From Voluntary Charity to Mandatory Happiness: Bhutan’s CSR Revolution

I. Introduction

Imagine a country where progress is measured not by money, but by happiness. In Bhutan, businesses are now legally required to help safeguard this happiness. What was once viewed as voluntary charity has become a legal obligation: companies must give back to society as part of their core responsibilities. This shift reflects the words of His Majesty Jigme Khesar Namgyel Wangchuck, who emphasized during his coronation, “My deepest concern is that as the world changes, we may lose the fundamental values on which rest our character as a nation and people.” Bhutan’s 2024 Corporate Social Responsibility (CSR) regulations operationalize this vision, raising a critical question for policymakers and scholars alike: How can nations align corporate behavior with societal goals, and which CSR model: voluntary, mandatory, or hybrid, best balances business interests with public welfare?

II. Context

Bhutan’s Unique CSR Approach

Bhutan’s CSR framework is rooted in its distinctive development philosophy: Gross National Happiness (GNH). Unlike GDP-centric models, GNH emphasizes holistic well-being, balancing material and spiritual progress across four pillars, socio-economic development, environmental conservation, cultural preservation, and good governance, and nine domains, including education, health, community vitality, and ecological resilience. In this context, businesses are expected to function as partners in national well-being, integrating social responsibility into their core operations rather than pursuing profits in isolation.

The 2024 CSR Regulations

The Corporate Governance and CSR Regulation 2024 mandates that all profitable companies allocate 0.5% of net profits to CSR projects, establish CSR committees, and report spending to the Corporate Regulatory Authority (CRA). Funds not spent in a given year can be carried forward, though this may reduce immediate social impact. While the regulations institutionalize CSR contributions, they currently lack mechanisms to ensure alignment with GNH principles or robust monitoring to assess project effectiveness. This introduces the risk that CSR initiatives could remain ad hoc or symbolic, rather than strategically advancing national well-being.

III. Legal Framework

Gross National Happiness as a Guiding Principle

GNH, conceptualized by His Majesty the Fourth King Jigme Singye Wangchuck, prioritizes holistic well-being over narrow economic metrics. Its pillars and domains provide a structured framework for evaluating social, cultural, and environmental outcomes. For corporations, GNH implies accountability beyond profit-making: ethical operations, cultural sensitivity, environmental stewardship, and meaningful engagement with stakeholders are expected. Businesses are thus partners in national development, not merely contributors to charity.

Corporate Social Responsibility

CSR refers to the obligation of companies to consider the societal and environmental consequences of their operations. Traditional CSR models have been voluntary, leaving companies discretion over contribution and project selection. However, without regulatory accountability, CSR often risks becoming a reputational tool rather than a genuine vehicle for social change. Countries such as India, Mauritius, and Nepal have introduced mandatory profit-linked CSR, while Norway emphasizes transparency and stakeholder reporting, illustrating that hybrid approaches can balance legal obligations with strategic accountability.

IV. Critical Analysis

Strengths of Bhutan’s CSR Law

The 2024 CSR regulation institutionalizes corporate contributions and integrates CSR responsibility at the board level. By making CSR a legal obligation, the law ensures a predictable flow of resources to social and environmental projects, aligning business success with collective well-being. Its connection to GNH reflects Bhutanese cultural values, emphasizing collective responsibility, social harmony, and sustainable development.

Limitations and Challenges

However, the law has notable gaps. It lacks targeted mechanisms to ensure CSR projects directly support GNH domains such as community vitality, ecological resilience, or cultural preservation. Companies may prioritize “easy” or high-visibility projects with limited societal benefit. The flat 0.5% rule applies uniformly, potentially burdening small businesses while allowing larger firms to contribute proportionally less relative to their impact. Moreover, reporting and oversight mechanisms are underdeveloped, with no mandatory independent audits or performance evaluations, increasing the risk that CSR could become a mere compliance exercise rather than a strategic development tool.

Lessons from Comparative Models

Bhutan can draw valuable lessons from India and Norway. India’s mandatory 2% CSR contribution demonstrates the benefits of enforcement and predictable funding but also reveals risks of superficial compliance and uneven project impact. Norway’s transparency-driven approach emphasizes ethical business conduct and stakeholder accountability, encouraging companies to integrate CSR into core operations. By synthesizing enforcement mechanisms and transparency measures, Bhutan can ensure CSR aligns with both national priorities and corporate capabilities, avoiding compliance without impact.

V. Conclusion

Solutions

To strengthen Bhutan’s CSR framework, a hybrid CSR model is advisable. Larger companies could have mandatory contributions scaled to size, profitability, or sectoral impact, while smaller firms participate voluntarily but with incentives such as tax credits or recognition for meaningful engagement. Incorporating a GNH Screening Tool for CSR projects would ensure alignment with national well-being indicators, guiding companies to contribute strategically rather than ad hoc. Dedicated oversight bodies, such as a GNH Business Responsibility Unit, could monitor projects, evaluate outcomes, and provide public reporting to maintain transparency.

Reforms

Legal reforms could embed CSR obligations directly within the Companies Act, granting them stronger statutory authority. Sector-specific CSR guidelines would encourage strategic contributions aligned with corporate expertise and societal needs. Introducing independent audits, structured reporting, and grievance mechanisms would enhance accountability, ensuring that projects achieve tangible impact. In addition, a pooled national CSR fund could channel unspent or smaller-scale contributions into high-priority projects, ensuring collective resources serve GNH objectives efficiently.

Future Insights

Looking ahead, Bhutan’s CSR model can evolve into a strategic tool for national development. By integrating lessons from India’s enforcement-focused system and Norway’s transparency-based framework, Bhutan can foster a culture where corporate responsibility is intrinsic rather than purely regulatory. Public recognition, structured incentives, and alignment with GNH principles can motivate businesses to invest in sustainable development, reinforcing Bhutan’s identity as a global advocate for holistic well-being. If implemented effectively, this hybrid approach can demonstrate how happiness and business success are mutually reinforcing, inspiring other nations to rethink corporate responsibility beyond profit metrics.

References

1. The Norwegian Transparency Act § 4, 5 (2021)

2. Bhutan Cont. art. 9, § 2(2008).

3. Centre for Bhutan Studies, Gross National Happiness, https://bhutanstudies.org.bt/gross-national-happiness.

4. Corporate Social Responsibility Fund, Corporate Governance and Corporate Social Responsibility Regulations for Companies in Bhutan § 360 (Amended, 2024) 2022

5. Corporate Regulatory authority of Bhutan, https://www.cra.gov.bt/ (last visited 8 May, 2025)

6. Tshering Lhaden, Corporate social responsibility of the public sector entities in Bhutan, Korean Development Institue,(2010), https://archives.kdischool.ac.kr/bitstream/11125/30266/1/Corporate%20social%20responsibility%20of%20the%20public%20sector%20entities%20in%20Bhutan.pdf

7. Melissa Cyill, Corporate Social Responsibility in India, India Briefings, Jan 7, 2025, https://www.india-briefing.com/news/corporate-social-responsibility-india-5511.html/#:~:text=,More%20than%20INR%2050%20million. 

8. Sattva Consulting, India’s backward districts receive only 2.5% of CSR funds: Study | Economic Times, SATTVA, Nov. 19, 2024, https://www.sattva.co.in/news-media/csr-spending-in-india-economic-times/. 

9. Haley Knudson, CSR in Norway: Joint Thematic Study, Interreg Europe (2018), https://projects2014-2020.interregeurope.eu/fileadmin/user_upload/tx_tevprojects/library/file_1523529564.pdf.

This article is authored by Chimmi Sonam Yangchen, Law Student in Bhutan and Trainee of Lets Learn Law Legal Research Training Programme. The views and opinions expressed in this piece are solely those of the author.