SMEs outshine big corporates with generous CSR Spend

A recently conducted research on 3,855 listed companies with the aim of studying their CSR spends and response towards the CSR mandate in fiscal year 2015. The report highlighted that around 1300 listed companies in India have met the mandatory 2% CSR spend in fiscal year 2015, during the second year of CSR implementation.

This year, SMEs have raised the bar with higher CSR spends as compared to the big corporations. Hence, it will not be exaggerating to term 2015 as year of SMEs in CSR. In fact, the companies with higher turnover lagged behind in meeting the 2% mandatory CSR compliance. Clearly, they are not short on altruistic, society-building motivation. This also reflects a broad-basing of CSR activity in India Inc,” Crisil said.

As per the Companies Act 2013, companies falling under the CSR ambit should either have the turnover of Rs 1,000 crore or net profit of Rs 5 crore to spend at least 2% of their average net profit in the preceding 3 financial years on CSR activities. 425 out of the 1024 companies surveyed were found to have turnover of Rs. 100 to Rs. 500 crore and 53% of them had spent the 2% or more of their net profit on CSR. 518 mid-sized companies with the turnover falling betwen Rs.500 crore to Rs.10,000 crore with 50% of them fulfilling the 2% spending requirement. However, in case of companies with turnover of over 10,000 crore or more, only 31% of the 81 companies either met or exceeded the CSR mandate. Many companies such as Tata Consultancy Services Ltd and HDFC Bank Ltd. even fell short of meeting the 2% target.

Mr. Ramraj Pai, President, Crisil Foundation, said, “Compliance towards CSR in fiscal 2015 seems to be inversely proportional to the size of the company; those with high turnover were short of the 2% mandatory spending.

Since SMEs contribute towards the development of Indian economy by providing employment to nearly 40% of the nation’s workforce and also contribute towards 45% to the manufacturing output, hence the larger CSR spend by them will pave the path towards holistic sustainable development as they employ a large chunk of employees from the rural and backward regions of India. The collaborative efforts in CSR domain by SMEs will not only help in upliftment of the weak and marginalized people but also prove highly beneficial for the companies by helping them in streamlining their business processes and managing their operational costs.

Considering this was the second year of implementation, the large corporations require considerable time and efforts to conceptualize CSR initiatives and implement the processes for maximizing the outcomes. But, the affirmative response of SMEs towards integrating CSR activities in their business reflects their long-term business vision and their concern towards the societal needs.

In nutshell, the size of SMEs doesn’t matter and they should engage in CSR activities both to avoid downside business risks and exploit the upside opportunities.

Manisha Bhatia

Media & Communications

Fiinovation

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