An Analysis of CSR Expenditure by Indian Companies

Abstract

The Companies Act 2013 has made a provision requiring corporates to spend 2% of the profits towards Corporate Social Responsibilities (CSR). The purpose of this study is to analyse the expenditure pattern of corporates towards CSR activities in the period of voluntary spending and based on the results, evaluate whether insertion of such a provision in the Act was necessary or not. The sample consists of thirty companies included in BSE Sensex from 2001 to 2012. The analysis is done on the basis of number of companies spending on CSR, details of CSR expenditure, amount of CSR spending as percentage of sales and profits for each year and on an overall basis. The analysis shows that the CSR spending has been very low as percentage of revenue and profits during the phase of voluntary spending. The results also suggest that spending on environment and pollution control is not on the priority list of companies. Though, impact of CSR activities cannot always be evaluated in terms of fund allocations, still it is one of the most important indicators of the engagement of companies with society. Therefore, based on the findings, it can be concluded that insertion of this provision is an appropriate step by the regulators to make corporates socially more responsible.