Supreme Court Resets CSR Mandate

The company building a hydropower project in Rasuwa had ambitious plans—not just to generate electricity but also to uplift the local community through Corporate Social Responsibility (CSR) initiatives. Improving healthcare, education and local infrastructure were high on the list.

However, as the project progressed, unexpected pressures began to mount. According to officials of the company, certain local individuals began demanding personal benefits, including vehicles and frequent travel allowances to Kathmandu. When the company explained that such expenses were not covered under CSR provisions, they were coerced into redirecting funds. What was meant for public good, were instead spent on personal perks. “This money was supposed to support the community, but it went to waste,” one official told New Business Age.

This case not only highlights the misuse of CSR funds by powerful individuals but also points to a broader trend in Nepal: CSR spending often serves as token gestures rather than delivering meaningful support to those who truly need it.

Across the country, many banks, financial institutions (BFIs) and industries appear to use their CSR budgets primarily for public relations—sponsoring events, funding photo-ops or branding initiatives—rather than for sustainable, impactful programs.

Now, the country’s highest court has intervened with a sweeping mandate aimed at reforming CSR practices.

CSR Must Benefit the Marginalized, Rules Supreme Court

In a landmark decision, the Supreme Court has ordered that CSR funds allocated by BFIs and industries must be used exclusively to benefit poor and marginalized communities. The order came in response to a writ petition filed by Advocate Shashi Basnet and eight others, raising concerns about the opaque and often self-serving use of CSR budgets.

The apex court ruled that CSR funds must not be spent on self-promotional events, infrastructure projects that do not directly serve marginalized communities, or employee perks. Instead, these funds must be channelled toward essential services such as housing, education, healthcare, child welfare and women's empowerment in the country’s most disadvantaged areas.

Citing the 2022/23 Nepal Living Standards Survey, which found that 20.27% of the population still lives below the poverty line, the top court emphasized the urgent need for CSR spending to play a meaningful role in poverty alleviation.

“Infrastructure built with CSR funds must directly benefit these communities,” the ruling stated, pointing to examples like the construction of private toilets, bathing facilities and basic housing as acceptable uses.

To ensure proper implementation and oversight, the Supreme Court has assigned clear responsibilities to several key institutions. It has tasked the Nepal Rastra Bank with overseeing how banks and financial institutions allocate and use CSR funds. Similarly, the Ministry of Industry, Commerce and Supplies has been told to ensure that industries direct their CSR allocations toward marginalized communities. Likewise, the Ministry of Law, Justice and Parliamentary Affairs has been instructed to draft a comprehensive CSR law and table it in the federal parliament within two years. This legislation is expected to bring clarity, consistency and enforceability to Nepal’s CSR framework.

The court also encouraged collaboration with credible social organizations to implement CSR programs that genuinely empower marginalized communities and help them to engage meaningfully with the state.

When Giving Is Just Branding

Despite the rise of powerful corporate groups, Nepal’s private sector has largely failed to cultivate a strong culture of philanthropic giving or socially impactful CSR. While isolated acts of generosity do occur, they are often overshadowed by a broader pattern of reluctant giving, self-promotion and a lack of sustained commitment to meaningful social transformation.

As income and wealth continue to concentrate among a select few, Nepal’s top 20% of earners hold 56.2% of the nation’s wealth, while the poorest 20% own just 4.1%. The Gini coefficient, a global standard for measuring inequality, stands at 0.58 for Nepal, highlighting the country’s growing wealth disparity.

Yet despite their considerable wealth, Nepal’s corporate houses have contributed only token amounts during times of national crisis. The private sector’s limited response during emergencies reveals the deep shortcomings of corporate philanthropy in the country. During the devastating 2015 earthquakes, for example, only about Rs 1.15 billion of the total Rs 6.81 billion raised for the Prime Minister’s Disaster Relief Fund came from the private sector. Most of it came from institutions rather than individual business leaders.

In many cases, CSR has become a tool for brand promotion rather than a vehicle for genuine social engagement. Even tree-planting drives are staged with corporate logos prominently displayed.

The annual CSR spending by multinational companies such as Unilever Nepal, Dabur Nepal and Bottlers Nepal ranges between Rs 12 million and Rs 24 million. Among Nepali corporate entities, Ncell and the Chaudhary Group have structured CSR initiatives, each supported by a dedicated foundation. Among wealthy Nepalis, Min Bahadur Gurung, managing director of the Bhatbhateni Group, stands out as a major contributor.

Misuse and Manipulation of CSR Funds

Nepal Rastra Bank’s own findings highlight the extent of the problem. A 2021 study revealed that many BFIs failed to disclose details of their CSR spending in their annual financial reports, despite being legally obligated to do so. Even more concerning, the majority of CSR funds were disproportionately directed toward urban centers, particularly in Bagmati Province, while rural and remote areas were largely overlooked.

Not much has changed since then. In 2023/24, 20 commercial banks collectively spent Rs 542.147 million on CSR initiatives. Once again, CSR spending was heavily concentrated in Bagamati Province, which received the largest share of allocations from most institutions. For instance, Everest Bank and Kumari Bank each allocated over Rs 12 million exclusively to Bagmati.

Among the top spenders, Global IME Bank led the way with Rs 71.88 million in CSR outlays. Nabil Bank followed with Rs 50.42 million, while Rastriya Banijya Bank and Nepal Investment Mega Bank each spent over Rs 43 million. CSR investments of these banks primarily focused on areas such as education and financial literacy, healthcare, environmental sustainability, disaster relief and other social development efforts.

“CSR funds are being diverted by top-level management and board members for their own benefit,” one senior banker said, requesting anonymity. “Most of the money went into branding exercises. Even when community events were held, they mostly served to promote the bank.”

Under the Industrial Enterprise Act, industries with annual turnover above Rs 150 million are required to allocate at least 1% of net profit to CSR. NRB’s guidelines for BFIs mandate the same contribution. However, vague definitions and weak enforcement have allowed CSR spending to remain largely self-regulated and opaque.

The Supreme Court’s intervention has thus come as a major course correction, transforming CSR from a discretionary corporate practice into a legally enforceable poverty-alleviation tool.

Court Ruling Sparks Debate on Corporate Freedom

While many have welcomed the Supreme Court’s directive as a push toward transparency and equity, the decision has also sparked concern within the business community over what they see as excessive micromanagement.

“CSR should not be dictated in such a prescriptive manner,” said Bhuwan Kumar Dahal, former president of the Nepal Bankers’ Association. “The government already collects taxes. Strictly telling companies where to spend CSR funds goes against the spirit of voluntary philanthropy.”

Dahal argues that CSR should retain some degree of strategic autonomy, allowing companies to align their social investments with both community needs and corporate goals. Globally, CSR is often understood as a hybrid of philanthropy and brand positioning, enabling firms to create long-term stakeholder value while contributing to public welfare.

Advocate Kirit Mani Adhikari echoed similar concerns, saying that existing laws already covered many of the areas emphasized by the court. “The Industrial Enterprises Act has already defined nine sectors for CSR investment. The NRB guidelines are also aligned with the Sustainable Development Goals,” he added.

According to Adhikari, the real gap lies not in legislation but in implementation. “Rather than drafting a new law, the focus should be on enforcing existing provisions and strengthening regulatory oversight. The apex court could have emphasized execution within the current legal framework.”

There are also fears that overregulation could dampen corporate enthusiasm for social spending. “A rigid and unpredictable regulatory environment reduces the willingness of companies to invest in long-term social projects,” said one industry executive. “It may even discourage foreign investment.”

Branding vs. Welfare: Redefining CSR’s Role

The ruling has also reignited the broader philosophical debate about the role of CSR. Is it merely charity—or a strategic investment in long-term development and brand goodwill?

Until now, many Nepali corporations and BFIs have engaged in a blend of both. While some initiatives—like financial literacy campaigns and free health camps—have addressed genuine needs, they have also doubled as public relations opportunities. For example, BFIs often highlighted their CSR programs in glossy brochures, annual reports and press coverage, using them to enhance their reputational capital.

This approach is not unique to Nepal. Globally, even major foundations like the Bill & Melinda Gates Foundation combine philanthropy with image-building. Critics argue that banning all branding from CSR might risk undervaluing a key motivator for sustained private sector involvement.

However, the court’s ruling takes a firm stand. “Using CSR funds for employee perks, tax evasion or donations to affiliated groups is misuse,” it stated. “Sponsoring events that primarily benefit the company or its associates is not legitimate CSR.”

The ruling demands transparency, accountability, and impact-driven spending—qualities often missing from corporate giving in Nepal to date.

Toward a Unified CSR Framework

The path forward is clear, at least from the court’s perspective. A consolidated CSR law, binding for all industries and financial institutions, must be drafted and introduced in parliament within two years.

The law ministry has been tasked with preparing the draft, while the enforcement responsibilities will be split between the NRB (for BFIs) and the industry ministry (for industrial entities).

Many in civil society and the legal community see this as an opportunity to formalize a social contract between businesses and communities. “A uniform law can introduce much-needed clarity, monitoring mechanisms, and compliance checks,” said a former government official involved in CSR policymaking. “But its design must strike a balance; it should be effective without becoming punitive.”

The Supreme Court’s ruling marks a turning point in how CSR is understood and practiced in Nepal. It shifts the paradigm from voluntary image-building to legally mandated impact delivery, focusing squarely on poverty alleviation and inclusion.

While the move has triggered pushback from some in the private sector, it has also brought long-overdue scrutiny to CSR practices that have too often served elite interests. If the upcoming legislation can marry accountability with operational flexibility, Nepal could set a valuable precedent for socially responsible capitalism in South Asia.

The message from the judiciary is unmistakable: Corporate profits come with public responsibility—and that responsibility must now be delivered in measurable terms.

(This report was originally publihsed in August 2025 issue of New Business Age Magazine.)