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.
