Corporate Social

Responsibility

Corporate Social Responsibility

Big business have always been criticized. Beginning around the turn of the century, the crusading journalists shocked the nation with exposes of corrupt business practices, touching off a wave of Government regulations. This followed the

wake of the great depression (1930) and again in 1960s and 1970s. The issues of 2007 also brought forth the American

President coming strongly in favor of CSR

CSR – The New Paradigm

A growing body of evidence asserts that corporations can do well by doing good. Well-known companies have already proven that they can differentiate their brands and reputations, as well as their products and services, if they take responsibility for the well-being of the societies and environments in which they operate. These companies are practicing Corporate Social Responsibility (CSR) in a manner that generates significant returns to their businesses.

The History of CSR

• Andrew Carnegie (founder of the conglomerate US steel corporation) published ‘The Gospel of Wealth’ which tried for the first time to define CSR. Carnegie’s views were based on two principles:– The Charity Principle : Doctrine of social responsibility

requiring more fortunate individuals to assist less fortunate members of the society

– The Stewardship Principle: Biblical doctrine that requires business and wealthy individuals to view themselves as stewards, or care takers, holding their property in trust for the benefit of the whole society

• Gradually the notion of CSR became a smoke screen for the personal values of few powerful individuals

The Two Opposing Views

• On one side there is the purely economic view (Milton Friedman) to maximize profits (thereby protecting the interests of the stake holders) while on the other stands the socio-economic position (Keith Davis – an iron law of responsibility which states that in the long run those who do not use power in a manner that the society considers responsible will tend to lose it) which holds management’s responsibility goes beyond making profits to include responsibilities towards the eco-system in which they operate.

• Supporters of the CSR contend that the managers should be concerned with maximizing the profits in the long run.to do this they must accept some social costs that go with them.

Arguments For and Against CSR

Arguments for:• Public expectation

• Long term profits

• Ethical obligations

• Public image

• Better environment

• Discouragement of further government control

• Balance of responsibility and power

• Stockholder’s interest

• Possession of resources

• Prevention is better than cure

Arguments against:• Violation of profit maximization

• Dilution of purpose

• Costs

• Too much power

• Lack of skills

• Lack of accountability

• Lack of broad public support

The Global Survey

IBM’s conducted global survey to gauge just how deeply the CSR issue has penetrated the core of the corporation and its strategies and operations. They surveyed more than 250 business executives worldwide. These were business leaders and strategists, not the executives responsible for charitable foundations or special corporate CSR initiatives. Their analysis led to three dynamics that companies should understand and act upon in dealing with CSR. They are:

• Impact on business – From cost to growth

• Information – From visibility to transparency

• Relationships – From containment to engagement

How do you develop a CSR strategy

• The approach is to view a company’s current activities and objectives against the CSR Value Curve, which captures the shift in thinking from CSR as a cost or risk mitigation effort to CSR as a strategic goal that brings in new revenue.

• When businesses do start to move beyond compliance they start their journey along a continuum described in the CSR Value Curve. The survey results showed that surprisingly few companies engaged in what appears to be a very fundamental area for reputation building – strategic philanthropy. Strategic philanthropy aligns charitable giving with business strategy, company skills and market needs. These efforts reinforce a company’s social commitment with ongoing returns, often in the form of goodwill and typically indirectly from a financial perspective.

• Companies are finding that many CSR initiatives, including those that reduce energy consumption or benefit the environment, help reduce overall cost structures or increase productivity.

Obligation Responsibility Responsiveness

Social Obligation

SocialResponsibility

SocialResponsiveness

The obligation of a business to meet its economic and legal responsibilities

The capacity of a firm toAdopt to changing and Challenging societalconditions

Stage 1Owners and Management

Stage 2Employees

Stage 3ConstituentsIn specificenvironment

Stage 4Broader Society

Lesser Greater

Social Responsibility

To Whom Is Management Responsible

1960 2007

Society’s expectation from business

Actual Business Practices

Social & Ethical Problems

Social Responsibility and Ethics Over Time

Conclusion

CEOs have long been accountable to a varied group of stakeholders – employees and communities, as well as investors. The nature of these relationships is now changing in ways that significantly affect corporate performance. In part due to the emergence of the Internet and continuing globalization, companies are becoming accountable for labor issues and working conditions in their partners’ operations as well as their own. In climbing the CSR Value Curve from compliance to growth, companies companies must:

Conclusion -- Contd

• Align and incorporate CSR with business strategy and integrate it across all operational functions. Thus, making it easy to invest (not spend) the funds necessary to achieve its objectives.

• Implement an open information strategy for more transparent information-sharing with multiple stakeholders.

• Leverage transparency to increase the level of engagement of key constituents and customers.

• When these activities are done in combination, CSR can become a dimension of a company’s successful competitive strategy. Done right, it offers a company improved relationships with all of its key constituents, more loyal customers, lower costs, higher revenues and an overall improvement of the business’ standing in society.

Thoughts for NOW

The demands on business and the expectations of what is considered “proper conduct” have risen faster than the ability of business to raise standards. Since society’s expectations of its institutions are regularly changing, managers must continually monitor these expectations. What is ethically acceptable today may be a poor guide for the future