CSR spending in the Indian sports sector
-Shreya Salampuria | corplaw@vinodkothari.com
Background
Corporate social responsibility (CSR) spending in India, as is well known, is focused on certain statutorily recognised social activities, of which sports is one. Schedule VII, clause (vii) deals with activities related to “training to promote rural sports, nationally recognised sports, paralympic sports and olympic sports”.
Most of the attention under the schedule is taken away by contribution on activities connected with healthcare followed by education.
Khelo India, Kheloge toh Khiloge, an attempt to improve the performance of our vast country in sports, however, can we tap csr funds for the same?
When it comes to choosing or prioritizing the sports related activities, the outlook of the Indian companies cannot be said to be very impressive, however, there has been an increment on the CSR spending under the sports sector.
The same can be understood by the graph below [1]:
Figure 1: Contribution by companies on different sectors from FY 14-15 to FY 21-22
As per the data given above, companies spent approx 287 crores towards this activity during FY 21-22, which is a substantial shift from FY 2014-15 where companies spent only 57.62 crores. This increase in the spending provides an indication of the shifting attention towards sports related activities.
Basic checks before contribution towards CSR:
Needless to mention that any contribution towards any activities under Schedule VII the basic checks will have to be kept in place by the companies as mentioned in Fig.2:
Figure 2: Basics of CSR
The write up intends to discuss on the meaning of clause (vii) under Schedule VII dealing with sports related activity including the manner of activities and programs that should generally be expected to be covered.
Decoding clause (vii) of Schedule VII of the CA, 2013
The clauses under Schedule VII need to be interpreted in a liberal manner so as to allow a wide variety of activities to fall under the same. In case of clause (vii) of the Schedule, activities which relate to training to promote the specified category of sports which again are mostly in the nature of being so identified given their current recognition or relevance in the country so as to be promoted and made more evolved, shall be qualified to be a CSR activity.
Training to promote is likely to include mediums or ways to promote the activities in one or more of the following manners which will result in the promotion of the permitted sports: Top notch companies have contributed through one mode or another [2].
- Infrastructure Development: Infrastructure developments like building proper playing fields, grounds, etc or an arena which would help the potential players/ sportsperson to take training lessons and practice properly, living area for their stay, instilling discipline and teamwork while nurturing their sports and academic abilities shall be qualified as CSR activities.
Having said that, it is also important to note that if the contribution is such that it somehow manages to reach the potential players/ sportsperson and is only resulting in giving or increasing the amenities for the sake of comfort and pleasure without actually having a direct nexus with the intent and impact of promoting specified sports then it cannot be said to be a CSR activity.
- Sponsorship and funding: Many companies spend recklessly on sponsorship activities as their csr contribution. Sponsorship activities of an event are done with an aim of deriving marketing benefits for a company’s product or services. It is very much evident that the intent of CSR is to encourage companies to undertake the activities in a project or programme mode rather than as a one-off event. Suppose companies are just sponsoring for the banners of the companies, then it is just a profit motive and hence it may not qualify as csr, however, when the main motive behind spending is the csr objective, then instilled profit has no harm [3]
Companies shall not use CSR purely as a marketing or brand building tool for their business, but brand building as a collateral benefit does not vitiate the spirit of CSR.
- Training: Identifying the athletes and other potential players and providing them with the access to health building, coaching, exercising, etc at the base level to make them eligible and competent to perform. Training shall be purely related to the training of the students/athletes which ultimately leads to the promotion of the sports.
- Running of sports academy: Sports academy recently has developed a lot. By opening and managing a sports academy, there could be overall development of students. These institutes generally also provide free accommodation, training and education to the students.
- Scholarships: There is a lack of awareness regarding the sports scholarships but companies may either directly or indirectly offer financial support to the athletes like offering financial assistance to the sports academy directly or the athletes.
All or any of the permitted modes of training has been specified for specific category of sports as discussed below:
- Rural Sports: Rural sports includes those traditional sports which used to be played in rural India and now whose existence has faded or likely to fade away like Yubi Lakpi, Kalariyapattu, Thoda, etc. The Khelo India programme has been introduced to revive the sports culture in India at the grass-root level by building a strong framework for all sports played in our country and establishing India as a great sporting nation. Through this, more than 23,000 athletes and more than 200 academics have been given support for the upliftment of sports. Similarly, companies are also contributing to the same, although this activity is not a priority for a lot of companies. Companies must think holistically before contributing to the csr activities. [4]
- Nationally recognised sports: Several sports federations in India have been nationally recognized like Badminton Association of India, All India Chess Federation, All India Football Federation Football House by the Ministry of Youth Affairs and Sports. Contribution for the same will qualify as a CSR activity.
- Paralympic and Olympic Sports: a series of international contests for athletes who may or may not be specially abled are associated with olympic games known as paralympic sports and Olympics are a series of international athletic contests held in a different country during the summer and the winter once in every four years. The Olympics is the crowning point of sports achievement, and by supporting students on their journey to olympics, companies play a role in shaping national pride and identity. The International Olympics Committee is also committed to promoting sport in society, strengthening the integrity of sport and supporting clean athletes and other sports organisation. Secondly, the Paralympics builds the importance of inclusivity and recognising the remarkable achievements of differently-abled participants. Companies spending on Paralympics can gain a culture of respect and equal opportunities. As per International Paralympic Committee (IPC), there are currently 28 paralympic sports sanctioned by the IPC.
Recently on 16th October, 2023, IOC officially included five additional sports on the programme for the Olympic Games Los Angeles 2028 (LA28) which is Baseball/softball, cricket (T20), flag football, lacrosse (sixes) and squash. The decision has been taken by the 141st Session of the International Olympic Committee (IOC).
Whether contribution towards / for “cricket” qualifies as a CSR activity?
While almost all sports are covered under the nationally recognised sports list, one of the most common and popular sports “cricket” which is administered by the Board of Control for Cricket in India (“BCCI”) is not a part of the list. Therefore, whether contribution towards the promotion of cricket will qualify as a CSR contribution?
Evidently, cricket is not included either under the list of nationally recognized sports federations nor under the Khelo India campaign. The intent behind spending on CSR activities is all about the upliftment of the specific sports which are not already uplifted.Cricket is one of the most acclaimed sports in India in terms of the expenses and the popularity. However, based on our prelim study, contribution towards cricket earlier was not likely to be categorised as a CSR activity, however, after being added as a part of the olympics, contribution towards cricket will surely qualify as a CSR activity.
Conclusion
Organizations have a unique opportunity to uplift those sectors through CSR spending which is either ignored or completely abandoned. The glory brought by the victory of our sportsperson is unmatched with any other advancement that the country achieves. Therefore, companies should look at the chance of spending on the training of the sportsperson of tomorrow so as to become a contributor to the victory and name that these persons bring as they represent the country worldwide. Further, another reason for choosing this sector for spending is to promote good health in terms of the mind and body.
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[1]https://www.csr.gov.in/content/csr/global/master/home/ExploreCsrData/mis-reports/development-sector-wise.html
[2] https://thecsrjournal.in/top-csr-projects-for-sports-in-india/
[3] https://www.icsi.edu/media/webmodules/FAQs_on_CSR_28-4-2021.pdf
Yes, I have a good case of investing in hockey for ground level players etc.
I work In a company who has to spend yearly on CSR.
I need consultancy on how to spend company csr funds on upgrading hockey infrastructure of that facility.