Where Is All The CSR Spend Going
Mercer survey identifies three areas: education (81%), community-based development (64%) and environmental sustainability within the company (61%)
BW Online Bureau
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CSR and sustainability are becoming an increasingly important component of business strategy both globally and in India. Indian organisations envisage CSR as an aspect that is connected to their core business, and beneficial for their workforce and the communities in which they operate. Despite the challenges, this presents an opportunity for innovation and improvement.
With the onset of the CSR provisions in the New Companies Act, that makes it mandatory for companies to spend of 2 per cent of the average profit on CSR, companies are looking at ways to create value for both their businesses and the society in conjunction. With the objective to understand the key driving factors for CSR engagement at companies, current initiatives, challenges and the structure of the CSR function within the companies in the country, a survey on ‘Corporate Social Responsibility and Sustainability Programs, Policies and Practices Survey,’ was conducted by Mercer across 40 organisations, with respondents based out of different cities in India and from various sectors. A global version of the survey was conducted by Mercer in 2012; a few aspects of which have been mentioned in the report for a comparative analysis. In both surveys, CSR and Sustainability were treated together.
The increasing importance of CSR was indicated by a majority of respondents, 75 per cent stating they feel that CSR has become more important at their company over the past two years. In fact, 81 per cent feel that it is an extremely important component for business strategy.
The survey identified three core areas around which most of the current CSR activities in the country are based on: education (81 per cent), community-based development (64 per cent) and environmental sustainability within the company (61 per cent). The majority of companies conduct their CSR/sustainability initiatives by partnering with a local, independent non-profit organisation (78 per cent), whereas 17 per cent of companies stated that they work with their company’s own non-profit organisation. Over a quarter of participating companies indicated that they are integrating social and environmental priorities into their business models to generate shared value.
The survey brought to the fore that 73 per cent of participating companies in India have a CSR policy in place. Of the companies that stated that they are undertaking CSR activities without a policy or guidelines (17 per cent), all of them plan to develop a formal policy within the next two years. While ten per cent of respondents indicated that their company does not undertake CSR activities.
Looking at policy maturity, a relatively equal distribution between newer and older policies was evident, with 54 per cent of employers having a CSR/sustainability policy for a period of up to five years and 46 per cent having a policy for five years or more. Among these companies, the most commonly seen policy age was three to four years (40 per cent). This demographic was predominately comprised of listed Indian organisations in the private sector and multinational organisations headquartered outside of India.
“The importance of CSR/sustainability is seeping deep into Indian companies as three out of four companies in India already have or are planning to form a core team dedicated to CSR/sustainability within the next one to two years. With dedicated teams in place and companies stating that employee volunteering will be involved in their corporate citizenship projects, India is surely striding in the right direction down the sustainability path”, says Shanthi Naresh, Mercer India Business Leader, Information Solutions.
One notable aspect where the Indian companies differed from their global counterparts was in that nearly 44 per cent of Indian companies stated they have a dedicated team responsible for CSR compared to only around one-quarter of companies globally having a dedicated team. Another structure for CSR commonly seen in organisations is to have another department/function with part-time responsibility for CSR/sustainability – 28 per cent of companies in India do this. The most common function to hold part-time responsibility for CSR/sustainability is Human Resources (HR), both in India and globally. However, in India, a significantly higher number of companies hold HR responsible for CSR/sustainability (90 per cent), compared to the global result of 69 per cent.
It is interesting to note that only about one-third of Indian organisations stated that they issue an integrated annual report on their CSR activities compared to the global results where almost half the participating companies worldwide stated that they provide an integrated annual report on CSR, presenting an area for improvement for companies in India. Further, quantifying the business value of CSR/sustainability initiatives is among the top challenged faced by participating companies in India.
When asked to rate the importance of different business factors when budgeting for CSR funds, 83 per cent of respondents indicated that CSR as value creation was very important or important and 73 per cent indicated the same for brand and reputation management. Another business factor that the majority of participating companies considered as very important or important when deciding CSR funds was CSR as a tool for employee engagement (69 per cent). These results display companies’ consideration of CSR’s role in business factors directly connected to their clients and workforce.
“Indian organisations recognise the significant role that CSR/sustainability plays not only in addressing social and environmental issues, but also its importance to a range of business factors such as value creation, effectively managing the triple bottom line and employee engagement,” says Cindy Arkin, Mercer Regional Corporate Social Responsibility, India, Middle East, Turkey and Africa.
A little more than half the respondents said that their organisation had an annual centralised budget for CSR programmes. Across industries and company sizes, budgets were varied, ranging from Rs 900,000 to Rs 25 crore per annum. The average yearly budget (Rs 58,128,571) allocated to CSR amongst participating companies was more than double the median (Rs 25,000,000), which demonstrated that several participating companies have budgets greatly above the median. Of those allocating a centralised budget for CSR, most were from the financial services industry. The yearly budget for these programmes for financial services companies was on average Rs 4.5 crore. The highest budget (Rs 25 crore) was seen at a large IT company.
With the onset of the CSR provisions in the New Companies Act, that makes it mandatory for companies to spend of 2 per cent of the average profit on CSR, companies are looking at ways to create value for both their businesses and the society in conjunction. With the objective to understand the key driving factors for CSR engagement at companies, current initiatives, challenges and the structure of the CSR function within the companies in the country, a survey on ‘Corporate Social Responsibility and Sustainability Programs, Policies and Practices Survey,’ was conducted by Mercer across 40 organisations, with respondents based out of different cities in India and from various sectors. A global version of the survey was conducted by Mercer in 2012; a few aspects of which have been mentioned in the report for a comparative analysis. In both surveys, CSR and Sustainability were treated together.
The increasing importance of CSR was indicated by a majority of respondents, 75 per cent stating they feel that CSR has become more important at their company over the past two years. In fact, 81 per cent feel that it is an extremely important component for business strategy.
The survey identified three core areas around which most of the current CSR activities in the country are based on: education (81 per cent), community-based development (64 per cent) and environmental sustainability within the company (61 per cent). The majority of companies conduct their CSR/sustainability initiatives by partnering with a local, independent non-profit organisation (78 per cent), whereas 17 per cent of companies stated that they work with their company’s own non-profit organisation. Over a quarter of participating companies indicated that they are integrating social and environmental priorities into their business models to generate shared value.
The survey brought to the fore that 73 per cent of participating companies in India have a CSR policy in place. Of the companies that stated that they are undertaking CSR activities without a policy or guidelines (17 per cent), all of them plan to develop a formal policy within the next two years. While ten per cent of respondents indicated that their company does not undertake CSR activities.
Looking at policy maturity, a relatively equal distribution between newer and older policies was evident, with 54 per cent of employers having a CSR/sustainability policy for a period of up to five years and 46 per cent having a policy for five years or more. Among these companies, the most commonly seen policy age was three to four years (40 per cent). This demographic was predominately comprised of listed Indian organisations in the private sector and multinational organisations headquartered outside of India.
“The importance of CSR/sustainability is seeping deep into Indian companies as three out of four companies in India already have or are planning to form a core team dedicated to CSR/sustainability within the next one to two years. With dedicated teams in place and companies stating that employee volunteering will be involved in their corporate citizenship projects, India is surely striding in the right direction down the sustainability path”, says Shanthi Naresh, Mercer India Business Leader, Information Solutions.
One notable aspect where the Indian companies differed from their global counterparts was in that nearly 44 per cent of Indian companies stated they have a dedicated team responsible for CSR compared to only around one-quarter of companies globally having a dedicated team. Another structure for CSR commonly seen in organisations is to have another department/function with part-time responsibility for CSR/sustainability – 28 per cent of companies in India do this. The most common function to hold part-time responsibility for CSR/sustainability is Human Resources (HR), both in India and globally. However, in India, a significantly higher number of companies hold HR responsible for CSR/sustainability (90 per cent), compared to the global result of 69 per cent.
It is interesting to note that only about one-third of Indian organisations stated that they issue an integrated annual report on their CSR activities compared to the global results where almost half the participating companies worldwide stated that they provide an integrated annual report on CSR, presenting an area for improvement for companies in India. Further, quantifying the business value of CSR/sustainability initiatives is among the top challenged faced by participating companies in India.
When asked to rate the importance of different business factors when budgeting for CSR funds, 83 per cent of respondents indicated that CSR as value creation was very important or important and 73 per cent indicated the same for brand and reputation management. Another business factor that the majority of participating companies considered as very important or important when deciding CSR funds was CSR as a tool for employee engagement (69 per cent). These results display companies’ consideration of CSR’s role in business factors directly connected to their clients and workforce.
“Indian organisations recognise the significant role that CSR/sustainability plays not only in addressing social and environmental issues, but also its importance to a range of business factors such as value creation, effectively managing the triple bottom line and employee engagement,” says Cindy Arkin, Mercer Regional Corporate Social Responsibility, India, Middle East, Turkey and Africa.
A little more than half the respondents said that their organisation had an annual centralised budget for CSR programmes. Across industries and company sizes, budgets were varied, ranging from Rs 900,000 to Rs 25 crore per annum. The average yearly budget (Rs 58,128,571) allocated to CSR amongst participating companies was more than double the median (Rs 25,000,000), which demonstrated that several participating companies have budgets greatly above the median. Of those allocating a centralised budget for CSR, most were from the financial services industry. The yearly budget for these programmes for financial services companies was on average Rs 4.5 crore. The highest budget (Rs 25 crore) was seen at a large IT company.
Nice info..
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