CSR in India: Compliance or Genuine Commitment?

Corporate Social Responsibility (CSR) in India has been shaped by the Companies Act, 2013, which made it mandatory for companies meeting certain financial criteria to allocate at least 2% of their average net profits over the last three years towards CSR activities. While this regulation was introduced with the intent to encourage businesses to play a proactive role in social and environmental issues, the reality is more complex. Over the years, CSR in India has often become more of a compliance exercise than a genuine effort toward sustainable development.

CSR as a Compliance Mandate

The mandatory CSR law, rather than fostering a culture of social responsibility, has led many corporations to approach it as another regulatory requirement. This is evident in how CSR spending often peaks toward the end of the financial year, with last-minute donations or partnerships designed to meet the legal obligations rather than long-term strategic initiatives. The focus is more on meeting the 2% spending target than ensuring the impact of those funds.

Several companies view CSR as a checklist item—ensuring their financial contribution ticks the regulatory box, with little regard for the sustainability or effectiveness of the projects they fund. For many organizations, CSR reports have become tools for PR, creating glossy annual reports that showcase their "philanthropy" but often lack a deep commitment to social change.

Lack of Alignment with Core Business Strategies

For CSR to have a meaningful impact, it must be integrated into a company's core strategy. Unfortunately, in India, many CSR initiatives operate in silos, disconnected from a company’s broader business goals. For instance, a company specializing in information technology may fund healthcare or education projects but without aligning these initiatives with its core competencies or exploring how its expertise could have a greater societal impact. This lack of alignment leads to fragmented efforts, diluting the potential of CSR to drive real change.

Short-Term Focus and the Pressure to Spend

Another critical issue is the short-term focus of many CSR programs. With companies feeling the pressure to spend 2% of their profits, they often choose projects with immediate, visible outcomes rather than addressing deep-rooted, systemic issues that require long-term commitment. This emphasis on quick wins leads to funding one-off events, donation drives, or infrastructure projects like building schools or hospitals, which may look good on paper but fail to address the underlying problems such as capacity-building or social empowerment.

Measuring Impact: A Missing Component

A fundamental flaw in the current approach to CSR in India is the lack of rigorous impact assessment. While companies are required to disclose their CSR activities and spending, there is no mandate to measure the outcomes or long-term benefits of their projects. As a result, many CSR initiatives lack accountability in terms of how they affect beneficiaries. A school may be built, but how is the quality of education improved? A hospital may be constructed, but what about access to quality healthcare services over time?

Without robust frameworks for measuring the effectiveness of CSR activities, companies remain focused on spending rather than on the outcomes of that spending. The result is a waste of resources and a missed opportunity to create sustainable change.

The Way Forward: From Compliance to Commitment

While CSR in India has largely become a compliance-driven exercise, there is potential for it to evolve into a more impactful and meaningful practice. To shift from compliance to genuine commitment, companies need to rethink their approach to CSR.

1. Integrating CSR into Core Business Practices: Instead of treating CSR as a peripheral activity, businesses should integrate it into their core strategy. Companies need to leverage their expertise, resources, and networks to address issues where they can make the most impact. For instance, tech companies could focus on digital literacy, while FMCG companies might focus on sustainability in packaging or fair trade practices.

2. Long-Term Commitment: Companies need to move away from short-term CSR projects and focus on long-term initiatives that address systemic issues. This requires strategic planning, community involvement, and patience to see results over time.

3. Collaborative Efforts: No company can solve social problems alone. Collaboration with government bodies, NGOs, and other companies can create larger and more sustainable impacts. By pooling resources and expertise, companies can support larger initiatives that bring about lasting change.

4. Measuring and Reporting Impact: Companies must adopt impact measurement frameworks that go beyond financial reporting and focus on social outcomes. Transparent reporting on the effectiveness of CSR programs will not only enhance accountability but also help companies refine their strategies for better results.

Conclusion: The Future of CSR in India

CSR in India, in its current form, is largely compliance-driven, with many companies treating it as a tick-the-box exercise. However, the potential for CSR to drive significant social and environmental change is enormous if companies begin to view it as a strategic, long-term investment rather than a regulatory requirement. The need is for companies to go beyond compliance and embrace CSR as a core value—only then can they truly make a difference.

As we move forward, businesses must recognize that the real value of CSR lies not in the amount of money spent but in the impact it generates for society. Only by shifting focus from compliance to commitment can India’s corporate sector contribute meaningfully to the country’s sustainable development goals.