Building a CSR strategy

A CSR strategy is a company’s long-term answer to three questions: which problems it will work on, where, and how it will know whether it helped. The best strategies start from real need in a community and from what the company is genuinely placed to add, stay with a few themes and places for years, and use the CSR policy and each year’s annual action plan to carry the strategy out.

The law sets the floor, not the strategy. Section 135 of the Companies Act, 2013 decides how much a company must spend, Schedule VII decides the kinds of activity that count, and the Companies (CSR Policy) Rules, 2014 (the CSR Rules) set out who decides and how. This guide covers the rest: need, focus, consultation, portfolio, multi-year budgets, risk and exit, with a one-page template at the end.

What the law decides, and what it leaves to you

The CSR policy is where strategy meets law. The CSR Rules define it as a statement of “the approach and direction given by the board”, including “guiding principles for selection, implementation and monitoring of activities as well as formulation of the annual action plan” (Rule 2(1)(f)). A strategy gives the policy something to say. See the CSR policy and annual action plan.

Start from need, and from your strengths

Need. Begin with evidence about the people and places you might serve: government data such as the Census, district fact sheets from the National Family Health Survey and school data, conversations with communities and frontline workers, and a map of who already works there. Our guide to needs assessment sets out the methods.

Strengths. Then ask what the company can add beyond money.

The Ministry of Corporate Affairs’ FAQs put the idea well: “Use of corporate innovations and management skills in the delivery of ‘public goods’ is at the core of CSR implementation by the companies” (FAQ 3.17, General Circular 14/2021). The line to hold is that CSR serves the public, not the business. A skills centre open to young people across a district is CSR; a course that trains only your own future recruits is risky.

Focus: few themes, few places, long horizons

A company that funds everything achieves little. Strong programmes usually:

• choose two or three focus areas and stay with them for years;
• keep the geography compact, such as a cluster of blocks, because nearby work is easier to support and learn from;
• think in phases. A single ongoing project can run at most three financial years after the year it starts (Rule 2(1)(i); FAQ 6.3), so a ten-year commitment is a series of projects, each designed on the last one’s results.

Score your options before you choose, giving each criterion a score from 1 to 5:

Two government programmes are worth knowing when you choose places. NITI Aayog’s Aspirational Districts Programme, launched in January 2018, covers 112 districts that lagged on key indicators, and the Aspirational Blocks Programme, launched in January 2023, covers 500 blocks. CSR spending in aspirational districts rose from ₹651.43 crore in 2020-21 to ₹1,402.89 crore in 2022-23, according to figures the Ministry of Corporate Affairs gave Parliament in December 2024. Mapping your themes to the Sustainable Development Goals also helps you speak the language of government and other funders: see CSR and the SDGs.

Listen before you decide

Consultation is how a strategy avoids building things nobody uses. Talk to:

• communities, especially women, people with disabilities and marginalised groups, in their language and on their terms;
• local government: the gram panchayat, block and district officials, and frontline workers such as ASHAs (community health workers) and anganwadi workers (who run village childcare and nutrition centres);
• NGOs and other funders already working there, so you complement rather than duplicate;
• your own people, including employees who live near your sites, and your CSR committee and board.

Explain what you are doing and why, don’t promise what you can’t deliver, and share back what you heard before you design anything.

Designing the portfolio

Most companies combine them: one or two flagships, a grant portfolio around them and a small responsive line. Give each focus area a theory of change, a map of how your activities are expected to lead to the change you want and what must be true along the way: see theory of change. Then choose delivery routes project by project, as described in ways to implement CSR, and partners carefully: see choosing an NGO partner.

Budgeting across years

Your obligation moves with profits, because it is 2% of the average net profit of the three preceding years. Plan a multi-year envelope, and build the rules into it:

• Ongoing projects carry a year-wise allocation that the board monitors (Rule 4(6)).
• No reserves across years. At the year-end, unspent money for ongoing projects goes to the Unspent CSR Account within 30 days, and other unspent money to a Schedule VII fund within six months. Keep flexibility inside the year instead: the board can alter the annual action plan on the committee’s recommendation, with reasonable justification (Rule 5(2)). See unspent CSR money.
• Spending more creates an excess that, by board resolution, can be set off against the next three years’ obligations, excluding any surplus (Rule 7(3)).
• Overheads are capped at 5% of total CSR expenditure (Rule 7(1)).
• Impact assessment becomes mandatory when your average obligation reaches ₹10 crore, for projects of ₹1 crore or more (Rule 8(3)), so budget for it.

Risks, and planning your exit

Keep a risk register for the portfolio and review it with the CSR committee. The usual risks are a partner that can’t deliver, safeguarding in work with children or vulnerable adults, profits that fall and shrink later budgets, changes in government programmes or local politics, and damage to people or reputation from overclaiming or poor work. Due diligence, tranches, monitoring and honest reporting manage most of them; keeping multi-year commitments within a prudent share of the expected budget manages the rest.

Every project ends, so decide at the start how its benefits will last: government takes the work over, the community runs it, other funders step in, or it closes because the need has been met. Taper funding rather than stopping suddenly, tell partners and communities well in advance, and settle who will own any capital asset and pay for its upkeep. Rule 7(4) allows CSR assets to be held only by eligible charities, collectives of beneficiaries or public authorities: see capital assets in CSR.

A one-page CSR strategy

Review the strategy with your CSR committee each year when it prepares the annual action plan, and rewrite it every few years in the light of what the programmes have taught you. See the CSR committee.