Corporate Social Responsibility (CSR)

Corporate Social Responsibility (CSR)

Context

On December 19, 2025, the Supreme Court of India delivered a landmark judgment in M.K. Ranjitsinh v. Union of India, significantly expanding the meaning and scope of Corporate Social Responsibility (CSR). The Court held that CSR must inherently include environmental and ecological protection, transforming CSR from a largely “voluntary charity-based activity” into a constitutional responsibility rooted in Article 51A(g).

About the News

Background of the Case

The ruling emerged during hearings concerning the conservation of the critically endangered Great Indian Bustard (GIB). Environmental concerns were raised that power transmission lines and other infrastructure activities were severely damaging the GIB’s habitat in Rajasthan and Gujarat, accelerating the species’ decline.

Key Observations of the Supreme Court

1. CSR as a Constitutional Duty (Article 51A(g))

The Court emphasized that corporations are “legal persons” and function as influential societal institutions. Hence, they are bound by the Fundamental Duty under Article 51A(g), which requires protection and improvement of the natural environment, including wildlife.

2. Redefining “Community” Beyond Humans

A major legal shift introduced by the Court was the interpretation of the term “community” under CSR norms. The Court clarified that community welfare cannot be restricted to humans alone, but must include:

• Local ecosystems
   
• Flora and fauna
   
• Shared ecological resources
   This approach recognizes the environment as a living stakeholder in development.
   

3. Polluter Pays Principle Through CSR Funding

The Court applied the Polluter Pays Principle, stating that companies whose operations harm biodiversity and habitats (such as mining, energy projects, and transmission networks) must bear the cost of ecological restoration and species recovery. Importantly, the Court indicated that CSR funds can be used for such recovery measures, making corporate environmental accountability enforceable.

4. “Guest in the Abode” Metaphor

The Court used a powerful ethical standard, stating that companies operating in sensitive ecological areas must behave like “guests in the abode” of wildlife, meaning development must be carried out with restraint, respect, and responsibility toward ecological survival.

Constitutional and Legal Framework Supporting CSR

Article 51A(g) – Fundamental Duty

Mandates every citizen and institution to protect and improve the natural environment, including:

• Forests
   
• Lakes and rivers
   
• Wildlife
   
• Ecological balance
   

Article 21 – Right to a Clean Environment

The Court linked CSR to Article 21, under which the right to life includes the right to live in a clean, safe, and healthy environment, reinforcing corporate responsibility in environmental harm cases.

Section 135, Companies Act, 2013

India became the first country to legally mandate CSR spending through statutory provisions under the Companies Act.

Schedule VII – Permissible CSR Activities

Schedule VII already includes activities such as:

• Ensuring environmental sustainability
   
• Conservation of natural resources
   
• Protection of biodiversity
   The 2025 ruling strengthens these provisions by giving them constitutional enforceability.
   

CSR Applicability: Eligibility Criteria

CSR provisions apply to companies that meet any one of the following thresholds in the preceding financial year:

Mandatory Spending Requirement

Eligible companies must spend at least 2% of the average net profits of the last three financial years on CSR activities.

Key Features of CSR in India

1. Mandatory Disclosure

CSR policy, implementation details, and spending must be reported in the Board’s Report, ensuring public transparency.

2. CSR Committee

Companies must form a CSR Committee at the board level (generally at least three directors, including one independent director) to:

• Frame CSR policy
   
• Monitor implementation
   
• Ensure compliance
   

3. Treatment of Unspent CSR Funds

If CSR spending is not completed:

• The company must provide reasons for non-spending
   
• Unspent amounts may be transferred to prescribed government funds (such as the Prime Minister’s National Relief Fund) within a fixed timeline, as per legal requirements
   

4. Environmental CSR Becomes Justiciable

After the 2025 ruling, environmental responsibility under CSR is no longer merely a discretionary corporate preference, it becomes legally enforceable and reviewable, especially in cases involving ecological damage.

Significance

1. CSR Moves Beyond Branding to Binding Responsibility

The judgment prevents CSR from being reduced to a publicity tool. It strengthens CSR as a core corporate obligation, aligning it with directors’ duties under Section 166(2) of the Companies Act, which requires directors to act in good faith for the benefit of stakeholders and the environment.

2. Ecological Justice and Rights of Nature Thinking

By recognizing ecosystems and wildlife as part of the “community,” the ruling introduces a stronger foundation for ecological justice within corporate law.

3. Holistic Sustainability Approach

The judgment restricts companies from claiming social responsibility through welfare projects (education/health) while simultaneously harming:

• habitats
   
• biodiversity
   
• local environment
   It enforces the idea that true CSR must not coexist with ecological destruction.
   

Way Forward

1. Integration of Conservation Funding

The Court suggested coordinating large environmental funds like National CAMPA with corporate CSR contributions for major biodiversity projects, including high-cost conservation needs.

2. Restoration in Sensitive Sectors

Companies in sectors like:

• Energy
   
• Mining
   
• Infrastructure
   must prioritize both:
   
• In-situ conservation (protecting habitats in natural conditions)
   
• Ex-situ conservation (captive breeding, rehabilitation, controlled protection)
   especially in ecologically fragile zones.
   

3. Improved Audit and Reporting Standards

The Ministry of Corporate Affairs may need to upgrade CSR reporting to explicitly track:

• Environmental responsibility spending
   
• Biodiversity restoration outcomes
   
• Habitat compensation measures
   
• Long-term ecological impact indicators
   

Conclusion

The Supreme Court’s ruling transforms CSR into an instrument of Environmental Democracy, ensuring corporations cannot separate profit-making from ecological accountability. By rooting CSR obligations in Article 51A(g) and linking them with the right to a clean environment under Article 21, the Court has strengthened the vision that development must be sustainable, inclusive, and ecologically just, so that economic progress and environmental protection advance together.