India’s CSR skipping the innovation bus

Hyderabad: A recent research report by AIC-IIIT Hyderabad has revealed a startling disconnect in India’s Corporate Social Responsibility (CSR) landscape: less than 0.2 per cent of the country’s annual CSR funds are directed toward innovation. This revelation prompted a high-level roundtable discussion titled "Unlocking CSR for Startup Innovation in India", jointly organised by AIC-IIITH and Artha Samarth Consultancy, to explore the reasons behind this gap and chart a path forward.

India’s startup ecosystem has surpassed 90,000 registered ventures, signalling a robust culture of innovation. Yet, despite this momentum, CSR funds—amounting to tens of thousands of crores annually—remain largely absent from the innovation economy. The law permits it: Schedule VII of the Companies Act includes technology incubators and research as valid CSR activities. But in practice, the allocation is negligible.

The report identified that legal provisions and cultural hesitations are key factors. Participants at the roundtable noted that while the CSR framework technically accommodates innovation, its placement alongside traditional causes, like health and education, renders it a "force fit." This perception influences corporate behaviour, with CSR teams favouring short-term, visible outcomes, while startups operate on long-term, iterative cycles. The lack of a clear legal definition of "startup" further deters CSR officers from engaging with young, for-profit ventures.

Public Sector Undertakings (PSUs), which manage a significant share of CSR funds, face heightened compliance scrutiny and political oversight, making them especially risk-averse. As a result, innovation-driven startups are often sidelined in favour of conventional NGOs.

Further awareness and leadership gaps are another barrier, causing limited awareness among CSR professionals, many of whom come from HR or finance backgrounds and may not be fluent in the language of innovation. Leadership plays a crucial role: if decision-makers equate social good with traditional philanthropy—such as building schools or donating equipment—they may struggle to see the social value in funding a startup developing a green tech prototype or a digital health tool. The culture and communication divide in India’s broader cultural hesitation around risk and research also permeates CSR practices. However, companies like EPAM and Titan demonstrate that when CSR aligns with a firm’s innovation DNA, impactful models emerge. EPAM’s Social Impact Innovation Program and Titan’s Design Impact Movement were cited as successful examples.

Still, cultural alignment isn’t enough. A communication gap persists between corporates, incubators, and startups. Each speaks a different language—compliance, incubation, growth—with little shared vocabulary for impact. The roundtable recommended adopting global frameworks like the UN Sustainable Development Goals (SDGs) and Social Return on Investment (SROI) to create a common grammar for measuring progress.

The report highlighted collaborative models and policy reform. Participants emphasised that startup innovation should complement, not compete with, CSR. Many startups are tackling the very issues CSR aims to address—clean energy, health access, and inclusive technology. Flexible engagement models such as co-designed programmes and joint monitoring can align CSR’s short-term accountability with innovation’s long-term potential.

Industry associations were urged to play a convening role, organising masterclasses and impact showcases to build trust and awareness. Corporations can simplify proposal processes and mentor startups, while incubators can tailor programmes to CSR timelines.

Stressing policy reform was deemed essential; stakeholders called for updated definitions of startups, permission for multi-year CSR commitments, and relaxation of geographic constraints under the "local area preference" clause.

The way forward, according to the report, is "From Duty to Catalyst." The roundtable concluded with a compelling vision: CSR must evolve from a compliance exercise into a strategic catalyst for innovation. When patient capital meets agile experimentation, India’s next social revolution may well be powered not by charity, but by transformative ideas.