04_CorporateSocialResponsibility

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Corporate Social Responsibility

Introduction

Corporate social responsibility (CSR) is the way a corporation achieves a balance among its economic,

social, and environmental responsibilities in its operations so as to address shareholder and otherstakeholder expectations.

7 Key Characteristics Relevance of CSR within an Org

Strengthening relationships with

stakeholders.

Enable continuous improvement.

Encourage innovation.

Attract best industry talent.

Employee motivation.

Risk mitigation.

Arguments for CSR Arguments against CSR

Changing social values Difficult to measure

Long run benefits Against profit maximization principle (Milton Friedman).

Image for company High cost

Benefit for society Lack of social skillsWelfare state Lack of public support

Giving back to society. Not supported by board of directors

Stockholders delight

Stakeholders happiness

Solution to social problems

Overall growth

CSR Dimensions

Customer Quality of goods.

Fair & reasonable price.

Relevant & meaningful advertisement.

Fair treatment to customers, no discrimination.

Provide relevant & recent information.

Excellent customer service.

Employee Fair wages.


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Safe & conducive work env.

Policies to increase efficiency.

Training & educational opportunities.

Support for physical, mental & emotional problems.

Labor welfare programs.

Employee empowerment.Environment Reduced & controlled pollution.

Provision for recycling wastes.

Government Payment of taxes.

Implement the policies formulated by govt.

Community Local community development programs.

Rehabilitation of displaced population.

Improved business standards.

Development of backward areas.

Promotion of research & development.

Promotion of ancillary units and small scale industries.

Social causes like adult education, health awareness, population control etc.

Identification of Areas for CSR

Social Forecasting- observing current social conditions & practices (ICT eChoupal)

Opinion Surveys-

National Issues- poverty, unemployment, inequality etc.

Social Scanning

Social Audit-

Pyramid Model of CSR

As per Archie Carroll, there are 4 kinds of social responsibility - economic, legal, ethical & philanthropic -

which can be depicted in a pyramid as shown below.

Economical Responsibility- Be profitable. This is the foundation.

Legal Responsibility- Obey the laws. Play by the rules of the game.

Ethical Responsibility- Be ethical. Avoid harm.

Philanthropic Responsibility- Be a good corporate citizen. Contribute resources to community.

Improve the quality of life..

2 Dimensional Model of CSR

Captures cost - benefit considerations of CSR activities.

Classical View- No provision for business to look beyond profit making & CSR is seen togenerate only costs but no benefits at all.

Socio Economic View- Business will continue to pursue profit maximization as a primary

objective, while it also try to meet social demands and derives some benefit in the process. The

benefit can be good customers and better supplier relations.

Modern View- Perceiving net benefits from socially responsible action.

Philanthropic View- Business agrees to participate in charitable activities even though perceived


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as a net loss.

Pyramid Model 2 Dimensional Model

3 Dimensional & Stakeholder Model of CSR

3 dimensional model is an extension of Pyramid model. With this model, overlap of the three domains -

Economical, Legal & Ethical - creates 7 possible categories for CSR activities.

3 Dimensional Model Stakeholder Model

Triple Bottom Line Model of CSR - People - Planet - Profit

Social improving the impact on its employees and the communities in which it operates, forexample by paying workers a fair salary, asking them to work reasonable hours within a safe

environment, not using child labour, paying suppliers a fair price and promoting health care and

education throughout the supply chain.

Environmental reducing the level of energy and non-renewable resources it consumes, the

waste it produces and the environmental impact of the services and products it provides.

Economic increasing its economic value for society not only by the profit it makes, but also its

contribution to the profits of the other entities with which it interacts.


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CSR Examples

In India, many firms have taken the initiatives of CSR practices which have met with varying needs of the

society. Most common thematic areas covered by companies include health, education, livelihoods, env &

rural development.


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Infosys

Healthcare Donation of blood, medicines.

Infra support (new building, wards, facilities like air conditioning).

Construction of new hospitals, rest houses etc.

Education Donation of study materials. Reconstructing schools in rural areas.

A Library for Every School project.

Culture Organization of cultural programs to promote rural artists.

Financial assistance.

Publication (Kantha book)

Rural Development National calamity assistance (tsunami, flood etc).

Sponsoring mid day meal program.

Donation of sewing machines.

Construction of rural infra like sanitary, rain water harvesting etc.

Destitute Care Rehabilitation of street children. Training to tribal communities.

Vocational training.

ITC

Employee Minority employment.

Family alignment

Flexible work hours

Diversity programs.

Customer Power efficiency.

Carbon audit. Recycling.

Community Community projects.

NGO support.

Philanthropy.

Economical development

Environment Carbon trading


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Supply chain ethics

Alternate energy

Maruti

Community Sanitation Education

Skill training

Local traffic management

Road Safety Driving training & awareness.

Institute of Driving & Traffic Research.

Maruti Driving Schools.

Road Safety Knowledge Centers.

Road Safety for Truck Drivers (Jagriti)

Skill Development

Public Policy

CSR forces businesses not only to consider the short-term interests of their shareholders, but also to

determine how to meet the long-term needs of all their stakeholders without compromising future

generations ability to meet their own needs.

Social Audit

SA is a management tool and accountability mechanism which can enhance an org capacity to

Evaluate their impact on stakeholders.

Determine how well they live up to the values they espouse.

Improve their strategic planning process by identifying potential problems in advance. Increase their accountability to the groups they serve and depend on.

Social Auditing is the process of measuring and reporting performance on fulfilling the economic, legal,

ethical and philanthropic social responsibilities expected by stakeholders.

6 key elements of Social Audit are


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Steps in conducting SA are

1. Assemble organization and secure agreement and commitment.

2. Define and prioritize the organizations objectives and establish the action it intends to perform to

meet them.

3. Identify the organizations stakeholders4. Agree upon indicators, information, benchmarks and targets.

5. Data gathering systems put in place.

6. Collating, analyzing and interpreting results

7. External verification process

8. Disclosure and act on results

Main reasons to conduct a SA are

Know what is happening.

Understand what people think & want.

Tell people what you are achieving. Strengthen loyalty/commitment.

Enhance decision making.

Improve overall performance.

SA has an excellent promise as a management tool, but some potential problems remains such as

Reporting organization can deliberately limit audit scope in order to avoid controversies.

Process can be managed internally to the disadvantage of some external stakeholders.

Some significant stakeholders may be omitted.

Organization may use arbitrary or inappropriate indicators to evaluate outcomes.

The standards, independence and honesty of the auditor may be open to question.

Ethics & Government

Government plays an important role in encouraging businesses to behave in an ethical manner, both by

encouragement and coercion, as it cannot be assumed that all businesses will behave ethically without

enforcement of regulations.

Legislating Role

Supervisory Role

Incentivizing Role

Some degree of legislation is necessary to ensure that businesses comply with their ethical obligations and

the public does not suffer as a result of dishonest business practices. Rules aim to prevent the practice of

bribing planning authorities to circumvent planning and zoning laws, for example. Many unethical

businesses have engaged in such practices, and without explicit laws restricting cheating, small businesses

that do not engage in illegal activities would be placed at a competitive disadvantage.


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The government has a supervisory role in the field of business ethics. Anti-competitive behavior can occur

when large organizations merge or are taken over, and when a large organization has a very substantial

market share or a monopoly, there is always the temptation for it to act in an unethical manner, which will

be detrimental to the public. The government must monitor and supervise such mergers -- which are

subject to antitrust law -- to ensure that they are acting ethically and are not abusing a position ofdominance.

The government can encourage ethical behavior by incentivizing it with tax breaks, or by imposing

surcharges on companies with high levels of emissions. "Green companies" that adhere to environmentally

friendly practices and demonstrate green awareness should be encouraged to do so and rewarded by

government as part of its environmental policy. If companies are financially penalized for wasting energy

or for improper waste disposal, they are less likely to engage in these practices.

Although government play an important role in ensuring that business operate in an ethical matter,

ultimately, the responsibility to do so lies with the business. It would be impossible for government tooversee all operations to such an extent that they could force all businesses to behave ethically. Such strict

supervision would most likely adversely affect the smooth operation of the market. Government agencies

hold the duty to promote ethics as much as possible without unduly restricting businesses.

Examples

Ban of Tobacco ads

Ban of Pan Masala

Age restriction for Smoking.

Minimum wages.

International Business Ethics

Many of the ethical issues and dilemmas in international business are rooted in the fact that political

system, law, economic development and culturevary significantly from nation to nation.

In the international business setting, the most common ethical issues involved are

Employment Practices.

Human Rights.

Env Regulations.


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Corruption

Moral Obligation of multinational operations.

Employment Practices

Employment practices are a frequent source of ethical dilemma for companies. Suppose, work conditions

in a host country are inferior to those in the home country. Which standards should you apply--the homecountry standards or the host country standards? Is it ok to employ minors to work a 50 hour week if it

doesnt violate local laws? Do you have to supply safety gear to employees if its not required by law?

Levis believes that its important to maintain standards that preserve the basic rights and dignity of

employees. So, when it discovered that one of its suppliers was forcing women to work more than 70

hours a week in guarded compounds, the company ended its relationship with the supplier.

Apple found itself in the middle of a similar type of controversy when a supplier making the iPod was

accused of labor abuses.

Human Rights

Things like freedom of association, freedom of speech, freedom of assembly, and so on are often taken for

granted in developed countries. But, its important to remember that these freedoms are not respected in

many countries. Think about the apartheid system that denied basic political rights to blacks in South

Africa, for example, or the ongoing situation in the Darfur region of western Sudan where the Sudanese

government has been accused of genocide by the U.S. and other countries.

Should companies do business in countries with repressive regimes? Some people argue that the presence

of multinational companies actually helps bring change to these countries. Some people believe that

change is occurring in China for example, because investments by multinationals are helping to raise livingstandards. Others, however, argue that some countries like Myanmar, which has one of the worst human

rights records in the world, are so brutally repressive that no investment can be justified. In fact, many

companies left the country in the mid-1990s because of its dismal human rights.

Env Pollution

Many countries are establishing strong environmental regulations to try to limit env damage, forcing

companies to adopt new measures that can be quite costly, to abide by the laws. So, new regulations are

forcing your company to take costly steps to stay within the law. You know that these regulations havent

been imposed in some other countries, particularly those that are lesser developed. Should you shift your

production to another country where the laws dont exist, or are only loosely enforced?

Your first response might be that the moral and ethical thing to do is to stay home and adopt the costly

compliance measures. But, you might worry that competitors that dont take the high road will have an

advantage. This brings up a phenomenon called the tragedy of the commons. It occurs when a resource

held in common by everyone, like the ocean or the atmosphere, is overused by individuals, and degraded.

What are the social consequences of this? If everyone else is pumping pollutants into the ocean, should

you do otherwise?


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BP has been widely criticized for its slow response to the leak at its facilities in the Gulf of Mexico near

Louisiana. In fact, some people have suggested that BP didnt follow proper safety procedures when it

built its pump and that the leak was a result of that failure. While its too soon to know whether BP

actually violated any laws, the controversy will surely impact the company in the future.

Corruption

Corrupt governments have always been around, and its important for international companies to consider

their effect on company strategies. At what point does gift giving become bribery for example?

Well, from a government perspective, bribery shouldnt be allowed.

In the U.S., the Foreign Corrupt Practices Act, which was passed in 1977, outlaws the paying of bribes to

foreign government officials in order to gain business. The act does allow for facilitating or grease

payments which are basically payments that are made to speed up standard procedures.

However, some economists believe that in some cases speed payments, or payments made to speed upapproval for business investments, can be justified if they enhance public welfare by creating jobs, and so

on. Others argue however, that corruption is a little like gamblingits hard to stop! If you do it once,

youre likely to do it again. BP believes this to be true and maintains a strict no bribery policy, regardless

of the implications.

Moral Obligations

So, what are the moral obligations of companies? Do companies have a responsibility to take into account

the social consequences of their actions when they make business decisions? Should companies always

choose the path that has both good economic and good social consequences?

You might answer yes--firms have a social responsibility simply because its the right way to operate.

Many people believe that companies need to recognize their noblesse oblige and give something back to

the societies that have made their success possible. BP supports this notion, and has made it company

policy to give back to the community. So, in Algeria for example, the company built two desalination

plants to provide drinking water to residents in Salah.

Other companies, however, dont share this view. As the Management Focus in your text points out,

Robert Murdoch, founder and CEO of News Corporation probably used the power of his company to gain

access to the Chinese market, and acted in an unethical way in doing so. As part of the deal, News

Corporation suppressed media content that was critical of China. Google has been accused of choosing a

similar path in China, much to the annoyance of some of its stakeholders.

Workforce Diversity


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Companies Act, 2013

CSR is governed by clause 135 of companies act, 2013.

Encourages companies to spend at least 2% of their average net profit in the previous years.

Schedule 7 details indicative list of activities.

Eradication of extreme hunger & poverty.

Promotion of education.

Gender equity & women empowerment.

Reducing child mortality & improving maternal health.

Combating HIV, Malaria & other diseases.

Env sustainability.

Social business projects.

Contribution to Prime Ministers relief funds.

Vocational skills.

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04_CorporateSocialResponsibility