When it comes to spending on social causes, big isn’t necessarily better in India.
A recent study shows that smaller companies (by revenue) are more generous compared to those with higher turnovers.
The report by Crisil Foundation, released on January 20, shows that 53% of the companies with revenue between Rs 100 crore ($14 million) and Rs 500 crore ($73 million) spent 2% or more of their net profit under the corporate social responsibility rule. But only 31% of those with revenue of over Rs 10,000 crore ($1.4 billion) spent 2% or more. Crisil Foundation is a non-profit unit of the credit ratings agency Crisil.
The Companies Act, 2013 stipulates that all private and public firms in India with a minimum net worth of Rs 500 crore, or a revenue of Rs 1,000 crore and more, or a profit of Rs 5 crore or more, must spend at least 2% of the three-year average net profit on CSR activities.
The analysis found that 1,000 out of the 1,300 Bombay Stock Exchange-listed companies, which qualify under the CSR rule, adhered to the mandate in fiscal 2015. But the average spending was around 1.35% of the profit, lower than the stipulated 2% level.
According to Crisil, these 1,000 companies spent Rs 6,800 crore ($1 billion) in total. If all of them had spent the mandatory 2%, an additional Rs 3,200 crore ($472 million) would have been spent. The study noted that 200 firms had not spent anything or were in the final stages of finalising their CSR strategy.
Here is the break-up of how much the companies spent, according to Crisil:
“Compliance towards CSR in fiscal 2015 seems to be inversely proportional to the size of the company – those with high turnover were short on the 2% mandatory spending,” Ramraj Pai, president of Crisil Foundation, said in a statement.
One reason for this, the study pointed out, is that companies with very high revenue need time to plan their CSR spending – which would be a significant amount of money because of the 2% clause. These firms are expected to complete their obligations in fiscal 2016.
Meanwhile, most of the money was spent on education and skills development, with very little going towards sports or technology development. Here’s the break-up of how these firms spent their CSR funds:
This article first appeared on Quartz.
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