Shaping the Future of CSR
Kartavya Desk Staff
Source: ET
Subject: Corporate Governance
Context: Corporate Social Responsibility (CSR) is undergoing a strategic shift globally and in India, with 2026 projected as a turning point where CSR moves from peripheral philanthropy to a core business imperative.
About Shaping the Future of CSR:
What is CSR?
• CSR is a business model where companies integrate social and environmental concerns into their operations and interactions with stakeholders.It represents a commitment to contribute to sustainable economic development while improving the quality of life for the workforce, local communities, and society at large.
Key Features of CSR in India:
• Mandatory Status: India is the first country to make CSR mandatory under Section 135 of the Companies Act, 2013, requiring companies with a certain turnover/profit to spend 2% of their average net profit.
• Board-Driven: The CSR policy is overseen by a Board-level Committee, ensuring high-level accountability.
• Schedule VII Framework: Spending is restricted to specific activities such as education, healthcare, poverty alleviation, and environmental sustainability.
• Unspent Funds Rule: Companies must transfer unspent CSR funds to specified government funds or Unspent CSR Accounts for ongoing projects.
How the CSR Landscape is Changing?
• From Philanthropy to Business Value: CSR is now linked to measurable ROI, such as building a future talent pipeline through skill development.
E.g. Tata Consultancy Services (TCS) uses its goIT program to teach coding to students, directly addressing the tech talent shortage in India.
• Focus on AI Literacy: With AI-driven layoffs rising, CSR is pivoting toward upskilling vulnerable communities to work alongside new tech.
E.g. Infosys Foundation has expanded its digital literacy programs to include AI training for rural teachers across Karnataka.
• Employee-Led Selection: Retention of Gen Z talent is now tied to whether employees feel their company’s social stance matches their personal values.
E.g. Wipro allows employees to nominate local NGOs for grants, resulting in higher internal engagement scores in 2025-26.
• Environmental Functionality over Beautification: Companies are moving away from simple tree plantation to restoring entire watersheds and ecosystems.
E.g. Reliance Industries has shifted from park maintenance to large-scale mangrove restoration along the Gujarat coast to act as a carbon sink.
• Direct Livelihood Linking: CSR projects now prioritize creating sustainable income sources rather than one-time donations.
E.g. Hindustan Unilever (HUL)‘s Project Shakti continues to empower rural women as micro-entrepreneurs, integrating them into the supply chain.
Initiatives Taken:
• National CSR Data Portal: A government initiative to ensure transparency by making all corporate spending data accessible to the public.
• Impact Assessment Mandate: Recent amendments require companies with large CSR budgets to conduct independent third-party assessments of their projects.
• Social Stock Exchange (SSE): India has launched the SSE to allow social enterprises and NGOs to raise capital, bridging the gap between CSR funds and impact.
Challenges to CSR:
• Compliance over Conscience: Many firms treat CSR as a checkbox legal requirement rather than a moral duty.
E.g. Several firms in 2025 were penalized for greenwashing – reporting environmental spend that had no actual ecological impact.
• Geographical Imbalance: CSR funds tend to flow to industrialized states (Maharashtra, Gujarat), leaving backward regions underserved.
E.g. In the 2024-25 fiscal year, Aspirational Districts in Eastern India received less than 5% of total national CSR spending.
• Capacity Constraints in NGOs: Many local NGOs lack the technical skills (GIS, AI, Impact Reporting) required by modern corporate partners.
E.g. Small-scale NGOs in Odisha struggled to partner with tech firms in 2025 due to a lack of digital transparency tools.
• Ethical Risks of AI: Using AI for grant selection can bake in biases if the data used is not diverse or representative.
E.g. An AI tool used by a major financial firm for scholarship selection was flagged in 2026 for inadvertently favoring urban applicants over rural ones.
• Short-termism: A focus on annual 2% spending often prevents long-term, multi-year projects that require sustained funding.
E.g. Many water-tank projects in Rajasthan failed within two years because CSR budgets did not cover long-term maintenance.
Way Forward:
• Collaborative CSR: Encourage companies to pool funds for mega-projects that address systemic issues like climate change or pandemic preparedness.
• Focus on ‘Aspirational Districts’: The government should provide incentives or mandates to direct a percentage of CSR funds toward the most underdeveloped regions.
• Human-in-the-Loop AI: Ensure that all AI-driven CSR decisions are audited by human experts to maintain equity and ethics.
• Integrating ESG: Move toward Environmental, Social, and Governance (ESG) reporting, where social impact is a core part of the company’s financial valuation.
• Strengthening Monitoring: Invest in satellite monitoring and blockchain to track the real-time progress of rural infrastructure projects.
Conclusion:
By 2026, CSR has evolved into a powerful tool for national development that goes beyond simple charity. By aligning corporate goals with local community needs and ethical AI usage, businesses can drive a more equitable future. Ultimately, the success of India’s social fabric depends on moving from mandatory compliance to authentic social leadership.
Q. Corporate social responsibility (CSR) though may have increased in terms spending but there remain many issues which restrict it from achieving its full potential. Suggest measures to ensure CSR funds are impactful across the country. (250 words)