Responsibility Laundering: What Switzerland’s Sustainable Business Conduct Act Reveals About the Structural Blindness of India’s CSR Mandate

[Arnav is a student at NALSAR University of Law.]

On 1 April 2026, the Swiss Federal Council opened public consultation on the draft Federal Act on Sustainable Business Conduct (SBCA). The draft is Switzerland’s indirect counterproposal to the second Responsible Business Initiative, which seeks to hold Swiss parent companies liable for human rights and environmental harm caused by their foreign subsidiaries. The Federal Council opposes the initiative in its current form but has responded with a counterproposal with (1) mandatory risk-based supply chain due diligence for very large enterprises, (2) a dedicated supervisory authority with administrative sanctions reaching up to three percent of global annual turnover, and, most significantly, (3) a proposed civil liability regime for damage caused by foreign subsidiary conduct where the parent company can be shown to have failed its due diligence obligations. 

For India, the SBCA is more than a comparative curiosity. It is a mirror. What it reflects is a structural flaw in India’s Section 135 of the Companies Act, 2013 (CA 2013) . A mandatory corporate social responsibility (CSR) regime that regulates the downstream disbursement of profits without examining the upstream conduct that generates them. This article terms that flaw “responsibility laundering,” which is the use of mandatory philanthropic spending to discharge, in form if not in substance, a corporate obligation to society, while the conduct that generates the profits being distributed remains unconstrained by law. 

The argument is developed in four steps. First, the SBCA’s tripartite architecture of reporting, due diligence, and civil liability is set out to establish a comparative baseline. Second, Section 135 is examined against that baseline to identify what India has built and what it has not. Third, the “responsibility laundering” concept is developed and illustrated. Fourth, the Supreme Court’s recent judgment in MK Ranjitsinh is assessed as a significant but ultimately incomplete judicial intervention that strains the philanthropy model without escaping it. The conclusion is that until India enacts a civil liability pillar its CSR framework, it will remain structurally incapable of addressing the problem that Switzerland is now legislating to solve.

The Swiss Model: Three Pillars of Corporate Responsibility

The SBCA, deliberately calibrated against the simplified post-Omnibus EU framework (the 2025 Omnibus package that narrowed the scope and pushed back the timelines of the EU's Corporate Sustainability Due Diligence Directive and Corporate Sustainability Reporting Directive), rests on three obligations.

First is a reporting obligation. Enterprises exceeding 1,000 full-time employees and CHF 450 million in global turnover must prepare a sustainability report applying double materiality, meaning that the company must assess both how external sustainability risks affect its own financial position and how its own activities affect people and the environment. They must disclose not only how sustainability risks affect the company’s financial position, but also how the company’s conduct affects society and the environment. 

Second is a due diligence obligation. Enterprises exceeding 5,000 FTE and CHF 1.5 billion must identify, assess, prevent, mitigate, and monitor actual and potential adverse human rights and environmental impacts across their operations and supply chains. 

Third is a civil liability rule. The Federal Council presents two variants. Under variant 1, the SBCA would introduce an express statutory cause of action where a parent company is liable for damage caused abroad by a foreign subsidiary where the plaintiff establishes that the parent intentionally or negligently breached its due diligence obligations. Variant 2 takes a lighter touch where no new cause of action is created, but the SBCA would include an explicit cross-reference to the Swiss Code of Obligations, confirming that its existing general liability rules apply to supply chain harm. Both variants share the premise that a parent company should not be insulated from responsibility for supply chain harm caused by breach of its due diligence obligations, but they differ in mechanism. Variant 1 creates an express statutory cause of action specific to such harm. Variant 2 creates no new cause of action; it instead confirms, by cross-reference, that the existing general liability rules of the Code of Obligations already extend to harm of this kind. Under both variants, companies would not be liable for the conduct of their business partners, only for conduct of controlled subsidiaries. 

This tripartite architecture of “report, act, and be liable” reflects the logic of the UN Guiding Principles on Business and Human Rights (UNGP), which rest on the pillars of protect, respect, and remedy. The civil liability under the proposed SBCA is not strict: it attaches to a proven failure of due diligence. The provision is causally tethered to conduct, not merely to outcomes. It asks not what the company spent, but what the company did.

India’s Section 135: Anatomy of a Philanthropic Mandate

Section 135, imposes on companies meeting specified financial thresholds, a mandatory obligation to constitute a CSR Committee and to spend at least two percent of the average net profits of the preceding three financial years on activities enumerated in Schedule VII. Schedule VII prescribes twelve categories of eligible activity, ranging from eradicating hunger, poverty, and malnutrition to promoting education, gender equality, environmental sustainability, and rural development.

The structure of Section 135, read with the Companies (Corporate Social Responsibility Policy) Rules 2014, is arguably transactional since it governs the disbursement of profits towards externally defined social goods. Non-compliance attracts financial penalties under Section 135(7) and Section 134(8). These are penalties for not spending, not penalties for causing harm. The statute nowhere asks how those profits were generated. It does not inquire whether the company’s supply chain tolerated forced labour. It does not investigate whether the company’s sourcing practices caused environmental destruction in communities its CSR funds simultaneously purport to uplift. The obligation begins after the profit is earned and ends once the disbursed.

This is the philanthropy model in its form. India’s CSR law is, at its core, a mandatory charitable giving scheme operated through the corporate form.

The Three-Pillar Deficit

Measured against the SBCA’s three-pillar framework, India has constructed an increasingly sophisticated reporting pillar through SEBI’s Business Responsibility and Sustainability Reporting (BRSR) framework, operative from FY 2022–23 for the top one thousand listed companies. The BRSR’s nine principles, grounded in the National Guidelines on Responsible Business Conduct (NGRBC), explicitly require companies to report on human rights performance across their value chains, and introduces limited third-party assurance and nascent supply chain disclosure obligations. India also has a spending pillar within Section 135.

What India conspicuously lacks is a liability pillar. There is no law that imposes civil or administrative liability on an Indian parent company for human rights or environmental harm caused by its subsidiaries, suppliers, or business partners. The NGRBC, for all its alignment with the UNGPs, is explicitly voluntary. The BRSR is disclosure-only; it generates no private right of action. Section 135 is silent on supply chain conduct. India has built two of the three pillars and left the third, the load-bearing pillar of accountability, entirely absent.

“Responsibility Laundering”

This gap enables what this article terms “responsibility laundering.” The use of mandatory philanthropic spending to discharge, in form if not in substance, a corporate obligation to society, while the conduct that generates the profits being distributed remains unconstrained by law.

Consider a hypothetical Indian conglomerate operating garment manufacturing facility directly, as well as through third-tier contractors across the same supply chain. At the level of its own operations, the conglomerate’s workers face documented wage suppression and unsafe shop-floor conditions. These are violations of other statutory law but no civil liability pathway for affected workers under the CSR law. At the contractor level, conditions are worse: wage theft and hazardous workplaces that neither the NGRBC (voluntary), the BRSR (disclosure-only), nor Section 135 (silent on supply chain conduct) reach.

The laundering mechanism operates at both levels. At the level of the company’s direct operations, the same statute that compels spending on social welfare says nothing about the conduct that generates the profits being distributed. The legal obligation begins after the harm is done and ends once the money is disbursed. It creates a certified, audited record of social responsibility that coexists with the harmful conduct, with no legal instrument connecting the two. At the contractor level, the mechanism requires one additional step since the NGRBC’s human rights obligation is voluntary and the BRSR generates no private right of action. At the contractor level, the mechanism requires one additional step. At the level of the company's own operations, the laundering effect arises because Section 135 regulates spending without regulating conduct, but the conduct is at least attributable to the company itself. At the contractor level, no Indian law first establishes that the contractor's conduct is attributable to the principal company at all. The NGRBC's value chain expectations are voluntary and the BRSR's supply chain disclosures generate no private right of action, so there is no legal mechanism that even brings contractor conduct within the principal company's accountability framework before the question of CSR spending arises. The laundering is therefore two-layered: first, the absence of any attribution of contractor conduct to the principal, and second, the absence of any link between that conduct and the principal's CSR obligations.

Responsibility laundering does not require bad faith, for it is a structural phenomenon. It arises from the absence of any legal nexus between the conduct that creates profits and the obligations that govern their distribution. Section 135 regulates the downstream flow of profits without examining the upstream conditions of their extraction. A company can satisfy the Indian CSR law, while simultaneously operating (or benefiting from) supply chains that violate the very social norms those CSR funds nominally support.

The SBCA attempts to close this gap. Its due diligence obligations tether to business conduct and not just profit. A company cannot satisfy the SBCA through philanthropic spending in communities it simultaneously harms. These are categorically different standards with categorically different incentive effects.

MK Ranjitsinh and the Philanthropy Frame

In December 2025, the Supreme Court of India (SCI) delivered a landmark judgment in MK Ranjitsinh and Others v. Union of India and Others, holding that corporate social responsibility under Sections 135 and 166(2) of the CA 2013 inherently includes environmental responsibility, grounding this in the fundamental duty under Article 51A(g) of the Constitution. The SCI held that “allocating funds for the protection of environment is not a voluntary act of charity but a fulfilment of a constitutional obligation” and that the word “community” in CSR law is not restricted to humans.

The judgment is a significant constitutional development. On this article's reading, it dismantles the narrow view that CSR is merely charitable in character and moves toward establishing corporations as constitutional actors with environmental duties, though this is a characterisation of the judgment's broader effect rather than a restatement of its express holding. However, it does not escape the philanthropy frame. The SCI’s holding remains targeted at the allocation of CSR funds rather than the regulation of corporate conduct. By directing that CSR expenditure must address environmental damage caused by corporate operations, the Court moves Section 135 in the right direction, but the logic remains transactional. A company that destroys a habitat but properly allocates its CSR budget to habitat conservation is, on the SCI’s analysis, more compliant than before. However, the legal framework still permits the destruction itself to occur.

The NGRBC–BRSR–Section 135 Incoherence

The structural gap shown by the SBCA is compounded by a legislative incoherence between India’s three regulatory tracks. The NGRBC’s Principle 5 requires businesses to “respect and promote human rights” across their value chains, aligned with the UNGPs. The BRSR requires disclosure of human rights performance. Section 135 requires philanthropic spending. These three tracks are operated by two different regulators (Ministry of Corporate Affairs and SEBI), directed at overlapping but non-identical companies, and connected by no legal mechanism. A company could score poorly on BRSR’s human rights indicators, face no legal consequence under the NGRBC (voluntary), and remain fully Section 135-compliant. The three tracks produce no cumulative accountability. 

The SBCA, by contrast, integrates reporting and due diligence into a single legal instrument administered by a single supervisory authority. Reporting is not severable from action.

Conclusion

Switzerland’s draft SBCA is significant, not merely for what it would introduce to Swiss law, but for what it reveals about the limits of other systems. India’s CSR law leaves an entire dimension of corporate responsibility unaddressed. Responsibility laundering is a foreseeable product of a statute that regulates charity while ignoring conduct. The SCI has begun to strain the philanthropy model towards something more constitutionally meaningful. The law must complete that journey. Until India enacts a liability pillar, its CSR framework will remain a sophisticated exercise in ticking boxes while the foundational question of “did the company cause harm?” goes unanswered.