The index tracks the profits-after-tax and CSR spends of top 10 private sector companies in India & provides

a peek into the overall CSR sentiment of the industry

CSR 10 India Index 2012

How the top private sector companies fair?

Anup Tiwari and Shweta Shukla

CSR 10 India Index 2012

Background
CSR 10 India Index tracks the performance of top 10 Indian private sector companies by revenue in terms of their CSR (Corporate Social Responsibility) spend. The criticality of the index is even more now with the upcoming Corporate Affairs Law that mandates CSR spend equivalent to 2% of net-profit. The CSR 10 India Index tracks the current performance of these wealth creators in terms of being responsible social citizens. The index has been created to reflect the overall sentiment of CSR investment and may be broadened in coming years for providing even better representation. In future editions it would also delve into quality of CSR aspects to work out a composite index value. The index tracks current year profit-after-tax than a three year average that the new law takes as base. In that sense Index takes a different approach from exact guidelines of the proposed law. However, the thinking is to help companies be CSR ready in coming years and plan CSR like core business.

Methodology
CSR 10 India Index has a fairly simple methodology. It bases its calculation on two basic factors- profit after tax and current CSR spends. The index first compares current CSR spends to the mandated amounts and calculates variance in percentage terms. This part of the index is called Variance Score and consequently there is a Variance Rank. The second part of the index tracks how much a company is contributing to the overall deficit or surplus in CSR spend for these 10 companies. This is known as the Contribution Score and hence there is a Contribution Rank. The latter is done with the belief that the larger the net-profit of the company larger is the responsibility for not missing the CSR spend target. The overall CSR 10 India Index Score is the average of Variance Score and Contribution Score. The smaller the score higher is the rank in CSR 10 India Index. As a last part CSR 10 India Index ranks are compared with Fortune India 500 ranks for 2012 to showcase difference in commitment towards generating profit vis--vis contributing to CSR.

Findings CSR India Index 2012

The top 10 private sector companies as per the Fortune India 500 List 2012 form part of the CSR 10 India Index. If a company which is in the above list but has not made profit the same is not included, since the basic calculation for the index is profit-after-tax. In such case the next company in the list is considered. These companies together made a total of INR 734 billion in profit-after-tax for the financial year 2011-12.

CSR 10 India Index 2012, Anup Tiwari & Shweta Shukla, www.fundraisingindia.org; May 2013

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CSR Variance Score and CSR Variance Rank

As a first step towards calculating CSR Variance Score and CSR Variance Rank the profit-aftertax figure for each company is taken from its Annual Report for 2011-12. From these figures, mandated 2% amount is arrived at, which is then compared with the current CSR spends. For 2011-12 the top 10 companies spent less than half of what is mandated in the proposed law i.e. instead of INR 14.67 billion the overall spend was only INR 6.9 billion. As a combine the top 10 companies returned a poor Variance Score of minus 53. This score is a representative of the market and in coming years would indicate the relative movement in CSR spends. The individual CSR Variance Scores of the companies and CSR Variance Ranks are in the table below. The profit-after-tax (PAT) and CSR spend amounts are in INR Millions. Name of the company
Tata Steel Larsen & Toubro Reliance Industries Hindalco Industries Bharti Airtel Mahindra & Mahindra Ltd Maruti Suzuki Ltd. TCS ICICI Bank Tata Motors Total

PAT 2011-12
53,898 44,565 197,240 33,970 42,954 28,790 16,352 104,135 76,429 135,165 733,498

CSR spend 2011-12

1,460 700 2,880 280 330 220 120 510 240 150 6,890

2% of PAT 2011-12
1,078 891 3,945 679 859 576 327 2,083 1,529 2,703 14,670

Variance
382 191 1,065 399 529 356 207 1,573 1,289 2,553 7,780

Variance %
+ 35.4 21.5 27.0 58.8 61.6 61.8 63.3 75.5 84.3 94.5 53.0

CSR Variance Rank

1 2 3 4 5 6 7 8 9 10

In the top 10, Tata Steel is the only one that has a CSR spend of more than 2% of its profit-aftertax. All others have to still ramp-up their act. It is also interesting to see a Tata company leading the ranking and another languishing at the bottom. Larsen and Toubro seem to be quite close to the mark in terms of percentage and even the amount of increase it needs to make in the coming years is not very high. Reliance Industries has a relatively high percentage, however in coming years it may need to increase its CSR spending by around INR 1 billion. The last three in the table also include the two Tata companies; figures for who mandate an increase in spend of whopping INR 4 billion as a combine. ICICI Bank also needs to make serious plans for ramping up its CSR spends by more than a billion Indian rupees.

CSR 10 India Index 2012, Anup Tiwari & Shweta Shukla, www.fundraisingindia.org; May 2013

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CSR Contribution Score and CSR Contribution Rank

The bigger the company and its profit-after-tax, greater is the responsibility of the company to increase its CSR spends. Since it is a leader its behaviour would impact the seriousness with which the industry works towards implementation of CSR. Therefore, the second part of the index looks at how much the variance in CSR spending of a company contributes to the cumulative surplus or deficit for the combine. A smaller score here would ensure a better rank.

Variance (INR CSR Contribution CSR Contribution Name of the company Millions) to overall deficit Rank
Tata Steel Larsen & Toubro Maruti Suzuki Ltd. Mahindra & Mahindra Ltd Hindalco Industries Bharti Airtel Reliance Industries ICICI Bank TCS Tata Motors Total 382.04 -191.3 -207.04 -355.8 -399.4 -529.08 -1064.8 -1288.58 -1572.7 -2553.3 -7779.96 -4.9 2.5 2.7 4.6 5.1 6.8 13.7 16.6 20.2 32.8 1 2 3 4 5 6 7 8 9 10

Reliance Industries is the biggest loser in this part of index, as its 1 billion ramp-up although a small percentage of its profit-after tax is a large amount in absolute terms; which means that a ramp-up not undertaken by Reliance will impact the overall CSR sentiment than a Maruti Suzuki. And therefore Maruti Suzuki has majorly improved its ranking in this section owing to a much smaller ramp-up in CSR spend needed in absolute money terms. The last three spots do not witness a change indicating the absolute urgency for these companies to ramp-up their CSR spending. The current CSR spending for these companies is not only low but also needs a very large ramp-up in terms of absolute money. This could be a big challenge for the boards and executives of these companies and even their NGO partners in terms of absorption capacity.

Overall CSR 10 India Index Score and Rankings

The overall CSR 10 India Index Score and hence the final rank is arrived at by taking an average of the two scores- CSR Variance Score and CSR Contribution Score. A lower score in this case will lead to a higher ranking and vice versa. The score is significant as it takes into consideration both the percentage and absolute amount of CSR spending that the company needs to make. The CSR 10 India Index Score 2012 and rankings for individual companies are as in the following table.

CSR 10 India Index 2012, Anup Tiwari & Shweta Shukla, www.fundraisingindia.org; May 2013

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CSR 10 India Name of the company Index Score

Tata Steel Larsen & Toubro Reliance Industries Hindalco Industries Maruti Suzuki Ltd. Mahindra & Mahindra Ltd Bharti Airtel TCS ICICI Bank Tata Motors -20.2 12.0 20.3 32.0 33.0 33.2 34.2 47.9 50.4 63.6

CSR 10 India Index Score

1 2 3 4 5 6 7 8 9 10

Fortune 500 India Rank

3 7 1 4 8 10 6 9 5 2

The CSR 10 India Index rankings are also compared with the Fortune 500 India rankings of the company to indicate how profitability drives may not always synchronise with the push for having a socially responsible company, point in case is Tata Motors that has a very high Fortune 500 India rank but a bottom position in CSR 10 India Index.

Utility of the CSR 10 India Index

The index will be highly useful for the companies in seeing their relative performance on CSR spends. It would also be useful to both companies and NGOs in exploring partnership synergies. It can be understood by non-India audience by using an exchange rate of 1 USD= INR 50. The Index will also provide the general sentiment of the industry towards CSR spending. For example the current sentiment is highly negative score of 53.

Acknowledgment
The CSR 10 India Index highly relies on the publically available work done by Fortune India magazine (Fortune 500 India ranking); Economic Times (ET 500 ranking); www.CSR identity.com and Forbes India magazine.

About the authors

Anup Tiwari is the Chair, South Asian Fundraising Group and has worked for almost two decades in forming symbiotic partnerships between companies and the not-for-profit sector. He is one of the authors of the book Global Fundraising- How the World is Changing Rules of Philanthropy published by Wiley USA and frequently writes and speaks on not-for-profit sector. Shweta Shukla is a banker turned not-for-profit leader who brings her background in Economics and Finance to developing partnerships between the non-profit and for-profit sectors. She also writes on www.fundraisingindia.org

CSR 10 India Index 2012, Anup Tiwari & Shweta Shukla, www.fundraisingindia.org; May 2013

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