The Reserve Bank of India (RBI) has issued a document describing five techniques for encouraging business climate action through the use of business Social Responsibility (CSR) money. The paper focuses on the decade-old CSR laws governed by Section 135 of the Companies Act of 2013, as well as the possibility of amending them to assist the country’s green transformation ambitions.

The RBI has proposed various revisions to present CSR requirements, including diversifying the geographies, businesses, and periods over which enterprises execute green projects. The study emphasizes the need for more effective CSR interventions to connect company strategies with pro-planet aims in response to the growing demand for environmental sustainability from investors, shareholders, and other stakeholders.

Section 135 of the firms Act, 2013, governs CSR legislation in India, while Schedule VII defines the activities that firms may incorporate in their CSR programmes. Companies with a net worth of INR 500 crore or more, a turnover of INR 1,000 crore or more, or a net profit of INR 5 crore or more are required by law to devote 2% of their net profit to CSR efforts. The legislation has been changed multiple times, most recently in 2022.

According to data available on the National CSR Portal based on disclosures made since the introduction of CSR legislation in April 2014, corporations have spent almost 1.27 trillion rupees (or 1.27 lakh crore rupees) in a duration of seven years.

RBI

The RBI study suggests a number of reforms to CSR legislation in order to incentivize and improve corporate India’s green transformation initiatives. To begin, the study suggests mandating regional diversity of CSR expenditure for enterprises with high CSR budgets. Second, corporations should be permitted to engage in CSR activities within the scope of their commercial operations in order to capitalize on their inherent skill in conducting socially responsible business. Third, the number of activities covered by CSR rules should be reduced to a few broad sectors, with an indicative list of CSR-related activities. Fourth, the duration of multi-year projects should be extended to encourage corporations to take on long-term initiatives that need long periods of finance, such as afforestation. Finally, CSR funding should be utilized to implement climate-friendly technology.

Environmentalists and academics applaud the RBI’s efforts to integrate environmental responsibility into CSR and put climate change goals to the forefront of debate. Sudhir K Sinha, founder-director of Centre for Sustainability and Responsibility Inc, told ET Prime that the act’s charitable model of CSR is insufficient and incompetent to solve climate change challenges. The RBI’s suggestions will broaden the scope of CSR to encompass essential components of sustainable development, primarily global warming and climate change, as well as other environmental requirements. Companies, on the other hand, must move beyond altruistic reactions to CSR and become a part of global effort to manage and reduce climate threats.

Environmentalists and civil society organizations have also praised the RBI’s ideas. They feel the move will aid in tackling the critical issue of climate change and its consequences for the economy and society. Climate change activists contend that it is a global catastrophe that demands collaborative action and accountability from all stakeholders, including governments, corporations, and individuals.

The RBI’s attempt to incorporate environmental responsibility in CSR and bring climate change targets to the forefront of debate is a positive step. It emphasizes the urgency of climate action and the necessity for corporations to go beyond altruistic responses to CSR and become a part of global effort to manage and mitigate climate hazards. It is crucial to remember, however, that reaching the

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