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The Reality of CSR Spending in India: Are Corporates Doing Enough?
Corporate social responsibility (CSR) has been a legal mandate for Indian companies since the Companies Act, 2013, came into effect. Over a decade later, India's top corporations collectively spend thousands of crores annually on CSR initiatives. Yet, a closer look reveals a troubling reality – while some companies lead the way, others fall short, and systemic inefficiencies plague the execution of these funds.
With Rs 17,967 crores spent in the latest fiscal year, the question remains: Is India's CSR spending truly making an impact, or is it just a compliance exercise?
The numbers speak
The latest data highlights India's top CSR spenders, with HDFC Bank leading at Rs 945.31 crores, followed by Reliance Industries (Rs 900 crores) and TCS (Rs 827 crores). While these figures seem substantial, a deeper analysis reveals disparities. Reliance Industries, with a market cap of Rs 20.10 lakh crores, spends only 0.045% of its valuation on CSR, while HDFC Bank allocates just 0.086%.
In contrast, ONGC, with a smaller market cap (Rs 3.37 lakh crores), spends a comparatively higher 0.188%, suggesting that some of India's wealthiest corporations are doing the bare minimum to meet legal requirements rather than embracing CSR as a core responsibility.
Sectoral disparities are also evident, with banking and IT giants dominating CSR spending, while manufacturing and PSUs contribute at lower scales. Startups and mid-sized firms, despite growing profitability, often lack structured CSR commitments. Geographically speaking, an IJCRT 2024 paper finds that a significant portion of CSR funds (nearly 60%) are directed towards states like Maharashtra, Karnataka, Tamil Nadu and Gujarat which are performing well on various socio-economic indicators.
In contrast, northeastern states and Bihar, which have higher poverty rates and developmental needs, receive minimal CSR funds. This highlights a regional imbalance in CSR spending, potentially hindering the development of less-developed areas.
How does India fare in the world?
Globally, CSR is often driven by voluntary commitments rather than legal mandates. In the United States, companies like Microsoft and Google allocate 1-2% of profits to philanthropy, focusing on education and climate change. Unlike India's mandatory 2% rule, U.S. firms often exceed legal requirements due to stakeholder pressure and brand reputation. Microsoft, for instance, has pledged USD 1 billion toward Artificial Intelligence for social good, while Google's CSR initiatives include renewable energy investments and digital literacy programs.
In the European Union, the Corporate Sustainability Reporting Directive (CSRD) requires detailed ESG disclosures, pushing firms toward long-term impact rather than token donations. Companies must report on environmental, social and governance metrics, ensuring transparency. Germany, for example, integrates CSR into corporate governance, with firms like Siemens allocating funds to vocational training and green energy.
China's approach differs, with state-linked corporations investing heavily in infrastructure and poverty alleviation, aligning CSR with national development goals. Firms like Alibaba and Tencent contribute to rural education and disaster relief, often under government guidance.
Coming to India, while the mandatory 2% CSR rule was revolutionary, it has led to a "check-box" approach – companies treat it as a tax rather than a strategic investment in social good.
Where is the money really going?
A 2023 KPMG report highlighted inefficiencies in India's CSR ecosystem. Transparency remains a major issue as many companies do not disclose detailed project outcomes. For instance, while a corporation may claim to have built 100 schools, there is often no data on student enrolment, teacher retention or learning outcomes.
Short-term projects usually dominate, with over 40% of CSR funds going into one-off initiatives like building schools or hospitals rather than sustainable programs such as skill development or women's empowerment. Only 15% of CSR projects have a monitoring mechanism beyond the first year.
Administrative delays further compound the problem. Bureaucratic hurdles in fund disbursement lead to underutilisation – nearly Rs 2,000 crores remained unspent in FY 2023-24. It has generally been found that 1 in 5 companies fail to meet the 2% spending threshold, project delays being the primary reason.
These delays can disrupt the planned CSR budget and timeline, leading to a shortfall in spending.
Case studies: Successes and failures
Some companies stand out for their impactful CSR initiatives. The TATA Group, for example, goes beyond mandatory spending with long-term programs like Tata STRIVE (skill development) and Tata Water Mission, reaching over 500,000 beneficiaries in rural India. Infosys Foundation focuses on education and rural healthcare, setting up 10,000 libraries since 2020 through its "Library for Every School" initiative. HDFC Bank's Parivartan program supports sustainable livelihoods, reaching 3 million households through skill development and microfinance.
However, not all CSR spending is effective. Some corporations divert funds into brand-building activities like sponsoring marathons or awards rather than grassroots change. Some spend on "awareness campaigns" with no tangible impact. Misallocation is another issue, with Rs 500 crores spent on projects lacking clear beneficiaries. In one case, a corporate-funded hospital remained non-operational due to a lack of staff.
Public perception and stakeholder pressure
Public scrutiny of CSR spending is growing. There is a growing feeling that CSR funds are not utilised effectively, while many want stricter penalties for companies that fail to meet spending targets. Additionally, most prefer CSR funds to be directed toward education and healthcare over infrastructure.
This pressure is already driving change – after public backlash, a major FMCG company revised its CSR policy to focus on malnutrition programs instead of cultural events.
The way forward
To enhance CSR effectiveness, India must adopt stricter monitoring mechanisms. The government could enforce real-time project tracking via a public dashboard, similar to the EU's CSRD, and penalise companies that fail to meet outcome-based targets.
Encouraging innovation is also critical. Allowing CSR funds to support social enterprises and impact startups, as seen in Kerala's "CSR Startup Pool" initiative, could improve execution. Corporate-NGO partnerships, facilitated by platforms like NITI Aayog's Darpan portal, should be promoted.
Regional equity must be addressed by incentivising CSR spending in underdeveloped states through tax benefits. Expanding the MCA's "Aspirational Districts" program to mandate a minimum percentage of CSR funds for these regions could help.
Learning from global best practices, such as the EU's sustainability reporting model or Japan's CSR culture, where firms like Toyota integrate social responsibility into core business strategies, could also drive meaningful change.
Finally, involving employees and communities in CSR decision-making, as done by IBM and Accenture through volunteer programs, could enhance engagement and accountability.
Beyond compliance, toward change
India's CSR law was a bold step, but Rs 17,967 crores alone won't solve the nation's deep-rooted inequalities. The shocking reality is that while some companies lead with purpose, others treat CSR as a regulatory burden. For CSR to truly transform lives, corporations must move beyond compliance and embrace impact-driven, transparent, and sustainable social investments.
The question isn't just "How much is spent?" but "How well is it spent?" – and India deserves an answer.
