CSR as relationship marketing strategy in Indian firms: An Empirical

Investigation

By:Sharad AgarwalFPM , IIM Ranchisharadiitian@gmail.com

Business for Social Responsibility: 2001 defines CSR as ‘‘operating in a manner that meets and even exceeds the legal, ethical, commercial and public expectations that society has of business’’

It is proposed that the Indian firms, knowingly or unknowingly, conduct their CSR practices, oriented towards their stakeholder

These CSR practices are aligned with their stakeholders’ needs and expectations,

Corporate Social Responsibility

Indian government has proposed to implement a bill which will make it mandatory for Indian corporations either with a turn over of INR 10 Billion or net profit of INR 50 million to spend 2% of the preceding three years profit on CSR

CSR has a special relevance for India as India has a rich and living spiritual heritage to complement the “analytical ethics” from the West with her “intuitive” or “being” or “consciousness” ethics (Enderle, 1997)

Relevance of CSR In INDIAN Context

CSR and Profitability

CSR and Profitability

One of the oldest questions in moral philosophy is whether it pays to be a morally good person

Many scholars, in the past, have tried to find the relation of CSR spending with the bottom line of the company and majority of them have found positive relationship between them

The literature shows link between CSR and financial performances of the companies.

CSR and Profitability (Continued)

We are interested to investigate the difference in CSR orientation of the companies on the basis of the difference in their profits

Hypothesis 1: The CSR orientation of the firms differs on the basis of the Profits (PAT) they make

CSR of firm and nature of its customer

Widely discussed in the literature about the difference in need, behavior and expectations of business customers, with the non business customer to a large extent ( kreindler and rajguru, 2006)

industrial marketing situations show unique characteristics that must be distinguished from consumer marketing: a small number of customers for any given supplier, buyer-seller interdependence and the existence of the durable customer supplier relationship (Bonoma and Johnston, 1978; Corey, 1976; Webster, 1979)

CSR of firm and nature of its customer

According to “Consumer culture theory” (CCT) proposed by Arnould and Thompson (2005), there exists the dynamic relationships between consumer actions, the marketplace, and cultural meanings

CSR of firm and nature of its customer (Continued)

Hypothesis 2 :The CSR orientation of the firm depends on the nature of its costumer i.e. B to B firms has distinct CSR behavior to that of B to C

firms

CSR of Firm and impact of firms’ operations on

environment

CSR of Firm and impact of firms’ operations on environment

Environmental protection is generally paid lot of attention in the area of CSR, (Reinhardt and. Stavins, 2010), probably because of the direct and indirect impact, the companies’ activities can have on its stakeholders

Bhopal gas Tragedy resulted in a loss of 10,000 lives and permanently disabled nearly 50,000 people and continued life-long misery for over 300,000 with certain genetic defects passed on to the next generation

CSR of Firm and impact of firms’ operations on environment (Continued)

Different industrial sectors are expected to have varied impact on society and environment for e.g Tobacco companies , Auto and oil companies

Deegan and Gordon (1996) noted that an industry whose activities modify or affect the environment might disclose more detailed social responsibility information than the companies in other industries

Hypothesis 3: The CSR orientation of the firms depends on the nature of their impact on environment i.e. manufacturing industries practice CSR distinctly when compared to non manufacturing or service industries

CSR of firm and its ownership structure

Graves and Waddock (1994) and Johnson and Greening (1999) document a relationship between firm ownership structure and CSR

Keim (1978), Ullmann (1985), and Roberts (1992) all document a positive relationship between dispersed corporate ownership and CSR disclosure in the context of developed countries.

A recent study by Li and Zang, (2010), in China, found difference in behavior of the firms controlled by state towards CSR when compared with the non state firms

CSR of firm and its ownership structure

Hypothesis 4: The CSR orientation of public sector firms is different from the CSR orientation of private sector firms in India

Methodology We collected data regarding the CSR policies

and practices of top 200 public listed companies in India

Content analysis was used to generate the underlying data for our research.

It is a ‘‘technique for making inferences by objectively and systematically identifying specified characteristics of messages”

We analyzed the websites, annual reports and sustainability reports of the companies in our sample

Methodology (Continued) We found that these companies worked on

one or more of the 100 areas and deployed any or a combination of 38 methodologies

We categorized those 100 areas into 8 broad areas those are ‘Education’, ‘Health’, ‘Community Welfare’, ‘Entrepreneurship Development’, ‘Environment’, ‘Work Place’, ‘Market Place’, ‘Rural Development’

Z test of proportions was used to test our hypothesis

Activities Explanation

EducationThe companies working in the area of promoting education for e.g. Child

education, girl education, providing scholarships , etc.

HealthThe companies working in the area of health care for the needful for e.g.

Rural health, preventing HIV/AIDS etc.

Community WelfareThe companies working for welfare of various sections of society for e.g.

Philanthropic donations, promoting inclusive growth

Entrepreneurship

Development

The companies working towards promotion of entrepreneurial activities or

helping people to set up their own enterprises to earn their livelihood for

e.g. Imparting technical know how, provision of start up capital, etc.

Environment

The company states a policy of minimizing negative environmental

impact or positively benefiting the natural environment as a part of

their business practices. For e.g. Not lending to industries depleting Ozone

layer

Market PlaceThe companies working in issues related to its market having impact on its

business. For e.g. Provisions of micro finance in villages etc.

Work Place

The companies working in issues related to its workplace development,

primarily aimed for the welfare of internal customers i.e. employees. For

example education of employees’ children etc.

Rural Development

The companies carrying out activities for the development of rural areas. For

e.g. Carrying out agriculture development activities, provisioning of street

lights in rural areas etc.

Results

Hypothesis Description Supported at p<0.05 in areas

H1 Profits (PAT)Education,

Health and Community welfare

H2 B to B Vs B to C Community Welfare

H3 Manf. Vs Non Manf. Health

H4 Public Vs Private ‘None'

Greater proportions of companies with higher Profits (PAT> 10 Billion) works in areas of Education, Health and Community Welfare

Larger proportions of B to B companies works for the cause of community welfare

Greater proportions of Manufacturing industries work for the cause of Health, they should also focus on environment

Conclusions and Implications

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References

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