GN Bureau | September 28, 2015
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.
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.
For instance, at Rs.215.14 crore, the combined spending by the 85 companies in these six CSR activities is only about one-seventh the Rs.1,571.10 crore spent on education and skill development.
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”.
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 Rs.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.
Maruti Suzuki slotted the expenditure on the Manesar stadium under community development, on which it spent a total of Rs.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”.
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