Transcript
IS MOTIVATION FOR CSR PROFIT OR ETHICS?
Pradnya Naik
Keval Kothari
BRIEF RECAP
MICHAEL PORTER’S VIEWS..
“If looked strategically, CSR can be more than a cost, constraint or a charitable deed and can be a source of opportunity, innovation and competitive advantage.”
MICHAEL PORTER’S VIEWS..
Two reasons CSR hasn’t been nearly as productive as it could be.• They pit business against society, when
two are interdependent• Companies think CSR as a generic
responsibility instead of a firm’s strategy.
Prevailing approaches are disconnected from business as to obscure many great opportunity for companies to benefit society.
WHAT IS CSR ?
SOME DEFINITIONS
European Commission definition in 2004: “CSR is a concept whereby companies integrate
social and environmental concerns in their business operations and in their interactions with their stakeholders on a voluntary basis”
McKinsey: “Large companies need to build social issues
into strategy. They need to articulate business’s social contribution and define its ultimate purpose in a way that has more subtlety than “the business of business is business” worldview.”
Philip Kotler: “CSR is the commitment to improve community
well- being through discretionary business practices and contributions of corporate resources”
World Business Council for Sustainable Development: “Corporate Social Responsibility is the continuing
commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large.”
Some Definitions
MOTIVES OF CSR
ECONOMIC CSR
Strategic tool to achieve economic objectives, increased profit and wealth creation
The company’s activities are seen as assets to get economic results
Any expected social activity is accepted if it is consistent with wealth creation
This approach usually takes shareholder value maximization as the over-riding reference for corporate decision-making
Economic CSR motive represent a defensive and business focus
Defensive focus Activity and strategy enquire increased economic profit in
their own business. This is important in market with competitive advantages Integration of CSR is a result of imitation or to get a
competitive comparative advantage
Business Focus Rationale for the CSR is derived entirely or very largely
from a concern with the interest of the enterprise itself. Corporations are seen as needing to adapt because it
makes good business for them to do so, and not because this not would make the world a better place.
ECONOMIC CSR AND UTILITARIANISM
Utility perspective
The philosophy of utilitarianism: “An action is morally right if it results in the greatest amount of good for the greatest amount of people affected by the actions”
looking at the consequences of any particular action and judge the ethical standing of that action in terms of those consequences
If the action tends to maximize good consequences it is an ethical right action, and if not the actions is wrong.
ETHICAL CSR
Approaches are focused on the ethical requirements that strengthen the relationship between business and society.
In general these approaches are based on values that
state the right thing to do or the obligation to create a good society.
Firms are obligated to make a payment in kind for using society’s infrastructure, land, air, water, plants, and animals to generate profit.
They have a duty to reimburse society for the negative externalities their activity generates.
ETHICAL CSR
Ethical CSR actively seeks a greater balance between profit and ethics.
There is an overt effort to manage the organization’s culture to produce the desired ethical climate.
This change in the culture involves recognition of a social contract between the business and the society.
Management approaches problem solving with awareness of the ethical consequences of an action as well as its potential profitability
ALTRUISTIC CSR
Altruistic CSR is equivalent to philanthropic responsibilities – to be “ a good corporate citizen” by giving back to society
Firms go beyond ethical CSR (preventing or rectifying the harms they have done) to assume liability for public welfare deficiencies they have not caused
Involves contributing to the good of various societal stakeholders, even if this sacrifices part of the business’ profitability.
Unlike Economic CSR, where it is believed that the money put into good work will yield a return on investment for the business , with altruistic CSR this is not the motive (although the firm could conceivably benefit as a byproduct)
Firms practicing altruistic CSR help to alleviate various social ills within a community or society, such as lack of sufficient funding for educational institutions, inadequate moneys for the arts, chronic unemployment, urban blight, drug and alcohol problems, and illiteracy,
EXAMPLES
NESTLE EXAMPLE
A TERRITORY NOT MEANT FOR BUSINESS
In 1962, company wanted to enter India.
Received government permission to build a dairy in Punjab’s district of Moga.
Poverty in the region was severe.
Infrastructure: No telephones, no electricity, no transportation, no medical care.
A farmer owned less than 5 Acres of poorly irrigated land with infertile soil.
Many kept one cow / buffalo for own consumption of milk.
60% of calves died newborn.
No methods to test for quality of milk, frequent contamination as there was lack of cold storage.
THE TRANSFORMATION
Nestle built refrigerated dairies in each town and sent trucks to collect the milk.
With trucks went vets, nutritionists, agronomists & quality assurance experts.
Medical units were provided for sick animals.
Farmers were given monthly training sessions.
It enabled them to learn that milk quality depended on cow’s diet which in turn depended on feed crop irrigation.
It provided technical & financial assistance to dig bore-wells.
Irrigation improved, crop yields improved and standard of living improved.
MAHINDRA AND MAHINDRA
NANHI KALI The Mahindra group started the project Nanhi
Kali in 1996 with an objective of providing primary education to the underprivileged girl child in India .
In 2005 , K.C.Mahindra education trust entered into a partnership with Nandi foundation , a reputed NGO to manage programme for 10 years .
Over the years the project Nanhi Kali has successfully evolved into a major national girl child sponsorship programme , which not only provides money but also material support in form of clothes , uniforms , notebooks etc.
PEPSICO
CSR ACTIVITIES BY PEPSICO INDIA PepsiCo India has pioneered several major initiatives
to Replenish water in communities
Solid Waste Management initiatives in partnership with Exnora, an environmental NGO
Continues to strengthen its partnerships with farmers across the country to boost their productivity and income
PepsiCo's Get Active & a Good Nutrition and Active Lifestyle Program for Children: to raise awareness on the importance of balanced nutrition and regular physical activity for a healthy lifestyle among school children.
PRACTICALITY AND FEASIBILITY
Economic CSR
Altruistic CSR
Is this the only duty ofthe firm?
Nestle ??
Is it too much for a firm ?
Nanhi Kali??
Practical ANDFeasible?
Ethical CSR
Pepsi Co??
RECAP OF LAST LECTURE
Business only has an economic
responsibility to make a profit“Pure profit-
making view or economic CSR”
Corporate management to be
more sensitive to the societal impact of
their decisions “Socially aware view or ethical
CSR”
Corporations actively involved in programs which can ameliorate various
social ills “Community
service view or altruistic CSR”
KARMAYOG CSR RATINGS Watchdog organizations that look specifically at CSR
activities of top 500 companies in India
“Every company harms the environment and
people!”Corporate Social Responsibility is thus just about two aspects: 1) The steps taken by a company to neutralise, minimise or
offset the harmful effects caused by its processes and product-usage
2) The further steps a company takes using its resources, core competence, skills, location and funds for the benefit of people and the environment
CRITERIA FOR CSR RATINGS
Sufficient Criteria Company fulfilling the basic needs of society through its
products or services Unique CSR activity Company reducing negative impact of others Company’s annual expenditure on CSR = 0.2% of sales
Necessary Criteria Focus on local community CSR embedded in the business operations Innovative ideas and practices are developed for CSR Activities sustainable, replicable, beneficial to the
society Negative Criteria
Companies that make liquor, tobacco, genetically modified crops
Companies that violate laws/rules/regulations
HUL’ COMPETITIVE, PROFITABLE & SUSTAINABLE GROWTH
8888888888888
“DOING WELL BY DOING GOOD”
Nitin Paranjpe: It is the mandate of business to offer goods and
services that meet the needs of consumers and generate a profit.
Only if you make a profit can you invest, innovate and build for the future.
Serving the Bottom of the Pyramid (BoP) can be a profitable opportunity for a business. The BoP markets can provide new focus to firms
ET Article: “Doing well by doing good” (2nd March 2012)
HUL’S SUCCESS AT BOTTOM OF PYRAMID
Lifebuoy’s Swasthya Chetna: The single largest private rural health and hygiene
programme The objective of the programme is to educate people
about basic hygiene habits. With a focus on rural communities, the programme
targets school children, women, and community elders.
Shakti Reach the so-called media-dark regions by turning rural
women into direct-to home distributors of its mass-market products
Provides livelihoods to thousands of women
PHILANTHROPY & CSRSAME OR DIFFERENT?
SOME DEFINITIONS Philanthropy:
Altruistic concern for human welfare and advancement, usually
manifested by donations of money, property, or work to needy
persons, by endowment of institutions of learning and hospitals, and
by generosity to other socially useful purposes.
Corporate Philanthropy:
Corporate Philanthropy mirrors individual philanthropy except for the
fact that a corporation, not an individual, is donating funds, time,
or talent.
Although done on a larger scale, corporate philanthropy is still
done without any expectation of direct corporate gain (such as
increases in revenue), but usually involves indirect gains (such as
enhancing a company’s brand, engaging employees, recognition, etc.).
Although Corporate Philanthropy and CSR are used interchangeably, there is a thin line of difference.
CSR is going beyond philanthropy and is not just about donations.
SOME BRAINSTORMING QUESTIONS..1. The ministry of Company Affairs is drafting the new Companies Bill and
has proposed the companies with turnover of more than Rs. 1000 crores
OR net profit of Rs. 5 crores should spend 2% of their profits on CSR.
Is this the only way companies can be obliged to indulge in CSR?
Is it Ethical?
2. Warren Buffet, in March 2011, persuaded Indian billionaires to donate
their wealth to charity. However, India has witnessed charitable activities
only Shiv Nadar and Azim Premji. Rahul Bajaj says “ Since time of
Buddha, India has been involved in philanthropy; its in our culture ;
however such activities are different from those in the first world.” Even
Sam Walton, an American, says “ Walmart was never and should never
be in the business of charity”.
Who of them is ethical and correct?
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