Corporate Social Responsibility - Compliance Burden Or Strategic Tool
Author: LawSphereX
Category: Corporate & Insolvency
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CORPORATE SOCIAL RESPONSIBILITY: COMPLIANCE
BURDEN OR STRATEGIC TOOL?
Shubha M, B.A. LL.B., Christ Academy Institute of Law, Bangalore
ABSTRACT
Is corporate social responsibility (CSR) a legal requirement, a strategic weapon, or both? This research article critically examines the dual nature of CSR and outlines the path by which companies in India can utilize CSR as a strategic advantage or as a burden to bear in light of legal enactments.
This study is rooted in the context of rapidly changing theoretical underpinnings of CSR, and how it has been metamorphosed over the years in terms from its beginnings as a philanthropic act to a formality by being made a statutory obligation under Section 135 of the Companies Act, 2013 Based on the comparative legal perspective, the paper compares the laws of India regarding the CSR framework against the international model of laws, like the stakeholder-oriented CSR model in the United Kingdom, the marketoriented CSR model of the United States, and the South African CSR model integrated into its governance. Using the trends in judicial practices and the case studies of companies, the paper assesses the problem of legal enforcement, compliance fatigue, and the threat of tokenism.
In its turn, it also emphasizes the potential of CSR in the improvement of brand equity, investor confidence, and meeting ESG and SDG objectives. Lastly, the paper offers robust policy suggestions that combine responsibility and adaptability, arguing for a shift towards genuine strategic incorporation, rather than merely box-ticking compliance. The conclusion envisions CSR as a win-win chance of sustainable and responsible capitalism, rather than as a legal obligation. Keywords: Corporate Social Responsibility, Compliance, Strategic Tools, Companies Act 2013, ESG, Corporate Governance
INTRODUCTION
Corporate Social Responsibility (CSR)1 is no longer a tokenism that aims at diluting the negative impact on society; corporate governance and corporate strategy have taken this serious issue seriously with well-established positions in the organization. 2 At the international level, an increasing number of agreements have been using frameworks like the UN Global Compact, ISO 26000, and the Shared Value paradigm of Porter and Kramer, which designates CSR as practices and policies providing social and economic conditions that raise competitiveness. The models promote the treatment of social and environmental issues as opportunities for innovation and the sustainability of businesses. 3 Situational: International and Indian systems CSR regimes all around the world are voluntary or disclosure-based.
To take an example, EU CSRD envisages ESG metric reporting, whereas the non-financial reporting under the Companies Act in the UK is only an obligation. 4 India, however, took a new step, having passed legislation on mandatory CSR expenditure: ten specified large companies must spend 2 per cent of their average net profit on CSR activities,5 As laid out in Section 135 of the Companies Act, 2013. This was preceded by the 2009 Voluntary CSR Guidelines, extended in 2011 via National Voluntary Guidelines (NVGs). 6 The Central Debate Such layers of regulation raise an imminent question: is CSR just a compliance issue (a forced tax in the guise of good intention), or a strategic corporate instrument that can achieve reputational benefit, better governance, and create shareholder value that is linked to ESG? 1 Manfred Max Bergman et al.
, Corporate Responsibility in India: Academic Perspectives on the Companies Act 2013, 11 Sustainability 5939 (2019), https://doi. org/10. 3390/su11215939. 2 Bharat Vasani et al. , Corporate Social Responsibility – Less Carrot, More Stick, MONDAQ (Aug. 9, 2019), https://www. mondaq. com/india/corporate-and-company-law/835148/corporate-social-responsibility-less-carrotmore-stick. 3 Creating Shared Value, WIKIPEDIA, https://en. wikipedia. org/wiki/Creating_shared_value (last visited July 2, 2025). 4 Corporate Social Responsibility, WIKIPEDIA, https://en. wikipedia. org/wiki/Corporate_social_responsibility (last visited July 2, 2025).
5 Legal Dimensions of Corporate Social Responsibility in India, DRISHTI JUDICIARY (Nov. 14, 2024),
https://www.drishtijudiciary.com/blog/legal-dimensions-of-corporate-social-responsibility-in-india. 6National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business, WIKIPEDIA, https://en.wikipedia.org/wiki/National_Voluntary_Guidelines_on_Social%2C_Environmental_and_Economic_ Responsibilities_of_Business (last visited July 2, 2025).
Administrative overhead, inflexible spending regulations, and transformational expenditures cited by critics of CSR monitoring programs have been the costs of aligning CSR with company strategy and aligning with CSR frameworks to generate value through shared value creation, proponents note that in the right company, with the right approach, CSR can be a business asset: improving brand equity, enhancing stakeholder relations, and satisfying the interests of investors and regulators interested in ESG risk.7
RESEARCH
OBJECTIVE
In this study, it critically analyzes the historical origin and legal arrangement of Corporate Social Responsibility (CSR) in the United States, and in India; with particular emphasis on how the concept of Corporate Social Responsibility has changed legally, right after it was still voluntary philanthropy in different segments of society, to make it a statutory obligation as per Section 135 of the Companies Act, 2013.8 It addresses the issue of whether the CSR is a compliance cost or it is possible that it may be utilized by the enterprises as a strategic advantage and can increase the brand value, governance, and the trust of stakeholders. The paper also contrasts the CSR model in India with global experience, evaluates the contribution of CSR to ethical business and sustainable development, and a plan of reforms to replot CSR as a strategic and business-driven corporate activity.
RESEARCH
METHODOLOGY
This paper utilizes a strictly doctrinal research approach. Doctrinal research, known as librarybased research, primarily involves the study and analysis of legal statutes, case law, and academic writings. This method is ideal for exploring the theoretical and conceptual dimensions of law. It systematically presents legal doctrines and principles. In doctrinal research, primary sources include statutory materials, judicial decisions, and authoritative literature. Secondary sources like commentaries, articles, and legal summaries are also essential. The research process entails identifying, gathering, and critically evaluating these sources to assess existing gaps and propose reforms within the international legal framework. 7 Ashima Obhan & Shubhangi Agarwal, Amendments to the Laws Related to Corporate Social Responsibility in India, MONDAQ (Aug. 23, 2019), https://www. mondaq.
com/india/corporate-and-companylaw/839500/amendments-to-the-laws-related-to-corporate-social-responsibility-in-india.
8 Companies Act, 2013, § 135, No. 18, Acts of Parliament, 2013 (India).
THEORETICAL AND OFFICIAL BASIS OF CSR
The development of CSR: Philanthropy to obligatory systems Corporate Social Responsibility (CSR) dates back to a voluntary philanthropy which had strong foundations in allowing charitable importance of leading business families and colonies. Historically, the idea of lok-kalyan or the spirit of undertaking welfare of the people inspired the rich merchants and rulers in India to contribute to causes of education, art, and health. Worldwide, CSR in the name of philanthropy gained prominence in the early 20th century when industrial barons like Rockefeller endowed with civil amenities. 9 But due to the effects of pollution and labor exploitation in the context of the industrialization process, a moral rise began to occur, and companies started behaving ethically in a way that was not required by law but was necessitated by the negative effects of pollution and labor exploitation.
10 By the 1990s CSR was starting to institutionalize: corporations established CSR departments, issued sustainability reports, and adopted models such as the triple bottom line business approach, developed by John Elkington around 1994, which focused on balancing Profit, People and Planet Freeman stakeholder model (1984) began to give further attention to stakeholder interests beyond profit maximizing the shareholders Freeman (1984)11 The 2010s were the turning point towards regulation.
In India, mandatory CSR was introduced through the Companies Act, 2013, which obliges eligible companies to spend 2 percent of their average net profits on social projects In other jurisdictions, such as that of France, which adopted the due diligence legislation in 2017, and the EU in its Corporate Sustainability Due Diligence Directive (CSDDD), introduced a mandatory process of assessing and addressing risks in their supply chains, as well as developing action plans Critically, CSR is no longer a choice but a regulatory and strategic imperative frequently linked to E. 12
9 Exploring the History of Corporate Social Responsibility, LAW BIZ TALK (Aug. 30, 2024),
https://lawbiztalk.com/history-of-corporate-social-responsibility/.
10 The Meaning and Evolution of CSR
From Philanthropy to Triple Bottom Line, CSR EDUCATION (May 8, 2024), https://csr.education/corporate-ethics-governance/meaning-evolution-csr-triple-bottom-line/.
11 The Evolution of Corporate Social Responsibility
From Charity to Strategic Integration, THE LAW INSTITUTE (Dec. 31, 2023), https://thelaw.institute/consumer-and-consumer-protection-legislations/evolutioncorporate-social-responsibility-strategic-integration/. 12 Christopher van Bergen, Comment: Drawing Back the Curtain on Supply Chains in a New Era of Corporate Social Responsibility, REUTERS (Feb. 22, 2024), https://www.reuters.com/sustainability/boards-policyregulation/comment-drawing-back-curtain-supply-chains-new-era-corporate-social-2024-02-22/.
CSR theories A learning about CSR needs to involve the participation of several theoretical frameworks:
Shareholder vs Stakeholder Theory: The most well-known statement is the theory of Milton Friedman (1970): A firm has only one social responsibility: the maximization of profits of its shareholders. Freeman, in contrast, believes that corporations have responsibilities towards everyone in the company; i. e. , including the community and customers. It is, therefore, according to Freeman, the stakeholder theory. 13 • Carroll's Pyramid: Archie Carroll developed this in 1991, where he organized the corporate responsibility into 4 levels, those being economic responsibility, legal responsibility, ethical responsibility, and philanthropic responsibility. This hierarchy, represented in this pyramid, implies that legal compliance is based on economic ability, then ethics, and finally, making a charitable act willingly.
14 • Triple Bottom Line (Elkington, 1994): The theory supports the fact that a business should measure environmental and social consequences in addition to financial profit. It strengthens the integrated, value-based orientation of CSR to sustainability. These theories are useful in drawing the line of metamorphosis of CSR from discretionary philanthropy to integrated, stakeholder-inclusive approaches that create lasting value. International CSR Instruments There are a few international tools that provide guiding directions concerning CSR: • UN Global Compact (2000): It has more than 20,000 participants in 167 nations that establish ten principles of human rights, labour, environment, and anti-corruption. It is voluntary, but creates corporate learning and community involvement. 15 13 Peter Gratton, The Importance of Social Responsibility for Businesses, INVESTOPEDIA (Apr.
30, 2025), https://www. investopedia. com/ask/answers/041015/why-social-responsibility-important-business. asp. 14 M. A. Latapí Agudelo, L. Jóhannsdóttir & B. Davídsdóttir, A Literature Review of the History and Evolution of Corporate Social Responsibility, 4 INT’L J. CORP. SOC. RESP. 1 (2019), https://doi. org/10. 1186/s40991-018- 0039-y.
15 United Nations Global Compact, WIKIPEDIA,
https://en.wikipedia.org/wiki/United_Nations_Global_Compact (last visited July 2, 2025).
OECD Guidelines to Multinational Enterprises: These are voluntary codes that provide guidelines in three different fields of responsible business conduct, and these are in the fields of transparency, workers' rights, and the environmental area. They aid due diligence, which resembles ISO and UN mechanisms, though they have no legal force • ISO 26000 (2010): This set of standards provides non-certifiable guidelines of social responsibility and includes governance or organization, human rights, labour, and environmental practices. It plans to embed the CSR into the management systems all over the globe.16 These structures develop agreement and practice standards that support CSR adoption in crossborder companies and allow the practice of cross-border agreements over social responsibility. UK - EU - US - India legal CSR Regimes:
A global summary shows incompatible legal lifestyles:
1. UK: CSR is based on the Companies Act 2006 and the UK Corporate Governance Code,
which encourages directors to consider the environmental and social impacts. The UK is an enlightened shareholder value model, which is non-binding, but intends to target internalizing CSR in the governance processes17
2. EU: The Non-Financial Reporting Directive requires all large corporations to disclose
environmental, social, and human rights in their reporting. The next CSDDD will go further to introduce binding supply chain due diligence requirements 18
3. US: Although there exists no federal requirement, regulatory initiatives such as the conflict
minerals rule in the Dodd-Frank Act and California disclosure law have induced certain transparency. The routine CSR is optional and is primarily driven by market and investor pressures.19
16 ISO 26000, WIKIPEDIA, https://en.wikipedia.org/wiki/ISO_26000 (last visited July 2, 2025).
17 Legal Dimensions of Corporate Social Responsibility in India, DRISHTI JUDICIARY (Nov. 14, 2024),
https://www.drishtijudiciary.com/blog/legal-dimensions-of-corporate-social-responsibility-in-india. 18 ISO 26000 – Social Responsibility, INT’L ORG. FOR STANDARDIZATION, https://www.iso.org/iso-26000social-responsibility.html (last visited July 2, 2025). 19National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business, WIKIPEDIA,
4 India
India has a statutory CSR model; Section 135 of the Companies Act of 2013 requires a profit threshold of 2% and board-level supervision with certain reporting requirements. It is still one of its kind in the world, even though other nations like Mauritius and Nepal have implemented similar mandates. Although triggering massive spending on philanthropic initiatives, critics have pointed out that there have been shortages in implementation, tokenism, and the absence of tax credits. CSR UNDER INDIAN LAW- VOLUNTARY TO MANDATORY Section 135 of the Companies Act, 2013 It was a landmark in corporate law in India as section 135 introduced mandatory CSR to companies that attain given levels (A company with a net worth of 500 crore rupees or more, or a turnover of 1000 crores rupees or more, or a net profit of 5 crore rupees or more.
20 In the case of such a company, or any business belonging to it, the provisions of this section shall apply, and said companies must do the following: • Make up a CSR Committee out of at least three directors, and one must be an outside director • Develop the CSR policy under Schedule VII activities. • When spending on CSR, invest at least 2 percent of the average net profit up to the last three financial years • Explain a deficit in expenditure in the annual report of the board In the case of a continuing-ahead unspent amounts, keep them in a different account and use them within three years; failure to which transfer them to a Schedule VII fund. 21 https://en. wikipedia. org/wiki/National_Voluntary_Guidelines_on_Social%2C_Environmental_and_Economic_ Responsibilities_of_Business (last visited July 2, 2025).
20 Naincy Mishra, CSR Laws in India – Provision Under the Companies Act, 2013, iPLEADERS (Apr. 8, 2024), https://blog. ipleaders. in/csr-laws-india. Section 135 of the Companies Act, 2013, SCRIBD (uploaded [date not provided]), https://www. scribd. com/document/797477505/Section-135-of-the-Companies-Act (last visited July 2, 2025).
CSR Regulations: Amendment, Reporting Obligations Since its inception, the CSR regime in India has been subjected to substantial legal optimization by way of further amendments to streamline the existing regime in terms of governance, accountability, and implementation. The CSR Policy Rules of 2014 provided the basis of the framework with obligations to constitute CSR committees, to outline allowable activities in Schedule VII, and to report periodically every year. 22 These first regulations establish the climate of an orderly regime of corporate responsibility. The 2019 and 2020 further amendments brought significant amendments, such as the allowance to surpass the expenditure on CSR to a maximum of three future financial years, a significant relief to companies undertaking long-term social schemes.
The compulsory transfer of unutilized CSR money was also another major condition: within 30 days in the case of continuing projects into a specific CSR account or within six months in the case of all other things into any Schedule VII fund like the PM CARES Fund. 23 The 2021-2022 Rules brought about additional improvements whereby there was the redefinition of the term administrative overheads, administrative overheads are now limited to internal expenses; and the requirement that companies undertake CSR activities by way of engaging the services of registered implementing agencies with a CSR-1 registration. In the case of higher assurances, the regulations have made the compulsory assessment of the impact of the projects where the outlay is over 1 crore greater or where the aggregate CSR commitment is over 10 Crore within the previous 3 years.
The purpose of these analyses is to measure the social returns and ensure that the corporate expenditures are not wasteful. 24 Non-compliance is subject to enormous fines in terms of enforcement. In case he fails to spend the required amount, he will be subjected to a fine of up to 1 crore rupees or twice the amount that was not spent, whichever is more. Officers in default are also liable to be personally liable and fined with Rs. 2 lakh or ten percent of the unspent funds. Penalties to the companies are also imposed when they are unable to disclose their CSR policies, fail to form a CSR 22Action Taken Against 271 Companies in Last Three Years to Safeguard Investors: Sitharaman, reddit, r/IndiaSpeaks (June 24, 2019), https://www. reddit.
com/r/IndiaSpeaks/comments/c4r7q0 23 Comprehensive Guide to CSR Activities – Implementation | Monitoring | Tax Implications, TAXMANN BLOG (last updated July 29, 2023), https://www. taxmann. com/post/blog/comprehensive-guide-to-csr-activitiesimplementation-monitoring-tax-implications/. 24 Maniraj Anantham, Corporate Social Responsibility (CSR) Mandate: Section 135 Explained, TAX ROBO (Apr. 10, 2025), https://blog. taxrobo. in/corporate-social-responsibility-section-135-explained/. committee, or miss required disclosures in the report of the board. A combination of such provisions has turned CSR in India into an aspiration: a powerful regulatory requirement with specifications and effective penalties.
25 CSR as viewed by the courts Even as judicial pronouncements on CSR are very few, there are several legal points of contact that have influenced the implementation of CSR: • Disobeying companies have been punished by Qatar by the tribunals, such as issuing fines in case of unimplemented CSR committees or obligations of spending amounts required by the government. • In 2019, parliamentary debate considered jailing officers of companies with a long track record of non-compliance, with review instead being changed to more substantial civil sanctions • It is also the nature of Schedule VII funds that are clarified by the court. Interestingly, the PM CARES Fund needs formal statutory modifications to be CSR credits. 26 Despite the restricted rulings by the apex courts, court judgments and acts of regulation depict judicial and quasi-judicial characteristics of the CSR role vigilance.
27 Regulation: MCA and SEBI The Ministry of Corporate Affairs (MCA) is the key body with regard to CSR compliance in the country. It regulates the framing of rules under CSR, gives circulars, and checks its application with the help of Registrars of Companies (RoC), who are authorised to give penalties in cases of non-compliance. The 2021-2022 amendments especially stated that registration as CSR-1, environmental impact assessment, and rigidity in the protocols of
25 CSR Applicability and Compliances Under Companies Act 2013, REGISTRATION ARENA (Mar. 16, 2024),
https://registrationarena.com/blog/csr-applicability-under-section-135-companies-act/. 26 PM CARES Fund, WIKIPEDIA, https://en.wikipedia.org/wiki/PM_CARES_Fund (last visited July 2, 2025).
27 Corporate Social Responsibility Under Section 135 of the Companies Act, 2013, DEWAN
P. N. CHOPRA & CO. (Dec. 1, 2022), https://www. dpncindia. com/corporate-social-responsibility-under-section- 135-of-companies-act-2013/. transferring funds should be instated. 28 MCA is partnered by the Securities and Exchange Board of India (SEBI), which provides transparency to ESG-connected disclosures. SEBI introduced the National Voluntary Guidelines (NVGs) then Business responsibility reports (BRRs) of the top 100 listed companies were to be made mandatory. This was subsequently developed into the more comprehensive Business Responsibility and Sustainability Reporting (BRSR) framework that is now mandatory for the 1000 largest listed entities. BRSR corresponds to the international ESG standards as it invites companies and organizations to incorporate CSR into their systems of risk and governance.
MCA and SEBI jointly develop a two-fold regulatory mechanism, a statutory aspect, and a market-based one to make CSR a lawfully compliant and strategically internalized corporate activity.
COMPLIANCE BURDEN OR STRATEGIC OPPORTUNITY? COMPARATIVE
ANALYSIS
CSR as Law Compliance Overhang Among the commonest arguments against a mandatory CSR regime in India is the extensive burdensomeness of compliance by corporations. The requirements of Section 135 and the latest CSR regulations thereon, specifying expenditure of 2 percent of net profits, CSR committees, evaluation of impact, and descriptive reporting, place an additional burden on the businesses in terms of administration. 29 The amendments of 2019 CSR imposed additional costs on businesses that conduct operations in India, exacerbated bureaucratic requirements, and presented multinational companies, which were doing business across borders, with legal risks. 30 Additionally, in many cases, small companies do not have sufficient financial, human, and informational capacities that they could require in order to implement CSR legally.
According to India CSR, the challenges are difficulty in locating qualified projects, difficulty in attaching 28National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business, WIKIPEDIA, https://en. wikipedia. org/wiki/National_Voluntary_Guidelines_on_Social%2C_Environmental_and_Economic_ Responsibilities_of_Business (last visited July 2, 2025). 29 Sushiila Ttiwari & D. Samarender Reddy, The Reality of CSR Spending in India: Are Corporates Doing Enough? , THE WIRE (June 25, 2025), https://thewire. in/economy/the-reality-of-csr-spending-in-india-arecorporates-doing-enough. 30 Sumesh Sawhney et al. , India’s New Corporate Social Responsibility Requirements – Beware of the Pitfalls, JONES DAY (Apr. 15, 2014), https://www. jonesday. com/en/insights/2014/04/indias-new-corporate-socialresponsibility-requirements--beware-of-the-pitfalls.
the right personnel, and measuring the impact in a strict regulatory environment. Such complexities are particularly taxing when the administrative cost limit is lower, i. e. , 5 per cent of CSR expenditure; in these circumstances, vital overhead activities, like monitoring systems or trained staff, would be increasingly difficult to finance; this would negatively affect the quality of implementation. 31 Structure distortions are empirical evidence as the firms endeavor to avoid these loads. Companies that are still on the brink of profits have reduced profits recorded and raised R&D costs by 3. 1 percent, and this trend is revealed in a study that was published by the India Water Portal.
This raises the issue of whether the implementation of CSR requirements as required rather than influencing complaints will trigger the generation of regulatory arbitrage that undermines the integrity of financial reporting, as well as corporate innovations. 32 Put together, these administrative requirements, hypothetical fines, and employee costs have given enough people a reason to view CSR as a legal tax as opposed to a moral or strategic financial investment. CSR as a strategic device On the contrary, CSR may become one of the strategic assets of the modern business world. Cross-national evidence demonstrates that CSR efforts can strengthen brand equity, employee involvement, and client retention. In India, companies with higher annual reporting and other types of committee compositions have enjoyed 12 per cent better access to external financing, despite capital costs increasing.
33 When a pro-market-based measurement is followed, it indicates that CSR-practicing companies that divulge responsible funds routes may counteract the investor-suspicion problems, and even enhance accessibility to financing. CSR is also in line with the dynamic ESG measures and investor demands. The Business Responsibility and Sustainability Reporting (BRSR), initiated by the SEBI to be filled by top 31 Exploring Corporate Social Responsibility in India, COCONOTE, https://coconote. app/notes/24d6e482-0b2e- 4cb6-9058-e82714ec1b7b/transcript (last visited July 2, 2025).
32 Shubhashis Gangopadhyay & Swarnodeep Homroy, Innovation in the Face of CSR Compliance, INDIA
WATER PORTAL (Nov. 19, 2023), https://www.indiawaterportal.org/governance-andpolicy/governance/innovation-face-csr-compliance.
33 Jitendra Aswani, The Costs of India’s Mandatory Corporate Social Responsibility Rule, PROMARKET
(July 11, 2024), https://www. promarket. org/2024/07/11/the-costs-of-indias-mandatory-corporate-socialresponsibility-rule/. and select listed companies, is more of a rigorous reporting on ESG, whereby the firms have incentives to incorporate CSR in their strategic planning and risk management efforts. 34 Intangible benefits are also mentioned in crowd-sourced studies where the IIM and the World Economic Forum declare that good ESG performance promotes brand image, stakeholder sentiment, and morale in the workforce. CASE STUDIES: TATA, INFOSYS, AND RELIANCE Strategic CSR is the action of the top Indian conglomerates: CSR is the legacy of the Tata Group, and it has surpassed the required expenditure. Their projects, e. g.
, Tata STRIVE (vocational training), Tata Water Mission, health programs by Tata Trusts, and others, support sustainable community development, as well as a good brand reputation. Their intervention of 500 crore in the relief fund set up by the Ahmedabad plane crash was further evidence of responsive CSR. 35 Infosys Foundation, which is funded voluntarily and on a large scale, provides assistance in education and healthcare. The Library in Every School has assisted in creating more than 10,000 libraries since 2020, which enhances educational equity. 36 One of the biggest CSR spenders in India was Reliance Industries, which invested ₹900 crore in FY23.
Nevertheless, structure counts: a Redditor (quoted in India CSR) has indicated that RIL uses the contributions channel to give the Reliance Foundation 94 percent of its contributions, bringing questions of practicability and control over CSR affiliate dealings. 37 In addition to compliance, these case studies demonstrate how firms can use CSR to get reputational leadership, trust of the stakeholders, and social improvements. 34 Venkatesh Kumar S. , The Growing Importance of CSR Compliance for Businesses, INDIA CSR (Nov. 2023), https://indiacsr. in/growing-importance-csr-compliance-for-businesses/ 35Hurun 2024: Reliance, TCS, HDFC among India’s top 10 most valuable companies!! , reddit, r/IndianStreetBets (posted by IndianByBrain 4 mo. ago) (noting “Reliance, TCS, HDFC among India’s top 10”), https://www. reddit. com/r/IndianStreetBets/comments/1ise6nu (last visited July 2, 2025).
36 Sushiila Ttiwari & D. Samarender Reddy, The Reality of CSR Spending in India: Are Corporates Doing Enough? , THE WIRE (June 25, 2025), https://thewire. in/economy/the-reality-of-csr-spending-in-india-arecorporates-doing-enough. 37What Happens When Firms Have to Stump Up for Good Causes, reddit, r/IndiaSpeaks (posted by silver_shield_95 5 yr. ago), https://www. reddit. com/r/IndiaSpeaks/comments/kwa6oc (last visited July 2, 2025).
Compliance versus Strategy CSR has a two-fold nature in India: an obligation and a chance to gain a competitive advantage. Compliance-wise, the companies incur additional administrative expenses, strict limitations on overheads, cumbersome filing conditions, and in the end, they either manipulate profits or slapdash on box-clicking just to satisfy the laws. CSR can be understood as having the aspect of a compulsory tax, causing the situation of administrative inertia. In contrast, companies that have taken a strategic approach to CSR can show how transparent, purposeful endeavors can result in improved ESG scores, investor confidence, and employee interest and serve to encourage long-term innovation, such as Tata, Infosys, and Reliance.
Strategic CSR, therefore, transforms the story to a story not of compulsion but an opportunity so that the social good is viewed alongside corporate good. CORPORATE SOCIAL RESPONSIBILITY AND CORPORATE GOVERNANCE: INTERWEAVING AND ISSUES The practice of Corporate Social Responsibility (CSR) in India has progressively become part of corporate governance, no longer remaining a side activity of charity. Compliance with Section 135 requires designated CSR committees, which are usually headed by independent directors and are anticipated to be highly skeptical of CSR policy, its implementation, and reporting. This is supported by an overall tendency to associate independent board members with improved ESG ratings, since independent directors do improve openness and efficacy of governance activities. 38 This merging, however, poses ethical issues and issues of accountability.
It is reported that there is widespread greenwashing with more firms making CSR claims than having any real effectclose to 47 per cent of big Indian firms are said to have carried out the practice. 39 The regulators have found the use of shell NGOs, ghost beneficiaries, and overspending on CSR to be some of the prime fraud strategies. Such issues portray systemic accountability failings, which
38 Arghya Sen, CSR in India
Compliance, Enforcement & Future Directions, TAXGURU (Mar. 11, 2023), https://taxguru. in/company-law/csr-india-compliance-enforcement-future-directions. html. 39 Swareena Pokley, Fraudulent Practices Under the Garb of Corporate Social Responsibility in India and What Can Be Done to Curb This Menace, INT' L J. ADVANCE LEGAL RES, vol. 2, issue 4 (2021), https://ijalr. in/volume-2/issue-4-2/fraudulent-practices-under-the-garb-of-corporate-social-responsibility-inindia-and-what-can-be-done-to-curb-this-menace-by-swareena-pokley/. include higher levels of board vigilance and independent validation. 40 CSR regulation also overlaps with Business & Human Rights (BHR) and the UN Sustainable Development Goals (SDGs).
NVGs in India and SEBI BRSR framework have placed a particular focus over alignment with the SDGs, particularly in terms of sustainable development, gender equality, health and education Reporting about ESGs may be strategically more significant when it allows the alignment with the SDGs, but the measures on the board structure, independent audit, and scrutiny by the key stakeholders are important to ensure that the implementation of CSR within corporate governance is ethical and does not amount to greenwashing. 41 JUDICIAL PRONOUNCEMENTS Although court involvement in CSR in India is still minimal, the admonitory cases present attractive predictive considerations ratiocinatively options not only to sanctify the civic nature of CSR but also because they evolve corporate responsibility beyond the conventional donations. Indian Cases The case Tech Mahindra Ltd v.
State of Andhra Pradesh discussed the position of CSR spending among the very duties of a company. In a case ruling of 2021, the Telangana High Court expressed, the CSR activities financed under Section 135 are beneficial to the community and have a social welfare motive. The Court noted that the CSR spending could not be detached from the notion of the public purpose, which acknowledges its indispensable nature in the frameworks of corporate governance. 42 The scenario of the above case came up in the case of Bharat Aluminium Co. (BALCO) v. Union of India (2002)43 The constitutional validity of the indirect taxation on power tariffs
40 Yiming Ma & Muhammad Ishfaq Ahmad, Do Board Characteristics Impact Greenwashing? Moderating Role
of CSR Committee, 10 Heliyon e38743 (2024), https://www.cell.com/heliyon/fulltext/S2405-8440(24)14774-3.
41 Nav Kishlay, Alignment of ESG, SDG, and CSR in the Indian Context, CHRMP (Dec. 2, 2024),
https://www.chrmp.com/alignment-of-esg-sdg-and-csr-in-the-indian-context/ 42 M/s Tech Mahindra Ltd. v. Government of Andhra Pradesh, Arbitration Application No. 20 of 2021 (Andhra Pradesh High Court, Amravati, Dec. 27, 2024).
43 Ashish Chugh, The Bharat Aluminium Case
The Indian Supreme Court Ushers In a New Era, KLUWER ARBITRATION BLOG (Sept. 26, 2012), https://arbitrationblog. kluwerarbitration. com/2012/09/26/the-bharat-aluminium-case-the-indian-supreme-court-u shers-in-a-new-era/. was examined by the Supreme Court. Even though the case is not categorically related to CSR, the inclusion by the Court of a wide range of corporate responsibilities under the regulatory body of law can be applied to CSR requirements. The judgment highlighted the fact that corporations have multifaceted roles not just to the interest of the shareholders but the interest of the society at large (Union Carbide India Ltd. v. Union of India [BALCO). 44 International Cases Examples Kiobel v. Royal Dutch Petroleum Co. (2013)45 It is an illustration of how CSR is discussed throughout the world in the domain of corporate human rights law.
The Nigerian plaintiffs claimed in this case in the U. S. Supreme Court a complicity by Royal Dutch Shell in the misuse of the Ogoni region by the Nigerian military, who were torturing and killing people extrajudicially, and committing human rights violations. The plaintiffs were appealing the power of redress under the Alien Tort Statute (ATS) that gives jurisdiction over the tort breaching international law. 46 The Court, however, held that ATS has no extraterritorial application with notable focus on the claims touching and concerning the territory of the United States, with an adequate force decision that curtails transnational litigation. This decision, which was re-stated by Jesner v. Arab Bank (2018), highlights the caution on judicial approaches to the expansion of liability to foreign corporate bodies without evident ties to the home country.
47 Kiobel emphasizes the international legal conundrum of corporations on an international level and points out the extent of legal accessibility in business-and-human-rights situations. It also demonstrates the value of national CSR, such as India, in which international enforcement is weak, while domestic enforcement fills jurisdictional gaps, balancing gaps in the jurisdiction of CSR systems. 48
44 Union Carbide India Ltd. v. Union of India, (1986) 2 S.C.C. 547 (India).
45 Kiobel v. Royal Dutch Petroleum
A Lesson on Business and Human Rights?, HSF KRAMER BLOG (Sept.
27, 2012), https://www.hsfkramer.com/notes/arbitration/2012-09/kiobel-v-royal-dutch-petroleum-a-lesson-onbusiness-and-human-rights/. 46 Elizabeth Giannini & Michael Farbstein, Corporate Accountability in Conflict Zones: How Kiobel Undermines the Nuremberg Legacy and Modern Human Rights, HARV. INT’L L.J. ONLINE SCHOLARSHIP (Nov. 30, 2010), https://journals.law.harvard.edu/ilj/2010/11/online_52_giannini_farbstein/.
47 Jesner v. Arab Bank, PLC, 584 U.S. 241 (2018).
48 Kiobel v. Royal Dutch Petroleum Co. (Amicus), CTR. FOR CONSTITUTIONAL RIGHTS,
https://ccrjustice.org/home/what-we-do/our-cases/kiobel-v-royal-dutch-petroleum-co-amicus (last visited July 2, 2025).
Both cases show the two-fold judicial approach about corporations as supervisors of the CSR public welfare obligation within the Indian judicial system, and having a different view within the legal system of international courts, such as Kiobel. Tech Mahindra vindicates the role of CSR in the form of a public good, and BALCO emphasizes greater corporate responsibilities. WAY FORWARD: REIMAGINING CSR POLICY AND TREE IN INDIA The state of CSR in India requires a compromise between the compliance-without-incentive model (existing in India) and any sort of incentive, whether in the form of tax deductions or ESG-related benefits (which are advocated by most experts but do not exist in India yet) .
To increase the level of participation, SMEs must be seduced through voluntary structures and gradual implementation facilitation Rockefeller Brothers Fund Lastly, CSR needs to be integrated into strategic long-term business-to-cut across SDGs, ESG standards, and sharedvalue platforms so that CSR becomes less of a regulatory strategic business, but rather becomes a long-term innovation and brand loyalty asset and sustainable business component.
CONCLUSION
As a conclusion to this paper, it will be understood that the concept of Corporate Social Responsibility (CSR) in India exists in a dual space, that is, it is a legal requirement and can be a strategic booster. Whereas Section 135 of the Companies Act, 2013 lays down stringent requirements, an integrated approach to CSR has been proven to have quantifiable returns on brand value, stakeholder credibility, and ESG. Examples such as Tata, Infosys, and Reliance confirm that purposeful CSR goes beyond check-marking. Nonetheless, such problems as greenwashing, bureaucratic barriers, and ineffective monitoring are still present. Judicial opinion, especially Tech Mahindra and BALCO, confirms the position of CSR as a corporate responsibility that works towards the welfare of society.
In an attempt to make it more influential, the paper suggests the use of a hybrid model between regulation and reward, thirdparty audits, facilitating participation of SMEs, and integrating CSR into long-term strategies of the companies aligned with SDGs. Finally, the CSR has to transform itself into a mission of creating shared value, not only values in business and society, but also the environment.