Corporate Social Responsibility: Legal Framework And Practical Impact

Understanding CSR in a Contemporary Context

CSR refers to a company’s ethical duty to give back to society through initiatives that promote social welfare, environmental protection, and inclusive development. Rather than being an afterthought, CSR has become a critical pillar of sustainable business strategy.

It goes beyond donations or charity—it includes responsible supply chains, eco-friendly operations, community development, and employee well-being.

India’s Legal Framework: A Global First

India became the first country to mandate CSR through legislation. The Companies Act, 2013 introduced Section 135, which requires certain companies to invest in social development.

Firms that meet at least one of the following criteria:

• Net worth of ₹500 crore or more

• Turnover of ₹1,000 crore or more

• Net profit of ₹5 crore or more

must spend 2% of their average net profit (over the last three financial years) on approved CSR activities.

These activities are defined in Schedule VII of the Act, which includes promoting education, eradicating hunger, supporting healthcare, ensuring environmental sustainability, and more.

Additionally, companies must form a CSR Committee and disclose their initiatives and expenditures in their annual reports.

CSR in Action: Real-World Impact

Since the mandate, many Indian companies have taken up CSR with renewed commitment. Large-scale projects have improved access to education, healthcare, clean water, and vocational training—especially in rural and underdeveloped areas.

CSR initiatives have also enhanced company credibility, built stronger community relations, and helped in brand differentiation in a competitive market.

Challenges in Implementation

While the legal framework has driven positive change, several challenges persist:

• Some companies prioritize compliance over real impact

• Monitoring and evaluation of CSR outcomes remain weak

• Lack of transparency and credible implementation partners can hinder success

True impact lies not just in spending, but in strategic, long-term engagement with communities.

Conclusion

CSR is not just about meeting a legal requirement—it’s about creating lasting value for society and the business itself. The Indian legal framework has laid a solid foundation, but it is up to companies to approach CSR with integrity and purpose.

By aligning profit with responsibility, businesses can help build a more equitable and sustainable future.