The correlation between the state’s economic output and the amount of CSR spends is 0.93. Zero indicates no correlation; 1 indicates perfect correlation.
Experts attribute this to regional concentration of industry. The CSR regulations prod companies
to give preference to local activities when they spend their funds. Companies
of a certain size are required to mandatorily spend 2 per cent of their average three-year profits on CSR.
Consulting firm KPMG, in its India’s CSR reporting survey 2017, also noted the difference in spends.
“It is interesting to note that the six states, which house almost 60 per cent backward districts of India, have received only 15 per cent CSR fund, whereas five states, with about 15 per cent concentration of backward districts, have received more than 70 per cent CSR funds,” it said in the report released in January this year.
Such concentration is in contrast to government allocation of resources, which seems to reallocate capital to poorer regions. Uttar Pradesh (UP), Bihar, and Madhya Pradesh (MP) get the maximum share of central resources, shows the data on the devolution and transfer of resources from the Centre.
Santhosh Jayaram, partner & head, sustainability and CSR advisory at KPMG in India, said the primary reason that mandatory CSR has come into being is in order to increase engagement with the local community it operates in. This is also seen in the CSR regulations which require giving preference to the local area of operation.
“Companies’ CSR can only be seen as a supplement to government spending in places where these firms are present. Corporate spending in such developed states can help free up resources for backward regions,” Jayaram said.
But companies should also consider key markets when they look at areas for doing CSR, according to Swentank Mishra, founder of Sahej, a Patna based non-governmental organization (NGO).
“Poorer and undeveloped states such as Bihar, UP, and MP have few manufacturing units but are now top markets for many companies in industries such as two-wheelers, tractors, and other consumer goods. But these states get a minuscule share of CSR budget from top companies in these industries,” Mishra said.
He also said the current CSR guidelines don’t cover the companies’ supply-chain such as vendors, distributors, and retailers. “The biggest impact companies can make is to improve the lives of people who are part of their supply chain, but most companies ignore this due to a lack of mandate.”
Shubha Srinivasan, director, Deloitte India, suggested there is a need for steps, including working with NGOs, to help scale up operations in backward regions.
“It is critical to work and strengthen the capacities of not-for-profits with a footprint in these geographies, allowing pilot initiatives to scale and enhance their abilities to absorb more funding. Higher level of collaboration between the government, industry and NGOs through a special purpose vehicle/platform can be considered,” Srinivasan said.