Institutionalising Corporate Environmental Responsibility (CER): A Legal Imperative for India’s Climate and Sustainability Agenda.

India’s Corporate Social Responsibility (CSR) framework, institutionalised through Section 135 of the Companies Act, 2013, marked a global milestone by mandating certain classes of companies to allocate at least 2% of their average net profits over the preceding three financial years toward socially beneficial activities. Over the past decade, this legal provision has enabled significant investment into health, education, rural development, and social welfare projects. 

However, as India faces the intensifying challenges of climate change, environmental degradation, and biodiversity loss, there is an urgent need to evolve from the traditional CSR paradigm toward a more focused, legally mandated framework for Corporate Environmental Responsibility (CER). The existing CSR obligations, while comprehensive, do not explicitly mandate corporate contributions to environmental restoration or climate mitigation. A legal and policy shift is therefore imperative.

CSR and CER: Distinct but Complementary

Although current CSR rules under Schedule VII of the Companies Act include provisions for "ensuring environmental sustainability" and "ecological balance," empirical data suggests environmental causes remain significantly under-prioritised.

According to the National CSR Portal (Ministry of Corporate Affairs), of the total ₹25,932 crore spent under CSR in the financial year 2021–22, only approximately ₹2,225 crore (9%) was allocated toward environment-related activities. This disproportion highlights the necessity for a distinct CER framework to ensure targeted and effective environmental action by the corporate sector.

The Climate Imperative for CER

India is among the most climate-vulnerable nations globally. According to the India Meteorological Department (IMD), there has been a 55% increase in extreme weather events in the last two decades. The Lancet Planetary Health Report (2020) attributes 1.67 million premature deaths annually in India to air pollution. In addition, the Reserve Bank of India (2022) has warned that climate change could result in a 2.5% annual decline in GDP by 2100 if not adequately addressed.

Despite India’s commitment under the Paris Agreement to reduce emissions intensity by 45% (from 2005 levels) by 2030 and achieve net-zero emissions by 2070, corporate participation in climate mitigation remains largely voluntary and unregulated beyond compliance mechanisms. Introducing CER as a formal legal obligation would bridge this critical gap.

Existing Legal Landscape: Gaps and Opportunities

India’s environmental governance is currently guided by several key legislations, including:

• The Environment (Protection) Act, 1986
• The Air (Prevention and Control of Pollution) Act, 1981
• The Water (Prevention and Control of Pollution) Act, 1974
• The Forest (Conservation) Act, 1980

These laws are primarily regulatory and compliance-focused. They impose penalties for violations but do not establish positive obligations for corporate entities to undertake environmental protection, restoration, or innovation initiatives beyond their statutory limits.

Moreover, guidelines such as the Business Responsibility and Sustainability Reporting (BRSR) framework, mandated by the Securities and Exchange Board of India (SEBI) for the top 1,000 listed companies, promote voluntary disclosures on environmental, social, and governance (ESG) parameters, but lack enforcement mechanisms.

Thus, the policy architecture lacks a dedicated, enforceable obligation for CER, leaving a critical void in the broader sustainability framework.

International Best Practices and Emerging Norms

Global precedents underscore the need for corporate environmental accountability:

• European Union: The Corporate Sustainability Reporting Directive (CSRD) mandates companies to report detailed environmental and climate-related impacts and risks.
• United States: The Securities and Exchange Commission (SEC) has proposed rules requiring climate-related disclosures, including Scope 1, 2, and 3 emissions.
• Southeast Asia: Countries such as Malaysia, Indonesia, and Singapore are adopting green taxonomies and sustainability-linked disclosures.

In light of these developments, India must align its corporate governance practices with international sustainability standards to remain globally competitive and environmentally resilient.

Policy Recommendations: Toward a Legal Mandate for CER

1. Incorporate CER within the Companies Act
   
   Amend the Companies Act, 2013 to introduce a distinct provision on CER, requiring corporates—particularly those with significant environmental footprints—to undertake dedicated environmental initiatives. This could be structured as an obligation separate from CSR or as an earmarked percentage (e.g., 30% of total CSR spend) for environmental causes.
2. Introduce a National CER Framework
   The Ministry of Environment, Forest and Climate Change (MoEF&CC), in coordination with the Ministry of Corporate Affairs, may develop a national policy or guidelines to define eligible CER activities, monitoring mechanisms, verification frameworks, and impact evaluation parameters.
3. Link CER Obligations to Environmental Impact
   
   CER responsibilities may be calibrated based on a company’s pollution load, carbon emissions, or environmental risk profile, assessed through Environmental Impact Assessments (EIA), carbon disclosure ratings, or other third-party tools.
4. Provide Incentives for CER Compliance
   
   Offer tax incentives, regulatory fast-tracking, or public recognition to companies undertaking credible CER initiatives—particularly in domains such as afforestation, carbon neutrality, waste management, and biodiversity conservation.
5. Ensure Public Disclosure and Accountability
   
   Mandate annual disclosures of CER initiatives through an online public portal, akin to the CSR portal, and introduce third-party audits to ensure transparency and accountability.

Observations

India stands at a critical juncture in its development trajectory, where economic growth must be reconciled with environmental stewardship. While CSR has enabled meaningful contributions to social welfare, it has not adequately addressed the environmental exigencies confronting the nation.

Mandating Corporate Environmental Responsibility (CER) through appropriate legal and policy frameworks is essential not only to support India's climate commitments but also to safeguard long-term economic and ecological resilience. The transition toward a green economy requires collective action, and the corporate sector must play a central, legally mandated role in this transformation.

Sources: Ministry of Corporate Affairs, National CSR Portal, MoEF&CC Reports, IMD, Lancet Planetary Health, RBI Climate Risk Report 2022, SEBI BRSR Guidelines, European Commission CSRD