Evaluating India’s Top Companies For CSR 2014

Submitted by Namrata Rana

By Namrata Rana and Utkarsh Majmudar

For India the need to change from business strategies to “Responsible business strategies” is urgent if it is to tackle issues such as health, nutrition, education, water scarcity and climate change, particularly with its population of over 1.2 billion people.

2014 saw the Companies Act with the mandatory CSR provision come into effect (see CSRwire : The Birth of a New Ecosystem: India's Mandatory CSR Rule Becomes a Reality). The Act makes it mandatory for companies meeting certain thresholds to spend 2% of its net profits in CSR.

This has led to many discussions on how these provisions and the newly notified rules impact corporate India. Economic Times, Futurescape and IIM Udaipur felt it was an opportune time to study what Indian Companies have been doing as part of CSR and the implications for them going forward on the path to social responsibility. The study - India’s Top Companies for CSR 2014 (www.responsiblefuture.in) scored companies based on four principal criteria:

- How well is the governance for CSR structured?

- How forthcoming are companies with respect to CSR activities and performance

- How well are key stakeholders (employees, community, customers and suppliers) integrated within a company’s CSR framework?

- How pervasive are sustainability practices of companies?

Top Stars 

Our study looks at understanding how companies are strategically investing in a multi stakeholder approach to rebuild businesses that can withstand the challenges of the 21st century.

Basis our extensive analysis we find that the top scoring Companies in CSR are Tata Steel, Tata Chemicals, Mahindra & Mahindra, Maruti Suzuki and Tata Motors. The same set of companies are top 5 in both the Manufacturing category as well as Private category.

Rank	Company
1	Tata Steel Ltd
2	Tata Chemicals Ltd.
3	Mahindra & Mahindra Ltd
4	Maruti Suzuki
5	Tata Motors Ltd

Top 5 Public companies

We have also shortlisted the top 5 Public sector companies, which are 

Rank	Company
1	SAIL
2	GAIL India
3	NTPC
4	Indian Oil Corporation
5	ONGC

Top 5 Services companies

The top 5 Service sector companies are

Rank	Company
1	Infosys
2	Wipro
3	Bharti Airtel Ltd
4	HCL Technologies
5	Tata Consltancy

While the overall ranks talk of a comprehensive approach towards CSR - we also need to understand how the key parameters of governance, disclosure, stakeholder engagement and sustainability stack up.

	Governance	Disclosure	Stakeholders	Sustainability	Overall

Average score for all companies

9.9

3.9

18.6

7.5

39.9

Top companies uniformly score well above average scores. This indicates that they do well not just on one or two parameters but perform consistently well on all parameters.

 

Some Key Findings are: 

- Tata Steel Ltd tops CSR ranking. SAIL leads the pack in public companies and Infosys in service companies. The Diversified industry is the top performer.

- Manufacturing companies fare marginally better than Service companies. Public companies are better than private companies.

- Companies are reasonably strong on governance, weak in disclosure, weak on stakeholder based CSR and, surprisingly, weak on sustainability.

- IT companies are relatively strong in governance and disclosure. Diversified companies are strong in stakeholder based CSR and sustainability. Automobile companies and telecom companies are strong on sustainability. Disclosure practices are weak across all industries.

- The Companies Act 2013 (and its rules) prescribe 10 areas in which companies will be required to invest. Currently companies focus least on armed forces veterans/war widows; protect national heritage; support artists, sportsmen and musicians, eradicating hunger and poverty, and initiatives for senior citizens.

- Presently only 10 corporate are complying with these norms with a spending of 2% or more. Most corporates are not meeting with the proposed 2% CSR norm – the average CSR spend as a percentage of PAT for 74 companies is 1.02%.

What Next 

The task now, is to convert the opportunity this legislation provides into tangible outcomes that not only comply with the law but also highlight the larger vision of the organisations they impact. Indian companies' unique culture, skills and intrinsic ability to innovate can establish new ways to support society and build their brands. CSR solutions can take the form of collective funds for greater impact, financial innovation and new social impact models.