Sectors Benefitting from CSR Projects
Section 135 of the Indian Companies Act, 2013 prescribes a mandatory “CSR spend of 2% of average net profits … during the three immediately preceding financial years” for all companies meeting specified financial thresholds (having net worth of rupees five billion or more, or turnover of rupees ten billion or more or a net profit of rupees fifty million or more during any financial year). With this, India becomes the first country in the world to legally enforce socio-environmental accountability of profit-making organizations.
Subsequently, the expenditure in CSR is humongous, if the Ministry of Corporate Affairs figures are anything to go by!
An analysis of the amounts spent by individual corporates in their CSR projects shows that most of the corporate entities are taking up projects in the range of below INR 10 lakh, while the other large chunk is in the range if INR 10-50 lakhs.
The EBI further classifies the environment industry into 14 segments, which has been provided in Table 1:
Another significant analysis output is the broad headings under which CSR projects can be segregated.
Clearly, Health and Education emerge as the most popular sectors benefitting from CSR projects. Also, several corporate entities find it simpler to donate in bona fide government funds. However, CSR, even if effective and successful, may produce a nominal social benefit restricted to a geographical area.
Based on our experience, CSR projects are ridden by several challenges:
- CSR projects for the purest of intentions are fewer than those motivated by ROI concerns or undertaken with the sole intention of ensuring local goodwill or preventing negative social reactions to their projects.
- Long-term projects in distant locations are not popular because of doubtful ROI
- Experimental projects are rather unpopular due to doubtful ROI. Hence, real innovation faces ground-level difficulties
- CSR mandates hiring not-for-profit bodies – which may not always have technically sound personnel on board
Possible suggestions to help enhance the efficacy and reach of CSR projects include:
- Partnering in government schemes through tri-partite or quadri-partite agreements
- Re-thinking CSR projects where at least indirect ROI can be worked out
- Adoption of successful - or at least semi-successful projects