Why has environmental restoration remained a weak CSR priority?

Every Indian boardroom today speaks the language of sustainability. Companies announce net-zero ambitions. Investors demand ESG disclosures. Annual reports carry pages of climate commitments, biodiversity goals, and renewable energy transitions. Environmental responsibility has become central to how corporate India presents itself to shareholders, regulators, and investors.

But follow the money flowing through India’s decade-old CSR regime, and a very different picture emerges.

In FY25, Indian companies spent nearly Rs 35,000 crore on Corporate Social Responsibility (CSR). Of this, just Rs 2,430 crore—less than 7%—went towards environmental sustainability and ecological balance. Over the last ten years, the environment has accounted for only 6.6% of cumulative CSR spending.

Education and healthcare dominated throughout, together absorbing more than half of all CSR in most years. In FY25, education alone took 35% of the total, nearly five times the environmental share. Rural development and livelihood enhancement each got roughly 7%.

This even though environmental sustainability was built directly into the original architecture of the CSR law. When mandatory CSR was introduced in 2014, the idea was not merely philanthropy. It carried an implicit logic of restitution: companies extracting profits from land, water, minerals, forests, and industrial activity were expected to reinvest a part of those profits into repairing social and ecological damage linked to growth.  

That restitution never fully happened.

Instead, a paradox emerged. Corporate India became increasingly serious about environmental responsibility inside the business through ESG disclosures but environmental restoration outside the business, through CSR spending, remained peripheral.

The result is a sustainability model where the environment aspect of ESG has become financially strategic but remains surprisingly weak in CSR.

Mandate Says Spend, Not Give Back

The CSR law requires eligible companies to spend 2% of profits on social responsibility activities. But it does not require companies to spend on repairing the environmental consequences of their own operations.

To elucidate, a mining company can spend its entire CSR budget on education. A manufacturing company dependent on groundwater can direct most of its CSR spending towards healthcare or rural development. A power company can remain fully compliant without meaningfully investing in ecological restoration.

The result is predictable: companies gravitate toward CSR categories that generate visible and immediate outcomes.

Schools can be inaugurated quickly. Hospitals demonstrate instant beneficiary numbers. Skill-development programmes produce measurable outreach. These projects fit naturally into annual reports, board presentations, and public communication. However, environmental restoration does not work that way.

“A significant reason companies prefer spending on education or healthcare is because the impact is immediately visible,” says Sai Priyanka Sajja, Co-Founder, Artha Samarth Consultancy LLP. “Building schools or supporting hospitals creates tangible outcomes that companies can easily communicate. Environmental sustainability projects are slower, and their impact takes years to become visible.”

That time lag creates a structural disadvantage for environmental CSR.

Groundwater recharges take years. River rejuvenation requires sustained intervention. Similarly, biodiversity restoration may become visible only over decades. Even afforestation projects produce meaningful ecological outcomes gradually as ecosystems mature.

For instance, Mahindra’s Project Hariyali, one of corporate India’s more visible environmental initiatives, has planted millions of trees. Tata Power has been breeding endangered Mahseer fish for the last five decades and releasing them into rivers by the millions. ITC had built a waste recycling network that touched 1.5 million households and kept 200,000 tonnes of material out of landfills every year. Reliance had ringed its industrial zones with green belts, planting five million trees and measurably cutting local air pollution. Hindustan Unilever had built 500 water conservation structures, bringing irrigation to 30,000 hectares of farmland.

But the actual value such as carbon sequestration, biodiversity support, ecosystem stabilisation emerges slowly over long periods, not annual reporting cycles.

“Environmental initiatives require long-term commitment, technical expertise and sustained monitoring, making them less attractive in many CSR portfolios. The trend is concerning at a time when climate change, water scarcity, pollution, waste management and biodiversity loss are emerging as critical challenges for both businesses and communities,” says Pooja Ghosh Executive Director, ESGRisk.ai, an ESG rating company.

Sajja further highlights that a large portion of CSR expenditure is often deployed in the final quarter of the financial year. That turns spending into more of a compliance exercise. Environmental projects require planning, continuity, and long-term monitoring. “But when timelines become compressed, companies naturally prefer projects that can be implemented quickly.”  

Environmental restoration rarely fits that model.

Watershed projects require scientific planning and community engagement. River restoration needs multi-year intervention. Biodiversity conservation demands monitoring and sustained investment. These are not projects that lend themselves to hurried year-end deployment.

Even when environmental CSR spending does happen, continuity often weakens after the initial intervention.

“Tree plantation is a common example,” says Sajja. “Planting trees is only the first stage. Ecological impact depends on survival, maintenance, and long-term care. But many projects focus on deployment rather than sustained restoration.”

The result is that environmental CSR often becomes episodic rather than restorative.

ESG is now deeply tied to enterprise value. Investors evaluate companies on emissions, climate risks, water usage, renewable energy adoption, and sustainability disclosures because these factors increasingly affect profitability, regulatory scrutiny, financing costs, and market perception.

Environmental responsibility inside the business has, therefore, become financially strategic, but CSR operates differently. It is an allocation of profits after they are earned. Its success is measured through spending, implementation, and compliance rather than strategic environmental outcomes.

Inside companies, the distinction is often institutional as well. ESG is increasingly driven by finance leadership, investor relations teams, and sustainability executives linked to business strategy. CSR is frequently managed separately through foundations, communications teams, or compliance structures.

One protects enterprise value. The other distributes enterprise profits. The incentives attached to each are fundamentally different. That distinction explains why companies are aggressively pursuing ESG targets while still allocating relatively little CSR capital towards environmental restoration.

After 10 years of mandatory CSR, corporate India has institutionalised giving. But it has not institutionalised ecological restitution.

“A more balanced allocation towards environmental sustainability will not only reflect responsible corporate leadership but also contribute meaningfully to India’s long-term development and climate goals,” says Ghosh.

With ESG expectations steadily gaining prominence among investors, regulators and consumers, CSR strategies must evolve beyond traditional welfare programmes. 

 

@NindakBaba