Corporate Social Responsibility and Its Impact on Society

Key Words: Social, Responsibility, Companies Act 2013, Ethics

INTRODUCTION

In today’s world, the role of a company is not centric towards making profit, rather engaging in the social welfare to become powerful economic and social entities. They are now accountable for not just their balance sheets and taxes, but also remaining mindful in taking care of the society they are all a part of. This gives rise to the concept that we know of as Corporate Social Responsibility. CSR refers to a company’s commitment to operate in an economically, socially, and environmentally sustainable manner while acknowledging the interests of a wide range of stakeholders, including employees, customers, investors, communities, and the environment. It is not merely about charitable donations or image management, but about embedding socially responsible values into the very fabric of corporate culture. It is no longer a catchphrase in today's globally interconnected and socially concerned society, it is now a need. Companies are now judged on their corporate citizenship as well as their financial performance. CSR is now the term that describe the businesses' ethical obligation to improve the environment, society, and communities they affect.

EVOLUTION OF CORPORATE SOCIAL RESPONSIBILITY

The idea of businesses helping the society isn’t new. Long before CSR became a formal concept, Indian companies and business families were already giving back in their own way. Industrialists like Jamsetji Tata and G.D. Birla believed that the wealth they earned should be used for the greater good of society. They built schools, hospitals, and community centres, not because they had to, but because they wanted to.

Over time, as businesses grew and the world changed, so did expectations. People started looking at companies not just for jobs or products, but also for how they treated people, how they used resources, and how they gave back to the community. In the 1990s, when India’s economy opened up, more companies came into the picture. Many of them started doing social work, but in an unstructured way. Some helped during disasters, others sponsored education or health camps. But there was no law to guide or track what companies were actually doing.

That changed in 2013, when India passed the Companies Act, making Corporate Social Responsibility a legal requirement for large companies. India became the first country in the world to do this. Now, companies that meet certain financial limits must spend a small percentage of their profits on Corporate Social Responsibility and report it officially.

This step helped move Corporate Social Responsibility from being just “good to do” to something that is “expected to do.” Today, CSR is not just about charity, rather it’s about creating long-term impact, supporting communities, and being a responsible part of society.

LEGALITY OF CORPORATE SOCIAL RESPONSIBILITY

According to Section 135 of the Companies Act, 2013, corporations that reach certain financial thresholds—a net value of ₹500 crore, a turnover of ₹1,000 crore, or a net profit of ₹5 crore—are required to fulfill CSR requirements. These businesses must invest in socially beneficial initiatives at least 2% of their average net profits over the preceding three financial years. The law necessitates a CSR committee to plan, oversee, and report on CSR actions, ensuring this is more than an empty promise. This committee recommends a CSR policy and ensures its implementation, with necessary disclosures in annual reports for transparency.

The legal framework was solidified by the Companies (Amendment) Act, 2019 and the CSR Policy Amendment Rules, 2021. Businesses must either act or pay; they can no longer merely state their purpose. CSR payments must be placed into assigned public funds or designated for "ongoing projects" through special accounts if unused. Conducting impact evaluations is mandatory for companies with significant CSR spend (₹10 crore or more), signaling a shift: CSR is now a social responsibility rather than a marketing tactic.

The framework ensures CSR is not just an abstract statement. The Ministry of Corporate Affairs regulates, the CBDT defines tax classification (though CSR spending is usually not tax deductible), and the National CSR Data Portal promotes transparency. NGOs, often entrusted with CSR execution, must register and comply with regulations like the FCRA. The CSR policy in India blends moral obligation with legality, encouraging companies to move beyond profit-driven goals to meaningful effect.

CASE LAWS STRENGTHENING CORPORATE SOCIAL RESPONSIBILITY

The Indian judicial system has repeatedly emphasized that corporate social responsibility, or CSR, is an integral part of ethical business practices and not just a formality. The court acknowledged CSR as a crucial component of corporate governance in Tata Power Co. Ltd. v. Maharashtra Electricity Regulatory Commission (2008), highlighting the need for businesses to strike a balance between their responsibilities to the public and their pursuit of profit.

Similar to this, the court made it clear in Vivek Ranjan Sriram v. IRDAI (2019) that CSR compliance is applicable consistently across all industries, even those subject to strict rules and regulations like insurance. The Supreme Court reaffirmed that social responsibility is deeply embedded in a company's legal identity in Binani Cement Ltd. v. Srei Equipment Finance Ltd. (2018), holding that CSR obligations cannot be ignored, even in cases of insolvency. Together, these cases solidify CSR as a moral and legal requirement in company law.

IMPACT ON SOCIETY

Corporate Social Responsibility has had a noticeable and significant effect on society. CSR has directed significant funding into essential industries including education, healthcare, rural development, environmental preservation, and women's empowerment by requiring businesses to allocate a percentage of their revenues to social projects. CSR initiatives have filled in gaps where government funding alone might not be sufficient, from constructing schools and hospitals to encouraging clean energy and helping artists.

Additionally, CSR has encouraged a culture of responsibility and community involvement in the corporate world. Businesses become active participants in nation-building as a result of its encouragement to align their operations with public welfare. In addition to improving marginalized communities, this change enhances the social structure and builds a more just and inclusive society. CSR is becoming a strategic tool for sustainable development and company credibility, rather than just a legal duty.

CONCLUSION

In conclusion, Corporate Social Responsibility in India has matured into a legally enforced, ethically grounded, and socially impactful mandate. With Section 135 of the Companies Act, 2013, CSR now obligates companies to contribute meaningfully to the society they profit from—be it through education, healthcare, environment, or rural development. It is no longer seen as charity, but as a duty embedded in corporate governance. Reinforced by judicial precedents and statutory frameworks, CSR today reflects a powerful shift in how businesses operate—not just to create wealth, but to share it responsibly and sustainably, ensuring that economic progress goes hand in hand with social upliftment.

References

• https://cas.lehigh.edu/articles/indias-corporate-social-responsibility-experiment

• https://vakilsearch.com/blog/corporate-social-responsibility-under-section-135-of-companies-act-2013/

• https://www.drishtijudiciary.com/blog/legal-dimensions-of-corporate-social-responsibility-in-india

• https://thelawcommunicants.com/legal-implications-of-corporate-social-responsibility-csr-in-india/

• Tata Power Co. Ltd. v. Maharashtra Electricity Regulatory Commission (2008)

• Binani Cement Ltd. v. Srei Equipment Finance Ltd. (2018)

• Vivek Ranjan Sriram v. IRDAI (2019)