Growth in CSR Spending

• 15 May 2025

For Prelims: Corporate Social Responsibility, Companies Act, 2013, UN Sustainable Development Goals, NGOs, Injeti Srinivas Committee Report on CSR 

For Mains: Significance of CSR Activities in India, Social Impact of CSR spending, Major Issues Related to CSR in India. 

Source: IE 

Why in News? 

The report by PRIME Database (Indian market data firm) reveals a 16% rise in Corporate Social Responsibility (CSR) expenditure by listed companies in FY 2023-24.  

• This can be attributed to improved profitability across sectors and reflects changing priorities in corporate philanthropy and compliance culture. 

Note: Listed companies are those whose shares are listed & traded on recognized stock exchanges like the Bombay Stock Exchange (BSE) or National Stock Exchange (NSE) in India and comply with regulatory requirements. 

What are the Recent Trends in CSR Expenditure? 

• Trends in CSR Spending (FY 2023-24): CSR spending by listed companies rose to Rs 17,967 crore in 2023-24 from Rs 15,524 crore in FY 2022-23, reflecting an overall increase in profits.  
  • HDFC Bank, Reliance Industries, TCS, and ONGC were the top contributors. 
  • About 98% of companies met their CSR obligations, and nearly half went beyond the required spending.  
  • Public sector undertakings (PSUs) also increased their CSR contribution by 19% compared to FY 2022-23. 
• Sectoral Allocation and Shifts: Education received the largest allocation (Rs 1,104 crore), followed by healthcare (Rs 720 crore). 
  • Spending on environmental sustainability rose the most at 54%  indicating a shift towards ESG (Environmental, Social, and Governance) goals, followed by a 5% increase in national heritage.  
    • However, support for areas like slum development, rural development, and welfare of armed forces veterans declined sharply (72%, 59%, and 52% respectively). 
• State-wise Trends: Maharashtra, Rajasthan, and Tamil Nadu were the top three recipients of CSR funds, with the top 10 states accounting for 60% of the total CSR expenditure. 
  • States that saw the highest increase in CSR funds compared to 2022–23 were Tamil Nadu, Maharashtra, and Gujarat, while Rajasthan, Haryana, and Punjab recorded the largest declines in CSR funding. 
• Direct Spends vs Implementing Agencies: In FY 2023–24, 31% of companies spent directly on CSR, 29% used implementing agencies, 38% used both, and 2% didn’t specify the method. 
  • However, most funds (over 50%) were spent through implementing agencies. 

What is Corporate Social Responsibility? 

• About: Corporate Social Responsibility (CSR) refers to a company’s responsibility towards society and the environment.  
  • It is a self-regulating model that ensures businesses remain accountable for their impact on economic, social, and environmental well-being.  
  • By adopting CSR, companies become more aware of their broader role in sustainable development. 

 

• Legal Framework: India is the first country to make CSR spending mandatory under Section 135 of the Companies Act, 2013, providing a structured framework for eligible activities. 
• Applicability: CSR rules apply to companies that, in the preceding financial year, have a net worth exceeding Rs 500 crore, or a turnover over Rs 1,000 crore, or a net profit above Rs 5 crore. 
  • Such companies must spend at least 2% of their average net profit of the last 3 financial years (or available years if newly incorporated) on CSR activities. 
• Types of CSR Initiatives: 
  • Corporate Philanthropy: Charitable donations 
  • Community Volunteering: Organised employee service 
  • Ethical Practices: Producing socially responsible products 
  • Cause Promotion: Supporting social causes 
  • Cause Marketing: Linking sales to donations 
  • Social Marketing: Funding campaigns for public good 
• Eligible Sectors: CSR spending covers areas like eradicating poverty, promoting education and gender equality, fighting diseases like HIV/AIDS, ensuring environmental sustainability, and contributing to government relief funds (Like PM CARES and PM Relief Fund)  for socio-economic development and the welfare of disadvantaged groups. 

What are the Challenges Related to CSR Spending in India?   

• Geographical Disparity in Spending: Spending is concentrated in industrial states like Maharashtra , Rajasthan,  Gujarat, Karnataka, and Tamil Nadu, while North Eastern states (Mizoram, Sikkim) and Lakshadweep, Leh and Ladakh receive comparatively less funding, reflecting a regional imbalance. 
• CSR Allocation Trends: Over 75% of CSR funds were concentrated in key areas like education and vocational skills, hunger, poverty and healthcare, environmental sustainability, rural development and sports. 
  • Sectors related to slum development, disaster management and armed force veterans have very less spending. 
• Implementation Delays and Poor Planning: Implementation delays from late approvals and fund allocation cause companies to favor quick infrastructure over long-term community development.  
  • Lack of strategic vision reduces CSR to charity, while absent long-term policies and duplicated efforts lead to unclear spending and competition instead of collaboration. 
• Monitoring and Evaluation (M&E) Gaps: Current M&E systems focus on quantitative outcomes rather than real social impact.  
  • Lack of standardized methods and inconsistent reporting by third-party evaluators hinder transparency and make comparison between projects difficult. 
• Challenges with NGO Partnerships:  Weak coordination between companies and NGOs limits project planning and execution.  
  • Short-term CSR cycles and restrictions on using funds for NGO reserves affect capacity building. Increasing dependence on intermediaries further reduces efficiency and accountability. 
• Unspent CSR Amount: Despite mandates, 27 companies did not spend on CSR.  
  • Most avoid innovative or high-impact projects, favoring safe, repetitive initiatives, which limits CSR’s potential for sustainable development. 

What Steps can be taken to Strengthen the Impact of CSR Initiatives in India? 

• Simplify and Broaden CSR Regulations: CSR guidelines should be simplified and made more flexible to eliminate regulatory ambiguity, helping companies understand permissible activities better. 
  • The list of eligible CSR activities should be expanded to allow innovation and better alignment with real societal needs. 
• Create a Centralized Platform: A national CSR portal should be developed where companies report their projects, fund usage, and outcomes.  
  • It can also connect corporates with NGOs and government schemes in need of support, improving fund matching and transparency. 
• Audits and Impact Assessment: Mandatory third-party audits for large projects can prevent fund misuse. Companies should also publish impact assessments showing actual results, shifting focus from just spending money to creating meaningful social change. 
• Promote Partnerships & Collaboration: Companies should work with NGOs, local authorities, and other firms for better on-ground execution.  
  • Pooling CSR funds across industries or within sectors can enable larger and more impactful projects, especially in areas like rural healthcare, climate adaptation, and education. 
• Support Long-Term Projects: Incentives like CSR awards can promote creative and effective initiatives.  
  • Policies should encourage long-term projects that address root problems such as education reforms, healthcare systems, and environmental sustainability, rather than short-term events or donations. 
• Capacity Building & Balanced Allocation:  Capacity building in smaller firms can enhance CSR impact. CSR funds should focus on underdeveloped regions and key areas like climate change, women’s empowerment, public health, disaster management, heritage conservation, and slum rehabilitation for balanced, inclusive development. 
• Awards & Recognition: Annual CSR awards can be established for 2 categories of companies-large and small, as recommended by the Anil Baijal Committee (2015). 

Injeti Srinivas Committee Recommendations on CSR 

• Make CSR expenditure tax-deductible. 
• Allow companies to carry forward unspent CSR funds for 3 to 5 years. 
• Align Schedule VII of the Companies Act, 2013  (which specifies the activities eligible for CSR initiatives) with SDGs, balancing local and national priorities. 
• Mandate impact assessments for CSR spend exceeding Rs 5 crore. 
• Register CSR implementation agencies on the MCA portal. 
• Create a CSR exchange portal to connect contributors, beneficiaries, and agencies. 
• Permit CSR investments in social impact bonds. 
  • A social impact bond is a financing tool involving government, private, and charitable sectors to address social problems. 
• Encourage the promotion of social impact companies, which prioritize social and environmental goals alongside profit. 

Conclusion 

CSR in India has evolved from a voluntary act to a regulated tool for inclusive growth. As corporate profits and public expectations grow, there is a need to make CSR more strategic, transparent, and aligned with national priorities. Revising thresholds and strengthening evaluation mechanisms can shift CSR from mere compliance to a powerful driver of sustainable socio-economic development. 

Drishti Mains Question:

Discuss the challenges in effective Corporate Social Responsibility (CSR) implementation and suggest measures to improve its impact on socio-economic development. 

UPSC Civil Services Examination, Previous Year Question  

Q. Corporate social responsibility makes companies more profitable and sustainable. Analyse. (2017)