Corporate Social Responsibility in India and its Implications

What is CSR?

While there exists no single universally accepted definition of Corporate Social Responsibility (CSR), each definition that currently exists hints us towards the impact that businesses have on the current society. Although the roots of Corporate Social Responsibility (CSR) lies in the various existing philanthropical activities (such as donations, charity, relief work, etc.) of the corporations, globally, the theme of Corporate Social Responsibility (CSR) has witnessed improvements. This is visible in the various definitions by various authors and authorities:

The EC1 defines CSR as “the responsibility of enterprises for their impacts on society”.

To completely meet their social responsibility, enterprises “should have in situ a process to integrate social, environmental, ethical human rights and consumer concerns into their business operations and core strategy in close collaboration with their stakeholders, it’s clear that:

• The CSR approach is focusing on the core business which is the main nature of CSR.
• CSR must address the happiness of all the stakeholders and not only companies stakeholders are benefitted through it.
• Philanthropic activities are only part of CSR, which otherwise constitutes a far larger set of activities entailing strategic business benefits.

CSR in India

After understanding the Definition and basic idea of CSR, it’s important to see and understand the current situation of CSR in India. In India, it has traditionally been seen as a philanthropic activity. As a result, there exists a limitation in the documentation on specific activities related to the very topic. As some observers have pointed out, the practise of CSR in India still remains within the philanthropic space, but now it’s not only limited to only the institutions but has come to a community phase through various projects.

Also, with global influences and with communities becoming more active and demanding, there appears a positive trend, that while CSR remains largely restricted to community development, it is getting more influenced with business activities (strategic) than philanthropic and a positive trend has been seen among the MNC’s applying the idea, publishing CSR reports as well.

With the inclusion of the Companies Act 2013, CSR was introduced and is promoting better transparency ever before. Schedule VII of the Act, which lists out the CSR activities, suggests communities be the focus. On the opposite hand, by discussing a company’s relationship to its stakeholders and integrating CSR into its core operations, the draft rules suggest that CSR must transcend communities and beyond the concept of philanthropy. It’ll be interesting to watch the ways within which this can translate into action at the bottom level, and the way the understanding of CSR is about to undergo a change.

Challenges faced by CSR in India

Several issues are challenging the effectiveness of CSR despite the fact that it has gained importance in India. There are many challenges faced by CSR like, no proper understanding of CSR, non-availability of authentic data, and specific information on the styles of CSR activities, coverage, and policy, etc. In addition to it, coaching and undeveloped staff are also creating problems that lead to a reduction in CSR initiatives.

• Lack of interest of the Public in CSR activities: There’s an absence of interest of the area people in participating and contributing to CSR activities of companies. So, it must be checked and folks should be told the benefits of the identical.
• Need to create local capacities: This initiative is way needed to make awareness at local levels and thus local capacities have to be built.
• Lack of transparency: As per the varied surveys, it’s noted that transparency has been dead and hence has been very problematic. CSR needs to play the matter of transparency and switches this negative into positive,
• Visibility factor: The role of media in highlighting good cases of successful CSR initiatives is welcomed because of its spreads good stories and sensitizes the local population about various ongoing CSR initiatives of companies.

Conclusion

The first and foremost advantage of CSR is that the transparency filter that has shown positive trends in India.CSR is absolutely about ensuring that the corporate can grow on a sustainable basis while ensuring fairness to any or all stakeholders, CSR has come a protracted way in India. It’s successfully interwoven business with social inclusion and environmental sustainability. From responsive activities to sustainable initiatives, corporate have clearly exhibited their ability to create a major difference within the society and improve the quality of life. Within the current social situation in India, it’s difficult for one single entity to motivate change because the scale is gigantic. Corporate have the expertise, strategic thinking, manpower, and money to facilitate extensive social change. Effective partnerships between corporate, NGOs, and therefore the government will place India’s social development on a faster track.

Here’s a comprehensive overview of Corporate Social Responsibility (CSR) in India and its implications under the Companies Act, 2025:

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🇮🇳 Corporate Social Responsibility (CSR) in India

📘 Definition

CSR refers to a company’s commitment to operate in an economically, socially, and environmentally sustainable manner, while recognizing the interests of all stakeholders.

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⚖️ Legal Framework – Section 135 of Companies Act, 2025

India became the first country in the world to mandate CSR spending through legislation.

✅ Applicability:

CSR is mandatory for companies (including foreign companies) meeting any of the following criteria in the previous financial year:

Condition	Threshold (₹)
Net worth	≥ ₹500 crore
Turnover	≥ ₹1,000 crore
Net profit	≥ ₹5 crore

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💰 CSR Spending Requirement

• Company must spend at least 2% of its average net profit (last 3 years) on CSR activities.
• If not spent, the company must disclose the reason and may need to transfer unspent amount to specific funds (Schedule VII or CSR fund).

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🧾 CSR Committee Requirements

• Companies must constitute a CSR Committee of the Board (min. 3 directors, including 1 independent director).
• The committee:
  • Formulates and recommends the CSR policy.
  • Recommends the amount to be spent.
  • Monitors the implementation of projects.

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📚 Permitted CSR Activities (Schedule VII)

CSR funds can be used for:

✅ Eradicating hunger, poverty, and malnutrition
✅ Promoting education, gender equality, and women empowerment
✅ Environmental sustainability
✅ Health care and sanitation (incl. COVID-19 support)
✅ Rural development projects
✅ PM Relief Fund, Clean Ganga Fund, etc.
✅ Promoting sports, art, and culture
✅ Supporting R&D in science, tech, and medicine

❌ CSR cannot be used for employee benefits, political donations, or activities in the normal course of business (except R&D for COVID-19 in certain years).

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🧩 Implications of CSR in India

1. Business Ethics and Accountability

• Promotes ethical responsibility beyond profit-making.
• Encourages transparency and sustainable practices.

2. Improved Brand Image

• Companies that engage in CSR earn goodwill and trust among customers and communities.

3. Social Impact

• CSR channels corporate money into sectors needing urgent development like education, sanitation, environment, etc.

4. Legal Compliance & Penalties

• Non-compliance can lead to penalties:
  • Up to ₹1 crore on the company
  • Up to ₹5 lakh or imprisonment (up to 3 years) for responsible officers

5. Corporate-Government Partnership

• Encourages private-public collaboration in nation-building.

6. Stakeholder Engagement

• Aligns corporate goals with stakeholder expectations (employees, communities, investors).

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🔎 Recent Developments

• CSR Rules were amended in 2021:
  • Introduced mandatory impact assessments for large projects.
  • Compulsory disclosure of CSR on company website.
  • Use of registered implementing agencies (with 80G registration).

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✅ Real-Life Examples

Company	Notable CSR Initiative
Tata Group	Education, healthcare, livelihood (Tata Trusts)
Infosys	Rural development, STEM education
Reliance	Swachh Bharat, COVID-19 relief, skill-building
ITC	Afforestation, e-Choupal, women empowerment

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📌 Conclusion

CSR in India is not just philanthropy — it’s a legal, strategic, and ethical imperative.

It ensures that companies give back to the communities they operate in, while aligning their goals with the nation’s development.

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