CSR & ESG

CSR and ESG in India: Building a Framework That Goes Beyond Compliance

India's mandatory CSR regime under Section 135 of the Companies Act is the floor, not the ceiling. Here's how forward-thinking companies are building ESG frameworks that create real value.

TALKLAWS Advisory Team· Corporate Advisory, CSR & ESG PracticeApril 8, 20267 min read

India was among the first countries to mandate corporate social responsibility through legislation. Section 135 of the Companies Act, 2013 requires qualifying companies to spend 2% of their average net profit on CSR activities. But in 2026, the conversation has evolved well beyond statutory compliance.

Section 135: The Compliance Baseline

Companies with a net worth of ₹500 crore or more, or turnover of ₹1,000 crore or more, or net profit of ₹5 crore or more are required to constitute a CSR Committee, formulate a CSR policy, and spend at least 2% of the average net profit of the preceding three years on eligible CSR activities.

Eligible activities include education, healthcare, environmental sustainability, rural development, and more — Schedule VII lists all approved categories
CSR spend can be through registered implementing agencies or the company's own foundation
Unspent amounts must be transferred to specified funds (PM-CARES, national clean energy fund, etc.) within prescribed timelines
Non-compliance attracts penalties under the Companies Act

Beyond Compliance: ESG as Business Strategy

ESG — Environmental, Social, and Governance — represents a broader framework for measuring non-financial performance. Unlike CSR (which is about spending), ESG is about how a company operates. Institutional investors, PE funds, and global supply chains are increasingly applying ESG screens in investment and procurement decisions.

The SEBI BRSR mandate has made ESG reporting mandatory for top 1,000 listed companies by market cap. For companies with global investors or supply-chain exposure, ESG performance is becoming a commercial necessity, not just a regulatory one.

Building an Integrated CSR-ESG Framework

Materiality assessment: Identify which ESG factors are most material to your specific business, sector, and stakeholders
Baseline measurement: Establish current performance metrics for carbon footprint, water usage, diversity ratios, supply chain ethics
Policy integration: Embed ESG principles into procurement, HR, and operational policies — not just in a standalone CSR policy
Governance: Assign board-level accountability for ESG, ideally through the CSR/ESG committee
Reporting: Adopt recognised frameworks (GRI, TCFD, BRSR) for credible, comparable disclosure
Targets: Set time-bound, measurable targets with external verification

Companies that treat CSR as a compliance exercise and ESG as a reporting burden are missing the strategic opportunity. Those that embed sustainability into their business model will find it an advantage in attracting investment, talent, and customers in the decade ahead.

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