Author: Utkarsh Singh

Abstract

This article examines how Corporate Social Responsibility (CSR) works in India and why it is important for society and business. It addresses the legal requirements under the Companies Act, 2013 that require CSR, gives examples of effective corporate practices, and pinpoints the greatest challenges to implementation. Generally, it demonstrates how CSR benefits companies to contribute to sustainable development and social well-being.

Keywords

Corporate Social Responsibility (CSR); Companies Act 2013; CSR compliance; CSR effectiveness;  Sustainable development; Social welfare programs

Introduction

Corporate Social Responsibility (CSR) represents a critical dimension of modern corporate conduct, emphasizing that businesses have obligations beyond profit generation. It reflects the idea that corporations, as integral parts of society, must contribute to community welfare, environmental sustainability, and ethical governance. In India, CSR has grown from voluntary philanthropy to a law, after the passage of the Companies Act, 2013. This legal shift marks the nation’s decision to harmonize corporate action with larger social and developmental ends.

The following article looks at the evolution of CSR in India, the policy environment under which CSR adoption happens, and the effectiveness of these policies in practice. It also compares the level at which companies include CSR in long-term strategy and how all these are integrated with national development goals. On both compliance and performance, this research identifies challenges and opportunities for CSR as an instrument of inclusive and sustainable growth.

Historical Context of CSR in India

 The concept of corporate responsibility in India has its roots in deep history and culture. Ancient Indian philosophy placed a strong moral obligation on the redistribution of wealth through acts like Daan (charitable donation), a long-standing societal expectation that the wealthy contribute to community well-being. Under the pre-independence industrial age, corporate leaders such as Jamsetji Tata and G.D. Birla institutionalized these beliefs by investing in social infrastructure, healthcare, and education. Their initiatives paved the way for contemporary CSR practices by proving that industrial advancement could go hand in hand with social development. With time, as Indian business grew and became more globalized, CSR transitioned from voluntary charity to formalized social investment. All this came to fruition with the enactment of the Companies Act, 2013, which made CSR compulsory for eligible companies under Section 135. CSR in India now is not only a demonstration of benevolent intentions but also a systematic process that incorporates social responsibility, responsible governance, and sustainable growth into business strategy.

Legal Framework of CSR according to the Companies Act, 2013

The enactment of Section 135 of the Companies Act, 2013 was a landmark in Indian corporate legislation, making India the first nation to mandate that companies perform CSR by law.

Based on this provision, organisations achieving any of the below criteria—net worth of ₹500 crore or above, turnover of ₹1,000 crore or above, or net profit of ₹5 crore or above—have to spend 2% of their average net profits over the last three financial years on CSR work. The legislative mandate ensures that the corporate world participates constructively in social and environmental development rather than limiting itself to profitability. Notably, Section 135 emphasizes that CSR is not just a financial burden but also a part of good corporate governance. By integrating social responsibility into law, the legislative intent was to ensure that companies act in consonance with general welfare and developmental objectives of society. The legislative scheme offers a well-defined framework for planning, implementation, and tracking of CSR activities, which meshes corporate actions with ethical expectations and national interests..

CSR Rules and Policy Making

The Companies (Corporate Social Responsibility Policy) Rules, 2014 lay down elaborate provisions for conducting CSR and ensuring compliance. As per these Rules, each such eligible company shall constitute a CSR Committee consisting of a minimum of three directors, out of which one shall be an independent director. The committee will prepare policy for CSR, select appropriate projects, review progress, and adhere to statutory mandates.

The CSR policy will be approved by the Board of Directors and place comprehensive information on CSR projects, expenses, and outcomes in the Board’s Report of the year and on the website of the company. The above conditions ensure transparency and accountability in projecting the CSR initiatives aimed at national objectives of poverty alleviation, education, healthcare, and pollution prevention. The scheme encourages a systematic and performance-oriented approach to CSR, projecting long-term community development over sporadic philanthropy.

Qualifying CSR Activities

The ambit of CSR activities in India is well-defined under Schedule VII of the Companies Act, 2013, which specifies domains wherein companies can channel their CSR initiatives. The areas covered include programs to eliminate hunger and poverty, education and gender equality promotion, health care improvement, environmental protection, and rural development initiatives. Donations to government relief funds, including the Prime Minister’s National Relief Fund (PMNRF), are also valid CSR expenses.

Schedule VII provides flexibility, allowing companies to choose activities that align with their core values, operational expertise, and community needs. This approach encourages long-term, sustainable interventions rather than short-term charitable contributions. By linking CSR projects to national development priorities, the framework ensures that corporate resources are leveraged to create meaningful social impact while complementing government efforts in public welfare.

CSR Spending and Reporting Requirements

According to the Companies Act, 2013, all eligible companies are mandated to allocate a minimum of 2% of their average net profits over the last three financial years for CSR expenditure. The expenditure has to be included in minute details in the company’s Board’s Report for the year, which would provide transparency and make it possible for stakeholders to monitor social expenditure.

In case the amount so allocated is not spent, there is a provision in the law that companies need to pay the unspent amount to a specific CSR Account within 30 days from the conclusion of the financial year.

These amounts would be required to be spent within three following financial years, or else credited to government-mandated funds like the PM National Relief Fund. Non-conformity is met with monetary sanctions, affirming the fact that CSR is a legal obligation and not an expendable cost. This systematic approach to ensuring corporate profits are meaningfully added to social welfare with accountability and the trust of the public is commendable.

Evolution of CSR Policy Post-2013

As CSR is now mandated by law, India’s paradigm has shifted from mere financial disclosure to its social value and sustainability. The 2019 and 2020 Companies (Amendment) Acts brought significant reforms—requiring carry-forward of unused CSR and penalizing non-compliance—albeit from process to performance. These reforms nudge companies to consider CSR a social investment strategy in line with national objectives as opposed to compliance.

The function of CSR legislation is to incorporate social responsibility in corporate management for enabling inclusive growth, sustainable development, and ethical business practices. It identifies economic growth with welfare, according to the Directive Principles of State Policy, and brings forth an idea of responsible capitalism where business prosperity leads to societal welfare and the environment.

Objectives of CSR Legislation

The main aim of CSR law is to coordinate social responsibility in the functioning of companies in a manner that business enterprises promote the public good while seeking economic progress. By mandating a share of profits for the welfare of society, the law is aimed at promoting inclusive growth, green development, and moral corporate behavior. It is not merely economic expenditure but instilling a sense of moral and social obligation in corporations.

On a larger canvas, CSR is a link between economic growth and social justice, an expression of values incorporated in the Directive Principles of State Policy in the Indian Constitution. By using corporate funds for community development, education, healthcare, and eco-friendliness, CSR imbibes business activity with the national agenda. In the end, the law propagates a culture of responsible capitalism, where business prosperity and welfare move together.

Judicial Interpretation of CSR Obligations

Though the legislative provisions of the Companies Act, 2013 specify CSR obligations, Indian courts have ensured to enhance the moral and ethical aspects of corporate responsibility.

Judicial pronouncements underscore that corporations have obligations not only to shareholders but to society at large. In Tata Iron & Steel Co. Ltd. v. Union of India (2000), the Supreme Court emphasized that industrial growth needs to synchronize with public welfare and ecological harmony, pinpointing the societal function of corporate bodies. Further, provisions of the constitution, especially Articles 38 and 39, are in favor of CSR by promoting social well-being and fair distribution of resources. Courts have construed CSR as an effective tool to give practical meaning to these constitutional principles, bolstering the ethical and legal framework for corporate social involvement. By such judicial pronouncements, CSR is seen not just as a discretionary action but as an organized, socially responsible, and legally supported corporate practice.

Effectiveness of CSR Implementation in India

Indian CSR activities have brought exemplary changes across verticals like education, health, sanitation, and eco-conservation. Corporate India as a whole spends more than ₹25,000 crore on CSR activities every year, as per the Ministry of Corporate Affairs, testifying to the great social commitment from the corporate sector. Initiatives such as rural education programs, digital literacy campaigns, and organic farming exemplify concrete gains for society, showcasing the effectiveness of properly designed CSR interventions.

Nonetheless, challenges exist. CSR impact is often undermined by uneven regional coverage, poor professional management, and the tendency among some corporations to treat CSR as a compliance exercise. Rural and poor communities are frequently neglected in favor of urban communities, and greater strategic planning, performance measurement, and outcome evaluation are needed. These need to be addressed if CSR is to fulfill its conceived role as a tool of good and sustainable social development

Recent Reforms and Amendments

With the challenges in CSR implementation, the Indian government implemented several reforms to make it more accountable and effective. The 2021 CSR Rules made impact studies mandatory for projects worth ₹1 crore or more, encouraging data-driven evaluation and measurable outcome assessment. The rules have also enhanced the definition of CSR to cover activities like COVID-19 work and support to startups, in consonance with the country’s changing socio-economic needs.

The amendments stress outcome-based CSR, encouraging corporations to go beyond basic expenditure disclosure and looking at concrete social impacts. Through enhancing reporting requirements, bringing in quantifiable performance metrics, and widening approved activities, the reforms aim to make CSR fund contributions impactful to national development while instilling a culture of responsible corporate citizenship.

Examples of Effective CSR

Some Indian corporations have shown how strategically planned CSR efforts can create both social returns and corporate value.

1. Tata Group – Works on rural education, health, and community infrastructure, enabling communities through efforts such as the Tata Education and Development Trust.

2. Infosys Foundation – Fosters digital literacy, skill building, and health infrastructure in rural India.

3. ITC Limited – Encourages sustainable agriculture, water collection, and rural livelihood through initiatives such as e-Choupal.

4. Reliance Foundation – Provides healthcare, rural development, and disaster relief via telemedicine and mobile medical units.

5. Mahindra Group – Engages in education, skill development, and environmental sustainability through initiatives like Nanhi Kali and Project Hariyali.

Non-Compliance and Penalties

The Companies (Amendment) Act, 2020 made CSR compliance more stringent through the imposition of financial penalties on those companies that do not spend or transfer unutilized CSR funds. Where non-compliance is reported, corporate entities must deposit the amount lying unspent in government-guaranteed funds, e.g., the Prime Minister’s National Relief Fund (PMNRF).

This legislative strategy ensures that all CSR investment, whether directly incurred by the company or remitted, benefits society ultimately. Through the connection of legal sanctions with unspent amounts, the law motivates companies to practice careful planning, efficient implementation, and timely use of CSR funds. This enforces the doctrine that CSR is a legal and societal responsibility, an integral component of ethical corporate governance and not a voluntary outlay.

Conclusion

Corporate Social Responsibility in India has grown from selfless service to a strategically important and legally imposed component of corporate management. Despite continuing problems of compliance, monitoring, and geographic distribution, CSR has been effective in changing the corporation’s stakeholder relationship with society. Planning and thoughtful consideration, management by professionals, and involvement with communities are still the hallmarks for achieving maximum impact.

Finally, CSR embodies more than a legal requirement—it embodies the spirit of ethical corporate citizenship. By connecting profitability with social well-being, Indian business is increasingly creating an environment for business where economic advancement and social betterment move forward in tandem. India’s commitment to inclusive, responsible, and sustainable growth is reflected in the ever-evolving CSR norms.

Footnotes (Bluebook Style)

1. The Companies Act, 2013, §.135, No. 18, Acts of Parliament, 2013 (India).

2. Companies (Corporate Social Responsibility Policy) Rules, 2014, Ministry of Corporate Affairs, Government of India.

3. Tata Iron & Steel Co. Ltd. v. Union of India, AIR 2000 SC 3720.

4. Ministry of Corporate Affairs, Annual CSR Report 2023.

5. National CSR Exchange Portal, Government of India, csr.gov.in.

6. The Companies (Amendment) Act, 2020, No. 29 of 2020 (India).

7. UN Sustainable Development Goals Report, 2023.

8. Infosys Foundation CSR Report, 2023; ITC Sustainability Report, 2022.

9. Nishith Desai Associates, ‘Corporate Social Responsibility: A Legal and Policy Overview’ (2024).