Corporate Social Responsibility

CORPORATE SOCIAL RESPONSIBILITY

Perspectives of Corporate Social Responsibility There are three perspectives that prompt

corporate social responsibility. These are:

Business perspective Eco-social perspective Rights-based perspective

Perspectives of Corporate Social Responsibility Business perspective It is of the opinion that the only

responsibility of business was to perform its economic functions effectively & provide goods & services to earn maximum profit & leave social function to other institutions of the society like government

They believe that business has no other social responsibility except making profits within legal & moral rules set by society

Perspectives of Corporate Social Responsibility Eco-social perspective In their views, government cannot & need

not be the solely responsible for promoting welfare of masses.

It is imperative for businesses to be socially responsible.

In this fast changing world, a businessman is judged on two counts- the social goals he meets, apart from profits he make.

Perspectives of Corporate Social Responsibility Rights-based perspective It is obligatory on part of business

organizations to be socially responsible as they primarily exist to benefit society

Citizens give them special rights, powers, privileges & protection on understanding that their activities will fulfill citizen’s purposes

Corporations cannot exist without our letting to do so & we let exist only if they are beneficial to us

The business in society in relation to its responsibilityThus, CSR is about how companies manage

the business process to produce an overall impact on society.

Companies need to answer 2 questions relating to their operations:

1.The quality of management- both in terms of people & processes (inner circle)

2.The nature & quality of their impact on society in various areas

The business in society in relation to its responsibility

Quality of management

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EmployeesUnions

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NGO’s

GovernmentImpact on Society

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WHY SOCIAL RESPONSIBILITY OF BUSINESS? Accountability to Society In a democratic society any kind of

enterprise exists for the sake of society. If private enterprise are allowed to exist, it

is because it is seen to contribute better than public enterprise to common good

Private firm is not encouraged because individuals may accumulate wealth for their own selfish benefit at he expense of public

WHY SOCIAL RESPONSIBILITY OF BUSINESS? Corporations’ Debt to Society A corporation has to behave as a good

citizen. The corporation has to donate generously towards causes of public welfare and must get itself directly involved in social welfare programmes.

DEFINITIONS OF CSRIt is a set of obligations to pursue those policies,

to make those decisions, or to follow those lines of action which are desirable in terms of the objectives and values of our society.

It is the overall relationship of the corporate with all of its stakeholders.

Elements of social responsibility include investment in community outreach, creation and maintenance of employment, environmental stewardship and financial performance.

DEFINITIONS OF CSRCSR is the continuing commitment by

business to behave ethically & contribute to economic development while improving the quality of workforce & their families as well as of the local community & society at large.

World Business Council for Sustainable Development

DEFINITIONS OF CSR (Contd.)The classical economic model: Adam Smith

believed that an “invisible hand” promoted the public welfare

The socio-economic model: Business is seen as one subsystem among many in a highly interdependent society.

It recognizes that companies have stakeholders other than their stockholders.

Business has an obligation to respond to the needs of all stakeholders while pursuing its profit.

A stakeholder audit allows companies to systematically identify all parties that could possibly be impacted by the company’s performance

SOME FACTSWHILE 94% OF THE COMPANIES BELIEVE

THAT DEVELOPMENT OF CSR STRATEGIES CAN DELIVER REAL BUSINESS BENEFITS ONLY 11% MADE ANY SIGNIFICANT PROGRESS IN IMPLEMENTING STRATEGY IN THE ORGANIZATION

CEOS ARE FAILING TO RECOGNIZE THE BENEFITS OF IMPLEMENTING CSR STRATEGIES DESPITE INCREASING PRESSURES TO DO SO

CSR PROGRAMMES INFLUENCE 70% OF ALL CUSTOMER PURCHASING DECISIONS

Today’s Corporate Social Responsibility The corporate social responsibility of an

organization today, is a set of obligations with which it has to protect, enhance, and otherwise work to the betterment of the society in which it functions.

The concept of corporate social performance includes a business organisation’s

Configuration of principles of social responsibility. Process of social responsiveness, and Policies, programmes, and observable outcomes

as they relate to the firm’s societal relationships.

Implementation of CSRThe systematic implementation of CSR

means:1.The adoption of strong organizational

values and norms depicting behaviours that are appropriate towards a variety of stakeholders.

2.The continuous generation of intelligence about stakeholder issues, along with positive responses to these issues.

Bhopal Gas

Tragedy

Theoretical Justification for CSR Trusteeship Model adopts a realistic and

descriptive perspective by viewing corporation as a social institution with a corporate personality.

Managers are the trustees of the corporation.The duty of the trustees is to sustain the

corporation’s assets, expectations of customers & suppliers & company's reputation in the community.

Mangers have to balance the conflicting interests of current & future stakeholders & to develop company’s capacities in a long term perspective rather than focus on short term gains

Theoretical Justification for CSR(Contd.)Social entity theory: The social entity

conception of the corporation regards the company not as a private association united by individual property rights, but as a public association constituted through political and legal processes and as a social entity for pursuing collective goals with public objectives.

Theoretical Justification for CSR(Contd.)The Pluralistic Model: This model

supports the idea of multiple interests of stakeholders, rather than shareholder interest alone. It argues that the corporation should serve and accommodate wider stakeholder interests in order to make the corporation more efficient and more legitimate.

What are Corporations Expected to do?

Corporations need to erase the perception of the public that they accumulate wealth for their own cause;

They should participate in social welfare projects, which will improve their image in public esteem;

They also have to make quality products and stick to delivery schedules while importing and exporting goods; and

They should create employment opportunities for the disadvantaged.

They have to pay taxes in full & on time, observe the laws of land

Ensure a clean & healthy environment

Thus they should understand the fact that economic goals & social responsibility objectives needs not be contradictory to each other & could be achieved simultaneously

MODELS FOR IMPLEMENTATION OF CSR Four Models of CSR

ModelModel EmphasisEmphasis ProponentProponent EthicalEthical Voluntary commitment by Voluntary commitment by

companies to public welfarecompanies to public welfare Mahatma GandhiMahatma Gandhi

StatistStatist State ownership and legal State ownership and legal requirements determine requirements determine corporate responsibilitiescorporate responsibilities

Jawaharlal NehruJawaharlal Nehru

LiberalLiberal Corporate responsibilities Corporate responsibilities limited to private owners limited to private owners (shareholders) (shareholders)

Milton FriedmanMilton Friedman

StakeholderStakeholder Companies respond to the Companies respond to the needs of stakeholders – needs of stakeholders – customers, creditors, customers, creditors, employees, communities, employees, communities, etc.etc.

R. Edward FreemanR. Edward Freeman

CSR as a business strategy for sustainable development

When CSR is adopted as a business strategy for sustainable development, it goes to improve corporate performance:-

It offers multiple benefits to corporations both internally & externally-

Externally it creates a positive image & goodwill among the public & earns a special respect amongst different stakeholders which go a long way in promoting long term shareholder value & sustainable development

Internally it cultivates a sense of loyalty & trust amongst employees

It provides workers a feeling of satisfaction & a meaning to their lives

Thus because of all these positive factors that organizations involve themselves in socially responsible investing (SRI)

CSR as a business strategy for sustainable developmentCSR is a cost effective way to gain

competitive advantage.Corporations in their effort to engage in

strategic CSR aim to match business objectives with the needs of community

Evaluation of CSR Activity3 basic principles to measure the impact of

CSR:-1.Sustainability2.Accountability3.Transparency

Evaluation of CSR ActivitySustainability: Implies that there must be a clear linkage established

between use of resources & their regeneration

Accountability:an organization should assume responsibility for the

effects of its action that have impacted the external environment

The organization needs to compensate for the cost of damages caused by its action, by creating benefits that exceeds costs to all affected stakeholders

Evaluation of CSR ActivityTransparency:The organization reports the impacts of its

action to all stakeholders truthfully without misguiding them in any manner

This enables stakeholders to have a full & fair view of the situation

Advantages of Corporate Social ResponsibilityThere are several advantages to corporations

when they exhibit a sense of CSR and implement it, such as:

1.Improved financial performance2.Enhanced brand image and reputation 3.Increased sales and customer loyalty4.Increased ability to attract and retain

employees5.Reduced regulatory oversight 6.Innovation and learning 7.Easier access to capital

SCOPE OF CORPORATE SOCIAL RESPONSIBILITY Three levels of social responsibility can be

identified (evolution of areas of social responsibility)

1. Market forces :Need to respond to the demands of the market. Managerial decisions may involve business

responding to the economics of the market by efficiently & effectively using resources.

2. Mandated actions:Managerial decisions may reflect business

responses to government mandated requirements or pressure group stakeholder (unions)

SCOPE OF CORPORATE SOCIAL RESPONSIBILITY 3. Voluntary actions: Managerial decisions may be undertaken

without outside pressure.

CSR addresses the following issues: Assistance in solving community problems Health & welfare Education Human rights Natural environment Culture

Understanding Social Responsibility of Business

1) Protecting and promoting stakeholders’ Interests.a) To Consumers and Communityb) Social Responsibilities of Business Towards

Employees c)To Owners and Inter-Business Establishments

2) Promotion of Common Welfare Programmes

3) Philanthropy

Understanding Social Responsibility of Business (Contd.)

4) Good Corporate Governance5) Render Social Service 6) Abiding by Rules and Regulations 7) Ensure Ecological Balance

Understanding Social Responsibility of Business (Contd.)

8) Focus on the Human Element 9) Improve Productivity 10) Sponsor Social and Charitable Causes 11) Supplement State Efforts

Steps to Attain Corporate Social Responsibility

The International Chamber of Commerce recommends the following nine steps to attain Corporate Social Responsibility:

1. Confirm CEO/Board commitment to prioritize responsible business conduct

2. State company purpose and agree on company values

3. Identify key stakeholders4. Define business principles and policies

Steps to Corporate Social Responsibility(Contd.)5. Establish implementation procedures and

management systems6. Benchmark against selected external

codes and standards7. Set up internal monitoring8. Use language that everyone can

understand9. Set pragmatic and realistic objectives.

ARGUMENTS FOR AND AGAINST CSRFORCREATING SHAREHOLDER VALUEREPUTATIONSTRATEGIC BRANDINGPRODUCTIVITY AND QUALITYHUMAN AND INTELLECTUAL CAPITAL

CONTD---AGAINSTMONEY RIGHTFULLY BELONGS TO

SHAREHOLDERSPOLITICIANS MUST DEAL WITH SOCIAL

ISSUES INVESTMENT ON CORE BUSINESSMORE A PUBLICITY STUNTPOWER AND RESPONSIBILITY DO NOT

NECESSARILY GO HAND IN HAND

EXTERNAL STANDARDS ON CSR There has been a substantial growth in the number of

external standards produced for business by governmental & non-governmental organizations with a view to support, measure & assist in implementation & to create a platform for accountability for performance of CSR issues.

These standards are necessary as companies do not have a clear vision about what constitutes CSR, how their investment on it is decided, how to evaluate the outcome & so on.

Some standards address single issue (e.g. focused on environmental performance or corporate governance) while others address a range of CSR issues

EXTERNAL STANDARDS ON CSR

The Caux Round Table (CRT) Organization for Economic Cooperation and

Development (OECD) United Nations Global Compact Asian-Pacific Economic Cooperation (APEC)

Business Code of Conduct The Global Reporting Initiative (GRI)

EXTERNAL STANDARDS ON CSR AA1000 Accountability Social Accountability 8000 Principles for Global Corporate

Responsibility The Global Sullivan Principles The Keidanren Charter for Good Corporate

Behaviour

CSR-The Indian PerspectiveCompanies in US & Europe are pressured by

stakeholders to adopt CSR practices but Indian companies so far have not experienced any such pressures

Indian companies are not legally bound to formally report CSR activities unlike developed countries which adhere to the Global Reporting Initiative (GRI)

India ranks last in terms of the level of CSR demanded from companies, but according to the survey conducted by Centre of Social Markets, there has been a growing change in the attitude of Indian firms towards CSR

CSR-The Indian PerspectiveThe most responsible companies in India

are:MNC’s: Unilever, Sony, Johnson& Johnson,

Coca cola, P&G

Indian: Tatas, Reliance, Birlas, BHEL

Tatas are known for their work in Tatanagar & have set up a Tata Council for Community Initiatives.

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INDIA ON THE ETHICAL/CSR MATRIX Indian corporations consider business ethics,

compliance with regulatory requirements and consistency in value delivery as the three most important factors that impact their social reputation

There is a transition from statist model & liberal model of CSR to ethical model

Wider adoption of CSR in Indian companies will be enabled by:

Provision of tax, duties & custom benefits, Inclusion of CSR performance of promoter as a

parameter for fast track clearance to projectsDepreciation benefits where asset investments are

made

Future of Indian CSRThere is a clear need forTransition from the present compliance centric

approach to the new paradigmCreation of an enabling environment and an array of

support measures. Business schools teaching CSR to facilitate this process Industry associations to share experiences and reward

best practiceNeed to incorporate public policies into the Indian

CSR. International agencies to share cross-country

experience.

SOME INITIATIVES IBM- UPLIFTMENT OF TRIBALS IN SASAN INDIAN PAINT INDUSTRY MAKING PAINTS MORE

ENVIRONMENT FRIENDLY FINANCIAL SERVICES-NEASING OF CARBON FOOTPRINTS-

RENEWABLE ENERGY ETC- HSBC, MAX NEWYORK LIFE, SCB

E CHAUPAL ADOBE, KPMG, PROMOTING ENTREPRENEURSHIP RELIANCE- PROJECT DRISHTI NDTV-GREENATHON AIRCEL-SAVE THE TIGER COPENHAGEN- ENVIRONMENT ISSUES E WASTE MANAGEMENT

DEVELOP STRATEGY BY---BUILD SUPPORT WITH SENIOR

MANAGEMENT AND EMPLOYEESRESEARCH WHAT BUSINESS IS DOINGPREPARE A MATRIX OF PROPOSED CSR

ACTIONSDEVELOP ACTIONS FOR THEMDECIDE ON DIRECTION,APPROACH AND

FOCUS AREAS.

IMPLEMENTING CSR STRATEGYDEVELOP AN INTEGRATED CSR DECISION

MAKING STRUCTUREPREPARE AND IMPLEMENT CSR BUSINESS

PLANSET MEASURABLE TARGETS AND IDENTIFY

PERFORMANCE MEASURESDESIGN AND CONDUCT CSR TRAININGESTABLISH MECHANISMS FOR ADDRESSING

PROBLEMATIC BEHAVIOURCREATE INTERNAL AND EXTERNAL

COMMUNICATION PLAN

AREAS OF CSR IMPLEMENTATION

ACCOUNTABILITY

ECO DEVP

ENVIRONMENT

LABOUR/HUMAN RTS

HR

CG

ETHICS

CSR