{"id":75342,"date":"2026-09-17T11:30:00","date_gmt":"2026-09-17T06:00:00","guid":{"rendered":"https:\/\/idronline.org\/?post_type=article&p=75342"},"modified":"2026-09-17T11:26:32","modified_gmt":"2026-09-17T05:56:32","slug":"a-csr-rule-that-needs-to-go","status":"publish","type":"article","link":"https:\/\/idronline.org\/kn-in\/article\/philanthropy-csr\/a-csr-rule-that-needs-to-go\/","title":{"rendered":"A CSR Rule that needs to go"},"content":{"rendered":"

We, the people behind Zerodha<\/a>, have been actively investing not just in start-ups but also in social enterprises and nonprofits that create a positive impact in society. <\/p>

We use the word ‘invest’ and not ‘donate’ because we firmly believe that funding nonprofit social enterprises and endeavours is an investment in the future. They are as important to us as our for-profit start-up investments. For instance, with the Rainmatter Foundation<\/a>, we have committed significant philanthropic capital to organisations working across a broad spectrum of pressing problems around climate change, environmental preservation, and livelihoods. Elsewhere, we support initiatives across education, science, research, public-good open-source technologies, preservation of arts, literature, and knowledge commons.<\/p>

We embarked on this journey almost a decade ago, not because corporate social responsibility (CSR) is a legal mandate but because we see it as our ethical and social commitment towards the nation. And, after many years of philanthropic and CSR investments, we have realised that certain compliance norms, while originally intended to create positive outcomes, have diverged over time and become serious impediments to efficient and impactful societal investments. <\/p>

\"What<\/a><\/div>

A CSR rule that needs to go<\/h3>

One such example is the egregious Rule 8(3)<\/a> of the Companies (CSR Policy) Rules, 2014. It stipulates that companies with an average CSR obligation of INR 10 crore or more over the past three financial years must independently assess the impact of each CSR project that cost INR 1 crore or more and was completed at least one year ago.<\/p>

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The statutory impact reporting requirement forces organisations to reduce complex, enduring societal change into a set of metrics every 12 months.<\/p>\n<\/blockquote>

We have seen first-hand that the most consequential and long-term societal problems—from air quality to climate resilience to education—require years, sometimes decades, of sustained, patient efforts. Of course, this is not really new knowledge, but the lesson for us has been that even problems that appear simple turn out to be complex once you dig deep. Such problems rarely have single, one-size-fits-all solutions or interventions, and much of the work relies on large-scale experimentation, long-term institution building, and even behavioural change. Most critically, systemic problems are fundamentally not quantifiable and their depth and nature cannot be measured simply by metrics such as ‘X trees planted’, ‘X people served’, or ‘X air purifiers installed’. These can show activity, but not ‘impact’.<\/p>

And yet, the statutory impact reporting requirement forces organisations to reduce complex, enduring societal change into a set of metrics every 12 months. It forces them to compress their mental models, strategies, and actions into a tiny, arbitrary time frame. What is worse is that this skews incentives and compels organisations to work on short-term projects that are quantifiable and produce numbers specifically for impact reporting, while taking away the focus from long-term thinking.<\/p>

We doubt anyone will disagree with the notion that what India needs is sustained efforts and patient capital across domains, be it in our social initiatives or our R&D ambitions.<\/p>

\"A<\/source><\/source><\/source><\/picture><\/a>
The most consequential and long-term societal problems require years, sometimes decades, of sustained, patient efforts. | Picture courtesy: Pexels<\/a><\/figcaption><\/figure>

A heavy burden<\/h3>

Materially, the cost incurred by a nonprofit, which often runs on a shoestring budget of hard-earned CSR funding, grants, or donations, to produce a single impact report can run into lakhs. In addition, it requires weeks or months of effort to produce, which diverts resources away from core work. The cost generally ranges from INR 1 lakh to INR 5 lakh per assessment report per year—a substantial amount for something for which the readership is likely close to nil. This number can also be in double-digit lakhs when big-name consultants are engaged. Needless to say, for philanthropic foundations and CSR initiatives that commission these reports on behalf of their grantees, this forms a large cost centre—money that should ideally go into social impact.<\/p>

\"donate<\/a><\/div>

Unlike profit and loss (P&L) statements in for-profit organisations that can be easily analysed, who out there is actually reading forced numerical abstractions of a multitude of complex societal problems on an annual basis? And how exactly does one compare the ‘impact’ of two lakes cleaned versus a thousand saplings planted?<\/p>

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For India’s progress, it is imperative that strong ecosystems are created and sustained for the long term. <\/p>\n<\/blockquote>

We must ask ourselves what ramifications for national development and social progress these impact reports have had. Personally, in the many years that we have been investing in nonprofits and social enterprises, we have yet to see a meaningful outcome from this exercise. What it has inadvertently done is spawn a lucrative reporting industry that generates a massive volume of reports every year yet rarely helps or guides actual, impactful work on the ground. A self-perpetuating system where the compliance burden keeps growing.<\/p>

This loss in capacity, time, resources, and opportunity costs us as a nation. For India’s progress, it is imperative that strong ecosystems, be it in science and research, environmental health and wealth, or arts and culture, are created and sustained for the long term. For this, patient capital and big-picture thinking and commitment are required, which are severely impeded by such misaligned motivations.<\/p>

We strongly believe that a simple reform addressing this particular issue could unburden an entire sector almost immediately and have far-reaching effects.<\/p>

Make impact assessment reports voluntary<\/h3>

We recently wrote to the Ministry of Corporate Affairs (MCA) and the Niti Aayog to plead our case. We said that impact reporting should be a voluntary best-practice guideline rather than a mandatory obligation, leaving the decision to commission an assessment to the company’s board or CSR committee. Anecdotally, we know that a large number of CSR and philanthropic offices share this view, not to mention the vast majority of nonprofit organisations out there.<\/p>

This view aligns with the spirit and intent of the original recommendations of the High-Level Committee on CSR (2018)<\/a>, which was set up by the MCA under the chairmanship of Injeti Srinivas to review India’s CSR framework and recommend measures to strengthen the ecosystem. It correctly perceived impact assessments primarily as a means for companies to learn from past spending and plan future CSR effectively. In fact, the MCA’s own clarification in General Circular No. 14\/2021<\/a> describes the purpose as feedback to help companies make considered decisions, allocate resources better, and deepen CSR impact, rather than being an exercise in compliance.<\/p>

We would like to end by recalling Goodhart’s Law, “When a measure becomes a target, it ceases to be a good measure.”<\/p>

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Know more<\/h3>