Implications of Fluidity in Compliance Regime for India’s Compulsory CSR Law

Abstract

In 2013, India introduced compulsory CSR spending by corporates over a certain size which created a pool of resources for innovative social impact activities. However, in reality, this law is yet to achieve its full potential. Direct work of T-Social Impact Group (official CSR cell of Telangana) and evidence-based research account multiple factors for this phenomenon. However, one of the primary factors is the ever-changing and heavy regulatory framework which shifted away from the original principles and acts as structural impediments to innovation and effectiveness. CSR rules are in constant flux with arbitrary (and at times) contradictory amendments and clarifications. These changes lack guiding philosophy and long-term objectives, reflecting only short-term political or policy imperatives. On cue, the entire framework of CSR laws was again changed on January 22, 2021, with significant changes in CSR definitions, implementation, reporting, and monitoring of projects. This paper argues that constant changes have stifled innovation and shifted the focus on compliance. This paper provides an in-depth review of the legal changes and analyzes their impact in Indian CSR space. Emphasis is on shifting compliance regimes instead of efficacious, creative approaches. These changes, arising out of contradiction in CSR model and political and policy choices of the government, have significantly changed the nature of CSR. Focus is not on beneficiary but on compliance to meet short-term aims of government or as revenue source for the government. In tandem, corporations have adopted a risk adverse bureaucratic approach to CSR which has decelerated decision-making and impact. Overregulation increases costs for companies, pushing them toward traditional, risk-averse programs. Overall, it creates a cautious environment where choices are made with the aim to avoid bureaucratic complications than use CSR as a tool for sustainable impact.