Top companies in India follow poor disclosure standards when it comes to revealing the details of their spending on corporate social responsibility (CSR) initiatives, says a recent report by proxy advisory firm Institutional Investor Advisory Services (IiAS).
The report says Indian companies spend almost half of what they are required to do on CSR activities under the Companies Act, 2013. The report tracked 51 companies that are part of the Bombay Stock Exchange's Sensex and the National Stock Exchange's Nifty indices.
These companies spent Rs 2,660 crore on CSR activities in 2012/13, which is one per cent of the average profit before tax of the preceding three years, it says.
Under the new Companies Act, companies with more than Rs 1,000 crore in revenue or Rs 500 crore of net worth or net profit of Rs 5 crore will have to spend at least two per cent of their three-year average net profit on CSR. It means these 51 companies will have to increase CSR spends by Rs 2,490 crore to meet the two per cent threshold, says the report. "Most companies will have to step up spending by 2014/15 to meet the norms laid out in the Companies Act," it says.
The report says companies are not forthcoming when it comes to sharing the details of their CSR spending. Bajaj Auto, for example, did not disclose the amount spent on CSR activities for 2012/13. Companies also did not disclose whether the amount reserved for CSR but not spent in a given financial year was carried forward to the next year.
The major areas of CSR activity for Indian companies are health care and sanitation, education and literacy, women's empowerment, sustainable livelihoods and employment, environment protection, infrastructure, rural development and employee welfare. Nearly 22 per cent of the companies did not disclose the amount spent under each of these categories while 50 per cent did not disclose the number of beneficiaries of their major CSR programme, the report says.
Also, the data indicate that 12 of 51 companies conduct CSR activities outside India. "As per the draft rules, programmes conducted solely for the benefit of employees and those conducted outside India are not considered CSR activity. Many companies will have to relook their CSR programmes to align it with the law," says Amit Tandon, founder, IiAS.
Among the 51 companies, the largest CSR spenders include Tata Steel (Rs 470.8 crore), Reliance Industries (Rs 357.1 crore), Oil & Natural Gas Corporation (Rs 261.6 crore), ICICI Bank (Rs 116.6 crore) and State Bank of India (Rs 123 crore).
Five companies - Ambuja Cements, Cairn India, Jindal Steel & Power, Tata Motors and Tata Steel-are already spending at least two per cent of their profits on CSR activities.