CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABLE DEVELOPMENT

Submitted By: APOORVA TIWARI IVTH YEAR BBA LLB (HONS.) From: MATS Law School MATS University RAIPUR, CHHATTISGARH

TABLE OF CONTENTS

INTRODUCTION............................................................................................3

GOVERNMENT AND CSR.............................................................................6

RELATIONSHIP BETWEEN SUSTAINABLE DEVELOPMENT AND CSR.....................................................................................................................9

CONCLUSION .................................................................................................12

BIBLIOGRAPHY..............................................................................................13

INTRODUCTION
Nowadays, Corporate Social Responsibility and Sustainable Development are the two major terms which are in issue and are the topic of discussion, specially in the field of economic science and business management. No doubt, that business industries, factories and enterprises helps in the growth and development of the nation, both, socially as well as economically. But, at the same time it also effect the nature, resources and the whole environment consisting of human beings and living creatures. The two terms Sustainable Development and CSR are known to one and all and hence the aim of the paper is to find out The relationship between sustainability and CSR, Government role to promote and support sustainability and responsible business.

A framework is presented to explain the above mentioned topic and to deeply analyse the extent of interference of the State in order to look after sustainable development and the steps that should be taken by such organizations. The organizations are now, need to keep a check on the impacts of their actions on the societies as well as environment. Today, corporations along with their continuously running bussiness strategies and policies, are required to look into one more policy or say, one more responsibility which imposes a liability on the corporation, to follow such a path so as to meet the needs of present generation, without compromising the needs of future generation. Hence, sustainability is the principle on which the concept of CSR is based. It refers to an organizations activities, typically considered voluntary, that demonstrate the inclusion of social and environmental concerns in business operations and in interactions with stakeholders1.

(van Marrewijk & Verre, 2003).

3

No any specific definition of CSR exists, some considered it as a corporate activity, on the other hand, some viewed it as a moral duty and, Corporate social responsibility (CSR) according to the definition provided by the International Organization for Standardization , 2007 means responsibility of an organization for the impacts of its decisions and activities on society and the environment, through transparent and ethical behaviour that contributes to sustainable development, health and welfare of society, takes into account the expectations of stakeholders, is in compliance with applicable law and consistent with international norms of behaviour and is integrated throughout the organization and practiced in its relationships. The concept of CSR has been evovled through years. Different approaches by several scholars, academics, consultants and corporations towards CSR can be seen and analysed. Marrewijk (2003)2 enlists some approaches about CSR that have been proposed over the years. The shareholder approach can be simply explained in the words of Milton Friedman, There is one and only one social responsibility of business to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud (Friedman, 1970). The stakeholder approach is about going beyond interest of shareholders to a multitude of stakeholders who are affected by the activities of the organization. The broader view of CSR and the full coverage of the various perspectives come forth in the societal approach which advocates responsibility to the society. The basis for this argument is the fact that the organization is a part of the society in which it functions. Here in this paper we will move forward to analyse the societal approach which constitutes the concept of sustainable development.

Why CSR ? Again, the concept regarding the practice of CSR involves n number of view points depending upon the thoughts and the extent of its applicability . Now, the question arises why a corporation must follow the path of CSR ? It is because, CSR can create globalisation and lead to industrial change. It directly effect the thoughts of general public and force them to think, that yes, this corporation is doing something for the society, it is concerned about the people ,environment and resources which leaves a good impact upon the people and creates a

IIIEE Theses 2009:01 Experiences of the Role of Government in promoting Corporate Social Responsibility initiatives in the private sector Recommendations to the Indian state of Gujarat Ajay Gajanan Bhave p. 3 para. 2

great impact on investment decisions of individuals and institutions both as consumers and investors. The Green Paper on Promoting a European Framework for Corporate Social Responsibility (European Union, 2001) very succinctly articulates the core arguments to move towards CSR3. New concerns and expectations from citizens, consumers, public authorities and investors in the context of globalization and large scale industrial change. Social criteria are increasingly influencing the investment decisions of individuals and institutions both as consumers and as investors. Increased concern about the damage caused by economic activity to the environment. Transparency of business activities brought about by the media and modern information and communication technologies.

Ibid

GOVERNMENT AND CSR Government now, is actively taking part in the acivities of CSR . There are various factors that lead government to show interest in CSR. The major factor is that, the aim of government and the duty of any government is to encourage sustainable development. In the principles of CSR the govt. found out that with the implementation of CSR policies, their aim of promotion of the economic, social and environmental conditions that favour more inclusive and sustainable development is getting fulfilled. Secondly, CSR is considered to play an important role in contributing to the competitiveness of a country. The European Commission stresses the need to link CSR with the competitiveness of companies and national and regional economies, which in turn has been described as fundamental for a nations sustainability4. Thirdly, financial crisis and fiscal deficit have forced many governments around the world to look for a new approach for developing and funding collective action to deal with social demands that cannot be met by the government alone. Hence, CSR activities helps and support the government in implementing the social missions for its people. Fourthly, Pascal Lamy, Director General of the WTO and former European Commissioner for Trade, has observed, The societal benefits of corporate responsibility practices will remain limited unless they can be incorporated into broader strategies, and public policies certainly have a role to play in this respect5.

Government Of India And CSR The Ministry of Corporate Affair brought a set of voluntary guidelines for responsible business which added value to the operations and contribute towards the long term sustainability of the business. These guidelines also enabled business to focus as well as contribute towards the interests of the stakeholders and the society.

European Commission (2002). Communication from the Commission concerning Corporate Social Responsibility: A Business Contribution to Sustainable Development. http://europa.eu/ legislation_summaries/employment_and_social_policy/employment_rights_and_work_organisation/ n26034_en.htm. 5 Pascal Lamy (2002). Preface in Swift, Tracey and Zadek, Simon. Corporate social responsibility and the competitive advantage of nations, p. ii.

According to the CSR Voluntary Guidelines 2009 by the MINISTRY OF CORPORATE AFFAIRS a CSR Policy should normally cover following core elements: 1. Care for all Stakeholders: The companies should respect the interests of, and be responsive towards all stakeholders, including shareholders, employees, customers, suppliers, project affected people, society at large etc. and create value for all of them. They should develop mechanism to actively engage with all stakeholders, inform them of inherent risks and mitigate them where they occur.

2. Ethical functioning: Their governance systems should be underpinned by Ethics, Transparency and Accountability. They should not engage in business practices that are abusive, unfair, corrupt or anti-competitive.

3. Respect for Workers' Rights and Welfare: Companies should provide a workplace environment that is safe, hygienic and humane and which upholds the dignity of employees. They should provide all employees with access to training and development of necessary skills for career advancement, on an equal and nondiscriminatory basis. They should uphold the freedom of association and the effective recognition of the right to collective bargaining of labour, have an effective grievance redressal system, should not employ child or forced labour and provide and maintain equality of opportunities without any discrimination on any grounds in recruitment and during employment.

4. Respect for Human Rights: Companies should respect human rights for all and avoid complicity with human rights abuses by them or by third party.

5. Respect for Environment: Companies should take measures to check and prevent pollution; recycle, manage and reduce waste, should manage natural resources in a sustainable manner and ensure optimal use of resources like land and water, should proactively respond to the challenges of climate change by adopting cleaner production methods, promoting efficient use of energy and environment friendly technologies.
7

6. Activities for Social and Inclusive Development: Depending upon their core competency and business interest, companies should undertake activities for economic and social development of communities and geographical areas, particularly in the vicinity of their operations. These could include: education, skill building for livelihood of people, health, cultural and social welfare etc., particularly targeting at disadvantaged sections of society. CSR provides opportunity as well as strategy to solve the social, environmental, economical and financial issues. Hence, the govt.should seek to develop and support the policies and rules of CSR .

RELATIONSHIP BETWEEN SUSTAINABLE DEVELOPMENT AND CSR Sustainable development means Development as the means to satisfy the needs of present generations without compromising the resources of future generations6 . Sustainability, the Commission argued, includes not only economic and social development, but also a commitment to the needs of the poor and recognizing the physical limitations of the earth. The World Business Council for Sustainable Development in its publication Making Good Business Sense by Lord Holme and Richard Watts, used the following words to define corporate social responsibility. 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.7 Multinational Companies (MNCs) are prime drivers of the trend of globalization. As such, they can be held responsible for the success or failure of sustainable development as it relates to continued economic growth without detriment to the environment and

exploitation of the human workforce through inadequate labor standards. Corporate social responsibility is an initiative that has been touted as a possible remedy for the ills of globalization that hinder the realization of sustainable development-that is, inequities in wealth, environmental degradation, and unfair labor practices that are endemic of globalization. The concept of Sustainable development and CSR are closely related. In general terms, Sustainable development means, using the already existing resources in such a manner so as the resources can also be utilised and enjoyed by the future generations. Now the question arises, how the two terms are in relation with each other ? Corporations, businesses, enterprises, factories all such entities constitute in the development of the Country economically as well as socially, so such entities, are an important part of any nation. While performing such a key role in the development of the Country these corporations has a negative effect in the environment, factories and companies emitts hazardous smoke, waste
6

World Commission on Environment and Developments (the Brundtland Commission) report Our Common Future , 1987.
7

Corporate Social Responsibility: Meeting changing expectations, 1998, p. 3; http://www.wbcsd.org/pages/edocument/edocumentdetails.aspx?id=82&nosearchcontextkey=true

materials, which in some way or the other causes harm to the environment. Also, every company, whether it be an Automobile Company, Information Technology Company, Pharmaceutical company etc. degrades the environment and effect the ecological system as well as consuming and utilising the energy and resources. Hence, minimising the chances of the coming generations to enjoy such resources. Therefore, the concept of Corporate Social Responsibility has been emerged, so as to keep a check on whether the corporations are concerned about the future generations or not. Corporate Social Responsibility, if followed honestly and mandatorily can result as a key and most effective concept in regard with the sustainable development. What Constitutes CSR ? Corporate Social Responsibilty can be considered as a tool for assesment and evaluation of an organizations impact over the society and its responsibilities respectively. Several aspects of a business need to be assessed in order to initiate the activity of CSR. Such factors includes the assessment of : customers, suppliers, environment, communities and employees8. It is a social responsibility of a company to satisfy its customers, to check whether they are getting the right thing and in time and quantity, for what they are spending their money or not. It the responsibility of the corporation to be concious about the demands of the customers. Secondly, the suppliers, the point on which the entities need to be attentive regarding the suppliers is that- what path does the supplier is following, it should not be like, the entity is wholly running, beleiving and following the road of being a responsible and socially consious enterprise and the supplier which is forming a substantive part of the enterprise is totally unaware about the concept and practices of CSR. Hence, a check on suppliers is necessary. Next in the list is, environment, it is a wide topic and most of the CSR principles and rules talks about this only. Environment is one of the important factor which constituted in the evolution of the concept of CSR. Because the activities of such entities our environment is continuously degrading, hence it has become essential to take a step in order to minimise the degradation or to search for an alternative, so as to conserve the environment and in fact, conserve the creatures who are living in such environment. Creating awareness among the communities and employees can be a major step in the pursuance of sustainable development through CSR. Hence, the corporations must take a step towards creating an awareness about their duties and responsibilities towards the nation, towards the people and towards the world.

Source: e-magazine.

10

In India, several companies follows Corporate Social Responsibility, such as, Tata Group, it has a range of CSR projects, most of which are community improvement programs. For example, it is a leading provider of maternal and child health services, family planning, and has provided 98 percent immunization in Jamshedpur. The company also endorses sports as a way of life. It has established a football academy, archery academy, and promotes sports among employees. It offers healthcare services all over the country with programs like rural health development.Tata Group also has an organized relief program in case of natural disasters, including long-term treatment and rebuilding efforts. It did laudable work during the Gujarat earthquakes and Orissa floods. It also supports education, with over 500 schools, and also is a benefactor of the arts and culture. It has done abundant work in improving the environment and local populations around its industries. Similarily, At Mahindra & Mahindra, The K. C. Mahindra Education Trust was established in 1953 with the purpose of promoting education. Its vision is to renovate the lives of people in India through education and financial assistance across age groups and across income strata. The K. C. Mahindra Education Trust undertakes a number of education plans, which make a difference to the lives of worthy students. The Trust has provided more than Rs. 7.5 crore in the form of grants, scholarships and loans. It promotes education mostly by the way of scholarships. The Nanhi Kali (children) project has over 3,300 children under it and the company aims to increase the number to 10,000 in the next two years by reaching out to the underprivileged children, especially in rural areas.

11

CONCLUSION
In our opinion, the two terms CSR and Sustainable development are closely linked with each other also, the role of Government in the promotion of CSR is equally important. CSR is basically a give and take concept. Means, when you are utilizing the energy and resources and taking so much from the environment, than you are also responsible to compliment the effects of your actions. The two terms are said to be related in the sense that, Corporate Social Responsibility, in the most simple terms is the responsibility towards the society, concerning about the environment, about social welfare, health, education etc. all such activities will lead to development and creating a sense of awareness among the people. It helps in bringing industrial change, it effects the investment decisions of the individual which results in better growth and enhancement of the Country which again is helpful in establishing a prosperous and advanced nation for the generations to come. Promotion of CSR is highly beneficial for the Government, as the aim of both the bodies are one and a same. So if the Government join hands with the CSR policies and encourages its implementation than the goal of both the parties can be fulfilled more effectively. Also, CSR policies will low down the governments burden, as, many a times it happens that the Government faces financial problems and it fails to come up with its promises or fails to perform such responsibilities of which the people are in need, in such a situation the Government need not to worry as it will have an alternative which will be performed by the corporate bodies for the welfare of the country and its people. No doubt, that the government always takes initiatives for the proper growth and development of the country but, in todays time, when the population and pollution is increasing in such a fast pace, the aim of building a rich and prosperous nation with sustainability can not be attained and fulfilled by the sole efforts of the Govenment, hence the promotion and support of CSR by the Government would be highly beneficial for each and every individual.

12

BIBLIOGRAPHY A B, Carroll A Three-Dimensional Conceptual Model of Corporate Social Performance, Academy of Management Review, 4 (1979) 497-505 A B, Carroll, The Four Faces of Corporate Citizenship, Business and Society Review 100/101 (1998) A B, Carroll- The Four Faces of Corporate Citizenship Business and Society Review 100/101 (1998) Bryan W, Husted and David B, Allen, Is It Ethical to Use Ethics as Strategy?, Journal of Business Ethics 27(1/2) (Sep, 2000): 21-31 Bryan W, Husted and David B, Allen- Is It Ethical to Use Ethics as Strategy? Journal of Business Ethics 27(1/2) (Sep, 2000): 21-31 C H, Enloe- The Politics of Pollution in a Comparative Perspective London:Longman,1975 D, Grayson- The Community as a Stakeholder, Corporate Governance and Competitiveness Westall A ed, London: Institute for Public Research,1996 D, Korten- When Corporations Rule the World London: Earthscan, reprinted, 1996 D, Petkoski and N, Twose- Public Policy for Corporate Social Responsibility World Bank Institute and Private Sector Development Vice Presidency of the World Bank (2003) D-C, Korten- 1996, When Corporations Rule the World London: Earthscan, reprinted, 1996 Citizenship Sheffield: Greenleaf Publishing,2001 Gao, S- S- and J- J-, Zhang, A Comparative Study of Stakeholder Engagement in Social Auditing, in J, Andriof and M, Mcintosh (eds-), Perspectives of Corporate Citizenship Sheffield: Greenleaf Publishing,2001 Gleckman and Krut, (1994) in Richter J, Holding Corporations Accountable: Cor porate Conduct, International Codes and Citizen Action New York: Zed books, 2001

13

 Gleckman and Krut- (1994) in Richter J, Holding Corporations Accountable: Corporate Conduct, International Codes and Citizen Action New York: Zed books, 2001 L, Burke- and Logsdon- How Corporate Social Responsibility Pays Off, Long Range Planning 29(4),(1996) 495-503 Laura Albareda, Josep M- Lozano and Tamyko Ysa- Public Policies on Corporate Social Responsibility: The Role of Governments in Europe Journal of Business Ethics 74(4) (2007): 391-407 M, Friedman- The Social Responsibility of Business is to Increase its Profits Corporate Ethics And Corporate Governance (2007)173-178 M, Jacobs- The Environment as Stakeholder Business Strategy Review 6(2) (1998): 25-28 Saul, Jason- : 5 Strategies for Driving Business Growth Through Social Change New Jersey: john wiley & sons, 2010 T, Cannon- Corporate Responsibility A textbook on business ethics, governance, environment, role and responsibilities London: Pitman Publishing,1994 T, Donaldson and L E, Preston- The Stakeholder Theory of the Corporation Concepts, evidence and implications, Academy of Management Review, 20 (1995) 65-91 W, Hoffman; Michael; R E, Frederick and M S, Schwartz- Business Ethics: Readings and Cases in Corporate Morality USA: McGraw Hill Inc,2001,4th edn W- Michael, Hoffman; R E, Frederick and M S, Schwartz- Business Ethics: Readings and Cases in Corporate Morality USA: McGraw Hill Inc,2001,4th edn

14

15