Is Corporate Social Responsibility Worth the Cost? Evaluating Financial Performance in the Indian Energy Sector

This study examines the impact of corporate social responsibility (CSR) on financial performance in the Indian energy sector from 2014–2015 to 2023–2024. The research uses a cost-benefit analysis to evaluate whether the financial investments made by firms in CSR activities yield financial gains. The research uses secondary data sourced from annual reports and the Prowess database of 23 energy firms that are part of the S&P BSE Energy index. Financial performance is measured using Return on Assets (ROA), Return on Capital Employed (ROCE), and Return on Equity (ROE), with additional control variables including firm age, size, and risk. Panel regression techniques such as the Random Effects Model (REM) and the two-step System Generalized Method of Moments are applied for data analysis, with the Hausman test confirming the consistency of the REM. The results highlight a statistically significant negative impact of CSR spending on ROA, ROCE, and ROE, even when accounting for lagged effects, suggesting that CSR allocations may impose short-term financial costs before potential long-term benefits emerge. These findings offer critical insights for policymakers and corporate strategists in the energy sector, underscoring the need to design CSR implementation strategies that balance compliance with future value creation.