How Corporate Social Responsibility Laws Drive Companies to Create a Fair and Thriving Society

"True corporate success is measured not by profits alone, but by the lives uplifted and communities transformed through shared responsibility." India's corporate sector is a driving force behind the nation's economic growth, creating wealth, jobs, and innovation.

- ABHINAV PANDEY

Yet, true progress lies not only in profits but in uplifting society. Corporate Social Responsibility (CSR), as mandated by the Companies Act, 2013, reflects India's commitment to ensuring businesses contribute to the greater good.

As a lawyer, I see this law as a groundbreaking step that blends legal duty with moral responsibility, making India a global leader in corporate accountability. The provisions of the Act, supported by key judicial decisions, have empowered companies to transform lives while fostering a culture of ethical governance. This is a story of law and goodwill working together to build a stronger, fairer India.

The backbone of India's CSR framework is Section 135 of the Companies Act, 2013. This section requires companies with a net worth of Rs 500 crore, a turnover of Rs 1,000 crore, or a net profit of Rs 5 crore to spend at least 2% of their average net profits from the past three years on CSR activities. These activities, listed in Schedule VII, include education, healthcare, environmental protection, gender equality, and rural development. The law mandates that companies form a CSR Committee with at least three directors, including one independent director, to create a CSR policy, oversee its implementation, and ensure transparency. Companies must report their CSR efforts in their annual board reports under Section 134. If they cannot spend the required amount, they must explain why, following the "comply or explain" principle. The Companies (Corporate Social Responsibility Policy) Rules, 2014, clarify how these activities should be carried out, often through registered trusts, societies, or Section 8 companies. Amendments in 2021 added teeth to the law, introducing penalties of up to Rs 1 crore for companies and Rs 2 lakh for officers for non-compliance, and requiring unspent CSR funds to be transferred to designated accounts or funds like PM CARES.