From Compliance to Catalyst: Transforming Corporate Social Responsibility in India 

From Compliance to Catalyst: Transforming Corporate Social Responsibility in India 

The story of Corporate Social Responsibility (CSR) in India is unique—it is a transition from voluntary philanthropy to mandated investment in the nation’s development. With a landmark legal framework requiring eligible companies to contribute a portion of their profits to social and environmental causes, India has positioned CSR as a strategic lever for inclusive and sustainable growth. However, as environmental pressures mount, the question is whether this framework can evolve from a compliance-driven exercise into a genuine force for systemic change. 

The Statutory Backbone: A Legal Mandate for Social Good 

India’s CSR journey is anchored in Section 135 of the Companies Act, 2013, making it the first country to legally mandate CSR for qualifying companies. The law applies to companies meeting any of the following financial thresholds in the preceding financial year: 

• Net worth of ₹500 crore or more 

• Turnover of ₹1,000 crore or more 

• Net profit of ₹5 crore or more 

Eligible companies must spend at least 2% of their average net profits from the preceding three years on CSR activities. This spending must align with a defined list of permissible activities in Schedule VII of the Act, which ranges from eradicating hunger and promoting education to ensuring environmental sustainability. 

Recent regulatory changes, such as the new CSR-1 online registration process introduced in July 2025, aim to bring more rigor and transparency. This system requires implementing agencies to register their details and track records with the Ministry of Corporate Affairs (MCA) portal, moving away from older, less structured methods. 

Assessing the Impact: Achievements and Persistent Gaps 

The scale of CSR in India is undeniably significant. In the 2023-24 financial year, a record ₹34,909 crore was spent on CSR initiatives by Indian corporates. Beyond the financial figures, CSR has spurred a shift in corporate mindset. Companies are increasingly aligning projects with national priorities like Skill India and Jal Jeevan Mission, and global frameworks like the UN Sustainable Development Goals (SDGs). 

However, this progress is uneven, revealing several critical challenges: 

• Regional and Sectoral Imbalances: Over 60% of CSR funds flow to a few industrialized states, leaving aspirational districts and tribal regions underserved. Furthermore, environmental sustainability receives less than 15% of total CSR expenditure, often sidelined in favor of more visible social projects. 

• Short-Term and Peripheral Actions: The annual spending cycle encourages “episodic” projects—like one-off plantation drives—rather than long-term, transformative initiatives integrated into core business operations. This approach limits genuine ecological impact. 

• Governance and Transparency Issues: Many projects are executed through company-controlled foundations, raising questions about independence and effectiveness. While compliance with the 2% spending rule is high, measuring real outcomes remains a challenge. 

Leading by Example: Pioneering Environmental CSR Projects 

Despite systemic challenges, several corporate initiatives demonstrate how CSR can drive meaningful environmental change: 

• Mahindra’s Project Hariyali: Moving beyond simple tree-planting, this initiative focuses on creating biodiverse, native forests. Having planted over 20 million trees, the project uses geo-tagging for monitoring and partners with local communities for long-term stewardship. 

• ITC’s Social & Farm Forestry: This program integrates afforestation with rural livelihoods. By helping farmers cultivate trees on degraded land, it has developed over 1.2 million acres of plantations, sequestering carbon while boosting farmer income and improving water tables. 

• Hindustan Unilever’s Plastic Circularity: Addressing its own value chain, HUL has enabled the collection and processing of over 1.2 million tonnes of plastic waste. The project builds a formal ecosystem involving waste-picker collectives, creating both environmental and livelihood benefits. 

• Tata Power’s Renewable Microgrids: Bringing clean energy to off-grid rural areas, this initiative has installed solar microgrids that power households and micro-enterprises, reducing diesel dependence and fostering local economic growth. 

Charting the Future: From Box-Ticking to Systemic Integration 

A 2018 High-Level Committee chaired by Injeti Srinivas provided a roadmap for reforming India’s CSR ecosystem. Its recommendations, alongside field insights, point toward a more mature and impactful future: 

• Deepening Impact Over Expanding Scope: The Srinivas Committee advocated for strengthening what exists rather than merely widening the net. Key proposals include mandatory impact assessment studies for large projects, bringing CSR spending under statutory audit, and developing a centralized CSR exchange portal for better transparency and stakeholder collaboration. 

• Strategic and Long-Term Orientation: To counter short-termism, the Committee suggested allowing a 3-5 year window to spend funds on ongoing projects. This encourages companies to commit to complex, long-duration initiatives in areas like ecological restoration or skill development, which require sustained investment. 

• Mainstreaming Sustainability into Core Business: The future lies in dissolving the artificial boundary between CSR and business strategy. Environmental responsibility must evolve from isolated CSR projects to being embedded in core operations and supply chains. This means adopting circular economy models, achieving net-zero targets that include Scope 3 (supply chain) emissions, and investing in clean technology R&D as part of CSR. 

• Fostering Collaborative Governance: Effective CSR requires partnerships. The Committee recommended that companies partner with the state and community when creating public assets, with ownership resting with the public. Empowering local Panchayats and Self-Help Groups in project design and monitoring can ensure initiatives are locally relevant and sustainable. 

Conclusion: A Pivot Point for Purpose 

India’s CSR mandate has successfully mobilized private capital for public good, creating a unique model of state-corporate partnership in development. The legal framework has ensured participation and scale. However, the next decade demands a qualitative leap—from proving compliance to demonstrating transformational impact. 

The convergence of a robust legal framework, insightful policy recommendations, and pioneering corporate examples provides a clear path forward. By embracing long-term thinking, outcome-based accountability, and deep integration of sustainability, corporate India can ensure that CSR fulfills its original promise: to be a powerful, strategic catalyst for building an equitable and ecologically resilient nation.