The judicial push for environmental CSR

UPSC Syllabus: Gs Paper 3- Environment

Introduction

India made CSR mandatory through the Companies Act, 2013 to direct corporate profits toward social good. However, environmental concerns remain underfunded despite rising climate challenges and the net-zero target for 2070. The Supreme Court has now reframed environmental CSR as a constitutional duty under Article 51A(g), linking business operations with ecological responsibility and pushing companies to prioritise restoration over voluntary charity.

What is Corporate Social Responsibility?

1. Meaning of CSR: CSR is a management concept where companies integrate social and environmental concerns into business operations and stakeholder interactions. It reflects responsibility toward society and the environment.
2. Triple Bottom Line Approach: CSR balances economic, social, and environmental goals. It aligns business growth with sustainability and stakeholder expectations.
3. Link with Sustainability and ESG: CSR supports long-term value creation by integrating environmental, social, and governance concerns. It ensures responsible and ethical business conduct.

Statutory Framework in India

1. Legal Mandate: India became the first country to mandate CSR through Section 135 of the Companies Act, 2013 and the Companies (CSR Policy) Rules, 2014.
2. Eligibility Criteria: CSR applies to companies with net worth ₹500 crore, turnover ₹1,000 crore, or net profit ₹5 crore in the previous financial year.
3. 2% Spending Requirement: Eligible companies must spend at least 2% of their average net profits of the last three years on CSR activities.
4. Permitted Activities under Schedule VII of the Act: CSR includes areas like education, healthcare, rural development, and environmental sustainability, ecological balance, and conservation of natural resources, along with support to welfare funds and research.
5. Compliance and Penalties: India moved to a “comply or be penalised” model in 2021. Unspent funds must be transferred to an Unspent CSR Account within 30 days and used within 3 years, or transferred to a government fund within 6 months.
6. Penalties for Non-Compliance: Companies face penalties of twice the unspent amount or ₹1 crore (whichever is less). Defaulting officers are liable for 1/10th of the unspent amount or ₹2 lakh (whichever is less).

Structural Challenges in Environmental Restoration

1. Skewed CSR Allocation: CSR funds favour social sectors with education (38%), healthcare (22%), and rural development (10%), while environment gets only 7–9%. This shows a strong human-centric bias.
2. Restoration Gap: Under the Bonn Challenge (global target: 350 million hectares by 2030), India aims to restore 26 million hectares by 2030, but private sector contribution is only 2% of 9.8 million hectares restored so far.
3. Preference for Quick Wins: Companies support awareness campaigns and basic green activities because they give quick results and easy reporting. Long-term restoration projects are avoided.
4. Complex Nature of Restoration: Activities like afforestation, habitat recovery, and water conservation take time and need expertise in soil, biodiversity, and ecology. Many CSR partners lack such skills.
5. Ecological Concerns in Practices: Rapid methods like Miyawaki plantations are preferred for visibility, but they often compromise native ecology and biodiversity.
6. Institutional and Policy Gaps: There is an urban bias in project selection, lack of practical policies for degraded lands, and poor coordination with forest departments and organisations.

Judicial Intervention and Constitutional Mandate

1. Shift from Charity to Duty: The Supreme Court reframed environmental CSR as a constitutional obligation. It linked business rights with environmental responsibility.
2. Article 51A(g): The Court invoked the duty to protect and improve the environment. It made ecological responsibility an integral part of corporate conduct.
3. Trigger for Judicial Action: Neglect of the Great Indian Bustard habitat by energy firms led to judicial intervention. It highlighted the consequences of ignoring ecological concerns.
4. Impact of Judicial Push: Environmental protection is no longer optional. It has become a mandatory aspect of corporate accountability and governance.

What should be done?

1. Ecosystem Recovery Approach: CSR must shift from short-term activities to long-term ecological restoration. Focus should be on restoring natural systems.
2. New Success Indicators: Performance should be measured through soil carbon sequestration, water retention, and biodiversity recovery. These reflect real ecological impact.
3. Focus on Degraded Lands: Priority should be given to remote and degraded forest areas that lack resources. This ensures better ecological outcomes.
4. Institutional Collaboration: Strong partnerships are needed between forest departments, universities, NGOs, and joint forest management committees. This brings scientific expertise.
5. Scientific Restoration Units: Dedicated units under expert supervision should guide restoration. They must focus on native species and ecological balance.
6. Long-term Financing Mechanism: Creation of a restoration trust or escrow fund can ensure continuous funding. It supports long-term projects and stability.
7. Governance Transformation: Corporate governance must move from shareholder focus to ecosystem focus. Directors should act as fiduciaries of the environment.

Conclusion

Environmental CSR must move beyond compliance and short-term visibility. The judicial push has made ecological responsibility a constitutional duty. A shift toward ecosystem-centric governance is necessary. Long-term restoration, scientific planning, and sustained financing must guide corporate action. Treating environmental protection as a non-negotiable business priority will help achieve balanced and sustainable development in India.

Question for practice:

Discuss the judicial push for environmental Corporate Social Responsibility (CSR) in India and examine the challenges and measures needed to strengthen ecosystem-based CSR.

Source: The Hindu