Education and Healthcare Are Most Preferred Social Causes For CSR By Firms 

By Outlook Planet Desk April 10, 2023

A recently published paper shows interesting patterns related to CSR patterns and strategies chosen by companies

Education and Healthcare Are Most Preferred Social Causes For CSR By Firms 
Corporate Social Responsibility is mandated by the law.

A majority (55.7%) of CSR projects, on average across years, focused on just two social causes—education (35.6%) and healthcare (20.1%), according to a new research paper that examines corporate social responsibility strategies under India's legal mandate. A certain kind of profitable businesses is required by the Companies Act of 2013 to devote at least 2% of their three-year average annual net profit to Corporate Social Responsibility (CSR) activities throughout a fiscal year.

The study published in Strategic Management Journal probed 86,755 projects and 12,086 businesses between 2014 and 2017. It investigated firms' selections of social causes, geographic locations, implementation channels, and number of projects. 

The second most popular group of projects prioritises environmental sustainability (5.2%), alleviating hunger and poverty (5.6%), and rural development (6.1%).

The 22 remaining social causes represent only 27.4% of projects on average over the years, with the remaining categories each representing 0.03–3.3% of initiatives. The fact that corporate managers consider CSR strategy as optional is attested to by these four government programmes, which enterprises can participate in (i.e., mandated CSR is not equated with a tax levied via a government fund).

Businesses frequently choose between two CSR approaches: the first, which is the most common, has a narrow focus, while the second, which is frequently pursued by top corporations and state-owned enterprises, is broader. Practical stakeholder issues appear to be the primary driving force behind both methodologies. Neither approach takes advantage of how much more effective corporations are than nonprofit actors, despite the second technique having a greater potential for differentiation and social influence. These disclosures illuminate how corporations address significant issues and have the power to affect CSR rules.

The distribution of projects throughout India's 28 states and 8 union territories demonstrates that only four states—Maharashtra (25%), Tamil Nadu (around 9%), Gujarat, and Karnataka—complete the majority (53%) of CSR projects, with little variation over time.

Delhi, West Bengal, Haryana, Uttar Pradesh, Telangana, Rajasthan, and Andhra Pradesh, account for 31% of all CSR efforts. They each host 3.5 to 7% of the projects. As a result, fewer than 50% of India's states are home to more than 85% of the projects. The remaining 17 states, some of which are home to fewer than 100 projects total, only account for 15% of projects.

Even though there are more companies engaged in CSR in Delhi, there are fewer projects than in Tamil Nadu, Gujarat, and Karnataka.

Another noteworthy fact is that businesses directly implement the majority of CSR projects (52% of projects on average across years). Furthermore, 6% of projects are implemented through a company's corporate foundation, which is also a type of direct implementation, compared to 39% of projects that are done through NGOs and only 3% that are conducted through state agencies. The small percentage of initiatives carried out by government agencies echoes the decision made by businesses to forgo donations to social causes from the federal government.

In contrast, 35% of businesses consistently use a portfolio method, while 43% always use a single-project approach, according to the study. The remaining 22% of businesses alternate between the two strategies over time.

Throughout almost all states, education and healthcare outpace all other 26 social causes combined: they account for more than half of projects in 60% of states and more than 30% of projects in all but one case (Nagaland). With the exception of three states, direct implementation accounts for at least 40% of projects in each of the other implementation types. Additionally, it demonstrates that compared to other states, the four states with the most projects had a smaller share of direct implementation but a higher proportion of education and healthcare programmes.