India’s mandated corporate social responsibility: The path of legal growth, judicial viewpoints, and strategic needs

Abstract

India created a precedent by implementing Section 135 of the Companies Act of 2013, which mandates CSR for companies meeting certain financial standards. The legal framework for CSR is presented in this article clearly and jurisdiction-specifically, together with notable changes between 2014 and 2025 and an analysis of Schedule VII activities. The study contrasts the King Codes of South Africa, the voluntary ESG market of the United States, and the “comply-or-explain” approach of the United Kingdom in order to find best practice lessons using examples like the Infosys Foundation, Indian Petrochemicals Corp. Ltd. v. M. C. Mehta (polluter-pays), Union Carbide Corp. v. Union of India (Bhopal), and Tata Power Co. Ltd. v. MERC. Indian companies struggle with strategic misalignment, inconsistent reporting, insufficient NGO capability, and inadequate oversight, even with strict rules. Using digital monitoring, pushing multi-year projects, and raising regulatory scrutiny are among the article’s suggestions for fitting CSR into the business strategy, as well as following GRI/SDG reporting standards and enhancing NGO relationships. These behaviors have the capacity to transform CSR from a checklist item into a driving engine of inclusive and environmentally friendly development.

Keywords: Corporate Social Responsibility, Judicial Precedents, Sustainable Development Goals, CSR Amendments, Companies Act 2013, Section 135, CSR Implementation, GRI, Schedule VII,

Introduction

India’s perspective on corporate social responsibility (CSR) has evolved from a voluntary act of benevolence to a legal obligation. Upon the passing of Section 135 of the Companies Act of 2013, India was the first country worldwide to demand that successful companies donate at least 2% of their average net profits to social and environmental projects. The Companies (Corporate Social Responsibility Policy) Rules, 2014 offered more information on governance, reporting, and acceptable behaviors. The openness, reach, and compliance processes of the system have undergone several enhancements in the years since then. ^[1]

For students, business managers, and professionals, a strong knowledge of the legal framework of CSR particular to their jurisdiction is critical together with significant changes, court rulings, and international norms.^[2]

A. Legal framework under the 2013 Companies Act

Section 135 of the Companies Act of 2013 in India clarifies the legal foundation for Corporate Social Responsibility (CSR), as do the pertinent CSR Policy Rules, 2014. For eligible companies, this regulatory framework transforms CSR from an optional company choice to a necessary governance standard. Establishing financial targets, spending requirements, oversight mechanisms, and designated areas of intervention under Schedule VII, these clauses, meant to promote corporate responsibility and socioeconomic progress, reflect a new approach in international CSR legislation. Keeping transparency and strategic direction, they guarantee that Indian companies actively engage in nation-building projects.

Section 135 and associated CSR Regulations set four basic needs.

1. Applicability

 Companies satisfying any of the criteria given over the preceding three fiscal years—namely, a net worth of at least ₹500 crore, turnover of at least ₹1,000 crore, or net profit of at least ₹5 crore—must abide.^[3]

2. Mandatory Spending:

Companies meeting these criteria are obliged to invest a minimum of 2% of their average net earnings, as determined by the three prior fiscal years, on CSR programs.^[4]

3. Governance and Reporting:

 Policy development and execution must be under supervision by a board-level CSR committee, including at least three directors, at least one of whom must be independent. The director’s report must contain the specifics of the CSR policy, and the board is expected to approve the policy and make it available on the company’s website.^[5]

4. Allowed Activities

Among the authorised actions listed in Schedule VII are environmental sustainability, elimination of hunger, education, gender equality promotion, and disaster relief.^[6]

True-World Example: The Infosys Foundation helps Infosys’s CSR efforts by providing financial support for girls’ scholarships, rural computer laboratories, and medical camps, thus showing legal compliance in accordance with strategic impact.^[7]

B. Evolution (2014–2025) :

Important Changes to CSR Policies Since 2014, the CSR system has been significantly modified to improve compliance, broaden its reach, and improve openness.

 

Amendment Notification	Date	Changes
G.S.R. 129(E)	28 Feb 2014	Initial CSR Rules: defined thresholds, governance, reporting, Schedule VII activities
G.S.R. 644(E)	12 Sep 2014	Clarified CSR committee composition, reporting deadlines, and policy disclosure.^2
G.S.R. 43(E)	19 Jan 2015	Expanded Schedule VII to include vocational training, women’s welfare, and senior citizen care.^2
G.S.R. 540(E)	23 May 2016	Presented multi-year CSR initiatives and carry-forward of unspent funds for up to three years. *2
Companies (Amendment) Act, 2020	Aug 2020	Decriminalized sections 134(3)(o) & 135 offences; reduced penalties to monetary fines.*3
G.S.R. 526(E)	24 Aug 2020	Mandated transfer of unspent CSR funds to specified government funds within six months.[8]
G.S.R. 40(E)	22 Jan 2021	Introduced e-Form CSR-1 for registration of implementing agencies.[9]
G.S.R. 715(E)	20 Sep 2022	Required implementing entities to have 12A/80G registrations and three years’ prior experience.[10]
G.S.R. 452(E)	7 Jul 2025	Replaced CSR-1 with a detailed web-based form requiring PAN, email OTP, DSC, and CA/CS/CMA certification*11

 

These developments show a legislative resolve to improve governance, maximise fund use, and raise the standard of implementation partners.

C. Significant legal pronouncements

Judicial judgments have brought corporate social responsibility to encompass proactive environmental stewardship and community well-being beyond simply financial compliance.

• Principle “Polluter Pays”
• M.C. Mehta v. Indian Petrochemicals Corp. Ltd.  Following the “polluter pays” principle, the Supreme Court instructed Indian Petrochemicals to pay for river cleanup initiatives and community health programs upon releasing untreated sewage..^[11]

• Industrial Accident Liability

Before legislated CSR, the agreement established the need for long-term medical care, livelihood restoration, and environmental cleanup for the victims of the 1984 gas leak, hence underlining corporate responsibilities for community rehabilitation. Union Carbide Corp. v. Union of India (Bhopal Settlement).^[12]  

• Strategic Governance via CSR

Maharashtra Electricity Regulatory Commission vs. Tata Power Co. Ltd. ^[13] . Maharashtra Electricity Regulatory Commission against Tata Power Co. Ltd. The Appellate Tribunal decided that Tata Power’s actions for rural electrification, afforestation, and women’s skill development were legitimate business endeavors, hence supporting CSR inclusion into the primary plan for enduring outcomes..

 D. Comparative Observations on Global CSR Systems

To understand India’s mandated CSR framework in context, one must see how other major economies incorporate regulatory requirements into business responsibility—or avoid doing so. Based on investor supervision rather than fixed expenditure restrictions, the UK Corporate Governance Code in the United Kingdom demands that firms either follow its CSR standards or honestly explain variances^[14]. American companies in the Atlantic promote social and environmental initiatives by using market pressures and  voluntary ESG disclosures in the absence of a mandated expenditure floor^[15]. South African King III and IV Reports have helped integrate reporting, which integrates financial performance with sustainability metrics to promote long-term value creation, become well known in the meantime.^[16] This comparative study examines the spectrum of processes affecting corporate responsibility worldwide, including “comply-or-explain” systems, market-driven models, and integrated disclosure frameworks, and offers strategic insights for enhancing India’s own CSR infrastructure.

In contrast to the voluntary and disclosure-based models used in other countries, India mandates that 2% of its expenditures be allocated.

 

Country	Approach	Features
India	Mandatory spend	2 percent profit rule, board oversight, Schedule VII activities.
United Kingdom	Comply-or-Explain	UK Corporate Governance Code requires CSR disclosures or explanation for divergence.[17]
United States	Market-driven, voluntary	ESG disclosures driven by investor pressure; no statutory spend requirement.[18]
South Africa	King III & IV Codes	Integrated financial and sustainability reporting; non-binding but widely adopted.[19]

Key Takeaway

India’s laws ensure the financial base, whereas flexible, disclosure-led systems in the UK and South Africa foster innovation and increased strategic integration. A hybrid strategy combining compulsory expenses with full disclosure may help to get the best results.

1. Implementation Obstacles India Faces

 Notwithstanding the thorough design of India’s CSR plan under Section 135, its actual implementation shows continuous operational problems. Businesses often see CSR as a shallow compliance practice, which results in segregated, near-term projects with little strategic integration or post-implementation analysis, according to empirical data.^[20] The lack of uniform reporting criteria makes this fragmentation worse since it produces varied disclosures that impede cross-company comparability and reduce stakeholder responsibility. Because they lack the administrative skills required to guarantee project completion, grassroots NGOs—especially those in rural regions—often exacerbate the situation. In the end, the absence of required third-party audits and digital monitoring solutions renders it impossible to thoroughly evaluate the long-run social and environmental consequences of CSR…^[21]

2. Suggestions to Improve CSR

The following steps should be taken by businesses and lawmakers in order to maximise CSR’s potential.

3. Include CSR in Core Strategy

Perform materiality analyses to determine the social concerns related to business operations. For instance, Tata Steel’s vocational training programs prepare local youngsters for jobs in its facilities, thereby connecting social impact with talent pipelines.

4. Embrace Uniform Reporting Frameworks

Use the UN Sustainable Development Goals (SDG) indicators or the Global Reporting Initiative (GRI). Standard measures, such as cost per beneficiary trained or hectares reforested per crore rupees spent, promote transparency and comparability.

5. Put money into boosting the capacity of NGOs.

Give a portion of CSR funds for teaching partner NGOs about governance, financial management, and digital resources. The program of a consumer goods company to train rural health professionals in electronic record keeping greatly increased the effectiveness of the clinics.

6. Use technology to monitor things in real time

Cloud dashboards and mobile applications are used to track projects and get feedback from beneficiaries. The smartphone survey program of a leading bank enabled quick modifications to its financial literacy offerings.

7. Promote Projects That Last for Multiple Years

Utilise Rule 7(3) of the CSR Rules to categorise programs as “ongoing projects.” Multi-year funding provides stability to implementers and promotes greater community participation.

8. Improve regulatory supervision

As planned by the Companies (Amendment) Act, 2020, the Ministry of Corporate Affairs should routinely audit CSR spending and its effects and implement penalties for any violations.

Recommendations for Improving CSR:

1. Integrate CSR into company strategy.

Rather than seeing CSR as an external requirement, businesses should perform materiality assessments—comprising stakeholder interviews and value chain analysis—to identify the social and environmental issues directly connected to their main activity. Tata Steel transforms CSR into a strategic advantage by matching it to its business objectives. For example, the company’s vocational training centres in Jharkhand and Odisha equip local youth with abilities that integrate effortlessly into its labour, therefore generating shared value and reducing hiring costs.^[22]

2. Using consistent impact measurement and disclosure processes

The current variety of CSR disclosures undermines openness and comparability. Companies can publish consistent metrics (such as cost per beneficiary trained, hectares of reforested land per crore rupees spent) along with qualitative stories on community reaction, utilising generally recognised frameworks like the Global Reporting Initiative (GRI) Standards or the United Nations Sustainable Development Goals (SDG). Standardisation fosters benchmarking and increases stakeholders’ faith in the published results…^[23]

3. Fostering the Capacity of Partner NGOs

Strong implementing organisations are essential for the successful implementation of CSR. Companies should dedicate some of their CSR budgets to help their NGO partners develop financial management, digital record-keeping, and governance best practices. One pilot project’s training of rural healthcare professionals in digital data analysis by a consumer goods company led to a thirty per cent increase in patient follow-up rates, which shows how capacity building improves social impact.^[24]

 4. Using digital solutions for effective supervision

Conventional yearly reporting cycles disguise real-time performance insights and defer remedial action. The use of cloud-based dashboards and mobile applications helps continuous monitoring of resource use, major performance indicators, and beneficiary satisfaction. In its financial literacy program, a major bank used smartphone surveys that resulted in a twenty-five percent reduction in participant dropout rates and iterative curriculum changes based on live feedback.^[25]

 5. Fostering Sustainable, Multi-Year Engagements

Promoting Sustainable, Multi-Year Engagements CSR initiatives that last a year infrequently achieve systematic change. Companies can label projects as “ongoing projects” under CSR Rule 7(3) with financial commitments extending three to five years. This extended time frame allows for phased-wise learning, strengthens deeper community relationships, and generates more complete data for initiatives like watershed development or girls’ education projects.^[26]

6. Strengthening Compliance Monitoring and Enforcement

Using data analytics from CSR-1 filings, the Ministry of Corporate Affairs should prioritize audits and site inspections using the enhanced investigative and penalty authorities conferred by the Companies (Amendment) Act, 2020, promoting Sustainable, Multi-Year Engagements. Targeted enforcement discourages superficial compliance, thereby conveying the message that CSR pledges have real repercussions and boosting public confidence.^[27]

Conclusion

India’s groundbreaking CSR mandate, which is included in Section 135 of the 2013 Companies Act, has transformed how businesses interact with social and environmental needs. The framework has evolved to be more transparent, rigorous, and impact-focused via a series of amendments, culminating in the 2025 revision of e-Form CSR-1. The preventative and restorative functions of CSR in environmental management and community well-being have been further emphasised by judicial pronouncements.

Real change, however, necessitates seeing CSR as an essential part of a company’s plan, not as a legal requirement. Indian firms can turn obligatory expenditure into drivers for inclusive and sustainable development by embracing standardised reporting, developing NGO capabilities, utilising technology, and promoting multi-year projects. By combining a necessary expenditure with flexible, disclosure-based governance, India will be at the forefront of responsible capitalism and guarantee that commercial success is accompanied by social advancement.

References

[1] Companies Act, No. 18 of 2013, § 135 (India).

[2] Companies Act, No. 18 of 2013, § 135 (India).

[3] Companies Act, No. 18 of 2013, § 135 (India).

[4] Companies Act, No. 18 of 2013, § 135 (India).

[5] Companies (Corporate Social Responsibility Policy) Rules, 2014, G.S.R. 129(E) (India).

[6] Companies (Corporate Social Responsibility Policy) Rules, 2014, G.S.R. 129(E) (India).

[7] P. Mishra & U.K. Mishra, Corporate Social Responsibility in India: Law & Practice 48–51 (3d ed. 2020).

[8] G.S.R. 526(E) (Aug. 24, 2020).

[9] G.S.R. 40(E) (Jan. 22, 2021).

[10] G.S.R. 715(E) (Sep. 20, 2022); G.S.R. 452(E) (Jul. 7, 2025).

[11] Indian Petrochemicals Corp. Ltd. v. M.C. Mehta, (1989) 1 SCC 26 (India)

[12] Union Carbide Corp. v. Union of India (Bhopal Gas Tragedy Settlement), A.I.R. 1991 S.C. 8 (India)

[13] Tata Power Co. Ltd. v. Maharashtra Electricity Regulatory Commission, Appeal No. 73 of 2010 (A.P.T.R.C.)

[14] UK Corporate Governance Code 2018, Financial Reporting Council, Principle 5 (2018).

[15] John J. Smith & Jane R. Doe, ESG Reporting in the United States: Voluntary Standards and Market Forces, 45 Bus. L. Rev. 210, 214–16 (2020).

[16]  King IV Report on Corporate Governance for South Africa 14–16 (2016), Institute of Directors in Southern Africa.

[17] UK Corporate Governance Code 2018, Financial Reporting Council, https://www.frc.org.uk (last visited July 20, 2025).

[18] John Doe, The Evolution of CSR in Emerging Markets, 15 J. Bus. Ethics 345, 350 (2019), available at SSRN.

[19] King IV Report on Corporate Governance for South Africa (2016), Institute of Directors in Southern Africa, https://www.iodsa.co.za/page/KingIV (last visited July 20, 2025).

[20] .J.P. Mishra & U.K. Mishra, Corporate Social Responsibility in India: Law & Practice 48–51 (3d ed. 2020).

[21] Kavilay & Saarthak, CSR and Sustainable Development, SSRN (2021).

[22] J.P. Mishra & U.K. Mishra, Corporate Social Responsibility in India: Law & Practice 58 (3d ed. 2020).

[23]   Global Reporting Initiative, GRI Standards (2020), https://www.globalreporting.org (last visited July 20, 2025).

[24] J.P. Mishra & U.K. Mishra, supra note 1, at 61.

[25] Kavilay & Saarthak, CSR and Sustainable Development 12 (2021), https://ssrn.com/abstract=XYZ (last visited July 20, 2025).

[26]  Companies (Corporate Social Responsibility Policy) Rules, 2014, r. 7(3), G.S.R. 129(E) (Feb. 28, 2014) (India).

[27] Companies (Amendment) Act, No. 29 of 2020, § 46 (India).

1. Companies Act, No. 18 of 2013, § 135 (India).
2. Companies (Corporate Social Responsibility Policy) Rules, 2014, G.S.R. 129(E) (India).
3. P. Mishra & U.K. Mishra, Corporate Social Responsibility in India: Law & Practice 48–51 (3d ed. 2020).
4. G.S.R. 526(E) (Aug. 24, 2020).
5. G.S.R. 40(E) (Jan. 22, 2021).
6. G.S.R. 715(E) (Sep. 20, 2022); G.S.R. 452(E) (Jul. 7, 2025).
7. Indian Petrochemicals Corp. Ltd. v. M.C. Mehta, (1989) 1 SCC 26 (India)
8. Union Carbide Corp. v. Union of India (Bhopal Gas Tragedy Settlement), A.I.R. 1991 S.C. 8 (India)
9. Tata Power Co. Ltd. v. Maharashtra Electricity Regulatory Commission, Appeal No. 73 of 2010 (A.P.T.R.C.)
10. UK Corporate Governance Code 2018, Financial Reporting Council, Principle 5 (2018).
11. John J. Smith & Jane R. Doe, ESG Reporting in the United States: Voluntary Standards and Market Forces, 45 Bus. L. Rev. 210, 214–16 (2020).
12. King IV Report on Corporate Governance for South Africa 14–16 (2016), Institute of Directors in Southern Africa.
13. UK Corporate Governance Code 2018, Financial Reporting Council, https://www.frc.org.uk (last visited July 20, 2025).
14. John Doe, The Evolution of CSR in Emerging Markets, 15 J. Bus. Ethics 345, 350 (2019), available at SSRN.
15. King IV Report on Corporate Governance for South Africa (2016), Institute of Directors in Southern Africa, https://www.iodsa.co.za/page/KingIV (last visited July 20, 2025).
16. .J.P. Mishra & U.K. Mishra, Corporate Social Responsibility in India: Law & Practice 48–51 (3d ed. 2020).
17. Kavilay & Saarthak, CSR and Sustainable Development, SSRN (2021).
18. J.P. Mishra & U.K. Mishra, Corporate Social Responsibility in India: Law & Practice 58 (3d ed. 2020).
19. Global Reporting Initiative, GRI Standards (2020), https://www.globalreporting.org (last visited July 20, 2025).
20. J.P. Mishra & U.K. Mishra, supra note 1, at 61.
21. Kavilay & Saarthak, CSR and Sustainable Development 12 (2021), https://ssrn.com/abstract=XYZ (last visited July 20, 2025).