Can Indian CSR funds be used for afforestation and environmental projects?

What Section 135 actually creates

India is unusual in having made corporate social spending a statutory requirement rather than a matter of corporate goodwill. Companies crossing the thresholds set in Section 135 of the Companies Act 2013 are required to spend at least two per cent of their average net profits over the three preceding financial years on activities listed in Schedule VII.

The word that matters is required. This is not a budget a company sets because it wants to. It is an obligation, tracked and reported, and a company that fails to spend has to explain why and transfer unspent amounts as the rules direct.

For anyone raising money for environmental work, that changes the nature of the conversation. You are not asking a company to be generous. You are offering a route for a company to meet an obligation it already carries, in a way that produces something it can report and stand behind. Those are very different conversations, and the second one is considerably easier.

Where environmental work sits

Schedule VII lists twelve broad categories of eligible activity. Environmental sustainability is one of them, expressed to cover ecological balance, protection of flora and fauna, animal welfare, agroforestry, conservation of natural resources, and maintaining the quality of soil, air and water.

In practice this covers most serious environmental work: afforestation and assisted natural regeneration, watershed development, wetland and lake restoration, biodiversity conservation, mangrove and coastal work, soil health programmes, agroforestry and regenerative agriculture, air quality monitoring, and waste management.

Land restoration and the measurement work that verifies it therefore fall comfortably inside the category. The eligibility question is rarely the obstacle.

The obstacles that actually stop projects

Eligibility is the easy part. Four practical requirements decide whether a company can route money to you, and they stop more projects than the rules ever do.

Registration. An implementing organisation generally needs a CSR registration number, obtained by filing Form CSR-1 with the Ministry of Corporate Affairs. Without it a company cannot route CSR spending through you at all. This is the single most common reason a willing company cannot proceed, and it is entirely avoidable by registering early.

No commercial benefit flowing back. CSR spending must not be structured so that the company gets a business advantage in return. This is why a CSR arrangement is documented as a project with defined outcomes rather than as a purchase. If you also sell that company something commercially, keep the two relationships clearly separate in the paperwork.

It cannot be your ordinary business. Activities undertaken in the normal course of the company’s own business do not qualify as its CSR. This matters when the funder is an industrial group whose core operations touch land or energy, and it is worth checking early rather than after a proposal is written.

Reporting. CSR spending is disclosed, and larger projects carry impact assessment expectations. A company is accountable for what its money produced, which means it needs an implementing partner who can report credibly. Organisations that publish measured outcomes have a real advantage here, and organisations that publish only photographs create a problem for the company that funded them.

How to make a project fundable

The strongest CSR proposals share a structure, and it has little to do with how moving the cause is.

Define an outcome that can be measured rather than an activity that can be counted. Hectares under restoration with survival measured after a full dry season is an outcome. Saplings planted is an activity, and it is the metric that has produced two decades of plantations nobody checked.

State the measurement method before the project starts, so the company knows in advance what it will be able to report. Name what could go wrong and what happens if it does, because a proposal with no risk section reads as either naive or evasive, and a CSR committee has seen enough of both.

A note on where CSR should sit in a business

CSR money is well suited to funding the establishment of new capacity, which is the riskiest and slowest part of environmental work. It is badly suited to covering salaries and running costs on a standing basis, because that creates an annual dependency and an organisation that has to raise money every year cannot credibly commit to land for twenty.

We keep that line explicit in our own funding policy, and we would rather say which side of it a particular rupee sits on than blur the two.

The CSR rules and Schedule VII have been amended several times since 2013. Confirm current thresholds, categories and filing requirements against the Ministry of Corporate Affairs before relying on this page.

Related questions

How much are Indian companies required to spend on CSR?

Companies that cross the thresholds set in Section 135 of the Companies Act 2013 must spend at least two per cent of their average net profits of the three immediately preceding financial years on activities listed in Schedule VII.

Is CSR money a grant or a payment for services?

It is neither, exactly. CSR spending must be applied to eligible activities rather than to the company's ordinary business, and it cannot be structured so that the company receives a commercial benefit in return. That is why a CSR arrangement is documented as a project with defined outcomes and reporting rather than as a contract for services.

What does a company need before it can give CSR funds to an implementing organisation?

The implementing entity generally has to be registered with the Ministry of Corporate Affairs and hold a CSR registration number, obtained by filing Form CSR-1. Without it, a company cannot route CSR spending through that entity, which makes the registration a practical prerequisite rather than a formality.