India Inc’s traditional CSR may end up in containment | Economic Times

ET Intelligence Group: The lockdown forced by Covid-19 is likely to have a severe impact on the traditional corporate social responsibility (CSR) expenditure and the ecosystem dependent on it. There are five reasons why:1. With donations to the PM-Cares Fund and Covid-19-related relief work eligible to be considered CSR expenditure, most companies are likely to nearly exhaust their current CSR budgets after donating to this fund or related relief work. For instance, L&T has donated Rs 150 crore to the fund and has committed to set aside more than Rs 500 crore per month to support about 160,000 contract workers. This is much more than the company’s FY19 CSR expenditure of Rs 122 crore. 2. According to a recent report by consulting firm FSG, the near- and medium-term focus of India’s CSR donors will be Covid-19 and the funding for traditional CSR activity could be reduced by 30-60%. While companies would want to support their long-term NGO partners and are likely to prioritise contractual commitments, some of these commitments may have to be reduced. This is likely to result in significant cost-cutting by the NGOs, resulting in restructuring of their operations and project delivery. It is most likely to adversely hit small, fledgling NGOs.3. With several companies having to reduce salaries, retrench staff and cut costs to remain afloat, there will be little incentive for them to undertake traditional CSR initiatives and publicise them. In addition, uncertainty over future growth may prevent them from making commitments for the coming quarters. 4. According to a Bank of America Global Research report, companies allocating resources to the Covid-19 crisis are likely to foster employee and community goodwill and enhance their brands and reputation. 5. With an unprecedented impact on their businesses, companies will not be able to generate profits like previous years and are therefore likely to significantly reduce CSR budgets. According to data from nseinfobase.com, listed companies spent Rs 11,961 crore on CSR in FY19, an 18% jump over the previous year. The CSR budget for the next fiscal is unlikely to surpass that of the preceding years.75545366