CSR expenditure is on the rise across India's business environment

Five years after corporate social responsibility (CSR) was mandated by the government, Big Four accounting and advisory firm KPMG has found that India’s largest companies are almost entirely compliant with the new regulations. 98 % of companies surveyed by the firm had their policies available in the public domain.

CSR was mandated by the government in 2013 under Section 135 of the Companies Act, a legislation that cam with a number of stipulations for businesses that fall under the label of ‘large companies.’ KPMG defines these as the 100 listed companies in India with the largest market capitalisation, or the N100.

A major stipulation, and one that has received a considerable amount of attention, is that large companies must earmark 2% of their annual profits towards CSR activity. The legislation comes with some leeway, in that companies that haven’t devoted the necessary funds have space to justify their actions.

Other stipulations include setting up a CSR committee at the board level that will devise a CSR policy, making the policy available in the public domain, enumerating the areas of intervention that come within this policy, disclosing the mode of implementation, and revealing the methods to monitor CSR activity, among a wide range of others.

Since CSR was mandated, KPMG has checked in regularly with the N100 to gauge the state of compliance vis-à-vis the relatively new regulatory framework.

This year, the firm’s evaluation produced promising results, showing an overall improvement in compliance across the board.

For instance, KPMG reports that there has been a 325% increase in the number of companies that have revealed details of their outreach effort in their annual financial statements. The amount of companies meeting their 2% per year quota is also on the rise, currently up to 76%.

This scenario is reflected in stories emerging throughout the year of social and developmental projects undertaken by large firms. The consulting sector is an integral part of this landscape. PwC, for instance, supports a number of social initiatives through its PwC India Foundation, including rehabilitation efforts in the wake of natural disasters.

Global management consultancy Accenture, meanwhile, has been involved in education efforts across the country. KPMG itself earmarked as much as Rs.2 crore towards helping those affected in the Kerala floods in 2018, in addition to deploying employee hours towards pro bono relief efforts.

Overall, KPMG reports that the N100 have spent more than Rs.35,000 on CSR-related projects in the last five years, accompanied by a 150% increase over the same period in the number of companies that carry the unspent portion of the annual 2% forwards into the next year.

With a long-term perspective, many large companies are looking to align their CSR activities with priorities within India and across the globe. As many as 41% of the N100 have now focused their CSR projects within the Sustainable Development Goals (SDGs) framework laid out by the United Nations.

Within the Indian context, a large share of the focus has been on projects to reduce inequality. Strikingly, KPGM reports that companies where women are chairpersons of the CSR committee have had the most dramatic increase in spending on reducing social inequality.