In most countries corporate social responsibility is voluntary — a company chooses whether to spend, how much, and on what. India took a different route. The Companies Act 2013 made a minimum spend a statutory obligation for companies above certain thresholds, with a reporting duty attached.

Voluntary CSR guidelines came first — the Ministry of Corporate Affairs issued them in 2009 and revised them in 2011 as the National Voluntary Guidelines. Uptake was thin and uneven. The Companies Act 2013 replaced encouragement with obligation.

• 2009 — MCA Corporate Social Responsibility Voluntary Guidelines
• 2011 — National Voluntary Guidelines on social, environmental and economic responsibilities of business
• 2013 — Companies Act 2013 passed; Section 135 creates the obligation
• 2014 — Section 135 and the CSR Rules come into force on 1 April
• 2021 — Amendment Rules add unspent-money machinery, CSR-1 registration and impact assessment

• Decide, from a company’s financials, whether Section 135 applies to it
• Compute the minimum obligation and say which years feed the average
• Judge whether a proposed activity falls inside Schedule VII — and defend the judgement
• Trace unspent money to the right account within the right deadline
• Read a BRSR filing and say what it does and does not tell you

Section 135(1) applies to every company — including a foreign company’s Indian branch or project office — that meets any one of these in the immediately preceding financial year.

Scope is tested on the immediately preceding financial year. The spending obligation is then calculated on the average of the three immediately preceding financial years. These are two different windows and they are routinely confused.

A company that ceases to meet the thresholds is not bound forever. Where a company no longer meets the criteria for three consecutive financial years, it is not required to constitute a CSR Committee, and the obligation lapses until it re-enters scope.

A foreign company with a branch or project office in India is in scope if it meets the thresholds. Net worth, turnover and net profit are computed from the balance sheet and profit-and-loss account prepared under Section 381(1)(a) of the Act.

‘Net profit’ for CSR is not the headline profit-after-tax in a press release. It is net profit computed under Section 198, with specific adjustments — and the CSR Rules further exclude:

• Any profit arising from overseas branches of the company, whether operated as a separate company or otherwise
• Any dividend received from other companies in India which are themselves covered by and complying with Section 135

Hand students the published annual report of any listed Indian company and ask three questions:

• Which threshold, if any, brings it into scope — and in which year?
• What is its prescribed CSR expenditure for the year just ended?
• Does the CSR note in the report agree with your figure? If not, why not?

Schedule VII lists the activities a company may include in its CSR policy. It is the gate: spending outside it is not CSR expenditure, however worthy.

• Eradicating hunger, poverty and malnutrition; promoting health care including preventive health care; sanitation; safe drinking water
• Promoting education, including special education and employment-enhancing vocational skills; livelihood enhancement projects
• Promoting gender equality; empowering women; homes and hostels for women and orphans; old age homes; reducing inequalities faced by socially and economically backward groups
• Environmental sustainability; ecological balance; conservation of natural resources; animal welfare; agroforestry
• Protection of national heritage, art and culture; public libraries; traditional arts and handicrafts
• Measures for the benefit of armed forces veterans, war widows and their dependants
• Training to promote rural, nationally recognised, Paralympic or Olympic sports
• Contribution to specified government funds
• Contributions to incubators and to specified research and development bodies
• Rural development projects; slum area development; disaster management including relief, rehabilitation and reconstruction

The Ministry of Corporate Affairs has repeatedly clarified that the entries in Schedule VII are to be interpreted liberally, so as to capture the essence of the subjects listed, rather than read as a narrow closed list.

Give students six proposed projects, three clearly inside the Schedule, three on the boundary. Ask each student to rule on all six and write the reasoning, then to argue a partner’s boundary case the other way.

The board must ensure the company spends, in every financial year, at least two per cent of the average net profit made during the three immediately preceding financial years.

Because the base is a three-year average, a single loss-making year does not extinguish the obligation. Equally, a company can be in scope on turnover or net worth while its three-year average net profit is nil — in which case the prescribed expenditure is nil, but the reporting duty remains.

Any surplus arising out of CSR activities does not form part of the business profit of the company. It must be ploughed back into the same project, or transferred to the Unspent CSR Account and spent, or transferred to a fund specified in Schedule VII.

Where a company spends more than its obligation in a financial year, that excess may be set off against the requirement for succeeding financial years, subject to conditions set out in the Rules — including board approval and limits on how far forward the set-off may be carried.

CSR spend may create or acquire a capital asset, but the asset may not simply sit on the company’s balance sheet. It must be held by a Section 8 company or a registered trust or society with an established track record, or by the beneficiaries themselves as a self-help group or collective, or by a public authority.

Administrative overheads — the company’s own expenses of managing and administering its CSR functions — may not exceed five per cent of total CSR expenditure for the financial year.

Ask students to find a real CSR partnership where an NGO was told its administrative costs must fit within 5%, and write a one-page note to the company explaining what Rule 7(1) actually caps.

A company in scope must constitute a CSR Committee of the Board, consisting of three or more directors, of which at least one must be an independent director.

• A company not required to appoint an independent director constitutes its Committee with two or more directors
• Where the amount to be spent does not exceed ₹50 lakh, the requirement to constitute a Committee does not apply, and the Board discharges its functions

• Approve the CSR Policy and disclose its contents in the Board’s report and on the website
• Ensure the activities in the Policy are actually undertaken
• Ensure the company spends the prescribed amount
• Satisfy itself that the funds disbursed have been utilised for the purposes and in the manner approved — with the CFO certifying this
• Where the amount is not spent, give the reason in the Board’s report

• The list of CSR projects or programmes approved, within Schedule VII
• The manner of execution
• The modalities of utilisation of funds and implementation schedules
• Monitoring and reporting mechanism
• Details of need and impact assessment, if any, for the projects

The Board’s report must include an annual report on CSR containing the particulars specified in the Rules, and the company must disclose the composition of the CSR Committee, the CSR Policy and the projects approved on its website.

Assign each student a different company. Ask them to find, on the company’s own website: the CSR Policy, the Committee composition, and the annual CSR report. Then:

• Does the Committee meet the statutory composition?
• Does the annual action plan name projects, or only themes?
• Can you trace a rupee from the prescribed amount to a named project?

Before 2021, a company that failed to spend explained itself in the Board’s report and that was largely the end of it. The Companies (Amendment) Act 2019 and the CSR Amendment Rules 2021 replaced ‘comply or explain’ with a transfer obligation and deadlines.

An ongoing project means a multi-year project undertaken by a company in fulfilment of its CSR obligation, having a timeline not exceeding three years excluding the financial year in which it was commenced. It includes a project that was initially not approved as multi-year but whose duration is extended beyond one year by the Board on reasonable justification.

Money sitting in the Unspent CSR Account that is not spent within three financial years must be transferred to a fund specified in Schedule VII within 30 days from the end of the third financial year.

• Prime Minister’s National Relief Fund
• PM CARES Fund
• Clean Ganga Fund
• Swachh Bharat Kosh
• Any other fund set up by the Central Government as specified in Schedule VII

Failure to comply with the transfer obligations attracts penalties on the company and on officers in default, as set out in Section 135(7). The Companies (Amendment) Act 2020 converted the regime from criminal to civil penalty.

Give students four scenarios and ask for the destination account and the deadline in each: a two-year skilling project half spent; a one-off disaster relief grant unspent; a project extended by the Board from one year to two; money still sitting in an Unspent CSR Account after three years.

• Itself — directly, through its own teams
• Its own foundation — a Section 8 company, registered trust or society established by the company, alone or with others
• A government entity — established under an Act of Parliament or a State legislature
• An external organisation — a Section 8 company, registered public trust or registered society with an established track record of at least three years

From 1 April 2021, an entity intending to undertake CSR activities on behalf of a company must register itself with the Central Government by filing Form CSR-1 electronically with the Registrar, and obtain a CSR Registration Number.

• Registration under Section 12A and 80G of the Income-tax Act 1961, where applicable
• Details of the entity — Section 8 company, registered trust or registered society
• Governing body details and PAN
• Digital signature of an authorised person and certification by a practising professional

An external implementing organisation must have an established track record of at least three years in undertaking similar activities. An entity established by the company itself does not face this requirement.

The Board must satisfy itself that funds disbursed have been utilised for the purposes and in the manner approved, and the Chief Financial Officer or the person responsible for financial management must certify to that effect.

A company may collaborate with other companies for undertaking projects, provided the CSR Committees of each are in a position to report separately on those projects in accordance with the Rules.

Ask students to take a real local NGO — ideally one they know — and produce a one-page readiness assessment for receiving CSR funds:

• Is it a Section 8 company, registered trust or registered society?
• Does it have three years of track record in the relevant activity?
• Is it CSR-1 registered? If not, what does it need first?
• Could it produce a utilisation certificate that would satisfy a CFO?

A company must undertake impact assessment through an independent agency where it meets both limbs:

Impact assessment expenditure may be booked to CSR for that financial year, subject to a cap set out in the Rules — expressed as a percentage of total CSR expenditure or an absolute figure, whichever is higher.

The Rules require an independent agency. They do not prescribe a methodology, a qualification or an accreditation. In practice this is a real weakness and a real opportunity.

• States the theory of change the project was built on, and tests it
• Distinguishes outputs from outcomes, and says which it can evidence
• Is explicit about attribution — what would have happened anyway
• Reports what did not work, not only what did
• Names its limitations, sample and period

A CSR report will say a programme reached 40,000 people. The evaluation question is different: what changed that would not have changed anyway?

The impact assessment report must be placed before the Board and annexed to the annual report on CSR.

Find a published CSR impact assessment for any large Indian company. Ask students to mark it against five questions:

• Is there a stated theory of change?
• Are outputs and outcomes distinguished?
• Is there any comparison group, or any counterfactual reasoning at all?
• Are limitations stated?
• Would you, as the board, change anything after reading it?

CSR under Section 135 asks: did you spend, and on what? ESG reporting asks a different question: how does your business behave, and what does it cost the world? The audience shifts from the regulator to the investor.

The Business Responsibility and Sustainability Report is SEBI’s mandatory ESG disclosure format, replacing the earlier Business Responsibility Report. It applies to the top 1,000 listed entities by market capitalisation, mandatory from FY 2022–23.

BRSR is structured on the National Guidelines on Responsible Business Conduct. Businesses should:

• Conduct themselves with integrity, ethics, transparency and accountability
• Provide goods and services in a safe and sustainable manner
• Respect and promote the wellbeing of all employees, including those in value chains
• Respect the interests of and be responsive to all stakeholders
• Respect and promote human rights
• Protect and restore the environment
• Engage in policy advocacy responsibly and transparently
• Promote inclusive growth and equitable development
• Engage with and provide value to consumers responsibly

• Section A — entity details, products, employees, CSR, transparency
• Section B — policies against each of the nine principles, and governance of them
• Section C — essential and leadership indicators for each principle

SEBI introduced a BRSR Core — a defined subset of key performance indicators requiring reasonable assurance, phased in by market-capitalisation rank, with disclosures extending to the value chain.

Assign one BRSR filing per student, from companies in different sectors. Ask for a two-page note answering:

• Which leadership indicators did they answer, and which did they skip?
• Is any figure assured? At what level?
• Find one number that contradicts a claim in the narrative
• What does the CSR section tell you that Section 135 filings do not?

ESG reporting grew from voluntary initiatives rather than a single regulator, so the field arrived crowded. Consolidation is underway but incomplete.

BRSR is built on the NGRBC principles and covers both business conduct and environmental performance, so it sits closer to a broad-stakeholder view than to a purely investor-financial one — while BRSR Core’s assured KPIs and value-chain reach move it toward investor-grade comparability.

Companies routinely map CSR and ESG activity to the Sustainable Development Goals. The mapping is genuinely useful for communication and genuinely weak as accountability: the SDGs were written for states, have no corporate reporting requirement, and almost any activity can be mapped to at least one goal.

The UN Guiding Principles on Business and Human Rights set out a duty to protect, a corporate responsibility to respect, and access to remedy — with human rights due diligence at the centre. NGRBC Principle 5 carries this into the Indian frame.

A company’s own operations are rarely where its worst impacts sit. They sit in the value chain — suppliers, contractors, informal labour. Scope 3 emissions, supplier labour conditions and contract-worker safety are where reporting is thinnest and the stakes are highest.

Take one company. Ask students to list its five most significant sustainability issues twice — once by financial materiality, once by impact materiality — and then to explain each difference between the lists.

Your students will not spend careers drafting Section 135 policies. They will read reports written by people with an interest in how they read, and decide what to believe.

• What is the reporting boundary — which entities are in?
• Is the prescribed CSR amount stated, and does the arithmetic work?
• Is any amount unspent, and where did it go?
• Are projects named, or only themes?
• Who implemented, and are they CSR-1 registered?
• Is there an impact assessment, and does it have a counterfactual?
• Are ESG figures assured — and reasonable or limited assurance?
• Are targets given a baseline and a date?
• Are Scope 3 emissions reported or omitted?
• Does anything in the numbers contradict the narrative?

Thresholds, deadlines, forms, penalty amounts and BRSR applicability have all been amended since 2014, several times. Do not teach any figure in this deck as permanent.

• mca.gov.in — the Companies Act, the CSR Rules, circulars and the CSR FAQ
• csr.gov.in — the national CSR data portal, with company-level spending data
• sebi.gov.in — LODR regulations and BRSR circulars
• The company’s own website — policy, committee composition and annual CSR report are all required to be public

The national CSR portal publishes company-level CSR spending, by year, sector and state. It is a genuine dataset and it is open.

• Which sectors attract the most CSR money — and which almost none?
• How is spending distributed across states? Does it follow need, or follow head offices?
• Which companies report large obligations and small spends?

• Development Architecture 101 — how development funding is structured, including CSR flows
• Climate Essentials 101 — the climate science and policy behind the E in ESG
• MEL for Development — the flagship, for the evaluation half of impact assessment
• Theory of Change Studio and Impact Evaluation Studio — build and defend the designs an assessment needs