CSR Under the Companies Act

• CSR in India became a statutory requirement through Section 135 of the Companies Act, 2013.
• Eligible companies must spend 2% of their average net profit (past 3 years) on notified CSR activities.
• The intention was to push companies toward structured social investment—but concerns remain about impact, intent, and uneven distribution.

Present Trends and Emerging Issues

• In 2022–23, nearly 24,500 companies invested around ₹30,000 crore in CSR.
• Most funding goes to education and healthcare, with Maharashtra and Karnataka receiving the largest share due to corporate concentration.
• CSR choices are often shaped by:
  • Promoter preferences, not national development priorities.
  • Projects in founders’ hometowns, even when they don’t align with regional developmental deficits.
• This leads to geographical imbalance and reduces the strategic value of CSR spending.

Debate on Revising the CSR Formula

• India’s uniform 2% rule may not suit the country’s uneven corporate profitability patterns.
• Experts suggest a graded CSR structure:
  • Highly profitable firms could contribute up to 5%.
  • Companies with modest or fluctuating profits could contribute lower amounts to avoid financial stress.
  • Startups and loss-making firms could contribute token CSR based on turnover, to build social responsibility from early stages.
• A flexible model could create greater equity and broader impact.

Global Approaches to CSR

• Indonesia: No fixed percentage; companies adjust CSR contributions to business conditions.
• South Africa: CSR is tied to economic and social policy goals, integrating development incentives.
• Nigeria: Uses sector-specific levies to ensure CSR benefits regions impacted by industrial activity.
• United Kingdom: Strong emphasis on governance, transparency, and demonstrable social impact rather than fixed spending.

CSR and the Power of Individual Vision

• Some of the most notable CSR contributions emerge from personal passion projects, such as:
  • Fondation Cartier (Franco Cologni) promoting craftsmanship.
  • Kiran Nadar Museum of Art, a major initiative for contemporary Indian art.
  • JSW Foundation (Sangita Jindal) supporting public art and cultural conservation.
• Although critics question spending on arts during socioeconomic distress, cultural investment strengthens national identity and preserves heritage.

Role of Tax Policy in Strengthening CSR

• Governments cannot enforce altruism, but they can encourage meaningful CSR through incentives.
• Examples:
  • Brazil and France offer tax relief for CSR in culture, education, and heritage.
• For India, tax benefits could be linked to priority areas, such as:
  • Climate adaptation
  • Water security
  • Renewable technologies
  • Public health
• This ensures CSR aligns with critical national challenges.

Future Path for CSR in India

To maximize long-term benefits, India’s CSR framework should encourage:

• Purpose-driven capitalism: Profit creation aligned with social progress.
• Innovation-led solutions: CSR funding used to scale models beyond charity.
• Resilient social systems: Sustainable interventions rather than one-time donations.
• Collaborative development: Government, business, and civil society working together.

CSR must be viewed not as a mandatory expenditure, but as a strategic investment in India’s social and economic future.