Education poverty eradication draw most firms CSR funds

Apart from these, ensuring environmental sustainability is another cause that firms have focused on

The government’s efforts to reduce illiteracy, poverty and environmental damage have received a shot in the arm with companies focusing their corporate social responsibility (CSR) spending on similar activities.

Promoting education and eradicating poverty received the maximum funds in the year ended 31 March, according to the annual reports of the top 100 companies by market capitalisation on the National Stock Exchange of India (NSE) as analysed by NextGen, a Bengaluru-based CSR management firm. Of the 100 companies, the annual reports of 85 were available by 14 September, the analysts’ cut-off date for accepting data.

The CSR rules, 2014, under the Companies Act, 2013, mandated that firms spend an average of 2% of their previous three years’ profit on 11 activities listed by the government in Schedule VII of the Act. An analysis of the 85 companies, carried out by CSR management firm NextGen, shows the favoured activities are promoting education, which received money from 80 companies; eradication of poverty and hunger, which came a close second with 79 companies; and ensuring environmental sustainability received funds from 57 firms.

There are external indicators that are easily available for at least two categories of the top receivers of CSR spending, making it a lot simpler for companies to set targets and projects to achieve goals.

For instance, in the fields of education, drinking water, sanitation and poverty, the government releases periodical data like national/state family health surveys, per capita income levels being maintained by the rural development departments and district information system for education (DISE). This, according to Sudhir Singh, partner risk advisory at PWC India, helps companies define outcome and impact with visible results.

“Any achievement in these fields can easily be attributed to a corporate—as something that has happened due to the CSR project of a corporate. And that is why the above four sectors have a distinct advantage over others,” he explained.

For activities such as art, culture and heritage, the measurement criteria has been a challenge for companies with the result that these areas have received less CSR funds.

Sector experts also believe the pattern of CSR spending in FY14-15 was driven by factors like accessibility to professionals, tangible results, governmental push, brand visibility and traditional pool of ‘social development initiatives’.

To understand why some activities were preferred over others, one needs to go into the history of industries’ engagement with social causes, said K.K. Upadhyay, head the Federation of Indian Chambers of Commerce and Industries (FICCI) CSR Centre for Excellence. “Traditionally work regarding social issues by companies started with providing the bare minimum facilities in and around their plants—like educational institutes, vocational training and healthcare for their own employees,” he said. This was born from the lack of such facilities in their areas of operation.

In a country with an average literacy rate of 74.4% (2011 census) an additional Rs.1571.1 crore towards promoting education can only help. This was the total sum of money spent by the 80 companies on activities classified as promoting education, which included special education and employment and enhancing vocation skills and livelihood projects.

The government aims to reach 80% literacy rate by March 2017, the end of the 12th five-year plan.

As per the annual report of Infosys Ltd, the company set aside Rs.243 crore for CSR initiatives and met the target. The Bengaluru-based company’s annual report said it spent money across Kolkata, Chennai, Bengaluru and Hyderabad on educational activities for which the company had earmarked Rs.105.55 crore—the highest in this category—and managed to spend Rs.102.66 crore.

The firm’s foundation was set up as far back as 1996 and has focused on education right from the beginning, working at both school and university levels.

Public sector companies such as GAIL also invest in education because as Anoop Gupta, deputy general manager, CSR at GAIL said, “We considers it (education) as one of the foundation pillars through which we can build a better, more equitable and just society.” GAIL spent Rs.4.47 crore on education out of a total CSR spend of close to Rs.17 crore.

Activities under ‘eradication of poverty and hunger’, which includes eradicating malnutrition, promoting preventive health care, sanitation and making available safe drinking water, received Rs.1564.39 crore from 79 companies.

However, Reliance Industries Ltd, which is the top spender in this category, included the setting up of the Sir H.N. Reliance Foundation Hospital and Research Centre in Mumbai for Rs.553.89 crore as part of its CSR activity for ‘eradication of hunger’.It is a 345-bed, multi-speciality tertiary care hospital.

“The hospital is run by a charitable trust and has 20% of its beds are subsidised. Technically the money has been categorised under CSR spend in the annual report, but it is not an expenditure—it is an investment for creating a world class health care facility,” a senior company official said.

All private hospitals must offer subsidised beds as a requirement under the law.

Construction of toilets also falls under ‘eradication of poverty and hunger’ and the Swachh Bharat push by Prime Minister Narendra Modi attracted a lot of CSR investment. In addition to non-state companies announcing plans to spend thousands of crores, state-run companies such as NTPC Ltd, which built 24,000 toilets, were issued directives by the government to build them. The Swachh Bharat programme helped increase the total spending in this category. As Upadhyay of FICCI said, “The government support made it a lot easier for companies.” He said getting clearances, licences and other regulatory requirements for a project from local authorities was a breeze, as the government was pushing the scheme.

However, some CSR activities defined as eradication of hunger are bewildering. There have been instances like Bharat Heavy Electricals Ltd (BHEL)’s donation of “100 benches, 1 water filter and water cooler to Elementary school, Goindwal Sahib (near Baoli Sahib Gurudwara in Punjab)” or even Chennai’s Shriram Transport Finance Co. Ltd’s “Subscription towards Share Capital of the Company Licensed under Section 8 of the Companies Act, 2013” which have been accounted under this heading.

The next highest recipient of CSR funds was environmental sustainability with 57 companies spending Rs.683.07 crore. Activities included ensuring environmental sustainability, ecological balance, protection of flora and fauna, animal welfare, agroforestry, conservation of natural resources and maintaining quality of soil, air and water.

Tree plantation was a favourite across the board with automobile company Mahindra and Mahindra Ltd spent Rs.5.4 crore on planting trees.

The impact of the spending will only be known after a few years. However, the reasons for the selection of one activity over another in Schedule VII are being ascribed to the processes involved in reorienting ongoing company activities to the CSR rules that came into force in 2014.

The initiatives that have fared better in terms of CSR budget allocations are in areas ((education, poverty and hunger) that are most widely acknowledged as needing funds and attention. “These are the building blocks of a developed country, and for companies to focus on education, poverty, etc. is all but natural,” said Shefali Chaturvedi, senior director at Confederation of Indian Industry (CII).

Niraj Seth, director of development advisory services at consulting firm EY, believes activities linked to education possibly got more money since they provide “tangible results”. It is relatively easier to buy books, computers or build toilets in schools but these alone cannot reduce the drop out rate or improve the quality of education, she said.

“Not undermining the efforts of companies, a challenge is emerging—the expenditure is happening in a scattered manner and needs to be streamlined for a comprehensive strategy to tackle the problem of the quality of education. Programmes need to be planned with a long-term vision so that problems related to infrastructure, teachers and classroom transactions can be addressed to improve quality of education,” she added.

HT Mint, New Delhi, 24th Sept. 2015