What is CSR fund?
- December 12, 2019
- Posted by: Avinash Chandra
- Category: Corporate Social Responsibility
We know that many Indian companies engage in CSR (corporate social responsibility) activities. But how do they implement these projects? It takes a lot of planning and engaging with many civil society organizations and citizens to achieve their social objectives. At the centre of all this is “CSR fund”. Read on to know more about it.
What is CSR Funding?
CSR funding is a grants process under which non-profit organizations can get financial as well as other support from the corporate players. Under the Companies Act, 2013 it is obligatory to contribute 2% of the average net profits of companies. The funds that are provided under Corporate Social Responsibility are for social development issues.
CSR funds can also be contributed to myriad causes and projects that have a positive impact on the lives of the underprivileged sections of our society. The Companies Act also specifies some Government of India programmes in which funds can be donated as part of a company’s CSR initiatives.
In most cases, this means that a company donates to or sponsors NGOs and civil society organizations who work on various social projects. The companies provide these organizations with the support they need from their CSR funds, and their CSR committees oversee the spending and monitor the projects to check that the resources have been used appropriately.
Conditions and Rules Related to the CSR Fund
India is the first country to make CSR compulsory for private sector companies.
The Section 135 of the Companies Act, 2013 states that companies who have a net worth of rupees five hundred crores ora turnover of one thousand crores in a financial year have to spend 2% of the average profits of last three years on CSR activities.
The United Nations Guiding Principles on Business and Human Rights 2011 states that companies are expected to respect human rights by engaging due diligence while operating. While these guiding principles are not legal obligations, most companies that have CSR programmes try to abide by these principles- and often, their CSR programmes are also influenced by the same.
However, “due diligence” is still a much-debated term when it comes to CSR. It involves various issues related to jurisprudence, so it is best to consult with qualified legal experts to understand the implications. Which is why, it is always good to go for CSR consulting, and get guidance from people who are experts in all-around social counselling.
CSR Funding Companies
As stated earlier, India is the first country to make CSR mandatory for private companies. If we talk about the public sector, many Indian PSUs engage in social programmes- just like their private sector counterparts.
In fact, Indian PSUs have had a big role to play in this case, by setting examples for other companies. They have:
- Endorsed and held up the concept of CSR in enterprises
- Implemented good CSR practices in their operations
- Played regulatory roles when required.
The public sector also has a leadership role in order to ensure that its own way of operating is in line with good CSR practices in its multiplicity of roles as purchaser, service provider, employer as well as in its engagement with communities.
How CSR Funds Flow Within India
According to the India CSR, Outlook Report it was stated that Reliance Industries, Wipro, Tata Steel, HDFC Bank, NTPC, ONGC as well as Indian Oil Corporation have spent more than their prescribed CSR budgets in FY 2017-18.
In 2017, the Government of India formed a high-level committee (HLC-CSR), which was tasked with reviewing the CSR Framework and address stakeholder concerns on the issue. The HLC submitted its report on August 2019. According to the report:
- A total of INR 100,000 Crores in CSR Fund was earmarked in five years
- Thirty-six per cent companies that fall under the ambit of mandatory CSR, did not report any data on CSR. In FY17-18, the number for non-reporting companies stood at 9753.
- 2015-16 was the best year for CSR compliance. During that time, companies spent 85% of the prescribed CSR fund.
- 53% of the total actual CSR spend in FY17-18 were contributed by top 2% contributors.
- Forty-three per cent of the CSR projects were implemented NGOs. Thirty-four per cent of the projects were implemented by companies directly.
- Companies are more active in their geographical areas of operation. Local projects were assigned over 50% of the actual CSR spend in FY 17-18.
- A total of INR 757 crores were contributed to the Prime Minister’s Relief Fund between FY 14-15 to FY 17-18 from CSR funds. Another big beneficiary was the Swach Bharat programme, that received INR 835 crores.
- 574 companies had earmarked more than INR 5 crores for CSR, while 7970 companies had allotted less than INR 10 lakhs for the same.
Top CSR donors for NGOs
Needless to say, CSR projects have become a mainstay in philanthropy, as many companies have contributed time, money and resources for making a better India. Many companies have donated extensively to NGOs as part of their CSR programmes, or sponsored social programmes that are aligned with their CSR objectives.
Here are some of the most well known foreign companies that have played a crucial role in supporting NGOs in various social endeavours:
It is one of the world’s largest companies. The automobile manufacturer has identified CSR programmes as a crucial part of its operations. In order to meet its in-house social objectives, BMW gives funding for charitable programs that helps to provide benefit to society.
As their website says, “We are committed to issues that are relevant to us as a company in the regions where we operate. The broad focus areas of our Corporate Social Responsibility include intercultural innovation, social inclusion, responsible use of resources, skill development, and road safety.”
American Express’ corporate social responsibility makes grants in areas like developing leadership, historic preservation, sustainability initiatives, as well as community service.
The Pfizer Foundation, obviously, is focused on public wellness. Taking a holistic approach to the idea, the organization aims at supporting projects that mitigate environmental damage and engages in community partnerships that strengthen public health systems. They also work towards improving public access to medicines, especially for those who cannot afford it.
Pfizer has also been at the forefront of many natural disaster relief programmes, like the Himalayan floods. They partnered with NGOs to provide relief and aid to the people affected by the calamity.
This is the CSR arm of Kellog- the name unanimous with breakfast cereals. The foundation focuses on projects and NGOs that work in the field of child education, family health and children’s healthcare. They also actively engage with organizations that work in the fields of racial equity and civic engagement.
WKF works with different communities in order to ensure a safe and healthy childhood for vulnerable children so that they are able to realize their full potential in life, work and school.
The Silicon Valley giant is involved in various social projects via civil society partnerships. The CISCO Foundation works at providing solutions that make use of the internet and network technology accessible to remote parts of the world, and in poor communities.
Apart from that, CISCO has also supported projects that provide aid to disaster-struck areas, make clean water accessible, fight hunger, environmental conservation, and provide IT skills training to the youth.
CSR Funding Companies in India
There are many Indian companies that have set an example in being corporate citizens. They are also some of the biggest donors to NGOs while partnering with the same in implementing programs and supporting projects that are in line with their in-house goals.
Here are some of the most well known Indian companies who contribute significant amounts of CSR funds to various causes and projects:
When it comes to CSR, there is no other name that commands respect like the Tata Group. The Tata conglomerate is the biggest spender with respect to CSR activities in India- and is even considered a model worldwide. While each of the companies under the Tata Group has their individual CSR projects and relevant civil society partnerships; in total, Tata Group spends 5-7% of its total profit after tax on CSR activities.
You will be hard-pressed to find an area where a Tata company is not supporting a social initiative. From education to healthcare to environment, skills training, rehabilitation, fighting hunger to supporting cultural initiatives- the Tata companies donate to and partner with several NGOs to make the world a better place.
Wipro is an Indian multinational with a presence in IT, consulting and business process services. It also commands tremendous goodwill in the market with respect to CSR and has been regarded as a model in the field. Chairman Azim Premji himself is a well-known philanthropist, and under his leadership, Wipro has gone on to support various social programmes.
As their CSR charter says, “Our implementation approach is to primarily work through partners with established track records in the respective domains. A small team of dedicated sustainability and CSR resources oversee and monitor the execution of the projects. The majority of our projects are long-term multi-year programs.”
Reliance Industries Ltd
RIL is an Indian conglomerate which is often cited as among the foremost contributors to social causes. The Reliance Foundation supports meaningful activities and many social projects in various fields all over India.
The company has identified six core areas of focus –
- Rural Transformation
- Protection of National Heritage, Art and Culture
- Disaster Response
The Foundation has sponsored many NGO projects that work in these areas, and whose projects align with the CSR goals.
Located in Kolkata, ITC Limited is an Indian multinational conglomerate company and has emerged as one of the most significant players in rural development projects.
The company is involved in some of the amazing projects such as rural development projects, social forestry, soil and moisture conservation, livelihood enhancement program, economic empowerment of women as well as vocational training. It donates to and partner with various civil society organizations.
As it says on its website, “ITC works in close collaboration with NGOs and target communities. NGO’s are Project Implementation Agencies, interacting directly and extensively with target communities who have the final say in major decisions – ensuring that the interventions are suited to their needs and thus have the best chance of sustained success in the long run.”
Oil and Natural Gas Corporation Limited
ONGC has a great CSR track record. It is applauded for its Corporate Governance practices, while Transparency International has ranked the ONGC 26th among the biggest publicly traded global giants that operate ethically.
Some of the CSR projects of the company are reviving the ancient river Saraswati, contribution towards the hostel, development of promenades, financial support for hospitals, construction of school buildings as well as the construction of administrative. The company supports various social projects by sponsoring and partnering with civil society organizations.
HDFC Bank Limited
HDFC bank is ranked 45th on the list of top 50 banks in the world in terms of their market capitalization. In India, they have established a sizeable presence and are expanding their footprint.
Under their HDFC Parivartan initiative, HDFC Bank has identified community development as their core area of CSR. Its CSR activities are focused on holistic rural development, poverty alleviation, ensuring environmental sustainability, promoting sanitation and health as well as financial literacy.
It implements its CSR programmes by partnering with NGOs active in the fields they focus on.
Hindustan Petroleum Corporation Limited
Hindustan Petroleum Corporation Limited as a responsible corporate citizen is involved in practising the CSR model of Creating Shared Values by productively reaching out to the stakeholders, society as well as the community that is directly or indirectly involved in its business operations.
The company has mainly identified the focus areas for its CSR programs like health care, skill development, community development as well as childcare and education. It works with several non-government agencies and sponsors various projects that are in line with its CSR guidelines.
Indian companies are working at supporting various civil society organizations make the world better, and are earmarking generous amounts of CSR funding for that purpose. However, to ensure successful implementation of these projects, and navigate the challenges they face while doing so, they need 360 degrees CSR consulting. Often, a company wants to support good projects but doesn’t know where to look.
In that case, they need to get in touch with organizations like CauseGood, that will provide them with all-around counselling, and also help them connect with social projects that they can proudly sponsor.