Corporate Social Responsibility (CSR) Obligations: Compliance vs. Impact

Corporate Social Responsibility (CSR) in India has evolved from being a voluntary philanthropic gesture to a statutory obligation under the Companies Act, 2013. Section 135 of the Act mandates companies meeting certain financial thresholds to spend at least 2% of their average net profits over the past three years on CSR activities. While this legislative step marked a significant move towards responsible capitalism, the critical question that continues to surface is whether CSR in India is merely about compliance, or is it genuinely delivering impact?

In practice, many companies have approached CSR as a checkbox exercise — allocating funds just enough to avoid regulatory scrutiny. This “tick-the-box” approach often leads to short-term, visibility-driven projects rather than sustainable, long-term initiatives. Activities are sometimes chosen based on ease of implementation or public relations value, rather than deep community engagement or alignment with local needs. As a result, while the compliance requirements are formally met, the social return on investment remains questionable.

However, there is a growing class of companies that have started integrating CSR into their core values and business strategy. These organizations engage in impact-driven CSR, which includes baseline surveys, stakeholder consultations, impact assessments, and long-term partnerships with NGOs and local communities. They view CSR not just as expenditure, but as an investment in social capital, reputation, and inclusive growth. Such models have not only uplifted communities but also improved employee morale, customer loyalty, and investor confidence.

The real challenge lies in bridging the gap between mandatory compliance and meaningful impact. Regulatory oversight by the Ministry of Corporate Affairs has improved, with greater scrutiny on unspent CSR funds, mandatory disclosures in Board Reports, and the creation of dedicated CSR Committees. However, to truly maximize CSR’s potential, there needs to be a cultural shift in corporate thinking — from obligation to opportunity. This includes capacity building within companies, more robust third-party evaluations, and transparent impact reporting.

In conclusion, while the CSR mandate has ensured that social responsibility is no longer optional for Indian corporates, the journey from compliance to impact is still ongoing. Companies must realize that CSR done right is not just about fulfilling a legal duty but about creating shared value — for business and for society.