Corporate Social Responsibility in India: A Legal Mandate or Moral Imperative

Businesses need to go beyond the interest of their companies to the communities they serve

– Ratan Tata

Corporate social responsibility does not have a specific definition; however, in general terms it means investing some parts of corporate profits in the social development of the society as the corporates are using the mankind natural resources of the society as whole.

India is the first country to make CSR a legal mandate under Section 135 of the Companies Act 2013.

Section – 135 mandates the companies to invest 2% of average net profits of the company made during the three immediately financial years in the activities stated in Schedule VII of the Companies Act 2013.

Section – 135 mandates the Companies only the companies which are –

(i) Every company having net worth of rupees five hundred crore or more, or

(ii) Turnover of rupees one thousand crore or more, or

(iii) A net profit of rupees five crore or more during any financial year

For smoother implementation of this section, the companies have to constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director.

Schedule – VII activities are as follows:
Activities which may be included by companies in their Corporate Social Responsibility Policies Activities relating to:—

(i) eradicating extreme hunger and poverty; (ii) promotion of education;

(iii) promoting gender equality and empowering women; (iv) reducing child mortality and improving maternal health;

(v) combating human immunodeficiency virus, acquired immune deficiency syndrome, malaria and other diseases;

(vi) ensuring environmental sustainability; (vii) employment enhancing vocational skills; (viii) social business projects;

(ix) contribution to the Prime Minister’s National Relief Fund or any other fund set up by the Central Government or the State Governments for socio-economic development and relief and funds for the welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women; and

(x) such other matters as may be prescribed.

These activities are aligned with Sustainable Development Goals .

Penalties in Case of Non-Compliance

CSR in Practice: Challenges and Criticism

Despite good intentions and legal backing, CSR implementation in India faces several hurdles:

1. Tick-box Mentality: Many companies see CSR as just another compliance requirement, resulting in superficial efforts with little long-term impact.
2. Lack of Innovation: CSR activities often lack creativity and alignment with community needs. There’s a tendency to fund safe, conventional projects like donation drives or tree plantation.
3. Poor Monitoring: Despite mandatory disclosures, the impact of CSR projects is often not audited or measured effectively.
4. Skewed Spending: Companies prefer working with NGOs in urban areas, leaving remote and tribal regions underserved.

Striking the Balance: Legal Compliance and Ethical Commitment

CSR in India is at a crossroads. The law provides a framework for companies to contribute to society, but genuine impact can only arise when these contributions are backed by a moral vision.

Mandatory CSR has advantages:

• Ensures a minimum investment in public good.
• Brings accountability and transparency.
• Encourages competition and benchmarking in CSR initiatives.

However, the soul of CSR lies in voluntary, need-based, and strategic contributions. Businesses must go beyond mere compliance and integrate social responsibility into their corporate DNA. CSR should be viewed not as a cost, but as an investment in long-term brand value, trust, and societal progress.

Conclusion

CSR in India is both a legal mandate and a moral imperative. The Companies Act, 2013, laid the foundation by mandating CSR for large companies, ensuring that economic growth is accompanied by social justice. However, the true success of CSR lies not in legal enforcement but in the ethical awakening of corporate India.

As India continues to grapple with issues like poverty, illiteracy, gender inequality, and climate change, the corporate sector must rise as a partner in nation-building, not because the law demands it, but because it is the right thing to do.

written by: Sudhanshu Gaur

– 2^nd Year LLB Hons

Law College Dehradun, Uttaranchal University