Supreme Court Links CSR to Ecosystem and Species Protection

Recently, the Supreme Court interpreted Corporate social responsibility (CSR) to include environmental responsibility inherently.

Background

• Case: The Supreme Court delivered a judgment on petitions highlighting the cause of a near-extinct bird species — the Great Indian Bustard.

About Corporate Social Responsibility (CSR)

• Definition: CSR is the responsibility of companies to contribute to the welfare of society, the environment and the economy while conducting business.
• Criteria: CSR is mandatory  for companies under Section 135 of the Companies Act, 2013, meeting the following criteria:
  • Net worth of ₹500 crore or more, a turnover of ₹1000 crore or more, or a net profit of ₹5 crore or more in a financial year
• CSR Spending Requirement: Such companies must spend at least 2% of their average net profits of the preceding three years on CSR activities.

Constitutional Basis of the Judgment

• Applicability of Article 51A(g): The Court brought corporations within the ambit of Article 51A(g) of the Constitution. 
  • It stated that environmental spending under CSR amounts to the fulfilment of a constitutional obligation.
  • Article 51A(g) of the Indian Constitution imposes a duty to protect and improve the natural environment, including forests, lakes, rivers, and wildlife, and to have compassion for living creatures.

Key Points of the Judgement

• Fundamental Duty of Corporations: The Supreme Court held that the legal person of a corporation has a fundamental duty to protect the environment and prevent species extinction as a key organ of society.
• Expansion of Corporate Responsibility: The Court stated that corporate responsibility must evolve beyond protecting shareholders to protecting the ecosystem.
• Limits of Social Responsibility Claims: The Court held that companies cannot claim to be socially responsible while ignoring environmental and other living beings’ rights.
• Rejection of Charity-Based Approach: The use of CSR funds for environmental protection is not a charitable act.
• Application of the Polluter Pays Principle: Where corporate activities, such as mining, power generation, or infrastructure, threaten the habitat of endangered species, the ‘polluter pays’ principle mandates that the company bear the cost of species recovery. 
  • CSR funds must, therefore, be directed towards ex-situ and in-situ conservation efforts to prevent extinction
  • Great Indian Bustard (GIB) Context: The Court stated that non-renewable power generators operating near GIB habitats share the environment with the bird and such power generators must conduct their activities as “guests in its abode”.

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Other Directions Given By the Supreme Court

• Revision of Priority Areas: The Supreme Court upheld the expert committee’s recommendation to revise the priority areas for the Great Indian Bustard.
  • The revised priority area in Rajasthan was fixed at 14,013 sq. km.
  • The revised priority area in Gujarat was fixed at 740 sq. km.
    • Priority Area: It is a critical habitat identified for focused conservation, monitoring, and protection to ensure the survival of the Great Indian Bustard.
• Conservation and Monitoring Directions: The Court directed immediate implementation of the committee’s recommendations for in-situ and ex-situ conservation, monitoring in revised priority areas, and long-term studies on the impact of climate change on the Great Indian Bustard.
• Power Corridor Direction: The Court accepted the committee’s recommendation for a power corridor up to 5 km wide, located at least 5 km south of the southern-most enclosure of the Desert National Park in Rajasthan.

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