The Ministry of Corporate Affairs (MCA) in its recent newsletter has flagged the limited impact of corporate social responsibility (CSR) initiatives despite a spike in such spending in recent years, and called on India Inc to adopt a long-term approach “to yield productive results”. As per MCA, the CSR spending stood at Rs. 26,210 crore in FY21, having grown 80% from FY16. However, the impact of the CSR funds is not widely felt and there is a need to enhance the visibility as well as impact of these invested funds. It is important to execute CSR efforts strategically with the right balance of capital investments and operational expenses. 

The MCA has also expressed concerns over wide regional disparity in the deployment of the CSR funds and called on companies to balance their area preference with national priorities and also highlighted the need to ensure the initiatives undertaken become self-sustaining so that the CSR programmes can run seamlessly without being a burden on the companies themselves. The emphasis should be on creating an appropriate structure for CSR, ensuring that the funds go towards the well-being of the community. Further, the highest quality of risk management framework needs to be adopted, so as to make the CSR projects sustainable.

As for regional disparity, the MCA pointed out that just ten states--including industrial ones such as Maharashtra, Gujarat, Karnataka and Andhra Pradesh--grabbed over 44% of the CSR funds in FY21, while the eight north-eastern ones received a mere 0.91%. The MCA acknowledged the potential reason for such disparity could be the stipulation under the Section 135(5) of the Companies Act 2013 that companies should give preference to the areas around which they operate while allocating CSR funds. “However, it's not mandatory to do so as the world has become too intricately close with the advent of digitalization and it is difficult to define what the local areas of operations are”.

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