CSR must inherently include environmental responsibility: Supreme Court

New Delhi, Dec 20 In a significant ruling, the Supreme Court has said that corporate social responsibility cannot be separated from corporate environmental responsibility and companies cannot claim to be socially responsible while ignoring equal claims of the environment and other beings of the ecosystem.

A bench of Justices PS Narasimha and AS Chandurkar passed a slew of directions to protect the Great Indian Bustard, a species which is on the verge of extinction and faces threat from the operation of non-renewable power generators in Rajasthan and Gujarat.

"Therefore, the corporate definition of 'social responsibility' must inherently include environmental responsibility. Companies cannot assert to be socially responsible while ignoring equal claims of the environment and other beings of the ecosystem," the bench said.

It added that the Constitution of India, under Article 51A(g), imposes a fundamental duty on every citizen "to protect and improve the natural environment, including forests, lakes, rivers and wildlife, and to have compassion for living creatures."

"A corporation, as a legal person and a key organ of society, shares this fundamental duty. CSR funds are the tangible expression of this duty. Consequently, allocating funds for the protection of the environment is not a voluntary act of charity but a fulfilment of a constitutional obligation," the top court said.

The bench said under Section 135 of the Companies Act, 2013, Parliament institutionalised this duty by mandating companies to meet specific financial thresholds espousing social responsibility.

It added that the provision effectively codifies the principle that corporate profit is not solely the private property of shareholders but is partly owed to the society that enables its generation.

"The magic of legitimacy is in the perspective that private property is a trust," the top court said, adding that this statutory mandate redefines the traditional role of corporate governance.

It added that historically, a director's primary duty was to maximise value for shareholders. However, Section 166(2) of the Companies Act, 2013, dismantled this narrow view by imposing a broader fiduciary duty.

"Directors are now legally mandated to act in good faith not just for members, but for the best interests of the company, its employees, the shareholders, the community, and for the protection of the environment.

"This crucial expansion recognises that a corporation is an organ of society, and its 'social' responsibility extends to the wider community impacted by its operations," the bench underscored.

It pointed out, "Where corporate activities such as mining, power generation, or infrastructure threaten the habitat of endangered species, the "polluter pays" principle mandates that the company bears the cost of species recovery. CSR funds must, therefore, be directed towards ex-situ and in-situ conservation efforts to prevent extinction."

Holding that the obligation to protect endangered species is paramount, the bench said corporate duty must evolve from merely protecting shareholders to protecting the ecosystem.

"The non-renewable power generators operating in the priority as well as non-priority areas in Rajasthan and Gujarat must always remember that they share the environment with the Godawan, the Great Indian Bustard, and must undertake their activities as if they are guests in its abode," it said.

The top court passed the order on a plea filed in 2019 by environmentalist MK Ranjitsinh, seeking measures for the protection of the endangered Great Indian Bustard.

The apex court has been passing directions from time to time for protecting the species.

In April 2021, the top court had imposed restrictions on overhead transmission lines across nearly 99,000 sq km in Rajasthan and Gujarat. However, the order was later modified in March 2024 after the Centre flagged serious implications for India's renewable energy transition.

The court had then constituted a high-level expert committee to recommend scientifically grounded and balanced measures.

Accepting the expert committee's recommendations, the top court approved revised priority conservation areas of 14,013 sq km in Rajasthan and 740 sq km in Gujarat, rationalising earlier demarcations to focus protection on the last remaining strongholds of the species.

It declined the petitioners' request to further expand the Rajasthan priority area by adding 657 sq km in the Rasla-Degrai Oran region, holding that the expert committee had taken a holistic view based on field studies and extensive stakeholder consultations.

The top court has imposed strict restrictions within the revised priority areas, directing that no new wind turbines and no new solar parks or solar plants exceeding 2 MW capacity shall be permitted. It also barred the expansion of existing solar parks.

It further directed that no new overhead power lines, except those of 11 kV and below, shall be allowed in these areas, except through dedicated power corridors identified by the expert committee.