CORPORATE SOCIAL RESPONSIBILITY IN INDIA: LAW, IMPACT & FUTURE

Introduction

Corporate social responsibility, or CSR, has become a global standard for ethical and sustainable company operations. CSR encapsulates a company’s responsibility to society, the environment, and economic advancement in addition to making a profit. It stems from the broader concept of stakeholder theory. The development of CSR as a soft law framework has been reinforced by international standards like as the UN Global Compact, ISO 26000, and the OECD Guidelines for Multinational Enterprises. The growing consensus that businesses should behave in ways that assist society and the environment rather than hurt them is reflected in these rules.

As a developing country struggling with environmental degradation, social inequality, and developmental barriers, India offers a unique environment for the implementation of CSR. Under Section 135 of the Companies Gesture, 2013, corporate social responsibility (CSR) in India underwent a radical and historic shift from a voluntary charitable gesture to a statutory requirement. This modification represents a broader movement to integrate social responsibility into business operations as well as a legal requirement.

This article’s goals are to analyse the legal structure governing corporate social responsibility (CSR) in India, look at the socioeconomic impacts of CSR, and discuss recent advancements and possible future paths. It uses a legal perspective to impartially assess compliance processes, implementation challenges, and policy recommendations that might help reposition CSR as a driver of sustainable development and fair growth. Through this analysis, the study seeks to demonstrate CSR’s potential to advance moral capitalism and nation-building.

The Evolution of CSR in India: From Charitable Giving to Legal Requirements

Business titans like the Tatas and Birlas employed voluntary philanthropy to finance social transformation, healthcare, and education prior to independence, which is when India’s participation with corporate social responsibility (CSR) began. However, without a legislative framework, such measures remained arbitrary and lacked uniform accountability. Stakeholder involvement and sustainability reporting gained importance after deregulation. Public awareness of corporate social responsibility (CSR) increased in the early 2000s as a result of globalisation, increased public scrutiny, and the proliferation of corporate governance rules.^[1]

An important turning point was the passage of the Companies Act of 2013. According to Section 135 of the Act,^[2] companies that have a net worth of at least ₹500 crore, a turnover of at least ₹1,000 crore, or a net profit of at least ₹5 crore are obligated to make investments in corporate social responsibility (CSR). These companies are required under Schedule VII of the Act to devote at least 2% of their average net income (from the preceding three fiscal years) to CSR activities. These include subjects including environmental sustainability, health, education, gender equality, and rural development.

The CSR Rules (Companies (CSR Policy) Rules, 2014) provide further explanations of compliance, governance, and transparency norms.^[3] A CSR committee must be formed, a policy must be made, and an annual report must be posted on the company’s website and in the board report. Amendments made in 2021 resulted in stricter regulation, including mandatory impact studies for major projects costing over ₹1 crore and criminal penalties for non-compliance under Section 135(7).^[4]

From a legal standpoint, India’s CSR framework is both prescriptive and enabling. It finds a balance between the necessary expenditure and the flexibility of the project and cooperation. Judicial interpretations have started to impact CSR jurisprudence, notwithstanding its limits. For instance, in Technip India Ltd. v. Union of India (2021), the court found that there might be criminal consequences under corporation law for not depositing unspent CSR funds.^[5]

In conclusion, the legislative evolution of corporate social responsibility (CSR) in India reflects a paradigm shift from moral obligation to statutory accountability. It marks a sea change in the way the law is used as a social engineering instrument to ensure that corporate success translates into the public benefit.

The Impact of CSR Law on Business Conduct and Social Development

Since corporate social responsibility (CSR) was codified in the Companies Act of 2013, there has been a noticeable shift in how Indian businesses approach this issue. More than ₹1 lakh crore in CSR investment was made possible by the 2% mandate between 2014 and 2023, which sparked development initiatives across several businesses. According to the Ministry of Corporate Affairs (MCA), the healthcare and education sectors have reaped the most benefits from CSR financing, which aligns with national developmental objectives.^[6]

Because CSR is mandated by law, corporate governance has become more visible, responsible, and structured. Businesses now invest in CSR planning, policy creation, and impact analysis. Consequently, there has been a rise in cooperation among government agencies, social entrepreneurs, and non-governmental organisations (NGOs).^[7] Additionally, the 2021 amendment’s provision to place leftover CSR funds in a special account has encouraged timely project execution and discouraged financial diversion.^[8]

The regulatory structure has also caused corporate boards to behave differently. These days, CSR committees, which are crucial to strategic planning, are staffed by executives at the board level. As a result of its integration, CSR is no longer an additional HR function but rather a fundamental governance issue. Annual disclosures and third-party audits have raised the public’s awareness of and interest in CSR outcomes.

However, issues persist. A 2020 report by the Comptroller and Auditor General (CAG) outlined issues such as inadequate monitoring, poor project selection, and underspending. Smaller firms often struggle with compliance because of resource constraints.^[9] Additionally, the emphasis on expenditure rather than impact has often led to tokenistic or short-lived projects that are not long-term viable.

CSR guidelines are still not consistently applied legally. Lack of jurisprudential clarity on a variety of issues, including as the legal standing of CSR obligations in respect to constitutional responsibilities or tax treatment, has led to interpretive problems. However, by combining social commitment with legal enforcement, CSR legislation has the potential to strengthen the corporate social contract.

In conclusion, the CSR obligation has had a significant influence on social development and corporate activity in India. Even if compliance has increased, the true shift is from obligation to value creation, where corporate social responsibility (CSR) is seen as a strategic investment in long-term business success and societal well-being rather than as an expense.

Legal Framework of CSR in India

The primary legal basis for Corporate Social Responsibility (CSR) in India is contained in Section 135 of the Companies Act 2013.^[10] Companies with a net worth of at least ₹500 crore, a turnover of at least ₹1,000 crore, or a net profit of at least ₹5 crore are required to allocate at least 2% of their average net earnings from the preceding three fiscal years to corporate social responsibility (CSR) projects.

The companies (Corporate Social Responsibility Policy) Rules 2014 were subsequently issued in order to operationalise this legal duty. These rules require eligible businesses to establish a CSR Committee of the Board, develop a CSR Policy, and supervise its implementation. The Act’s Schedule VII lists many areas that are eligible to receive CSR spending, including education, healthcare, gender equality, sanitation, environmental sustainability, rural development, and contributions to government relief funds.^[11]

The Companies (Amendment) Act of 2019 included revisions that further restricted CSR compliance.^[12] Notably, unless they are allocated for existing initiatives, all unused CSR money must now be moved to a designated fund within six months after the fiscal year’s conclusion. In these cases, the money must be transferred to another CSR account and used within three years. The threat of sanctions for noncompliance emphasises how serious CSR obligations are.

Another significant legislative modification was General Circular No. 10/2020, which was released by the Ministry of Corporate Affairs (MCA). This expanded the scope of CSR during national crises, showing the law’s flexibility and responsiveness to society needs. It made it plain that CSR donations to COVID-19 assistance, including to the PM CARES Fund, would be regarded as legitimate CSR operations.^[13]

Despite being explicitly created under India’s CSR Act, social responsibility’s effectiveness is still up for debate. Critics contend that mandatory CSR has the potential to reduce genuine social engagement to a box-checking exercise, especially when companies see it just as a burden of compliance. Nonetheless, the regulatory structure has been effective in focussing business attention and resources on significant developmental concerns, suggesting a significant

The Socioeconomic Impact of CSR in India

The formalisation of Corporate Social Responsibility (CSR) via law has had measurable consequences on India’s socioeconomic prosperity. According to reports from the Ministry of Corporate Affairs and other research organisations, the adoption of mandatory CSR has led to a significant increase in funding for the social sector. Between 2014 and 2022, corporate India collectively invested over ₹1.25 lakh crore in CSR initiatives, focussing on critical sectors such as healthcare, education, rural infrastructure, and skill development.^[14]

Education continues to get the most support, accounting for about 30% of all CSR expenditures. Projects being carried out at government schools include infrastructural improvement, scholarships, and digital classrooms. Additionally, healthcare gets a lot of assistance, particularly in the wake of the COVID-19 epidemic, with CSR monies financing medical equipment purchases, vaccination drives, and outreach programs for rural health.^[15]

Sustainability of the environment is another area of impact that is growing. Companies have been investing more and more in sustainable energy, afforestation, and water conservation. To encourage organic farming, rejuvenate rivers, and reduce carbon emissions, for instance, several companies have teamed up with charity organisations. CSR-funded rural development projects include installing toilets, supplying potable water, and livelihood projects that generate money.

Despite these achievements, the quality and longevity of CSR outcomes continue to differ. Many projects lack robust monitoring and evaluation systems, raising doubts about their long-term effectiveness.^[16] Six, CSR spending is disproportionately concentrated among a few large corporations, with many eligible firms either not spending the required amount or spending it in ways misaligned with community needs.^[17]

However, CSR has encouraged a culture of structured giving and stakeholder participation in India’s corporate environment. Now, a number of CSR programs align with the Sustainable Development Goals (SDGs) of the UN, increasing their impact and strengthening accountability frameworks.^[18] Additionally, it has spurred partnerships among enterprises, NGOs, and government agencies, encouraging cooperative forms of development.

All things considered, corporate social responsibility (CSR) in India has facilitated the establishment of significant social sectors, encouraged ethical business practices, and allocated substantial sums of private sector funding to development. To fully fulfil its transformative potential, however, more regulatory enforcement and a more significant shift

Judicial and Regulatory Perspectives on CSR

The regulatory and judicial branches in India have played a pivotal role in interpreting and guiding the application of CSR laws. Although courts have seldom made direct decisions on CSR compliance, they have altered the scope, interpretation, and operationalisation of CSR legislation via judicial decisions and regulatory clarifications.

The High Court clarified in TechnipFMC v. Union of India that CSR expenditures cannot be equated with tax obligations and must adhere to statutory standards under Section 135 of the Companies Act 2013. The Court emphasised that corporate social responsibility (CSR) is not a crime but rather a legislative expression of an ethical and developmental duty.^[19]

Judicial interpretations have bolstered the CSR Act’s purposive approach, encouraging businesses to embrace CSR as a way to genuinely engage with society rather than as a financial requirement. In doing so, the court has recognised the need of finding a balance between intended compliance and societal effect.^[20]

Through the publication of circulars and frequently asked questions on the regulatory front, the Ministry of Corporate Affairs (MCA) has been actively offering operational clarity. Importantly, it stipulated that surpluses from CSR activities must be reinvested in CSR instead of being categorised as commercial profit. To maintain the integrity of the law, it also enumerated activities that are illegal, such branding events under the guise of CSR.

The Companies (Amendment) Act, 2019 established penalties for non-compliance, which were later enhanced by the 2020 Amendment that converted criminal penalties to civil fines.^[21] This change struck a balance between equity and enforcement, reducing the punitive load while enhancing corporate accountability.

Reports from the Comptroller and Auditor General (CAG) and the High-Level Committee on CSR have highlighted deficiencies in disclosure practices and impact assessments. They recommend the creation of a national CSR repository, uniform reporting, and independent audits as ways to increase transparency.^[22]

Legal scholars contend that despite India’s CSR framework’s advancements, it still has to be institutionally reinforced, strategically matched with important business activities, and moved towards impact-driven models. The future of CSR depends less on regulatory requirements and more on the ethical commitment of corporate actors to social change.^[23]

Emerging Trends and Future of CSR in India

Technology-Assisted Integration of CSR and ESG

The Indian CSR landscape is undergoing a change due to the combination of technology and ESG (Environmental, Social, Governance) alignment. Businesses can now monitor, evaluate, and report on their CSR activities in real time, increasing efficiency and transparency, thanks to technology-based CSR solutions like Goodera, Samhita, and Impact Dashboard.^[24]

The global trend towards ESG investing is also having an effect on Indian corporate practices. Businesses are increasingly including ESG metrics into their sustainability and corporate social responsibility reports. Since ESG ratings are now used to assess financial access, investor trust, and market competitiveness, companies are encouraged to adopt more thorough and integrated CSR strategies.^[25]

The growing confluence of CSR and ESG marks a new paradigm where corporate responsibility is not a stand-alone obligation but rather a key element of sustainable business operations in accordance with SDG objectives.

Policy Recommendations

To increase and strengthen the impact of CSR, a number of legislative changes are required. Independent CSR audit bodies should be set up for large-scale projects in order to provide trustworthy third-party verification. Regular reviews and required disclosures should be standardised by national regulations.

Second, the government should promote a culture of volunteer excellence in CSR by providing incentives such as tax exemptions, awards, and rankings that highlight effective company activities.^[26] This kind of positive reinforcement would transform CSR from an obligation to a value-adding strategy.

Third, it is necessary to encourage public-private partnerships (PPPs) and other cooperative strategies. These partnerships allow companies, government agencies, and non-governmental groups to coordinate their activities, use local knowledge, and maximise development outcomes.^[27]

Youth and Stakeholder Involvement

Innovation in corporate social responsibility is beginning to be stimulated by India’s demographic dividend. Young social entrepreneurs are creating scalable models that combine profit and purpose in order to attract CSR finance and create grassroots impact ecosystems.^[28]

Academic institutions are simultaneously incorporating corporate social responsibility, sustainability, and business ethics into their courses. Graduates are thus becoming more socially conscious and equipped to encourage moral conduct in professional settings.^[29]

Civil society organisations, which ensure local stakeholder engagement and modify CSR projects to suit local circumstances, are equally significant. Their presence enhances the accountability, pertinence, and credibility of project execution.

Collectively, these patterns suggest a shift from top-down charity to decentralised, stakeholder-driven impact creation. Increasingly, corporate social responsibility (CSR) is being seen as a driving force behind inclusive capitalism, where companies work with communities to generate long-term shared benefits rather than merely operating inside them.^[30]

Conclusion

One of the few countries with statutory corporate social responsibility (CSR) obligations is India, which under the Companies Act of 2013 changed CSR from a voluntary endeavour to a mandated legal obligation.^[31] Discussions over impact, compliance, and alignment with national goals have been triggered by the required 2% spending by qualified businesses. In addition to being required by law, corporate social responsibility (CSR) is being recognised as a strategic tool for inclusive growth. Through its contributions to healthcare, education, sanitation, and environmental sustainability, CSR addresses deeply rooted social concerns.^[32] Recurring improvements and MCA rules are among the regulatory reforms that have enhanced the implementation of CSR. The future lies in deliberately integrating corporate social responsibility (CSR) with business goals rather than just adhering to legislation. Innovations in ESG standards, digital technologies, and social companies, which present CSR as both ethically and financially essential for India’s long-term prosperity, represent a growing trend towards purpose-driven business.^[33]

References

1. Aishwarya Singh, ‘Tech-Driven CSR in India: The Rise of CSR Analytics’ (2022) CSR Trends India Journal 56.
2. Amrita Sen, ‘From Philanthropy to Inclusive Capitalism: The CSR Shift’ (2021) Harvard CSR India Review 39.
3. Companies Act 2013, s 135.
4. Companies (Amendment) Act 2019, s 21.
5. Companies (Corporate Social Responsibility Policy) Rules 2014.
6. Comptroller and Auditor General of India, Performance Audit Report on CSR Implementation (2021) https://cag.gov.in accessed 19 July 2025.
7. Comptroller and Auditor General of India, Performance Audit Report on CSR Spending (CAG Report No. 34 of 2022).
8. IIM Bangalore, ‘CSR in MBA Curriculum: Shaping Ethical Leaders’ (2022) https://www.iimb.ac.in accessed 15 July 2025.
9. KPMG, India’s CSR Reporting Survey 2022: From Responsibility to Impact (KPMG India, 2022) https://home.kpmg/in/en/home/insights/2022/12/india-csr-reporting-survey-2022.html accessed 18 July 2025.
10. MCA, ‘Report of the High-Level Committee on CSR’ (August 2019) https://www.mca.gov.in accessed 15 July 2025.
11. Ministry of Corporate Affairs, National CSR Data Portal https://csr.gov.in accessed 18 July 2025.
12. Ministry of Corporate Affairs, ‘Clarification on Spending of CSR Funds for COVID-19’ (General Circular No. 10/2020, 23 March 2020).
13. Ministry of Law and Justice, The Companies Act, 2013, No 18 of 2013, s 135.
14. Neha Singh, ‘CSR Partnerships and Governance Models in India’ (2021) 5(2) Indian Journal of Public Administration 99.
15. Nimesh G Desai, ‘Challenges in Evaluating CSR Effectiveness in India’ (2020) 7(1) Journal of Development Policy and Practice 45.
16. PWC India, ‘ESG and CSR Convergence: 2023 Outlook’ (PWC Report, 2023) https://www.pwc.in accessed 15 July 2025.
17. PwC India, Impact Assessment of CSR Activities in Rural India (PwC, 2021) 11.
18. Rajnish Kumar, ‘CSR Law and Judicial Responsibility in India’ (2021) 13(2) Indian Journal of Corporate Law 45.
19. Richa Gautam and Anju Singh, ‘Corporate Social Responsibility Practices in India: A Study of Top 500 Companies’ (2022) 29(3) Vision: The Journal of Business Perspective 226.
20. Surabhi Modgil, ‘CSR and Legal Reform: Building a Culture of Ethical Business in India’ (2020) 27(1) National Law Review 77.
21. TechnipFMC v Union of India (2021) SCC OnLine Del 4921.
22. United Nations Global Compact Network India, CSR and the SDGs: Converging Priorities (UNGCNI, 2023).
23. World Bank, ‘Leveraging PPPs for Development’ (2020) https://www.worldbank.org/en/topic/publicprivatepartnerships accessed 15 July 2025.

 

^[1] Ministry of Corporate Affairs, National CSR Data Portal https://csr.gov.in accessed 18 July 2025.

^[2] Companies Act 2013, s 135

^[3] Companies (Corporate Social Responsibility Policy) Rules 2014.

^[4] Companies Act 2013, s 135

^[5] KPMG, India’s CSR Reporting Survey 2022: From Responsibility to Impact (KPMG India, 2022) https://home.kpmg/in/en/home/insights/2022/12/india-csr-reporting-survey-2022.html accessed 18 July 2025.

^[6] Ministry of Corporate Affairs, National CSR Data Portal https://csr.gov.in accessed 18 July 2025.

^[7] Neha Singh, ‘CSR Partnerships and Governance Models in India’ (2021) 5(2) Indian Journal of Public Administration 99.

^[8] Neha Singh, ‘CSR Partnerships and Governance Models in India’ (2021) 5(2) Indian Journal of Public Administration 99.

^[9] Comptroller and Auditor General of India, Performance Audit Report on CSR Implementation (2021) https://cag.gov.in accessed 19 July 2025

^[10] Companies Act 2013, s 135

^[11] Companies (Corporate Social Responsibility Policy) Rules 2014.

^[12] Companies (Amendment) Act 2019.

^[13] Ministry of Corporate Affairs, ‘Clarification on spending of CSR funds for COVID-19’ (General Circular No. 10/2020, 23 March 2020).

^[14] Ministry of Corporate Affairs, National CSR Data Portal https://csr.gov.in accessed 18 July 2025

^[15] PwC India, Impact Assessment of CSR Activities in Rural India (PwC, 2021) 11.

^[16] Nimesh G Desai, ‘Challenges in Evaluating CSR Effectiveness in India’ (2020) 7(1) Journal of Development Policy and Practice 45.

^[17] Comptroller and Auditor General of India, Performance Audit Report on CSR Spending (CAG Report No. 34 of 2022).

^[18] United Nations Global Compact Network India, CSR and the SDGs: Converging Priorities (UNGCNI, 2023).

^[19] TechnipFMC v Union of India (2021) SCC OnLine Del 4921.

^[20] Rajnish Kumar, ‘CSR Law and Judicial Responsibility in India’ (2021) 13(2) Indian Journal of Corporate Law 45.

^[21] Companies (Amendment) Act 2019, s 21.

^[22] Comptroller and Auditor General of India, Performance Audit Report on CSR Implementation (2021) https://cag.gov.in accessed 19 July 2025.

^[23] Surabhi Modgil, ‘CSR and Legal Reform: Building a Culture of Ethical Business in India’ (2020) 27(1) National Law Review 77.

^[24] Aishwarya Singh, ‘Tech-Driven CSR in India: The Rise of CSR Analytics’ (2022) CSR Trends India Journal 56.

^[25] PWC India, ‘ESG and CSR Convergence: 2023 Outlook’ (PWC Report, 2023) https://www.pwc.in accessed 15 July 2025.

^[26] MCA, ‘Report of the High-Level Committee on CSR’ (August 2019) https://www.mca.gov.in accessed 15 July 2025.

^[27] World Bank, ‘Leveraging PPPs for Development’ (2020) https://www.worldbank.org/en/topic/publicprivatepartnerships accessed 15 July 2025.

^[28] Richa Gautam and Anju Singh, ‘Corporate Social Responsibility Practices in India: A Study of Top 500 Companies’ (2022) 29(3) Vision: The Journal of Business Perspective 226.

^[29] IIM Bangalore, ‘CSR in MBA Curriculum: Shaping Ethical Leaders’ (2022) https://www.iimb.ac.in accessed 15 July 2025

^[30] Amrita Sen, ‘From Philanthropy to Inclusive Capitalism: The CSR Shift’ (2021) Harvard CSR India Review 39

^[31] Ministry of Law and Justice, The Companies Act, 2013, No 18 of 2013, s 135.

^[32] KPMG, India’s CSR Reporting Survey 2022: From Responsibility to Impact (KPMG India, 2022) https://home.kpmg/in/en/home/insights/2022/12/india-csr-reporting-survey-2022.html  accessed 18 July 2025

^[33] Richa Gautam and Anju Singh, ‘Corporate Social Responsibility Practices in India: A Study of Top 500 Companies’ (2022) 29(3) Vision: The Journal of Business Perspective 226