When the Covid-19 pandemic hit India, the fault-lines in the social, economic and political spheres widened and deepened. The disruptions in lives and livelihoods changed the interface among the state, the market and the people. It was the time when the state deliberated on ways to increase the public spending to improve the falling social and economic situation of the people. But how did the market respond to this unprecedented crisis?
Corporate Social Responsibility (CSR) is considered as a management concept that helps the market to integrate social and ecological outcomes, and address all stakeholders including the local area and the people. India is the first country that experimented with mandatory CSR for businesses registered under Companies Act, 2013. After 2015, with universal call for sustainable development goals, CSR projects and public-private partnerships received greater motivation.
Since the advent of mandatory provision, total amount spent under CSR was on a steady increase. For perspective, total amount spent in 2014-15 was over 10,000 crores rupees, which increased to 24,600 crores rupees in 2019-20. During this time, total number of CSR projects increased from around 9,300 to over 34,800. The share of total spending by non-government companies increased from 72% in 2014-15 to 79% in 2019-20. The number of companies which spent over 100 crores in CSR also increased from 17 to 41 in the given time-period.
Clearly, pandemic-induced catastrophe pulled down India’s economic success story further and alienated millions from the workforce. However, the annual report by Reserve Bank of India (RBI) for the year 2020-21 uncovers some interesting divergence. Despite a significant contraction in India’s GDP, the profitability of Indian corporates increased by seven percent year-on-year. This improvement in operational profits was also corroborated by stock market which experienced an all-time high, where Sensex outperformed ten major world indices during the year.
So, how CSR spending was reported in year 2020-21? The recent data available from the Ministry of Corporate Affairs indicate a major shrinkage in the total CSR spending. To begin with, there was a 64% fall in the total spending of less than 9,000 crores rupees comparing to 2019-20. In fact, it hits the bottom this year, as it is 12% less than the year 2014-15. Total number of CSR projects came down to just above 8,000 which is less than a quarter of preceding year. The number of companies which spent over 100 crores in CSR also come down to 19.
An interesting change came in the share of spending by non-government companies that increased from 79% to 94% implying that government companies had a major pull back in the CSR spending. For the year 2020-21, CSR spending for non-government companies shrunk by 57% while it was almost 90% for the government companies.
Assessing CSR spending profile for the last two financial years could give us a sense of changing priorities in given twenty-nine development sectors. In terms of proportion, healthcare received maximum upward change, with 29% of total spending in 2020-21 comparing to 20% in the preceding year. Still, in absolute terms, the total spending in healthcare sector decreased from 4,825 crores rupees to 2,559 crores rupees during these years. On the other side, the sector which had the maximum downward change is Education, from 29% to 25% in the given time-period. Art and Culture, and Rural Development Projects are the two other sectors which received relatively lesser share of spending in the pandemic year.
In terms of spatial distribution, around 43% of the total spending in 2019-20 was on Pan-India projects that remains unchanged in the pandemic year. Maharashtra had maximum share of 13.8% in 2019-20, that comes down to 12.5% in 2020-21. Karnataka and Tamil Nadu were next two leading states in 2019-20 with 10.5% share together, while Gujarat and Andhra Pradesh are two leading states for 2020-21 with 11.7% together. Although, total CSR spending remained below 2% for the eight north-eastern states.
With the latest reports on income and unemployment estimating at least seven million job loss and 12% average income loss, and deficits in the nutrition indicators among others, show various areas of concern. Moreover, the small, medium and micro enterprises, and the informal sector has been smitten by the pandemic, with a profound impact overall. The government spending has increased to set-off some of the negative consequences of the pandemic, through subsidies as well as income support schemes. But these initiatives are short-term measures, and there is an immediate need to place a more robust long-term view in the present development discourse.
One of the foremost steps in that direction is by undergoing a review on the nature of CSR spending in terms of not only compliance but also qualitative assessment and alignment with the sustainable development goals. For example, if a company spend a certain amount in any rural development project, then how much improvement is recorded in the quality of life and incomes of rural people should be reported. This should be accompanied by evaluation studies of such major projects, so that real progress could be demonstrated. CSR spending should also be integrated with other modes of grassroots transformation such as social enterprises and collectives.
Moving ahead, with internationally benchmarked business responsibility and sustainability reporting, and impact investments, a network could be created that is result-oriented, accountable and efficient. To conclude, it can be underscored that the market functions at the best when there are disclosures and dividends in actions, not merely a mandate.
