India’s Corporate Social Responsibility (CSR) mandate under Section 135 of the Companies Act, 2013, has significantly influenced the role of private corporations in national development. However, CSR performance has traditionally been assessed in terms of total spending, which fails to capture the strategic distribution of investments across sectors and geographies. This analysis develops a data-driven CSR Index using Principal Component Analysis (PCA) to evaluate not only how much companies spend, but also how diversely and equitably they allocate their resources.
CSR expenditure data was sourced from the Ministry of Corporate Affairs’ CSR portal, focusing on the top ten contributing companies during FY 2023–24. Each CSR activity was mapped to one of twelve standardized development sectors such as Education & Livelihood, Health & Sanitation, Rural Development, Environmental Sustainability, and Women Empowerment, based on the thematic classifications outlined in Schedule VII of the Companies Act and recommendations from the Indian Institute of Corporate Affairs.
To evaluate inclusion and regional equity, additional variables were created to capture the proportion of CSR funds spent (1) Northeastern (NE) states, (2) SC/ST-concentrated districts, defined as those where the combined SC/ST population exceeds 30% based on Census 2011, and (3) and Empowered Action Group (EAG) states, which are demographically and economically lagging states as identified by the Ministry of Health and Family Welfare.
The core of this analysis employs Principal Component Analysis (PCA), a multivariate statistical technique that reduces high-dimensional data into a smaller set of uncorrelated components. A matrix of company- wise spending across the 12 sectors and 3 regional indicators (15 variables in total) was constructed and normalized to account for scale differences across firms. PCA was then applied to this standardized dataset. The first principal component (PC1), which captured the highest variance, was used as a composite index score, effectively summarizing each company’s CSR orientation. Companies with high PC1 scores were those that demonstrated a diversified sectoral spread as well as a conscious focus on equity by investing in NE, SC/ST, and EAG regions.
A company-by-variable matrix was constructed, with each row representing a company and each column representing its standardized expenditure in a particular sector or region. The data were normalized (z- scores) to prevent scale bias from dominating the analysis.
PCA was then conducted using Stata software. The first principal component (PC1), which explained 28.8% of the total variance, was selected as the composite CSR Index. It represents the most significant underlying dimension of CSR behaviour, capturing companies’ breadth of engagement across sectors and their commitment to regional equity. Components two and three (Comp2 and Comp3) brought the cumulative variance explained to 68.3%, affirming the multidimensional nature of CSR strategies.
Unlike simpler ranking methods based on total expenditure, PCA provides a statistically rigorous and unbiased measure that captures the complexity of CSR decisions. It penalizes concentration in a single sector and rewards multi-sector engagement, while also integrating spatial justice into performance assessment. As a result, this PCA-based CSR Index is a more holistic and robust tool to evaluate corporate contributions toward national development.
Note: Views expressed are personal and do not reflect the official position or policy of the Clear Cut Magazine.
Clear Cut CSR Desk
New Delhi, UPDATED: Dec 17, 2025 03:17 IST
Written By: Clear Cut Team
