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  • Akanksha Jumde

Potential Challenges to Legal Regulation of CSR: Findings and Lessons from the Indian Experiment in the COVID Pandemic Context

Dr Akanksha Jumde*


(This is an abridged version of the full paper. To request a copy of the full paper, please contact the author directly on: 


In 2020-21, the second wave of COVID plunged India into a severe public health crisis. To provide multi-pronged relief, the Indian government solicited companies’ support to address the pandemic crisis. This support was solicited essentially to facilitate the government to augment the country’s public health infrastructure by regulating companies’ statutorily governed CSR activities. In this regard, a government-corporate nexus was established to regulate companies’ Corporate Social Responsibility (CSR) activities through COVID-related government directives. The Indian treatment of CSR, governed by quasi-mandatory[1] legal and regulatory regimes, requires companies[2] to invest part of their profits in designated CSR activities. Specifically, companies meeting a financial eligibility criterion (and thus ‘large’ companies, by market value) are required to invest 2% of their average net profits on certain categories of social development activities listed under Schedule VII of the Companies Act, 2013 (See Section 135 and Schedule VII of Companies Act 2013 and Companies (CSR) Rules 2014). In 2020-2021, the Ministry of Corporate Affairs (MCA) released a series of notifications to regulate companies’ CSR activities during the pandemic. Essentially, companies were required to redirect their CSR activities to support the government’s COVID relief efforts. Significantly, On March 28, 2020, the Government of India set up the ‘Prime Minister's Citizen Assistance and Relief in Emergency Situations Fund’ (PM-CARES Fund) as a ‘public charitable trust.’ In this regard, the MCA notified that any contributions to the PM-CARES Fund would be regarded as spending on corporate social responsibility (CSR) for that year. To this effect, the PM-CARES Fund was added to join the Prime Minister’s National Relief Fund under Schedule VII of the Companies Act, 2013 as an ‘authorised CSR activity.’

Contextually, this paper provides a critical analysis of the nature of companies’ compliance with government COVID-related directives through their regulated CSR activities. To provide extensive information on the state of corporate compliance with COVID-related CSR government directives, companies’ annual reports containing specific CSR-related sections have been analysed. This analysis has been triangulated with relevant stakeholder interviews. From a broader corporate law context, this paper examines the potential challenges to the legal regulation of CSR, based on the extent and depth of this legal control. This study, through its findings, reinforces observations made in some of the existing literature on the potential challenges with legally regulated CSR.


To determine Indian companies’ compliance with COVID-related government directives, a comprehensive content analysis of the CSR sections under companies’ Annual Reports (ARs) of 200 companies for the financial year (FY) 2020-21 was undertaken. They were a representative sample of all companies (20,840) incorporated with the Registrar of Companies (ROC) and to whom CSR provisions under the Companies Act, 2013 are applicable, as obtained from official government CSR-related data sources. To examine the companies’ responses in compliance with the COVID-related CSR regulations, a coding scheme was created. These codes or themes are as follows: (1) company-level CSR policy for 2020-21 FY to comply with government COVID-related CSR directives (2) company’s CSR vision regarding COVID-19 crisis management (3) Geographical spread of the CSR Activities for COVID relief (localised/Pan-India) (4) Mode of Implementation of COVID relief related CSR Activities (Company Foundation / Trust / NGO) (5) nature of COVID relief CSR activities. This description-based, in-depth content analysis technique facilitated a comprehensive qualitative examination of companies’ disclosures to demonstrate their compliance with COVID-related CSR during the pandemic. After identifying and organising information from the companies’ reports based on these codes, a comprehensive data analysis was undertaken. The data obtained and analysed from companies’ reports was triangulated with qualitative interviews using predefined semi-structured guides of some relevant stakeholders: (1) ten companies’ executives working as CSR managers at their organisations with varied experience levels, (2) five managers at audit firms, who are routinely involved in auditing corporate CSR reports and (3) five workers from well-known localised NGOs with vast experience in working for both government and privately-owned companies in areas of corporate CSR project implementation, and (4) five officials from the Ministry of Corporate Affairs. The interviews provided a better understanding of the practical realities by providing the views of individuals who are responsible for, or involved in, compliance with these provisions. These confidential interviews also provided an opportunity for companies’ CSR managers to voice any constraints they face in complying with the government’s COVID-related CSR regulations. They also allowed them to speak about the approaches they adopted due to the nature and timing of these new regulations. Additionally, interviews with representatives from the companies’ affairs regulatory body were useful to reveal important information on the intent of the government to enact these elaborately prescriptive and impactful COVID-related directives.


Tellingly, the government’s COVID-related directives had a profound impact on corporate CSR activities. As the findings suggest, most companies re-aligned their activities towards supporting the public healthcare demands of the time.

A. Realignments in internal corporate CSR policies and orientations

In 2020-21 FY, corporate CSR policies were heavily restricted and narrowly focused on COVID relief, and accordingly, complying with government directives. This contradicts current empirical studies on Indian CSR law that have examined corporate reports from previous financial years, during which companies’ sector-wise CSR contributions were more diversified. Corporate CSR contributions were allotted to a broader range of sectors, including education, healthcare, and slum development. In contrast, in 2020-21, a majority of the companies focused their CSR activities on implementing government directives to support COVID-relief efforts. This perspective, therefore, formed the basis for their CSR policies for the FY 2020-21. The above findings indicate the penetrative nature of government directives, leading to overhauling changes to established internal corporate CSR policies and procedures.

B. Nature of CSR activities

Typically, companies logistically and financially supported the government in setting up specialised COVID hospitals at various locations in and around the companies’ operations. Most companies supported COVID-relief efforts in the form of ‘donations’ of various kinds of items and equipment. In most cases, companies have engaged in donations and distribution of masks, shields, IR temperature guns, testing kits, PPE kits, sanitisers, oxygen cylinders and concentrators, ventilators, ICU beds, soaps and other hygiene products, hand sanitisers, and even ambulances. Many companies provided support to government hospitals by donating essential items for nurses and doctors. Companies also participated in augmenting the country’s COVID vaccination efforts. They provided vital assistance to migrant workers through food distribution drives, distribution of food packets and ration kits, sanitation kits, meals, financial aid, and transportation assistance, including fuel that helped thousands of workers to reach their homes.

C. Contribution to PM-CARES Fund

In compliance with the government, through the Ministry of Corporate Affairs directives, companies made phenomenal contributions towards the PM-CARES Fund. Due to companies’ disproportionate contributions to the PM-CARES Fund, other sectors under Schedule VII of the Act lacked the required spending on them. Corporate contributions towards the PM-CARES Fund significantly disrupted the CSR activities of many companies.

However, government directives related to companies’ contributions to the PM-CARES Fund seem to contradict some of the existing CSR provisions under the Companies Act, 2013. First, Schedule VII of the Act does not inherently treat the Prime-Minister-established funds as superior to the state relief funds. Therefore, the notification to set up the PM-CARES Fund and soon after, call upon companies to divert their CSR contributions towards it is not in line with the acceptable list of ‘eligible activities’ under Schedule VII of the Act. Second, according to the proviso to sub-section 5 of Section 135, Companies Act, 2013, companies should give preference to the local areas around which they operate. Since companies diverted most of their CSR funds’ allocations towards the PM-CARES, this diversion severally affected the outreach to ground-level beneficiaries at the base of their operations. Third, the setting-up of the PM-CARES Fund disrupted funds flow to the NGOs. 

Traditionally, under Schedule VII of the Act, companies could meet their CSR obligations by ‘donating’ their CSR funds to NGOs as implementing agencies (IAs) for their outlined CSR activities. However, with the establishment of the PM-CARES Fund and the subsequent diversions of CSR funds by most companies, NGOs were faced with severe funds shortages. The interviews suggested that many companies favoured the COVID-related CSR government directives.[3] The company executives who participated in the interviews demonstrated active support for the government. Most companies were observed to be expressly committed to ‘fulfilling’ the government directives.

The interviews suggested many companies consider compliance with the government’s directives as their ‘responsibility.’ Most corporates had a positive outlook on the COVID-related CSR directives of the government. In fact, the directives were considered as a helping tool to maximise the companies’ overall impact on society, investors, and all stakeholders. Many companies viewed the government as a ‘support system’ to ‘ensure that rules, responsibilities, and accountabilities’ are complied with and implemented well. The company executives did not view the government’s directives as an intervention or interference into companies’ internal policies and decision-making systems.’ As the interviews revealed, for several companies, the internal decision to comply with the government directives is ‘voluntary’ and ‘without (internal or external) pressure that drives such conformity.’ To conclude, most corporates consider their ‘dharma (moral duty)’ or ‘a moral responsibility’ to comply with government directives. For them, complying with the government’s regulations is a positive ‘step towards doing good for the society.’[4]

The interviews also revealed the ‘push factors’ that drove privately held and public companies to plainly comply with the government’s COVID-CSR directives. The ‘push factors’ for government companies differ from those of privately-owned companies. any ‘directive’ issued by the government, such as the COVID-related CSR notifications, is treated as an ‘instruction’ to the top management of government companies.[5] Even though such ‘notifications’ cause significant disruptions to corporate internal CSR policies and procedures, companies usually redirect their planned activities to ensure that, as much as possible, the government’s directions are complied with and implemented. On the other hand, private companies believe that undertaking CSR activities in compliance with government directives increases reputation and develops a better brand image amongst their external stakeholders. This, in turn, helps companies achieve their long-term financial goals. For private companies, complying with government CSR regulations, such as those related to COVID relief work, is an image-building exercise. Therefore, privately-owned companies, too, prefer to comply with government directives strictly and plainly, including the government’s COVID-related CSR directives.

In terms of the government’s COVID-related CSR directives, the results demonstrate that despite several companies’ efforts to do innovative CSR projects, they have taken away CSR’s most valuable characteristic: flexibility and organizational autonomy. Further, this contradicts Schedule VII of the Act permitting companies to focus their CSR activities on a wide range of social development. The restrictive nature of the government directives, some of which are wrought with ambiguities, has taken away corporate freedom to engage in innovative CSR activities which are most suitable for them.  First, no justification was ever offered on why contributions to the state relief funds could not be considered as CSR. The exclusion of state-administered CSR funds adversely impacted state-level responses to the pandemic. Similarly, no justification was ever provided for corporate contributions to the PM-CARES Fund receiving more tax benefits than contributions to NGOs. Curiously, however, companies still went ahead and made contributions towards the state-administered relief funds.

Second, the government’s directives left ambiguities on whether companies providing their premises as COVID treatment facilities could be considered CSR or not. Despite the ambiguity, companies did offer their premises as COVID treatment facilities. This suggests that some companies may have genuine social concern and also perhaps an awareness of the potential reputational value of complying with the government directives as plainly and literally possible, at crucial times, such as a public health emergency.

The Indian CSR legal and regulatory framework, by its original design, despite its details and instructional character, is broad enough to provide wide flexibility for corporate CSR activities. However, the recent COVID-related government directives, as an addition to the existing framework, have restricted that flexibility. Several concerns related to transparency and accountability of the PM-CARES Fund were raised in the media as well as members of the opposition parties in the Indian Parliament. However, the government routinely declared it beyond the purview of any public audits. In this regard, companies providing unquestioned and unwavering support to the government by literally and plainly complying with its directives is significant. Apart from a few companies taking actual measures to undertake innovative CSR projects, most corporates have, ostensibly, taken a more politically correct and diplomatic stance by preferring to plainly comply with the government’s directives.

Thus, argumentatively, the penetrative nature of the government’s directives displays its own high-handedness in its relationship with those persons who are responsible for managing companies. The subsequent uncreative, politically correct corporate responses to these COVID-related directives have led to tangible diversions within CSR as a concept in India. Companies, too, on their part, tend to comply with the government’s directives in the nature of ‘instructions’, and therefore, provide unwavering and unconditional support to the government. 


By excluding a broader range of socially innovative activities, the government’s COVID-19 directives have argumentatively disincentivised some innovative corporate-socially responsive activities. Such counterproductive outcomes need comprehensive theory and policy justification behind such amendments and their interactions with the nature and purpose of the corporation.  This policy rationale could be based on the concession theory of the view of the corporation. This theory suggests that corporations need to consider the general welfare of society because they owe their existence to the state. By applying the collaboration theory of corporations, it is plausible to experiment where the government interferes less with the CSR activities of the companies. The government needs to change its approach from being a ‘strict enforcer’ that constantly instructs companies to considering them as ‘co-adventurers’ owing fiduciary duties to each other.  On this basis, people involved in managing and operating the company have a duty to treat the government well.  It also flows from this proposition that the government has a duty to treat companies well. Even though the government is free to introduce amendments to the CSR provisions to solicit corporate support, the government needs to give equal weightage to all types of CSR activities. Equal weightage for all types of CSR activities ensures better social outreach during the implementation of those activities within the local beneficiary community.  This can be done, firstly, by removing the tax benefits that may be accrued by companies to the PM-CARES Fund. Further, when amendments are introduced, disclaimers can be placed to clarify that such ‘directions’ are merely indicative or suggestive rather than compulsory in character. In turn, companies are still free to make their own choices. Companies need to do their own advocacy to retain organisational control over their CSR activities and related internal policies. So far, only India has tried to give companies a purpose beyond seeking profits through a semi-mandatory CSR legal and regulatory framework that is peculiar to the Indian situation. In this regard, India’s experiment is increasingly becoming more relevant to the outside world. While stakeholder interests need to be considered, keeping such requirements vague can only lead to increasingly unchecked governmental intervention. The Indian experience informs us that excessive corporate regulation can only be counterproductive. It also informs that companies can misuse CSR provisions for self-serving interpretations or even circumvent the law by using its inherent loopholes or lacunae in the law. Hence, for the Indian experiment, a balance must be struck between excessive regulation on the one hand and any excessive flexibility on the other han

[1]Section 135, Companies Act, 2013; It is applicable to companies meeting certain financial criteria and such companies are required to spend a minimum percentage of their profits on CSR activities in addition to constituting a CSR committee consisting of at least three directors, with atleast one being independent director; see also Umakanth Varottil, ‘Analysing the CSR Spending Requirements Under Indian Company Law’ in Umakanth Varottil, Jean du Plessis, and Jeroen Veldman (eds), Globalisation of Corporate Social Responsibility and its Impact on Corporate Governance (Springer, 2018) 231, 233.

[2] In India, there are essentially two types of companies: government-owned (partially or wholly, also known as Public-Sector Undertakings (PSUs) and privately-owned companies, which are usually promoter-driven family-owned businesses.

[3] Interview with Anonymous Company Executive A, Company-name A (Gurugram, India, 12 October 2023).

[4] Interview with Anonymous Company Executive H, name, Company H (Noida, India, 2 December 2023).

[5] Interview with Anonymous CSR Manager C, Central Public Sector Enterprise 3 (Telephone Interview, New Delhi, India, 15 November 2023).

*Dr. Akanksha Jumde is a Lecturer of Corporate and Business Law at Central Queensland University, Sydney Campus, Australia. She may be contacted at:

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