Businesses with small CSR budgets overspend, but large firms face hiccups, shows study

Businesses with small CSR budgets show “excessive intent” to do charitable work compared to their legal obligations, while those with the largest budgets face challenges in the absorptive capacity of implementing agencies, according to a study of government data by private ESG and CSR consulting firm Sattva Consulting.

The findings of the study, titled ‘The next Act of CSR: How the next decade will redefine corporate impact’, are based on analysis of the spending patterns of more than 20,000 companies in every three years through FY24. It also shows that while cities continue to be the focus of companies’ CSR spending, small towns are increasingly gaining ground.

According to the research, 29% of companies that spent on CSR in all three years to FY24 consistently spent above their projected budgets. According to data from the corporate affairs ministry, more than 27,000 companies spent almost ₹35,000 crore from CSR in FY24.

In FY24, just over two-thirds of 17,645 companies spent less than 2020. ₹While 1 billion people overspent their budgets on CSR, a fifth underspent and close to 16% spent exactly as ordered.

For larger companies, the picture changes significantly. Among 35 businesses spending between ₹50 crore and ₹100 crore in FY24, more than half underspent, while two-thirds of 44 companies overspent ₹That year he spent Rs 100 crore less than his legal obligations.

“Businesses with large CSR budgets should start diversifying their project portfolios, leveraging all the technology and expertise needed to successfully implement projects and create impact,” said Srikrishna Sridhar Murthy, co-founder and CEO of Sattva Consulting.

Challenges and opportunities

Experts also said that the idea of ​​giving back to society through philanthropy or corporate social responsibility is still finding footing in India.

“Unlike in the Global North, where the culture of giving has grown over time, CSR here has become a rule rather than a habit, something companies are told to do,” said Rajib Nandi, vice president of Sambodhi Research and Communications Pvt Ltd., a consulting firm that works in various sectors, including CSR.

“Small organizations often find it easier to allocate funds and engage directly with communities or government initiatives, while for large companies this is more complicated,” Nandi said. “Big companies don’t always understand how the development sector works, who to trust to create real impact, how to identify trusted partners, how to understand social impact, or how to build systems to deliver meaningful change.”

“This gap has led to the rise of intermediary organizations that bridge the two worlds, helping companies direct their intentions and social organizations access the support they need to create real impact,” Nandi said.

Sattva Consulting’s Murthy said economic activities are growing in small towns and as businesses expand their presence in small towns, CSR operations will also expand there. Murthy said it is difficult for businesses to spend their entire CSR budget in big cities due to the increase in stakeholders in other cities and the limits of their absorptive capacity. The research showed that small cities and industrial centers are increasingly attracting more CSR funds.

The Companies Act provides that every business with a net worth ₹500 crore or more or turnover ₹1000 crore or more or net profit ₹Those who earned revenue of Rs 5 crore or more in the previous financial year are required to spend 2% of their net profit on CSR.