AIC-IIITH Roundtable Highlights Barriers To CSR For Innovation

A recent AIC-IIITH research report highlighted that less that 0.2% of India’s annual CSR funds go towards innovation. This prompted a roundtable discussion of related stakeholders to brainstorm on the existing gaps and suggestions on how CSR can evolve from a mere duty to a catalyst for innovation and impact. Below are the highlights.

When India’s startup ecosystem crossed 90,000 registered ventures, it became clear that innovation had firmly taken root in the country’s economic imagination. Yet, despite this explosion of ideas and enterprise, one question lingers: why are India’s Corporate Social Responsibility (CSR) funds – running into tens of thousands of crores each year – not flowing toward the country’s innovators?

It’s a paradox hiding in plain sight. The law already allows it. Schedule VII of the Companies Act explicitly lists technology incubators and research as eligible areas for CSR spending. And yet, less than 0.2% of India’s annual CSR corpus finds its way to startup innovation. These were the findings of AIC-IIITH’s recent research. 

This gap – between permission and practice – is what the recent round table discussion titled “Unlocking CSR for Startup Innovation in India” held on 25 September 2025 and organized jointly by AIC-IIIT Hyderabad, the social-tech incubator of IIITH and Artha Samarth Consultancy, set out to explore. Drawing insights from convened key stakeholders across corporates, incubators, industry associations, and ecosystem stakeholders, the discussions deep dived into the structural, cultural, and interpretive reasons behind this persistent disconnect, while charting a pathway toward change.

A Law Lost in Translation
On paper, the CSR framework seems friendly to innovation. In practice, it tells another story. The inclusion of “technology incubators” in the CSR schedule, though well-intentioned, sits awkwardly among traditional social causes like health, education, and sanitation. It feels like a “force fit,” the participants at the roundtable noted – an addendum rather than a core intent.

This perception shapes behavior. Companies see CSR as an annual expenditure, tied to immediate, visible outcomes. Startups, however, work in cycles measured not in months but in years – developing solutions that often fail before they succeed. The result is a mismatch of expectations: one side demands short-term impact, the other promises long-term transformation.

The law’s silence on what exactly constitutes a “startup” only adds to the confusion. Many CSR teams, wary of ambiguity, prefer safer bets – nonprofits and NGOs – over young, for-profit ventures. Public Sector Undertakings (PSUs), which control a significant portion of CSR funds, face even tighter compliance scrutiny and political oversight, making them especially risk-averse.

The Awareness and Leadership Gap
Beyond legal ambiguity lies another, quieter barrier: awareness or the lack thereof. Many CSR officers simply don’t know that innovation-driven startups fall within their mandate. Others understand it but lack the leadership backing to take the leap. CSR decisions are often made by professionals from HR or finance backgrounds, who may not be familiar with the language of innovation or its uncertain, iterative pathways.

Personal experience also plays a role. If a leader’s worldview of “doing good” is shaped by traditional philanthropy – building schools or donating medical equipment – it is hard to imagine funding a startup developing a digital diagnostic tool or a green tech prototype. Innovation, for many, still feels too commercial to be “social.”

Culture, Communication, and the Missing Framework
India’s broader culture around innovation mirrors this hesitation. Research and risk-taking have rarely been celebrated at scale, and CSR is no exception. Corporates that do embrace innovation – typically those rooted in technology or engineering, such as EPAM and Titan – show that culture makes a difference. EPAM’s Social Impact Innovation Program and Titan’s Design Impact Movement are proof that when CSR aligns with a company’s DNA, it can nurture meaningful, scalable solutions.

However culture alone isn’t enough. There’s also a communication chasm between corporates, incubators, and startups. Each speaks its own language – of compliance, incubation, or growth—with little shared vocabulary to measure or articulate impact.

CSR seeks short-term, tangible outcomes; startups deliver long-term, systemic change. Without a shared impact framework, these worlds struggle to meet halfway. The round table participants were unanimous in recommending the usage of globally recognized tools like the UN Sustainable Development Goals (SDGs) and Social Return on Investment (SROI) to bridge this gap, thereby creating a common grammar of impact and progress.

Realigning Purpose and Practice
At the conference, arguments were made in favour of making sure that startup innovation didn’t compete with CSR, but rather complement it. After all, many startups are solving precisely the challenges that CSR seeks to address: clean energy, health access, livelihood creation, and inclusive technology.

By repositioning startup support as a direct enabler of CSR goals – rather than a risky outlier – corporates can unlock enormous potential. Flexible models such as direct product deployment, co-designed programs, and joint monitoring frameworks can align the short-term accountability of CSR with the long-term gestation of innovation. When co-created thoughtfully, these partnerships can deliver both measurable impact and sustainable transformation.

Bridging Through Ecosystem Collaboration
The conference highlighted the crucial role of industry associations in driving this shift. As trusted conveners of corporate leadership, they can organize masterclasses, closed-door dialogues, and impact showcases to demystify startup collaboration. The goal is not just awareness, but social proof or real examples that demonstrate how CSR and innovation can thrive together.

Corporates, for their part, can simplify proposal frameworks, encourage employee mentorship, and fast-track decision-making to avoid missed opportunities. Incubators, meanwhile, can adapt their programs to corporate priorities, offering flexible engagement models that fit within CSR timelines.

Policy Reform: Updating the Rules of the Game
Finally, the participants urged to bring about policy modernization. India’s CSR law was drafted more than a decade ago, before the startup boom. Today, it needs to evolve.

The stakeholders recommended clear definitions of startups within the law, explicit permission for multi-year CSR commitments, and relaxation of the “local area preference” clause that limits geographic flexibility. Such reforms would not only remove compliance bottlenecks but also signal national recognition of innovation as a legitimate social investment.

From Compliance to Catalysis
In its closing reflection, the round table made a powerful point that unlocking CSR for startups is not merely about tweaking regulations but it’s about redefining trust, language, and leadership. CSR brings patient, socially legitimized capital; startups bring agility, experimentation, and scale. Together, they can accelerate India’s progress toward inclusive development. But this will happen only when CSR evolves from a checkbox exercise into a strategic catalyst for innovation.