#Understanding CSR Funding: Myths, Misuse, and the Need for Due Diligence

Corporate Social Responsibility (CSR) funding is a crucial tool for promoting sustainable development, empowering marginalized communities, and addressing social and environmental challenges. However, recent trends have shown a worrying rise in CSR fund misappropriation and fraudulent schemes, where unethical entities exploit loopholes to divert funds for non-essential or misleading purposes. This article aims to clarify what CSR funding is truly meant for, debunk myths surrounding it, and provide guidance on how to detect and avoid CSR-related scams.

The True Purpose of CSR Funding

CSR funding is not a donation or a giveaway; it is a strategic investment by corporations in social causes that align with their corporate ethos and legal obligations. Under Section 135 of the Companies Act, 2013 (India), eligible companies must contribute at least 2% of their net profits towards CSR activities, focusing on:

• Education & Skill Development
• Healthcare & Sanitation
• Sustainability & Climate Change Initiatives
• Rural Development
• Women Empowerment
• Disaster Relief & Rehabilitation

CSR funds are meant to create long-term, measurable impact, not to provide one-time personal benefits such as home appliances, subsidized scooters, or direct financial giveaways, which have become misleading tactics used by fraudulent organizations.

Why CSR Funds Are Not for Individual Benefits

Many fake NGOs and fraudulent schemes attempt to attract people by falsely claiming that they can use CSR funds to provide discounted vehicles, free home appliances, or personal grants. This is a gross misrepresentation of CSR principles. CSR funds are allocated for community-wide, sustainable development projects that uplift underprivileged sections through long-term empowerment, not individual material benefits.

Common misleading schemes include:

• Subsidized Scooters from CSR Funds: Fraudsters claim that CSR funds can be used to provide two-wheelers at half price for personal use. However, CSR funds cannot be used to finance personal purchases or private gains.
• Home Appliances Through CSR Funding: Some organizations claim to provide electronic goods like fridges, televisions, or washing machines under CSR schemes. Such schemes do not fall under the purview of legitimate CSR activities.
• Fake Scholarships & Employment Promises: Fraudsters promise monetary benefits to individuals under CSR but fail to deliver, often disappearing after collecting registration fees.

Such fraudulent practices harm genuine NGOs and mislead beneficiaries, resulting in reputational damage to CSR initiatives.

How to Identify & Avoid CSR Scams?

The rise of fake CSR initiatives requires corporates, NGOs, and beneficiaries to exercise extreme caution. Here’s how due diligence can help in identifying real vs. fake CSR opportunities:

1. Verify the NGO’s Legitimacy

• Check if the organization is registered under the Ministry of Corporate Affairs (MCA) & NGO DARPAN (NITI Aayog).
• Look for past project reports, audited financial statements, and impact assessments.
• Ensure the NGO has a valid FCRA (Foreign Contribution Regulation Act) certificate if it receives foreign CSR funds.

2. Examine the Project Proposal

• Genuine CSR initiatives clearly define their objectives, beneficiaries, and expected outcomes.
• The project should align with the CSR guidelines under the Companies Act, 2013.
• Be wary of organizations making unrealistic promises of personal benefits.

3. Verify the Funding Source & Company Details

• CSR funding should be linked to a legitimate corporate entity and not an individual.
• Corporations publish Annual CSR Reports under regulatory compliance; cross-check details on the company’s website.
• Always ask for legal documentation of CSR commitments and approvals.

4. Avoid Upfront Payments or Registration Fees

• Real CSR projects do not charge money from beneficiaries.
• Fraudsters often collect deposits, only to disappear later.
• Any organization demanding upfront payments under the guise of CSR is likely a scam.

AISDC’s Commitment to Ethical CSR Practices

The All India Sustainable Development Council (AISDC) is committed to promoting transparent, accountable, and impactful CSR practices across India. As an organization actively engaged in sustainable development, we ensure that:

• CSR funds are utilized strictly for community welfare initiatives, adhering to legal and ethical standards.
• We conduct rigorous due diligence on project partners to eliminate fraudulent activities.
• Our programs are aligned with 17 UN Sustainable Development Goals (SDGs)
• We provide awareness programs to corporations, NGOs, and citizens on recognizing CSR fraud and engaging in ethical funding.

A Call for Vigilance & Responsible CSR Engagement

CSR is a powerful tool for driving social and environmental change. However, misuse and fraud threaten the credibility of real CSR efforts. It is crucial for businesses, NGOs, and individuals to be aware of fraudulent schemes that promise personal benefits instead of sustainable impact.

By conducting proper due diligence, verifying funding sources, and staying vigilant, we can ensure that CSR funds serve their true purpose: creating long-term, meaningful change in society. AISDC urges all stakeholders to engage in authentic, transparent, and ethical CSR partnerships to build a more sustainable and equitable future.

For further inquiries or collaborations, reach out to AISDC India at [email protected]

Under Public Interest Published by All India Sustainable Development Council (AISDC), 2025.