Evaluation of Corporate Social Responsibility Performance and Approach of Some Select Indian Firms
Sumit Kumar Dutta & Radhagobinda Basak
Researchers & Academic Scholars in Accounting and CSR Policy
The present study endeavours to evaluate the corporate social responsibility performance and approach of a few leading firms belonging to the oil drilling and exploration industry in India. For measuring CSR performance, two parameters based on CSR expenditure of the firms have been used. For finding out the focus areas of CSR practice, the CSR activities of the companies have been categorised under some major expenditure heads. Some parametric and non-parametric tests like ANOVA, Kruskal-Wallis, Mann-Whitney, etc. have been performed to analyse the data. Majority of the sample companies were found to be unable to spend their budgeted amount on CSR. Significant difference was also followed among the companies in respect of their CSR performance. While implementing their CSR projects, the companies did not focus much on the environment sector which is in contrary to the expectation from the companies in the chosen industry. Read on…
Introduction: The Statutory CSR Mandate in India
Following the enforcement of the Companies (Corporate Social Responsibility Policy) Rules, 2014, effective from 1st April 2014 under Section 135 of the Companies Act, 2013, qualifying Indian companies were placed under legal compulsion to spend at least 2% of their average net profits earned during the three immediately preceding financial years on specified CSR initiatives. The rules also prescribed designated thematic activities eligible for CSR expenditure under Schedule VII of the Act, alongside standardized annual reporting disclosure formats.
While prior academic literature has examined CSR compliance trends (Singh & Verma, 2014; Shyam, 2016; Sai, 2017), substantial gaps remain regarding sector-specific capital deployment in environmentally intensive industries. This study bridges that gap by investigating the extractive oil drilling and exploration industry in India.
Objectives, Sample Selection & Empirical Methodology
The primary objectives of this empirical investigation are twofold:
- To analyse the CSR performance of sample companies with respect to selected expenditure metrics; and
- To identify and evaluate the specific focus areas of the sample companies in implementing their CSR portfolios.
Sample & Horizon: The study evaluates secondary financial data from annual reports across a six-year period from 2014-15 to 2019-20. Five market-leading public and private entities were selected on the basis of market capitalization on the Bombay Stock Exchange (BSE):
- OIL: Oil India Limited
- ONGC: Oil and Natural Gas Corporation Limited
- GAIL: GAIL (India) Limited
- IGL: Indraprastha Gas Limited
- Petronet: Petronet LNG Limited
The Extractive Industry Paradox
The oil drilling and exploration sector is an extractive industry that heavily exploits, depletes, and disrupts natural environmental resources. Societal stakeholders and regulatory frameworks naturally expect these firms to prioritize environmental restoration, eco-conservation, and green sustainability within their Schedule VII CSR allocations.
Analytical Parameters: Two quantitative parameters evaluate CSR spending:
- Parameter 1: Percentage of actual CSR expenditure on budgeted CSR expenditure (budget utilization).
- Parameter 2: Percentage of actual CSR expenditure on Profit After Tax (PAT).
Content analysis categorized company CSR initiatives into seven major expenditure heads: Health & Hygiene, Education & Skill Development, Community & Rural Development, Women Empowerment & Gender Equality, Environment, Other Schedule VII Expenses, and Administrative Capacity Building.
Parameter 1: Actual CSR Spending vs. Budgeted Obligation
Table 1 ranks the sample companies based on their aggregate percentage of actual CSR expenditure against the mandatory budgeted amount across 2014-15 to 2019-20.
| Company | Percentage during Study Period (2014-15 to 2019-20) | Empirical Ranking |
|---|---|---|
| Oil India Limited (OIL) | 159.04% | Rank I |
| GAIL (India) Limited | 118.47% | Rank II |
| ONGC | 95.08% | Rank III |
| Petronet LNG | 71.77% | Rank IV |
| Indraprastha Gas Limited (IGL) | 68.72% | Rank V |
Table 2: Normality & Homogeneity Tests for Parameter 1
| Company | Kolmogorov-Smirnov | Shapiro-Wilk | Levene’s Homogeneity | |||
|---|---|---|---|---|---|---|
| Statistic | Sig. | Statistic | Sig. | Statistic | Sig. | |
| OIL | .207 | .200 | .913 | .458 | 2.819 | 0.050 |
| ONGC | .191 | .200 | .937 | .638 | ||
| GAIL | .260 | .200 | .887 | .305 | ||
| IGL | .219 | .200 | .944 | .690 | ||
| Petronet | .323 | .050 | .745 | .018 | ||
Table 3: One-Way ANOVA Results for Parameter 1
| Source of Variation | Sum of Squares | df | Mean Square | F-Statistic | Sig. (p-value) |
|---|---|---|---|---|---|
| Between Groups | 70388.418 | 4 | 17597.104 | 14.792 | .000 |
| Within Groups | 29740.747 | 25 | 1189.630 | ||
| Total | 100129.165 | 29 | — | ||
Table 4: Bonferroni Post Hoc Pairwise Comparisons
| Company (I) | Company (J) | Mean Difference (I - J) | Sig. (p-value) | Statistical Inferences |
|---|---|---|---|---|
| OIL | ONGC | 71.25333 | .015 | Statistically Significant |
| GAIL | 45.17333 | .322 | Not Significant | |
| IGL | 106.02500 | .000 | Statistically Significant (p < .001) | |
| Petronet | 140.34500 | .000 | Statistically Significant (p < .001) | |
| ONGC | GAIL | 26.08000 | 1.000 | Not Significant |
| IGL | 34.77167 | .931 | Not Significant | |
| Petronet | 69.09167 | .019 | Statistically Significant | |
| GAIL | IGL | 60.85167 | .053 | Marginal / Not Significant |
| Petronet | 95.17167 | .001 | Statistically Significant | |
| IGL | Petronet | 34.32000 | .972 | Not Significant |
Parameter 2: Actual CSR Expenditure as a Percentage of Profit After Tax (PAT)
Table 5 reflects the actual percentage of CSR spend relative to annual corporate PAT over the 6-year period.
| Company | CSR Spend as % of PAT (2014-15 to 2019-20) | Empirical Ranking |
|---|---|---|
| Oil India Limited (OIL) | 4.87% | Rank I |
| ONGC | 2.83% | Rank II |
| GAIL (India) Limited | 2.16% | Rank III |
| Indraprastha Gas Limited (IGL) | 1.45% | Rank IV |
| Petronet LNG | 1.42% | Rank V |
Table 6: Normality & Homogeneity Tests for Parameter 2
| Company | Kolmogorov-Smirnov | Shapiro-Wilk | Levene’s Homogeneity | |||
|---|---|---|---|---|---|---|
| Statistic | Sig. | Statistic | Sig. | Statistic | Sig. | |
| OIL | .230 | .200 | .915 | .469 | 0.750 | 0.567 |
| ONGC (Non-Normal) | .337 | .032 | .760 | .025 | ||
| GAIL | .267 | .200 | .859 | .186 | ||
| IGL | .264 | .200 | .867 | .214 | ||
| Petronet (Non-Normal) | .440 | .001 | .574 | .000 | ||
Table 7: Kruskal-Wallis Test on % of PAT
| Oil India Limited (OIL) | Mean Rank: 26.17 |
| ONGC | Mean Rank: 19.50 |
| GAIL | Mean Rank: 15.83 |
| IGL | Mean Rank: 8.67 |
| Petronet LNG | Mean Rank: 7.33 |
| Chi-Square: 18.839 | Asymp. Sig.: .001 |
Table 8: Pair-Wise Mann-Whitney U Test (OIL vs. Others)
| OIL vs. ONGC | Mean: (9.17, 3.83) | U=2.000 (p=.010) |
| OIL vs. GAIL | Mean: (8.83, 4.17) | U=4.000 (p=.025) |
| OIL vs. IGL | Mean: (9.50, 3.50) | U=0.000 (p=.004) |
| OIL vs. Petronet | Mean: (9.17, 3.83) | U=2.000 (p=.010) |
Focus Areas Analysis: The Paradox of Environmental Neglect
Table 9 groups total CSR expenditures across all five firms over 2014-15 to 2019-20 into seven functional categories:
| Focus Area (Schedule VII Head) | Percentage of Total CSR Spend | Overall Ranking |
|---|---|---|
| Other Schedule VII Expenses (Disaster Relief, Armed Forces, Heritage) | 28.51% | Rank I |
| Education & Skill Development (Top Individual Head) | 25.93% | Rank II |
| Health & Hygiene (Sanitation, Healthcare) | 18.80% | Rank III |
| Community & Rural Development | 15.52% | Rank IV |
| Environment (Flora/Fauna, Ecological Balance, Agroforestry) | 6.54% | Rank V |
| Women Empowerment & Gender Equality | 3.30% | Rank VI |
| Capacity Building | 1.40% | Rank VII |
Statistical Validation Across Heads (Tables 10 & 11)
Levene’s test across the seven heads yielded Statistic = 5.152, Sig = 0.001, proving severe heterogeneity of variance and mandating the non-parametric Kruskal-Wallis test (Table 11).
Table 12: Pair-Wise Mann-Whitney U Tests Across Heads
| Pairwise Focus Comparison | Mean Ranks | Mann-Whitney U | Asymp. Sig. | Empirical Conclusion |
|---|---|---|---|---|
| Education vs. Health | (6.00, 5.00) | 10.000 | .602 | No Significant Difference |
| Education vs. Rural Development | (6.60, 4.40) | 7.000 | .251 | No Significant Difference |
| Education vs. Women Empowerment | (7.60, 3.40) | 2.000 | .028 | Statistically Significant |
| Education vs. Environment | (7.40, 3.60) | 3.000 | .047 | Statistically Significant (p < .05) |
| Education vs. Other Schedule VII | (5.80, 5.20) | 11.000 | .754 | No Significant Difference |
| Health vs. Women Empowerment | (7.60, 3.40) | 2.000 | .028 | Statistically Significant |
“Environment sector was not found to be a focus sector for the companies. The difference between environment sector and the prime focus sector education in attracting CSR expenditure was huge and statistically significant.”
Synthesis & Conclusion: Policy Implications
The empirical findings paint an unsatisfactory picture of CSR compliance within India’s oil drilling and exploration sector:
- Absence of Parity: Despite a uniform statutory obligation under Section 135 to spend 2% of profits, there is severe, statistically significant disparity in CSR spending patterns across firms.
- Chronic Under-spending: Three out of the five sample entities (ONGC, Petronet LNG, and IGL) failed to meet 100% of their budgeted CSR obligations across the six-year observation window.
- Extremes of Performance: Oil India Limited (OIL) emerged as the undisputed benchmark, spending 159.04% of budget and 4.87% of PAT, whereas Petronet LNG lagged severely at 71.77% of budget and 1.42% of PAT.
- Environmental Blindspot: Despite depleting and extracting fossil fuels, environmental projects received a meager 6.54% of total CSR funds, representing a statistically significant neglect compared to education (25.93%) and health (18.80%).
These findings highlight the urgent necessity for regulatory oversight to ensure that companies operating in environmentally intrusive industries actively replenish the natural capital they consume.
References & Empirical Sources
Journal Articles:
- Shyam, R. (2016): An analysis of corporate social responsibility in India. International Journal of Research – Granthaalayah, Vol. 4, No. 5, pp. 56–64.
- Arevalo, J. A., & Aravind, D. (2011): Corporate social responsibility practices in India: approach, drivers, and barriers. Corporate Governance International Journal of Business in Society, Vol. 11, No. 4, pp. 399–414.
- Das, C. D. (2013): Corporate Social Reporting and Human Resource Disclosures: Experiences from Insurance Companies in India. Social Responsibility Journal, Vol. 9, No. 1, pp. 19–32.
- Hodges, N., & Gupta, M. (2012): Corporate Social Responsibility in the Apparel Industry. Journal of Fashion Marketing and Management, Vol. 16, No. 2, pp. 216–233.
- Kumar, N. (2014): Corporate Social Responsibility: An Analysis of Impact and Challenges in India. Abhinav International Monthly Refereed Journal of Research in Management & Technology, Vol. 3, No. 5.
- Narwal, M. (2007): CSR Initiatives of Indian Banking Industry. Social Responsibility Journal, Vol. 3, No. 4, pp. 49–60.
- Gautam, R., & Singh, A. (2010): Corporate Social Responsibility Practices in India: A Study of Top 500 Companies. Global Business and Management Research: An International Journal, Vol. 2, No. 1, pp. 41–56.
- Sai, P. V. S. (2017): A comparative study of CSR practice in India before and after 2013. Asian Journal of Management Research, Vol. 7, No. 3.
- Verma, P., & Singh, A. (2014): CSR@2%: A New Model of Corporate Social Responsibility in India. International Journal of Academic Research in Business and Social Sciences, Vol. 4, No. 10.
- Srivastava, A. K., Negi, G., Mishra, V., & Pandey, S. (2012): Corporate Social Responsibility: A Case Study of TATA Group. IOSR Journal of Business and Management, Vol. 3, No. 5, pp. 17–27.
Corporate & Regulatory Data Sources:
- BSE Oil Drilling & Exploration Market Capitalisation Database: https://www.moneycontrol.com
- Oil India Limited Annual Reports & Financial Disclosures: https://www.oil-india.com
- GAIL (India) Limited Corporate Disclosures: http://gailonline.com
- Oil and Natural Gas Corporation (ONGC) Reports: https://www.ongcindia.com
- Petronet LNG Limited CSR Disclosures: https://www.petronetlng.com
- Indraprastha Gas Limited Annual Reports: https://iglonline.net
- Ministry of Corporate Affairs (MCA) CSR FAQ Guidance: http://www.mca.gov.in