Mandatory CSR in India: An Operational Review 2014-2024

Prof D Mukherjee
Over recent decades, Corporate Social Responsibility (CSR) has shifted from peripheral philanthropy to a central pillar of corporate governance. A major milestone in its global institutionalization was the UN’s introduction of the Global Compact by Secretary-General Kofi Annan at Davos in 1999. Officially launched in July 2000, the Compact encouraged businesses to align voluntarily with principles of human rights, labour rights, environmental protection, and anti-corruption (United Nations Global Compact Reports, 2000). This global momentum gradually shaped national policies, including in developing countries like India, where CSR emerged as a bridge between business interests and social equity.
CSR in India, though legally formalized only recently, is deeply embedded in the country’s cultural and spiritual traditions. Practices such as Dhramada (Hindus), Dushaant (Sikhs), and Zakat/Zakhath (Muslims) reflect historical commitments to charity and social welfare. Ancient scriptures like the Vedas, Upanishads, and the Bhagavad Gita stress selfless service (nishkama karma, Gita Ch. 3, Verse 19) and collective well-being (lokasangraha), laying ethical foundations akin to modern CSR. Historical Indian rulers institutionalized these values through public utilities like dharmashalas, water tanks, and community granaries.
Despite ongoing criticisms, globalization and widening wealth inequalities have prompted both governments and corporations to rethink their approach to Corporate Social Responsibility (CSR). As businesses expand in revenue and influence, their role in shaping human development, environmental sustainability, and community well-being has become increasingly crucial. This calls for a model where economic growth supports broader societal advancement.Archie B. Carroll’s 1991 framework was pivotal in shaping the modern CSR narrative. Building on Howard Bowen’s foundational work, Carroll introduced the Pyramid of CSR, classifying corporate responsibilities into four levels: economic, legal, ethical, and philanthropic. His model offered businesses a clear and practical structure for integrating CSR into their operations and highlighted the need to look beyond profits.
In India, CSR evolved from informal philanthropy to a formalized legal obligation with the Companies Act, 2013. Section 135 of the Act mandated that firms exceeding Rs 500 crore in net worth, Rs 1000 crore in turnover, or Rs 5 crore in net profit must allocate 2% of their average net profit over the previous three years toward CSR , evident from the MCA Annual Reports, 2014-2024. Enforced from April 1, 2014, this landmark move made India the first country to legally require CSR spending.
This transition redefined CSR from discretionary giving to a strategic responsibility. Today, CSR initiatives serve as tools for brand enhancement, stakeholder engagement, and sustainable development. From ancient traditions to global frameworks, India’s CSR journey exemplifies the fusion of moral obligation with business strategy, establishing CSR as a key pillar of modern corporate governance
Japan and South Korea exhibit unique cultural and economic influences on CSR. Japanese corporates emphasize community harmony and employee welfare, while South Korea’s chaebols increasingly align CSR with national innovation goals. The UK, through Section 172 of the Companies Act 2006, mandates directors to account for broader stakeholder interests, subtly weaving CSR into corporate governance itself (UK Parliament Reports on CSR, 2019).
A bird’s eye view of adecade (2014-2024) of mandated CSR practice in India, since the enactment of mandatory CSR in 2014, India has witnessed notable shifts in corporate conduct and public-private partnerships. Initial years , 2014-2018, witnessed uneven compliance, but regulatory reforms brought greater accountability. The Companies (Amendment) Act, 2019, and CSR Rules, 2021 introduced stricter norms, including mandated transfers of unspent funds and compulsory impact assessments for large-scale projects. The CSR-2 online disclosure format further enhanced transparency as stipulated by MCA Notifications, 2019 and 2021.
It is evident from that MCA CSR Portal, 2023, corporate spending has surged, with over Rs 25,000 crore invested in FY 2022-23 alone. Core sectors like education, health, the environment, and rural development remain top priorities. Major contributors include Reliance Industries, Tata Group, Infosys, and ONGC
In the context of India referring to the global CSR landscape, it may be mentioned that India stands apart globally with its legally mandated 2% PAT CSR rule. KPMG Global CSR Survey, 2021 observes that unlike nations such as the US, Canada, and Japan, where CSR is largely voluntary, India enforces both expenditure and reporting. European countries Favor hybrid models, focusing on disclosures rather than set spending limits . However, the NITI Aayog SDG Index, 2022 provides that CSR funding in India remains skewed, with urbanized states receiving the bulk, while Aspirational Districts continue to lag. Despite a clear legal mandate, in India faces ongoing hurdles that hinder its full potential. For many firms, CSR compliance has become procedural, focused more on financial allocation than meaningful social impact.
A key challenge in India’s CSR landscape is the limited capacity of grassroots NGOs, which often lack sufficient resources and operational expertise, hampering effective implementation and scalability. Impact assessment remains weak, with irregular use of third-party evaluations and standardized metrics, diminishing transparency and long-term planning. Additionally, under Section 135 of the Companies Act, CSR spending is not tax-deductible-unlike donations under Section 80G-since taxes are levied on profit-after-tax, making deductions for CSR a “double benefit.” Though some argue this disincentivizes spending beyond the mandated 2%, legal experts consider this position untenable.
Governance issues persist, including fund mismanagement, inadequate community involvement, and disconnects between companies and NGOs, as highlighted in TISS CSR Evaluation Reports, 2021. Meanwhile, debates continue over the adequacy of the 2% CSR spending norm. While it has mobilized over Rs 1.25 lakh crore from 2014 to 2024 (MCA Data), critics argue it fails to consider sectoral externalities-suggesting industries like mining or tobacco should face higher CSR obligations. Experts, including the National CSR Advisory Committee (2023), advocate for reforms such as “CSR credits,” sector-specific percentages, and tying CSR performance to public procurement or ease-of-doing-business indices. These changes could make CSR more adaptive, transparent, and impactful in driving inclusive development.
India’s statutory CSR model has positioned it as a global frontrunner in mandating corporate responsibility. Over the past decade, this framework has mobilized substantial private capital toward social development. However, to harness its full potential, CSR must evolve from a compliance-based obligation to a results-oriented investment in societal well-being. Achieving this shift requires tighter regulation, better incentives, cultural change within businesses, and a sharper focus on measurable outcomes. A robust, impact-driven CSR system can significantly contribute to India’s inclusive growth and its vision for ‘Vikshit Bharat 2047’.
(The author is an educationist, a management scientist and an independent researcher)

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