A study on corporate social responsibility obligations by the Indian School of Business (ISB) as part of which 1,210 entities were covered has found that a greater proportion of family firms met the CSR mandate even as the overall non-compliance level remains a matter of concern.
Conducted by Thomas Schmidheiny Centre for Family Enterprise at the premium business school, the study ‘Family Businesses: Heeding the Call of Corporate Conscience, 2015-2017’ analysed the CSR spend behaviour of different categories of firms, based on their ownership structures, for three-year period from FY 2015 to FY 2017.
Of the 1,210 firms, 562 were Family Business Group Firms (FBGF); 486 Standalone Family Firm (SFF); 77 multinational companies (MNC); 57 State-owned enterprises (SOE); 12 non-family standalone firm (NF) and 16 Other Business Group Firms (OBGF). Under the Companies Act of 2013, certain class of companies need to spend at least 2% of the average net profit towards CSR activities and make mandatory disclosures about their spending.
Nupur Pavan Bang, one of the authors, said the percentage of family firms that met their CSR obligations or went above the prescribed limit were 50%. The corresponding figure was 45.1 per cent for non-family firms.
Family firms are more driven by non-economic utilities and thus more likely to contribute to social welfare activities in keeping with the objective of building an enduring organisation as trustees of society’s wealth. However, these firms need to professionalise their social pursuits and build transparent and strong governance mechanisms, the study recommended.
State enterprises
The study found that State-owned enterprises have been largely driving the CSR spends in India given their social welfare mandate. Despite forming only 4.7% of the sample size in terms of numbers, they contributed to 31.7% of the total CSR spending of the sample as compared to 46.4% of FBGFs contributing to 42.7% of the total spend.
OBGFs and NFs have been restrained in their spending indicating that continuity in long-term vision and institutional values may be an issue in such firms. Professional managers may not have the required will to proactively drive social welfare activities, a release from ISB on the study said. ISB Dean Rajendra Srivastava, who released the study, said the re-constitution of the high-level committee on CSR in November is a step in the right direction and points towards the intent of the government to make the law more effective. A panel discussion on CSR followed.
