European Companies’ CSR Journey in India: Seven Years of Transformative Impact

July 4, 2023

As India embarks on its eighth decade of independent governance, it finds itself at a crucial juncture of change, presenting vast opportunities for substantial economic growth and notable progress in attaining the country’s Sustainable Development Goals (SDGs).

The private sector has emerged as a key player in India’s development story, with over 1.4 million active companies in 2022. More than 29,500 of these companies have collectively invested nearly €13.5 billion Euros towards social impact since 2014.

India set a remarkable precedent in 2014 by enacting legislation that made Corporate Social Responsibility (CSR) mandatory for companies surpassing a specific financial threshold. This regulation mandates that such companies allocate a minimum of 2% of their average net profits over the preceding three years to developmental endeavours.

European companies operating in India have emerged as one of the key contributors towards social innovation efforts in India. To explore how these companies are undertaking social innovation in India and going beyond the mandatory CSR requirements, we conducted an extensive mapping of the corporate social impact landscape in India.

The SKI team researched the CSR data of 1,537 companies, that contribute to 85% of the CSR spend in India, 148 are of them are of European origin and account for 45% of the global corporates’ CSR spend in India. The team interviewed the CSR heads of 16 companies of European origin, from diverse sectors to delve into the reasons behind the trends identified in our analysis.

Six Key Trends

The study captured six key trends of European companies’ social innovation efforts in India:

European companies operating in India have spent €618 million Euros towards social innovation over the last seven years, contributing to 45% of the total CSR spend by multinational companies.

The Fast Moving Consumer Goods (FMCG) sector has emerged as a leader in driving social innovation efforts in India, contributing to 17% of the total CSR funding by European companies. 50% of total CSR spend comes from these top 5 sectors: FMCG, Information Technology (IT), Industry Wise Share of European Corporates’ Spend in India (%) Manufacturing, Automotive and BFSI.

More than 50% of social investments by European companies in India have been channelled towards Education, Healthcare and Livelihood enhancement efforts, aided largely by civil society organisations (CSOs) and corporate foundations.

European companies need to increase their spend towards environmental sustainability in the years ahead, as focus shifts to strongly towards integrating ESG and CSR. So far, European companies have contributed €50 million Euros towards environmental sustainability in India over the last 7 years.

Only 2% of CSR funding is directed towards the less developed states in Northeast and Central India, where the needs are the highest.

Of the 148 European companies researched in this report, a third of them have a corporate foundation in India and 61% of these were established prior to 2014, when CSR was mandated in India, indicating their long standing commitment to philanthropy and social responsibility.

European companies in India are increasingly adopting the 'five levers of social innovation' for impact. These levers signify the blurring of lines between business and social responsibility, and the accelerated thrust on innovation to address social, environmental and business challenges.

The Road Ahead

Several companies in India are shifting their CSR strategy from being driven by compliance, to now ensuring closer alignment with their ESG and social impact investments, thereby fuelling sustainable social innovation.

Innovative instruments of financing to improve the leverage of philanthropic capital have emerged in India and the corporate sector has the opportunity to play six important roles to expedite impact.

Provide funding to trusted non-profits with credible programs that drive demonstrable outcomes and establish a low-touch grant-focused governance system.

Provide philanthropic support to work towards creating systemic impact by collaborating with the public and private sectors, as well as other ecosystem players.

Provide high-risk philanthropic support to innovative sectors and underfunded causes by closely collaborating with ecosystem players and intermediary organisations.

Enable financial returns, along with social returns, through partnerships with private players to leverage debt, equity, or other innovative instruments and absorb risks.

Provide close strategic guidance to early-stage organisations, running incubation/accelerator programmes, and providing access to networks to drive impact.

Drive on-the-ground implementation anchored in specific geographies, sectors, or beneficiary groups to ensure impact at the last mile.

In the pursuit of these six roles, corporate social investments can bridge viability gaps, establish proof-of-concept, and enhance the attractiveness of development investments to private investors through blended finance.

The study also showcases a heterogeneous mix of case studies from European companies and their work on social innovation in India. This included examples of their innovative work that originated in India and has subsequently been taken to other countries, not limited to the Global South. We hope that the insights and findings will inspire and encourage more companies to embrace social innovation and contribute towards Sustainable Development.