Corporate Social Responsibility (CSR) is often at the centre of discussions about private-sector engagement in development. Yet it is one of the most misrepresented and misunderstood concepts. CSR has recently made its presence felt in most businesses, often as a small department or unit, which is highly commendable. Fewer than 10 countries, including Nepal and India, have made CSR mandatory. In recent times, CSR has evolved, formalising its structure within the private sector.

It is common to hear that the Nepali private sector does not fully fulfil its social responsibility or that it uses CSR only for marketing. While there may be some truth to this argument, we often overlook the fact that the CSR fund from the Nepali private sector is much smaller. Until FY2082/83, CSR was mandatory for the manufacturing sector and Banking and Financial Institutions (BFIs), which were required to spend 1 percent of their net profit on social development activities. Even then, the requirement was limited to medium- and large-scale industries and to cottage and small industries with annual turnover above Rs150 million. 

In Nepal, where the industrial landscape is predominantly Micro, Small and Medium Enterprises (MSMEs), there are relatively few industries with profitability and annual turnover above Rs150 million. Hence, CSR funds from manufacturing industries are not very significant. Meanwhile, BFIs generate most CSR funds in Nepal, estimated at around Rs2 billion per annum. 

We now have a draft Company Act, 2083, which requires every company having annual transactions exceeding Rs250 million to deposit an amount equivalent to 1 percent of its net profit into a government-created CSR Reserve Fund, administered by a Steering Committee, constituted by the Government. With this new Act, Nepal will generate a fairly significant CSR fund, as it is not limited to the manufacturing sector like the previous Industrial Enterprise Act, 2080. From a public finance perspective, it may seem reasonable to have a centrally managed, consolidated fund that the government can spend on national development priorities. However, from a corporate or business perspective, it raises an important question: Is this truly Corporate Social Responsibility or merely another form of tax? 

At its core, CSR is not just about financial transactions or donations. It encompasses a company’s broader responsibility to manage its economic, social, environmental and ethical impacts. It is most effective when embedded within business strategy, influencing how companies source, produce, employ, invest and engage with communities. When CSR becomes a statutory obligation, it undermines its ethos as a way of doing business in a socially responsible, environmentally conscious and ethically sound way, with a shared vision. It is about how businesses create positive social value through their operations, relationships and investments. 

If Nepal is serious about leveraging the private sector as a development partner, the conversation must go beyond ceremonial regulatory CSR. We should explore how development objectives can be strategically aligned with business. Rather than asking how much CSR funding one can contribute, we can form alliances where development work and corporate interests converge to generate shared value. The major areas currently eligible for CSR in Nepal include education, health, natural disaster management, environmental protection, preservation of arts, culture and heritage, and livelihood development, mostly for poor and marginalised communities.  

For example, whenever a disaster strikes—whether an earthquake, flood, landslide, fire or extreme weather event—the government is often the first responder, followed closely by the private sector and philanthropists. We saw this in the recent Bhotekoshi disaster: the private sector voluntarily came together when the Nation needed it most. However, its role is mostly viewed through the lens of relief and response, rather than as a partner in disaster risk reduction and resilience building. 

Research from some prominent agencies suggests that investing $1 in resilience and management saves $4–$7 in response. This presents a compelling case for rethinking beyond ‘ceremonial CSR’ for private sector engagement. This is where Strategic CSR becomes important. Strategic CSR goes beyond one-time donations, relief distribution and support. It involves integrating social and environmental considerations into a company’s core business strategies, creating longer-term value for both society and business. Unlike ceremonial/traditional CSR, which often operates as a standalone philanthropic activity, strategic CSR focuses on sustainable impact, stakeholder engagement and alignment between business objectives and development outcomes. 

The concept is as simple as ride-sharing: you know the rider’s destination, so you can ask, “Can we also pick up or drop off someone along the way without detouring from their destination?” Instead of asking business support or doing something unrelated to their operation, where development needs extend beyond strategic CSR, the private sector may choose to top up through philanthropy, which serves as another important dimension of private sector engagement. During the Bhotekoshi flash flood, private helicopter service providers, freight companies and drone companies came together to provide their expertise through and beyond CSR.

The need for stronger collaboration is evident. According to the Doing Good Index 2024 on Nepal, only 43 percent of community-based organisations (CBOs) feel trusted by corporates, and less than 35 percent of CBOs receive corporate funding. This figure highlights a significant trust and collaboration gap between the development and private sectors. Nepal should view this as an opportunity. 

The future of private sector engagement in Nepal should therefore not be confined within the CSR Reserve Fund. If we truly want meaningful private sector engagement in development, we must stop viewing businesses merely as funding agencies. We should recognise them as capable strategic partners who can contribute their knowledge, technology, innovation and networks. 

The debate should not be limited to whether Nepal should focus on a CSR-to-CSR Reserved fund; it should instead discuss whether we can develop ways to encourage genuine development partnership rather than compliance-driven contribution. Only then shall we move towards a progressive nation that creates lasting value for both the economy and society.