Corporate Social Responsibility (CSR) Inherently Includes Environmental Responsibility: SC 

Syllabus:GS3/Economy /Environment 

In News

• Recently, the Supreme Court ruled that corporate social responsibility (CSR) inherently includes environmental responsibility.

Key Observations by the Court

• Corporations as Constitutional Actors: The Court held that corporations are not merely profit-making entities, but constitutional actors within society.
  • As legal persons, corporations are bound by Fundamental Duties, particularly Article 51A(g) of the Constitution.
  • Article 51A(g) mandates protection and improvement of the natural environment, conservation of forests, lakes, rivers and wildlife & compassion for living creatures.
• CSR Is a Constitutional Obligation, Not Charity: The Court clarified that Corporate Social Responsibility (CSR), especially in environmental matters, cannot be treated as voluntary philanthropy.
• Polluter Pays Principle Applied to Wildlife Conservation: The Court invoked the Polluter Pays Principle in cases where corporate activities threaten or damage endangered species or habitats & corporations must bear the financial burden of restoration.

Corporate Social Responsibility (CSR) 

• It is a management framework that integrates social and environmental considerations into business operations and stakeholder interactions, reflecting a long-term commitment to societal welfare.
• The concept of CSR in India was first introduced through the 2009 Voluntary Guidelines  by the Ministry of Corporate Affairs and later refined in the 2011 National Voluntary Guidelines on Social, Environmental, and Economic Responsibilities of Business. 
• The 21st Report of the Parliamentary Standing Committee on Finance highlighted the need for statutory CSR provisions, noting that annual disclosures would ensure compliance. 
• Consequently, the Companies Act, 2013 made it mandatory for certain large companies, both listed and unlisted, to spend at least 2% of their average net profit on CSR activities.

Criteria for CSR Eligibility

• According to the section 135(1) of the Companies Act, 2013 read with the Companies (CSR Policy) Rules, 2014, companies with net worth of Rs 500 crore and above or turnover of Rs 1,000 crore and above or net profit of Rs 5 crore and above have to spend two per cent of average net profits of last three years.
• Notably, a holding or subsidiary of a company is not required to comply with the CSR provisions unless the holding or subsidiary itself fulfils the eligibility criteria prescribed under section 135(1) stated above.

Activities Permitted under CSR

• The Schedule VII of the Companies Act lists out a set of activities that firms can include within their CSR activity. 
• These include Eradicating hunger, poverty, malnutrition, Promoting health care including preventive health and sanitation, Promoting education, Promoting gender equality, empowering women, Ensuring environmental sustainability, ecological balance, Protection of national heritage, art and culture, Measures for the benefit of armed forces veterans, war widows and their dependents, Project on rural development and ensuring environmental sustainability etc.
• They can also contribute to the Prime Minister’s National Relief Fund or any other fund set up by the Central government for socio-economic development.

Importance of CSR

• It promotes equitable development by addressing social inequalities.
• It encourages environmentally responsible practices, including conservation and renewable energy.
• It ensures disclosure of CSR spending in annual reports.
• It supports education, healthcare, sanitation, and livelihood initiatives.
• It aligns corporate efforts with government campaigns like Swachh Bharat Abhiyan, Skill India, and Digital India.

Emerging Issues

• While CSR spending has surged but  concerns remain about the impact and monitoring of projects.
• There are Greenwashing Risks because some companies focus on optics rather than genuine impact.
• CSR funds often cluster in urban or industrial areas, leaving rural regions underserved.
• Smaller firms struggle with reporting and regulatory requirements.

Conclusion

• CSR in India has evolved from voluntary charity to a legal and moral responsibility, linking corporate profits with public welfare.
• To address challenges like environmental sustainability, equitable distribution, and accountability, CSR must move beyond compliance and become a strategic tool for inclusive and sustainable national development.

Source :TH