Analysis: With CSR kitty bulging this year, increasing number and variety of donees are appealing companies for funds

With a surge in net profit due to cut in corporate tax rate this fiscal, the ‘2% of profit’ kitty earmarked for spending on corporate social responsibility (CSR) initiatives has also swelled. A clamp down on foreign funding to NGOs has also turned them towards tapping the corporate philanthropy funds. Consequently, the contenders making a beeline for seeking a handout from India Inc's CSR largesse has risen.

Right from traditional NGOs and social enterprises to incubator funds, IITs and government institutions to municipal corporations, armed force veterans and the country’s labour ministry – the seekers of the CSR funds are steadily increasing.

In a first, the Brihanmumbai Municipal Corporation has roped in companies on a pilot basis to hire manpower and machinery for cleaning the G-South Ward as part of their CSR initiatives. There are other municipal corporations of Pune and Aurangabad that are tapping CSR funds.


Armed forces veterans are also seeking funds as the CSR law specifically lists them as eligible entities. In comparison to previous year, CSR spends on armed force veterans in FY19 increased the most - by 84%, as per data from nseinfobase.com. “When the CSR law was enacted, there was little awareness about it among the armed forces personnel and over the years, the awareness has increased steadily”, said one of the founding members of CSR team of Indian Navy. “Post the Pulwama attack last year, significant help was provided from the various quarters, including the industry, for the families of the affected. The incident helped draw national attention towards the welfare of armed forces, veterans and war widows”, he told ET.

Details of CSR Expenditure of Companies listed on NSE	FY18	FY19	% change
CSR spend reported (Rs crore)	10179	11961	18
Unspent amount (Rs crore)	1749	1343	-23
CSR spend by PSU Companies (Rs crore)	2710	3198	18
No. of companies spending on CSR	1024	1055	3
Companies that missed spending the minimum 2% of net profit	353	332	-6

Data: nseinfobase.com

India’s labour ministry is pushing for expanding the definition of ‘spending’ under the CSR law to include contributions towards social security fund for unorganised workers. The social security code bill 2019 that has been introduced in Lok Sabha proposes the setting up of a social security fund using CSR corpus.

IIT Madras is among the leading educational institutes to receive corporate funds towards researching products and services of social impact. “We want newer IITs to get government funding and older IITs to look at alternative sources for funding their programmes and CSR money is the new funding option that has come up”, said Sapna Poti, vice president – development at the institute.

However, the increasing choices do pose a problem of plenty for the donor companies. “In the absence of a widely accepted evaluation standard, choice-making is still based on certain easy to deploy factors like familiarity with the donee institution and references from the donor company’s networks and in several cases, the easy principle of first come first served”, said Milind Sarwate, an independent director on several boards of listed companies. “The economic slowdown has meant that the donor organizations are far more circumspect and choosier about how much they give and to whom. The timing of the donations too is measured and planned to match the cash flow availability”, he told ET.

The organisations seeking funds, while being more aware about the avenues to approach, are yet to develop their capabilities amidst intensifying competition. “What they lack is service delivery, social audit and impact assessment - to effectively demonstrate their interventions and there is a clear need to strengthen these capacities”, said Professor Siva Raju, chairperson, Centre for Excellence in CSR at the Tata Institute of Social Sciences.

Given this scenario, small grassroot NGOs often lose out to large NGOs when it comes to receiving funds from large companies. “Since 2014, big NGOs dominate the CSR space as the companies feel comfortable partnering with them”, revealed Professor Sudhir Sinha of IRMA. “Companies are unlikely to donate CSR funds to grassroot NGOs who may not have capacity in terms of making presentations to the board. In contrast, the large NGOs have the people, the brand and the capability to deliver on the expectations of a corporate donor”.

“The approach of the donee organisations needs to change from an inside-out to an outside-in approach, which calls for the adoption of a well thought out strategy” said Sarwate. “Concepts like branding and positioning need to find their rightful place in the strategy-set of the donee organisations”, he elaborated.