CSR plans should be self-sustaining: MCA
New Delhi, Jul 2, 2023
The ministry also pointed out that some states have received significantly more portion of CSR funds due to factors such as the presence of major corporations, industrial development, and social development needs
Corporate Social Responsibility (CSR) projects have to have the right balance of capital and operational spending and should be self-sustaining so that programmes run “seamlessly and efficiently", the ministry of corporate affairs said.
To ensure that the impact of CSR is deeply felt, it is imperative that companies take a long-term comprehensive approach, it said in its latest monthly bulletin.
“For increased effectiveness and efficiency, it is important to execute CSR efforts strategically with the right balance of capital investments and operational expenses. Moreover, it is also essential to ensure that the initiatives undertaken are self-sustaining, so that the programmes run seamlessly and efficiently, without them being a burden on the company. The emphasis should be on creating an appropriate structure for CSR, ensuring that the funds go towards the well-being of the community," said the ministry.
Also, the highest quality of risk management framework needs to be adopted, so as to make the CSR projects sustainable, it said. The ministry also pointed out that some states have received significantly more portion of CSR funds due to factors such as the presence of major corporations, industrial development, and social development needs. This disparity however, is common in other aspects also, such as state-wise distribution of net proceeds of union taxes and duties. Data shows that in FY 2020-21, over 44% of the CSR funds went to just 10 states. These states include eight of the largest state economies by their FY20 GDP—Maharashtra, Gujarat, Andhra Pradesh, Karnataka, Uttar Pradesh, Tamil Nadu, Rajasthan and Madhya Pradesh.
These states are the financial and industrial bases, and are major hubs for technology companies and startups which is why they are known for their business-friendly environment. This could be one of the reasons for them attracting a significant amount of CSR funds, the bulletin said.
“It is seen that the companies tend to spend the CSR funds in the areas where they operate to gain the goodwill of the local community given that the support of the local community is just as important for the running of their business smoothly. It is seen that Maharashtra, Gujarat and Karnataka, received the largest share of CSR funds, with Maharashtra alone receiving 13.21% of the total during FY 2020-21," the bulletin noted.
In contrast, the northeastern states of Assam, Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, and Tripura received a mere 0.91% of the funds in FY 2020-21.
This is a matter of concern, as the smaller regions are the most socio-economically and culturally diverse in the country and have a high incidence of poverty and underdevelopment. It is imperative that there is a balance of local area preference with national priorities to avoid any concentration of CSR funds in specific regions, the bulletin noted.
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