A four-decade-old school is run by an old couple in a remote village in Uttar Pradesh on personal savings and donations. During the lockdown, they had no option than discontinuing classes. Students did not have any laptops, tablets or smartphones. Teachers visited respective households, but the outcome was no match to the routine. Since then, they have been struggling to set up a computer centre. Government schemes come with their own set of challenges. They have heard of CSR funding but don’t know whom to approach? Which company will support them? How challenging will it be? Will they even consider a non-government school?

We tried to explore some of these questions by analyzing CSR reports of India’s top ten companies (based on market cap) from the last decade and interviewing experts. The article discusses their CSR budgets for education, significant projects, locations, governance, and associated challenges. To begin with, a brief explanation of the CSR regulation in India and its impact follows.

The CSR Regulation

Section 135 of the Companies Act, 2013 mandates listed companies with a turnover of Rs. 5,000 crores or a net worth of Rs. 500 crores or a net profit of Rs. 5 crores to constitute a CSR committee. This committee formulates and recommends the CSR policy to the Board. It includes spending at least 2 percent of the last three years’ average net profits on Schedule VII activities. Education is one of these activities.

The Ministry of Corporate Affairs suggested that Schedule VII must be “interpreted liberally.” But long-term projects rather than one-off events are allowed, and expenditure on employees, routine business, statutory obligations or activities outside India does not qualify. The projects’ surplus is not profit. Simply, CSR includes charitable activities that meet social and/or environmental objectives. In May 2021, Covid-19 projects were added to the list.

Regulation’s Impact

Experts suggest the Act has been a game-changer. Dr Amit Kumar, Head of CSR Initiatives at TERI, said, “It was a huge, positive step that made companies proactive.” A study published in the Economic and Political Weekly based on firm-level data from 2010 to 2015 stated a “sharp spurt” in the number of firms spending on CSR after the Act; total spending also increased. Another study noted that CSR helped in moving toward the SDGs.

Top CSR Activities 

Education and healthcare are the top CSR activities in India; next comes environmental sustainability (Bansal et al., 2018). In 2020-21, the total CSR funds for health and education were more than Rs. 13,380 crores, almost 65 percent of the total funds (csr.gov.in).

Barring the pandemic, education has been the top activity in the last few years (csr.gov.in). In 2020-21, Rs. 6,463 crores were spent on education, despite a dip of Rs. 3,000 crores (approx.) from the previous year (Ibid.). As per our previous study published in Terragreen, India’s top ten companies spent almost Rs. 1,500 crores on Covid-19 activities in the last two years, but education remained one of the leading activities. While education has been at the top of the CSR priority list, what has been the impact? We will try to discuss this in the remaining article.

CSR Funds for Education

Total Funds: India’s top ten companies[1] spent more than 2,800 crores on education between 2014 and 2020 after the Act of 2013 mandated CSR. Reliance, TCS, and Infosys spent the highest, followed by HDFC Bank and Bharti Airtel. The projects operated in selected states at primary, secondary, adult literacy, and vocational levels. Leading NGOs implemented these projects under the purview of CSR committees. Maharashtra and Karnataka received the maximum funds.

Projects: Most companies did not disclose project-wise funds except HDFC and Kotak Bank. Table 1 presents select projects based on their scale and impact; all the projects were long-term.

States: Each company prioritized a geographical area. Big projects were primarily located in large states in southern, western or central India. Only two northeastern states, Assam and Meghalaya, were included. Out of Union territories, Delhi and Daman and Diu were on the list.

Implementing Agencies: Companies hired NGOs for designing and implementing projects. Some set up their organizations and directed funds through them. Reliance, Airtel, and Kotak Bank’s foundations opened schools, provided scholarships, and other expenditures. Some partnered with the government. For instance, ICICI Bank liaisoned with the governments of Rajasthan and Chhattisgarh. 

Governance: CSR comes under the purview of a committee that must include three directors for public companies and an independent director as the chairperson. The number of members in our sampled companies’ committees was four to seven; ITC had seven members. While companies have started hiring specialized workforce like the Chief Sustainability Officer or the CSR Head, such designations were not part of committees. 

Impact Assessment: CSR is the Board’s responsibility. Details are filed in the MCA21 registry and included in the annual report and the business responsibility report. The recent amendment has introduced some rules for impact assessment. Companies with an average CSR obligation of Rs. 10 crores or more in any of the preceding three financial years or projects of minimum Rs. 1 crore completed at least a year before must carry out the assessment. But it is still an emerging area. Different companies use different methodologies. Reliance adopts a monitoring framework; Airtel hires a third party while some companies conduct internal assessment. 

Issues and Concerns

Restricted to the Foundations or NGOs: Practically, CSR funding for education in India is available to select organizations and regions. Prof Vinay Nangia, Distinguished Professor, BML Munjal University, said, “CSR fund is not a low hanging fruit for those looking for funds.” Companies will not fund independent or private organizations. Dr Kumar of TERI said that the NGO must be at least four or five years old.

A senior CSR Manager with a leading FMCG company said, “If you are not an NGO, but a volunteer group or a student initiative, you cannot get funding. Apart from credibility, you must strongly connect with the Gram Panchayat for projects in rural areas.” Thus, all the hired NGOs have an established record. They must also register in the MCA21 portal as per the recent amendment. 

Restricted to the Few States: The Act of 2013 recommends a company’s local areas for CSR. On the ground, each company has priority regions. Prof Nangia informed that some companies might cover the entire country, some might cover specific parts and some only the headquarters. For instance, one big oil company funds only in Assam. He added that organizations or individuals at the receiving end rarely conduct extensive research about the company’s priorities, and that’s the biggest obstacle.

Lack of Training and Resources: A primary prerequisite for seeking CSR funding is the project proposal. Dr Kumar of TERI said that schools might not have the expertise to develop a proposal and pursue companies. The proposal includes a needs assessment or baseline survey, impact measurement mechanisms, other funding sources and sustainability provisions. Small organizations may not have the resources to meet these requirements. Higher education organizations may get funding because employees can prepare such proposals and have personal connections. So, the affluent organizations have better chances. Companies are now allowed to hire international organizations for project designing, monitoring, evaluation and capacity building as per the recent amendment.

Public and Private Sector Approaches: In 2016, the Ministry recommended the Central Public Sector Enterprises (CPSEs)  spend 33 per cent of CSR funds on Swachh Bharat and Ganga Rejuvenation activities. For 2022-23, Health and Nutrition have been announced as the CSR theme. Overall, the public sector has more restrictions. So, their priorities may be fixed, and they may fund accordingly. There are other challenges as well. Dr Kumar of TERI said, “Public enterprises mainly fund infrastructure whereas the private sector is open to new projects and initiatives. The former takes a lot of time for project approvals, but that’s not the case with private companies.”

The Meaning of CSR: Globally, India’s CSR mandate is unique. But as per the Act, CSR is philanthropy. From a practical and theoretical perspective, CSR has a different meaning. It includes philanthropic and other activities related to the business model and operational efficiency (Ranjan et al., 2015). In such a scenario, which companies should invest in education? Logically, those in related business will better understand the education market, and their core competency could amplify the impact. Complete de-alignment of CSR from the core business is neither practical nor beneficial.

The Way Forward

As the regulation evolves and the stakeholders become more conscious, three areas shall gain attention – accessibility and equity in the funding process and the impact of CSR on education.

First and foremost, more clarity on what constitutes CSR will be helpful. As the global debate on sustainability is gaining ground, companies are moving towards integrated and ESG (environmental, social and governance) reporting, and CSR outcomes are being linked to the SDGs. It may be an excellent time to evaluate if activities beyond philanthropy can be promoted through regulation. If that’s the case, companies in the education market shall strive harder for social outcomes. Second, there could be rules for a level playing field to fund lesser-known NGOs and remote areas. Third, training may be organized for those seeking funding and measuring the impact. Here, the public sector could play a proactive role. Fourth, those seeking funds need to understand companies’ systems, processes, and priorities. Fifth, a system for impact assessment needs to be developed. Prof Nangia suggested that there must be a framework for assessment that companies adopt uniformly. It will improve transparency, equity as well as accessibility. After all, let it be a fair game!

By Ritika Mahajan and Monica Sareen