While the war in West Asia has been examined from several angles, geopolitical, macroeconomic, and humanitarian, its impact on the social impact space has remained largely unexplored. This matters for a developing nation like India, whose mandatory corporate social responsibility (CSR) architecture will feel the reverberations of the economic shocks that travel through corporate profitability into the social purpose sector.
Under Section 135 of the Companies Act 2013, eligible firms must spend 2% of their three-year average net profit on CSR. Therefore, a profit hit in FY 2026-27 is felt only by FY 2029-30. This averaging mechanism is a feature, not a bug, as it was designed to prevent CSR from collapsing in any single bad year. But it also means that when a crisis hits, it happens when the sector has forgotten what caused it, and is, therefore, liable to misdiagnose it as donor fatigue or a tougher fundraising climate. Lagged effects are the hardest to plan for, and the easiest to misattribute.
The shock of the Covid pandemic offers clues about how India’s CSR architecture might respond to shocks stemming from tensions in West Asia. A study by the capital markets research firm Primeinfobase tracked the CSR spending of 1300 of the largest listed companies in India. It was found that in FY 2022-23, these companies spent ₹15,602 crore on CSR, against a legal requirement of ₹15,787 crore. Comparing 2019-20 and 2022-23, companies were spending ₹111 for ₹100 in 2019-20 and ₹99 for ₹100 by 2022-23. CSR as a share of company profits dropped to around 1.9% in 2022-23, below the legally prescribed 2% and the lowest level in five years. And on average, each of these companies spent ₹11.29 crore on CSR in 2022-23, roughly 9% less than in 2020-21.
The impact of the pandemic on CSR did not manifest as an immediate decline. Rather, it showed up as a steady reduction in the amount individual companies invested, two to three years after the shock, exactly as the three-year averaging mechanism would predict. Given that we are facing another crisis, it remains to be seen if Covid-era shocks will compound, and which kinds of non-profits bear the cost.
{{/usCountry}}The impact of the pandemic on CSR did not manifest as an immediate decline. Rather, it showed up as a steady reduction in the amount individual companies invested, two to three years after the shock, exactly as the three-year averaging mechanism would predict. Given that we are facing another crisis, it remains to be seen if Covid-era shocks will compound, and which kinds of non-profits bear the cost.
{{/usCountry}}The answer to these questions lies in how CSR operates in India.
Indian companies are channeling their CSR funds away from one-year, one-off projects towards longer commitments that span multiple years and track results more closely. They now lean towards organisations that demonstrate easily measurable impact. This tilts the balance towards large organisations, which are often urban, equipped with robust documentation systems, and the ability to report measurable targets.
Smaller organisations and those working in rural areas will struggle to clear the bar and access CSR funding because they often cannot present their work in the structured and measurable formats that corporate CSR teams require. Even though this problem was not directly created by the US-Iran war, the war will tighten the conditions under which it operates. When the CSR pool comes under pressure from an external shock, as we saw during Covid, there is less money to go around. When there is less CSR money to go around, the organisations that have already had the hardest time accessing funding will find it even harder.
Any analysis of the war in West Asia must consider this perspective.
First, researchers examining the societal impact of conflicts must also evaluate their effects on non-profit sectors in developing nations. This should be viewed as integral rather than incidental, as the health of these sectors has a bearing on society’s resilience against external shocks.
Secondly, CSR funders, regulators, and non-profit institutions have an approximate 18 to 24-month timeline before compliance challenges from the US-Iran war shock manifest. This period should be used to support smaller organisations, which are more vulnerable to external risks and already struggle to secure CSR funding in stable times, so they do not become disproportionately burdened when funding pools contract.
The question to be asked is which organisations can access funding, and whether the ones doing invisible work with longer impact timelines will still be standing when the shock arrives. The decisions being made now about how CSR funds flow and to whom will determine whether India's non-profit sector is in good shape when the next shock lands.
(The views expressed are personal)
This article is authored by Siddharth Dhote, senior associate (data analyst), Indian School of Development Management.