Two years back, India became the first country to make corporate social responsibility investments mandatory. Companies of certain size – those with a net worth of Rs 500 crore or more, turnover of Rs 1000 crore or more, or a net profit of Rs five crore or more – were asked to spend 2% of average profits of the past three years on CSR. How have they fared?
No flying colours, here.
Over 55% of 4257 companies surveyed spent nothing on CSR. Three fourth of the companies spent less than the mandated amount, according to data from the minister of corporate affairs responding to a question in Parliament. About 15% of the companies surveyed spent more than the mandated amount, pushing the average up.
One reason for the low compliance could be that it’s still early stages, and companies might need more time to put their initiatives in place. On the other hand, there is also a risk that the companies who are spending more than the mandated percentage might scale it down, keeping 2% as an anchor. We will get a better sense in the years to come.