Approaches to CSR and How It Is Implemented in India

Corporate Social Responsibility is no longer just a feel-good phrase tucked away in a company’s annual report. It is a structured commitment, a legal requirement, and in many cases, a strategic advantage. But not every company engages with CSR in the same way. Some go the extra mile, some do the bare minimum, and some actively resist the idea. Understanding the different approaches companies take toward CSR, and how these play out in the Indian regulatory landscape, helps us see why some firms genuinely drive social change while others merely tick boxes.

The four approaches to CSR 🔗

Scholars and management theorists have long classified corporate behaviour toward social responsibility into four distinct stances. Research on CSR management strategies identifies these as obstructionist, defensive, accommodative, and proactive. Each reflects a different level of commitment, with obstructionist companies showing the least and proactive companies the most.

The obstructionist approach 🔗

At the lowest end of the spectrum sits the obstructionist stance. A company following this path prioritises profit above all else and actively blocks or ignores its social responsibilities. Such firms may pollute freely, mislead customers, or exploit workers, and when caught, often deny wrongdoing or try to prevent information from reaching the public.

A classic global illustration is Nestlé’s historical promotion of infant formula over breastfeeding in developing countries, which contributed to health problems among infants. Closer to business practice in general, manufacturers that hide harmful ingredients in their products or companies that dump hazardous waste illegally fit this pattern. Thankfully, as increasing global scrutiny of business practices has grown, very few corporations openly follow this approach today.

The defensive approach 🔗

A defensive company does what the law strictly requires and nothing more. It is not interested in voluntary social contributions but is equally keen to avoid legal trouble. The mindset is simple: comply with regulations, dodge lawsuits, and keep moving.

A tobacco company that places statutory warnings on cigarette packets only where the law demands, without launching any independent public health initiative, exemplifies the defensive stance. The defensive approach is often summarised as doing as little as possible to address social or environmental problems while still staying within legal boundaries.

The accommodative approach 🔗

The accommodative approach marks a shift toward genuine engagement. Companies here accept that social responsibility matters and respond to pressure from stakeholders, activists, or community groups. They meet legal requirements and often go a step beyond, especially when prompted by public expectations.

Accommodative firms do not hide their actions; they remain open about policy decisions and are willing to reduce waste, support fair wages, or adjust sourcing practices when concerns are raised. However, their action is often reactive rather than self-initiated. As one analysis points out, these companies may change their policies in response to criticism rather than leading the charge themselves.

The proactive approach 🔗

The proactive approach represents the highest commitment to CSR. Proactive companies do not wait for laws to change or activists to protest. They treat social and environmental responsibility as part of their core business strategy, embedding it into mission statements, product design, and long-term planning.

A proactive firm might invest in renewable energy, set up employee welfare programmes well beyond legal requirements, or voluntarily recall faulty products before consumers complain. Toyota’s voluntary product recalls and Kingfisher’s waste reduction and sustainable timber sourcing are examples of firms seeking opportunities to strengthen communities rather than waiting for demands.

How Indian businesses historically engaged with society 🔗

The Indian story of CSR did not begin with the Companies Act. It began centuries earlier in the form of charity and philanthropy, shaped deeply by culture, religion, family values, and later by industrialisation. Wealthy merchants in the pre-industrial period shared part of their wealth with society by setting up temples and helping communities during famines and epidemics.

The pioneers: Tata, Birla, and Godrej 🔗

Once industrialisation took hold, large business families stepped into the role of social investors. The Tata group’s founder, Jamsetji Tata, envisioned an entire city for workers long before worker welfare was a common corporate concern. The Sir Ratan Tata Trust was established in 1918, followed by the Sir Dorabji Tata Trust in 1932, which funded institutions such as the Tata Institute of Social Sciences, the Tata Memorial Centre for Cancer Research, the Tata Institute of Fundamental Research, and the National Centre for the Performing Arts.

G.D. Birla, founder of the Birla clan, was a notable financier of the Indian independence movement and a close associate of Mahatma Gandhi. The Birla family built temples, schools, and institutions such as BITS Pilani, shaped by the belief that education is a great leveller. Ardeshir Godrej’s donation of Rs. 3 lakh to the Tilak Swaraj Fund in 1920 for the upliftment of the downtrodden set the tone for the Godrej group’s philanthropic commitments. Today, roughly 25% of the shares of Godrej & Boyce are held in a trust that reinvests returns into environmental, healthcare, and educational causes.

Many of these industrialists were influenced by Gandhi’s theory of trusteeship, which held that wealth belonged to society and industrialists were merely its trustees. This philosophical grounding meant Indian CSR, long before it had that name, carried a strong ethical and nationalistic flavour.

The 2013 Companies Act: CSR becomes law 🔗

For decades, CSR in India relied on the goodwill and family traditions of individual industrialists. That changed dramatically with the Companies Act, 2013, which made India the first country in the world to make CSR a statutory obligation for certain companies. The provisions came into effect from 1 April 2014, following notification by the Ministry of Corporate Affairs.

Who must comply with Section 135 🔗

The heart of the law is Section 135 of the Companies Act, 2013. As per government provisions, every company with a net worth of Rs. 500 crore or more, or a turnover of Rs. 1,000 crore or more, or a net profit of Rs. 5 crore or more during the immediately preceding financial year must comply with CSR provisions. Such companies are required to spend, in every financial year, at least 2% of the average net profits made during the three immediately preceding financial years on activities specified in Schedule VII.

This applies to Indian companies as well as foreign companies with branch or project offices in India. Even Section 8 companies, if they meet the financial thresholds, are not exempt from forming a CSR committee and complying with the rules.

The CSR committee and policy 🔗

Eligible companies must constitute a CSR Committee of the Board. The committee formulates and recommends the company’s CSR policy, identifies the activities to be undertaken in line with Schedule VII, and monitors implementation. For companies with a CSR spending requirement of Rs. 50 lakh or less, forming a committee is not mandatory and the Board itself can discharge these functions.

The Board has to approve the CSR policy, disclose its contents in the annual report, and publish details on the company’s website. The CFO certifies the expenditure, and statutory auditors audit it, ensuring a disclosure-based accountability framework.

What counts as a CSR activity 🔗

Schedule VII of the Act lists the permissible CSR activities, and these are interpreted liberally to cover a broad range of initiatives. According to the Schedule VII list, eligible activities include eradicating hunger, poverty and malnutrition, promoting preventive healthcare and sanitation, making safe drinking water available, promoting education including skill development, promoting gender equality and empowering women, ensuring environmental sustainability and ecological balance, protecting national heritage and culture, supporting armed forces veterans and their dependents, promoting rural sports and Olympic sports, contributing to the Prime Minister’s National Relief Fund, funding research in technology incubators, rural development projects, slum area development, and disaster management.

Certain activities are explicitly excluded. Initiatives undertaken in the normal course of business, activities carried out outside India (except for training Indian sports personnel), contributions to political parties, one-off events such as marathons or awards, and actions to fulfil other statutory obligations do not count as CSR.

Handling unspent amounts 🔗

If a company fails to spend the required 2%, it must disclose the reasons in its Board report. For ongoing projects, the unspent amount must be transferred within 30 days of the financial year end to a special account called the “Unspent CSR Account,” and spent within three financial years. Any amount still unspent thereafter must be transferred to a fund specified in Schedule VII, such as the Prime Minister’s National Relief Fund. Non-compliance attracts penalties for both the company and its officers.

How CSR is playing out on the ground 🔗

Since the law took effect, CSR spending in India has grown significantly. In FY 2021-22, more than 10,000 companies spent the prescribed amount on CSR activities, up from around 9,935 in the previous year. Maharashtra, Karnataka, Gujarat, and Tamil Nadu have emerged as the largest recipients of CSR funds, and the dominant spending areas continue to be healthcare, education, environment, and rural development.

Modern CSR champions in India 🔗

Major Indian corporates have embedded CSR deeply into their operations. The Tata group companies invest extensively in education, skill development, and sustainability. Reliance Industries focuses on healthcare, water conservation, and digital education initiatives. The Adani Group concentrates on renewable energy, education, and community infrastructure. The Aditya Birla Centre for Community Initiatives and Rural Development leads work on healthcare, education, and sustainable livelihoods. ITC’s e-Choupal initiative has reshaped rural livelihoods, while Infosys focuses on environmental sustainability and rural development programmes.

During the COVID-19 pandemic, the Ministry of Corporate Affairs allowed contributions to the PM CARES Fund and spending on vaccination programmes, makeshift hospitals, and temporary care facilities to qualify as CSR. Companies like the Tata group, Reliance Industries, and L&T stepped up significantly during this period.

Challenges in CSR implementation 🔗

Despite the legal framework, CSR implementation in India faces several obstacles. Smaller eligible companies sometimes lack the administrative capacity to design meaningful projects. Occasional cases of fund misuse and weak impact assessment have raised questions about accountability. There is also a tendency among some firms to treat CSR as a compliance exercise rather than a strategic lever, spending money simply to avoid penalties rather than creating lasting impact.

However, the framework is evolving. Amendments in 2021 expanded the list of eligible activities to include research and development, contributions to incubators, and more. The future of CSR in India points toward deeper rural engagement, technology integration for impact assessment, and stronger collaboration between corporates, NGOs, and government bodies.

Why the shift from philanthropy to mandate matters 🔗

The Indian transition from voluntary philanthropy to legally mandated CSR is significant for several reasons. First, it ensures that societal contribution is no longer dependent solely on the goodwill of a founder or family. Second, it pushes previously obstructionist or defensive companies into at least the accommodative zone, even if the motivation is compliance. Third, the disclosure requirements make corporate behaviour transparent, letting consumers, investors, and civil society evaluate how seriously a company takes its responsibilities.

Critics argue that mandatory CSR risks reducing it to a tax-like exercise, stripping away the voluntary spirit that made earlier industrialist philanthropy distinctive. Supporters counter that without a legal floor, countless companies would never contribute meaningfully at all. The reality sits somewhere in between: the law sets a minimum, but whether a company stays at that minimum or leaps well beyond depends on which of the four approaches it genuinely embraces.

What do you think? Does mandating CSR through law dilute the ethical spirit behind corporate generosity, or is legal compulsion essential to ensure that businesses take social responsibility seriously in the first place? And when you look at your favourite brands, do their actions suggest a truly proactive CSR approach, or are they merely accommodative?

References

1. https://www.researchgate.net/publication/234167105_CORPORATE_SOCIAL_RESPONSIBILTY_IMPORTANCE_BENEFITS_CONSEQUENCES_APPROACHES_TO_MANAGING_CORPORATE_SOCIAL_RESPONSIBILTY
2. https://www.mylawquestions.com/what-are-the-different-approaches-to-corporate-social-responsibility.htm
3. https://brainly.com/question/30529699
4. https://www.ijltemas.in/DigitalLibrary/Vol.3Issue7/164-167.pdf
5. https://knowledge.wharton.upenn.edu/article/temples-townships-and-schools-indias-philanthropic-legacy/
6. https://taxguru.in/company-law/csr-activities-section-135-companies-act-2013.html
7. https://ca2013.com/schedule/schedule7-3/
8. https://blog.ipleaders.in/schedule-vii-of-companies-act-2013/
9. https://www.taxtmi.com/article/detailed?id=13337