Corporate Social Responsibility Funds being Responsible enough?

Corporate Social Responsibility (CSR) funds are the contribution to society, which helps the growth story of countries such as India. This can be in the form of funds being allocated to Non-Governmental Organizations (NGO) for helping the poor and giving resources which can help them survive.

Corporate Social Responsibility Funds being Responsible enough
Corporate Social Responsibility Funds being Responsible enough

In August 2013, The Indian Companies Act, 2013 replaced the Companies Act of 1956 by the Indian parliament. In this new Act, CSR obligations became mandatory to tackle mostly social problems. The value of no less than two percent of its average net profit must be used for CSR activities. This however has none to do with operations of companies outside India or dividends received from an Indian company that has met its CSR requirements.

According to Nasscom Foundation, more than 60 percent of companies that were surveyed said they fully used CSR funds or more in the period 2016- 2017. In division to Multinational Corporations the use of CSR is 63.3 per cent MNCs and 68 per cent non-MNCs.

It would be likely that a small sized firm (Less than₹100 crore) would not spend much of their CSR funds; however this was not the case. 72.7 per cent Smaller-sized companies were reported to reporting 100 per cent utilisation, followed by 57.57 per cent large companies and 53.3 per cent medium-sized ones.

Most of the spending has been on Education, which is to the estimate of 76% of the funds, 18% on gender equality and 12% on hunger and poverty. This will further improve India as a whole, thanks to big corporations.

However, the problem with CSR is the on hire charitable organisations. These organisations help large corporations misuse CSR spending. A case scenario explaining this is

If a company is to spend roughly ₹10 Crore which is 2% of its profit, this will be written on a cheque in favour of a trust that works in charities. This trust which is a made one will cut its commission and return its funds to the original company. This is a notorious financial method where large corporations turn their white money into black untaxable money.