ CSR spending was crimped by lack of clarity and experience. “If I don’t have a background in arts and culture, how do I know what is a good project to put my money in and how to go about it?" she asks.

For months, CSR consultants have also been advising companies to invest in areas that gel with the work they do. Quinn said any company that has young people as a large part of its market should find sports programming to be a good fit, but admitted that areas such as the welfare of armed forces veterans may be harder to sell. “It’s much easier to see how women’s empowerment or skilling might tie in with the core business of most companies," she said.

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