The CSR Framework in India: A Study of Indian Corporate Sector for Implementation of Regulatory Framework

Abstract

The concept of corporate social responsibility, which recognizes the noble obligation of businesses to contribute to communities and environment, has evolved tremendously over time, globally as well as in India. In India, starting from the Gandhian philosophy of trusteeship, the concept eventually took shape of a legal mandate in 2013, when the Companies Act, 2013 made an express provision for larger companies to contribute to CSR out of their profit. The model was based on the philosophy that companies must be held accountable through their boards to quantifiable targets of social spending. Inability to spend did not attract punitive action, but an explanation of non-compliance was sought. The experiment did yield some result as the CSR spending spiked. However, it fell short of the expected outcomes. Many companies chose not to spend and simply offered an explanation, sometimes flimsy. The obdurate conduct of some of the corporates, coupled with the demands of changing times led the government to review the legal framework of CSR. Most recommendations made by a committee constituted in 2018 found favour with the lawmakers, resulting in amendments in the Act in 2019 and 2020, and in the CSR Rules in 2021. The changes, which took effect from 22 January 2021, brought about substantial change in CSR regime. The new CSR framework is far more nuanced and result oriented. It also provides clear penal consequences for non-compliance. This new framework will require companies in India to define a clear strategy for CSR, not just to be compliant on paper, but also to be aligned with the national priorities and
Sustainable Development Goals. Government, companies and the civil society would be required to combine their efforts to help India Inc. improve its preparedness for this new CSR framework of India. The objective of this research is to study the CSR framework in the Indian corporate sector for implementation of the regulatory framework and to critically evaluate the framework and lay down suggestions for its betterment. The research methodology adopted for this paper is doctrinal study from secondary sources and certain journals and research papers.