Corporate social responsibility (CSR) as a concept essentially stipulates that the goal of the corporate sector goes beyond wealth maximisation and has to assume the responsibility of the social and environmental concerns in the process.[1] In the Indian context, during the period of independence struggle and immediately afterwards, Mahatma Gandhi propounded the concept of trusteeship and urged industrialists to share their wealth for the benefit of underprivileged sections of the society.[2] The corporates were encouraged to establish trusts that would work towards the socio-economic growth of India by investing in rural development, education, women empowerment among others. With the emergence of public sector undertakings (PSUs) during 1960-1980, the idea of CSR again gained traction with the aim of proper distribution of wealth.[3] However, the role of private sector could not be ignored and it was stressed to ensure accountability and transparency in their functioning as well. Finally, with the advent of globalisation, liberalisation and push in industrial growth, even private companies started to contribute more towards social responsibilities and CSR came to be understood as a duty rather than charity.

The statutory mandate regarding CSR came into effect very recently under Section 135 of the Companies Act, 2013 (“the Act”) which states that every company having a net worth of Rupees Five hundred crores or more, or a turnover of Rupees One thousand crores or more or a net profit of Rupees Five crores or more shall spend at least two percent of the average net profits towards social responsibilities as determined by the Committee.[4] Schedule 7 to the Act specifies certain activities that companies may encompass in their CSR policies and include the eradication of hunger and poverty; promoting education and gender equality; ensuring environmental sustainability and ecological balance; contribution to research and development; protection of national heritage, among others.[5]

Interestingly, despite environmental sustainability, protection of flora and fauna, and conservation of natural resources being mentioned explicitly in the Schedule to the Act, there have been attempts by the Government to impose separate obligations on the corporates to ensure the protection of the environment in the nature of corporate environment responsibility (CER)/enterprises social commitment (ESC). For instance, the widely debated Draft EIA Notification, 2020 defines CER as “part of Environment Management Plan wherein the project proponent is mandated to carry out certain activities for environment safeguard in the immediate surroundings of the project based on the issues raised during the public consultation and/or social need based assessment carried during the EIA studies”.[6] One could argue that to attain sustainable development, corporates must be made to spend on environment protection separately and expressly. On the other hand, in practicality, this has led to an overlap of efforts in attaining the same objective causing confusion among the corporates. This article seeks to trace the origins and developments of the imposition of separate CER on corporates in India and whether this has actually led to duplication of efforts.

Under the powers conferred by Section 3 of the Environment Protection Act, 1986[7], the Ministry of Environment, Forest and Climate Change (MoEFCC) issued an office memorandum in 2014 stating that project proponents must specify the activities and costs being planned to be undertaken to mitigate the environmental concerns highlighted during public consultation.[8] It further states that if such activities are being proposed to be covered under CSR, they must be highlighted at the clearance stage. The Act under Sections 6[9] and 25[10] provides broad powers to the Central Government to make rules regulating environmental pollution. Remarkably, in 2018 MoEFCC issued another memorandum obligating the corporates to earmark funds for CER in addition to the costs envisaged for Environment Management Plan.[11] The memorandum while trying to differentiate between CSR and CER stated that CSR comes into effect only when companies make certain net profits, there are instances where the rules pertaining to CSR do not apply to them as the company is yet to make any net profit.[12]

The industrial sectors specified in the Environment Impact Assessment (EIA) Notification 2006 dated 14-9-2006, which have direct environmental footprint, are required to take prior environment clearance (EC) from the MoEFCC before setting up any new project/expansion/modernisation of an existing project/change in the product mix. While granting such EC, the Ministry puts certain conditions (requirements) on the project proponent (PP) in two categories – specific conditions and general conditions – implementation of which, if unsatisfactory, the EC may be revoked. One of such specific conditions imposed by the MoEFCC while granting EC is that the applicant should undertake corporate environment responsibility/ESC, which is to be based on the local needs and should be restricted to the affected areas around the proposed project. It is understood that the CER activities being part of the project have to go along with the project and not after making net profits, as CER is approved at the time of giving the EC. As per the understanding of the authors, CER and CSR expenses are to be treated differently and paid separately.

An instance where the demarcation between CSR and CER became apparent was when Ambuja Cements during the expansion of their cement plant in Himachal Pradesh claimed a waiver of CER conditions stating that they have already spent amounts over and above the statutory prescription in three preceding financial years.[13] The EAC while deliberating on the request stated that the environmental commitments were prescribed for a period of 5 years and instead of waiving off the condition, the span of implementation was increased to 10 years. This shows that the neither the Ministry nor the EAC is in favour of waiving/expunging the conditions imposed on corporates qua the CER.

To that effect, the memorandum specified a certain percentage of funds to be allocated for CER, which shall be worked out based on the issues raised during the public hearing. It was further stated that the activity undertaken as part of CER should be part of the project, which must be regularly monitored and restricted to the area around the project.[14] The Ministry issued another office memorandum in 2019 titled “Standardisation of Environment Clearance Conditions for Non-Coal Mining Sector,” which further streamlined the procedures to be followed while undertaking CER activities.[15] The CER activities being time-bound have to be completed within the specified period and to account for the financial bit it has been provided that year-wise funds earmarked for environmental protection measures shall be kept in separate account and not to be diverted for any other purpose. It has further been specified that the project proponent has to strictly abide by all the commitments and recommendations made as part of the environmental clearance and further if during periodic review the adherence is not found to be satisfactory, the Ministry may revoke or suspend the clearance as well.[16]

It is pertinent here to note that even before the Ministry issued these memorandums, the Expert Appraisal Committee (EAC) for Environmental Appraisal in 2015 itself had noted that:

The corporate sector should be asked to perform such welfare function towards society, which is necessary for maintaining the social interest of the society as the business entrepreneurs are trustees and not the owners of the society. The works so carried out as part of social commitment could be visible during the implementation phase of the project.[17]

The Committee unanimously agreed for uniform earmarking of the capital cost of the project towards environmental conservation support activities, in addition to the company’s commitment under the Companies Act.

The obligation to separately allocate funds for CER was not received well by the corporates, and the office memorandum of 2018 was challenged before the Delhi High Court in CREDAI NCR v. Union of India[18] which is sub judice before the Court. In light of the legal challenges as well as several representations to the Ministry, another office memorandum was issued in 2020, suppressing the earlier memorandum of 2018, which stated that instead of allocation of funds under CER, the EAC should deliberate on the commitment made by the project proponent and prescribe specific conditions in physical form while recommending the proposal for grant of clearance.[19]

The manner in which the issue has proceeded so far makes it clear that the Government itself has not been able to determine whether CER and CSR are mutually exclusive or operate in separate spheres. The logical construction that can be made out of the last memorandum issued in this regard is that while the Government has done away with the requirement of allocation of specific funds for CER, activities addressing the environmental concerns raised during public consultations still need to be undertaken and form a prerequisite for granting environmental clearance. Whether these activities and expenses incurred therein are in addition to the usual environmental management and protection measures, whether such expense can be considered to be expenditure under CSR remains unclear.

The uncertainty and subsequent confusion among the corporates has essentially been created due to the fact that while the objectives of CSR and CER might appear to overlap, certain distinctions suggest that they might operate in mutually exclusive spheres. As the memorandums itself suggested that obligation under CSR arises only when the company crosses a certain threshold as specified under the Act, there exists a void when companies have not yet reached the brink to trigger CSR but cannot be allowed to get away with the environmental degradation and social consequences of their project as well. Hence, CER obligation is not linked to the net profits and it must be met irrespective of whether or not the generating company is making any profits. Moreover, the provision relating to CSR under the Act provides that preference must be given to areas affected by the project, however, the company may choose to spend elsewhere as well. On the other hand, taking a project-centric approach, the CER is considered a part of the project and must therefore, be undertaken in the project-affected area only.

It is accepted, without exception, that protection of the environment must not be compromised; nonetheless, the lack of clarity regarding this issue often leaves the corporates in a conundrum. It is difficult to determine if the expenditure under CER is to be made at the project site separately or if it can be undertaken as part of the CSR. While the outcome of the challenge pending before the Delhi High Court is awaited, a clarification in this regard from the Government, keeping in mind the genuine concerns of the project affected area, would bring huge respite to corporates.

*Partner at L&L Partners Law Offices.

**Managing Associate at L&L Partners Law Offices.

***Student, BA LLB, NUJS, Kolkata.

[1]Sebastian Kot, Knowledge and Understanding of Corporate Social Responsibility, 2 Journal of Advanced Research in Law and Economics 5 (2014).

[2]Dr Kalpana Sharma, Corporate Social Responsibility (CSR): An Overview of the Indian Perspective, 3 Indian Journal of Law and Public Policy 1 (2016).

[3]Dr Kalpana Sharma, Corporate Social Responsibility (CSR): An Overview of the Indian Perspective,3 Indian Journal of Law and Public Policy 1 (2016).

[4]Companies Act, 2013, S. 135.

[5]Companies Act, 2013, Sch. 7.

[6]The Draft Environment Impact Assessment Notification – 2020, S. 3(16).

[7]Environment (Protection) Act, 1986, S. 3.

[8]Ministry of Environment, Forest & Climate Change, Office Memorandum, Environment Sustainability and CSR related Issues – Guidelines, No. J-11013/25/2014- IA.I (issued on 11-8-2014).

[9]Environment (Protection) Act, 1986, S. 6.

[10]Environment (Protection) Act, 1986, S. 25.

[11]Ministry of Environment, Forest and Climate Change, Office Memorandum, Corporate Environment Responsibility (CER), F. No. 22-65/2017-IA.III (issued on 1-5-2018).

[12]Ministry of Environment, Forest and Climate Change, Office Memorandum, Corporate Environment Responsibility (CER),F. No. 22-65/2017-IA.III (issued on 1-5-2018).

[13]Nitu Poddar, Whether Expense towards Corporate Environment Responsibility be Eligible as CSR Spending?, 14-4-2021, available at <> (last visited on 15-11-2021).

[14]Nitu Poddar, Whether Expense towards Corporate Environment Responsibility be Eligible as CSR Spending?, 14-4-2021, available at <> (last visited on 15-11-2021).

[15]Ministry of Environment, Forest and Climate Change, Office Memorandum, Standardisation of Environment Clearance Conditions for Non-Coal Mining Sector, F. No. 22-34/2018-IA.III (issued on 4-1-2019).

[16]Ministry of Environment, Forest and Climate Change, Office Memorandum, Standardisation of Environment Clearance Conditions for Non-Coal Mining Sector, F. No. 22-34/2018-IA.III (issued on 4-1-2019).

[17]Ministry of Environment, Forest and Climate Change, Summary Record of the 2nd Meeting of Expert Appraisal Committee for Environmental Appraisal of Industry-I Sector Projects Constituted under EIA Notification, 2006, available at

<,2ndEAC,28th30thDecember2015EACmeeting.pdf>(last visited on 15-11-2021).

[18]WP (C) No. 13252 of 2019.

[19]Ministry of Environment, Forest and Climate Change, Office Memorandum, Corporate Environment Responsibility (CER), F. No. 22-65/2017-IA.III (issued on 30-9-2020).

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