Proceedings of the International Conference on Business Management & Information Systems, 2012

A Study of Successful CSR Practices by Industry Leaders

Phani Marpaka and Pushkala Muralidharan1
Department of Computer Science, Birla Institute of Technology & Science Pilani, Dubai Campus, United Arab Emirates 1 Department of Management Studies, Birla Institute of Technology & Science Pilani, Dubai Campus, United Arab Emirates
E-mail: phani.teja4@gmail.com; pushkala@bits-dubai.ac.ae

ABSTRACT
This exploratory research aims at analyzing the importance of Corporate Social Responsibility (CSR) from a companys perspective and the impact of the different successful CSR practices followed by industry leaders to increase their competitive advantage and brand equity. The scope of the report is limited to CSR practices of companies towards the community. It is a comparative study about the practices adopted by companies in view with the changing times. 15 companies of different sectors have been studied based on CSR theory, most of which also feature in The Global 50 Sustainable Companies of 2011 list compiled by Corporate Knights Research Group with verification performed using The Bloomberg Professional. The results obtained from these companies through their websites and journals have been illustrated. The paper also gives details as to when and to what extent a company is to consider CSR practices, the different CSR practices that can be adopted, concerns of the public towards a CSR oriented company and how it results in a win-win situation for both the corporate sector and the community that it serves. CSR actions are becoming more and more visible and numerous, both in the business environment and at governmental level. The CSR concept was initially used by national companies more as a marketing and media coverage instrument, rather than for its ethical values. As time went by, it became clear that the business environment is a key element in finding solutions to community issues. It is crucial that while making decisions, a responsible company takes into account the impact of its actions on the general public, the environment - internal and external- in which it operates and the economy as a whole. As organizations across the world continue to rethink their role in the wider society, refine their CSR practices and strategies and gain more capabilities to do so, their role in society is set to evolve.

Keywords: CSR, Corporate Governance, CSR Policies, Corporate Sustainability Report, Industry Leaders

Introduction
Among the four CSR dimensions of marketplace, workplace, community and environment, it is the environment that has been focused upon by most of the companies followed by community initiatives. Signs of increased activity and awareness can be seen with the increasing level of information available on CSR in the region. Surveys, discourses, reports all point towards corporate interest in promoting CSR and working towards increasing database for CSR related activities in the world. The research on CSR shows that although we can see promising signs of commitment to CSR overall, it still has a long way to go. It can also be noted that there is an increased level of awareness of CSR but the initiatives and activities have been limited to philanthropic and charitable activities. The companies social commitment has become a significant competitive edge in the new economy.

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Successful CSR Practices by Companies

Avon Products Inc., operating in over 140 countries with sales turnover of $9.9 billion, has been socially responsible since 2007. It initiated the Breast Cancer Crusade and helped provide education on cancer and early detection screening services to help women with breast cancer. In total the company has amassed over $250 million for the cause. In India too Bharti Airtel Limited (Indian Telecommunications Company; 5th largest operator in the world as of 2012) under its flagship Airtel brand has been active through its efforts during Tsunami, with the Airtel Crisis Communication centers, during Mumbai floods, Kashmir earthquake and by adopting community parks for development. Toyota Motor Corporation (Japanese Multinational automaker; 9th largest company by revenue in 2010) has put its brand soundly behind the United Nations World Food Program by supplying fleets of trucks to help with food deliveries .The UN is aided by the use of its trucks, and Toyota gains increasing credibility for its environmental stewardship leading to a win-win proposition. But what makes it so successful is that this activity is perfectly consistent with Toyotas mission, image, capabilities, and strategic context. HSBC holdings PLC, spent $108 million on community investment activities. The HSBC Climate Partnership, a five-year commitment between HSBC, The Climate Group, Earthwatch, Smithsonian Tropical Research Institute and WWF to reduce the impact of climate change on people, forests, freshwater and cities, and accelerate the adoption of low-carbon policies. In 2010, HSBCs U.S. and Canadian employees contributed over 72,000 volunteer hours to non-profit organizations. Johnson & Johnson, which enjoys high brand equity in consumer, pharmaceutical and medical devices & diagnostics, had a sales turnover of $63.7 billion worldwide in 2008. It signed a royalty-free license agreement with Emcure, a generic drug manufacturer in India, to register, package and distribute HIV/AIDS medicine in many least developed markets at a substantially lower price than developed-world prices.

Software Industrys CSR Policies

Wipro (Indias 3rd largest IT & consumer goods company) has upon the call of its Chairman, Azim Premji, established a trust Azim Premji Foundation to start 1,300 schools across different locations in India. These free for all schools would impart education in local languages. Microsoft (American MNC and largest software corporation in the world measured by revenues) has focused on several key areas: enabling jobs and opportunities, encouraging and promoting local talent & innovations, transforming education. It has extended its hand to international non-profit organizations like World Food Program, Save the Children, and Mercy Corps to provide technology-based development assistance through the HEART (Humanitarian Empowerment and Response through Technology) program. Apart from these Microsoft also supports a network of more than 29,000 Community Technology Centers (CTCs) in over 100 countries with cash grants, scholarships and certification programs. Not to be left far behind, GOOGLE (American national Company; worlds biggest search engine & internet related services) with its employees have raised over $2.6 million in cash and donated $1.02 millions worth of free online advertising to earthquake relief organizations. Google Quake Relief Hope Schools were constructed in the city of Mianyang in Sichuan province in September 2008. Google used its technology to the maximum by helping out the Chinese government with satellite images of quake affected regions and helped in the rescue operations. 18,184 children have been benefited. Google also collaborated with Mercy Corps, Save the Children, Doctors with Borders, China Red Cross, China Charity Federation and other similar organizations over the years to extend its help in community services.

CSR within the Food and Beverages Industry

Kelloggs, in 2005, has raised more than $8 million in cash and $20 million in products for different causes. It actively works with organizations such as United Way, Americas second harvest, and HOSTS

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learning- Help One Student to succeed and programs with proven results, to improve millions of lives around the world. It encourages its employees to volunteer and participate in wide- ranging charitable activities. Kelloggs provides a dollar- for dollar match of employee gifts to qualified educational, cultural and environmental organizations. Procter & Gamble has recorded a staggering $ 82.6 billion dollars in sales in 2011 and also has been appreciated as the 5th most Worlds Admired Company in the same year by Fortune magazine. At the 2008 Clinton Global Initiative, the Company unveiled a $55 million investment program focused on saving and changing hundreds of thousands of lives across the globe through its three commitments: Provide safe drinking water; Protect mothers and babies from neonatal tetanus (Pampers Maternal and Neonatal Tetanus Global Campaign); Promote education among girls in the under developed countries mainly the African nations (Always and Tampax Protecting Futures Program). P&G announced a further $11 million investment plan to provide an additional one billion litres of safe drinking water using PUR sachets that will prevent 40 million days of diarrhoea and save an estimated 5,000 lives. In addition, the company will spend $7 million on reaching a 1/3 billion households in developed countries to raise awareness and generate a further $11 million in donations for the campaign. Cadbury Schweppes approach to corporate social responsibility (CSR) stems from its founders philosophy of fair treatment of employees and philanthropy in the community. Cadbury Schweppes has invested 1m over six years in partnership with two charities Young Enterprise and the Princes Trust. The partnership involves volunteer Cadbury Schweppes employees (working in company time) and teachers in improving students awareness of society. The company hopes to improve standards and develop skills among both teachers and pupils. Nestle, the Swiss multinational nutritional and health-related consumer goods company, received governments approval to build a dairy farm in the Indian district of Moga. The company needed to establish local sources of milk from a large and diversified based of small farmers across the region. But in Moga, farmers were impoverished, failed crops led to a high death rate in calves, and lack of refrigeration prevented farmers from keeping milk fresh and shipping it. Nestl built refrigerated dairies as milk collection points in each Moga town, sent its trucks to the dairies to collect the milk accompanied by veterinarians, nutritionists, agronomists, and quality assurance experts. With financing and technical assistance from Nestl, farmers dug deep-bore wells. There was reduction in calves death rate by 75%, and increase in milk production 50-fold allowed Nestl to pay higher prices to farmers than those set by the government. Mogas standard of living improved: Meanwhile, Nestl gained a stable supply of high quality commodities, without having to pay middlemen and saw demand for its products increase in India.

CSR Initiatives by Oil Companies

Almost all oil companies have initiated, funded and implemented significant community development schemes. Oil companies now help to build schools and hospitals, launch micro-credit schemes for local people and assist youth employment programs, particularly in developing countries. They participate in partnerships with established development agencies such as the US Agency for International Development (USAID) and the United Nations Development Program (UNDP), while using nongovernmental organizations (NGOs) to implement development programs. Royal Dutch Shell and BP have specifically been recognized as leaders in corporate citizenship world-wide. They have become significant players in renewable energy and have professed to combat carbon dioxide emissions in order to minimize their contribution to global warming. But other companies appear to have done less. The improvements by Shell and BP have often been contrasted with the relative lack of social and environmental engagement by Exxon a company of a similar size to Shell and BP (Rowlands 2000; Skjaerseth and Skodvin 2003). BP, the British multinational Oil and Gas Company, had taken the route to Community services after the companys brand equity took a beating due to few unpopular

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work practices. Across the world BP has partnered with NGOs and international organizations like CARE International, World Bank in Colombia, World Wildlife Fund in China and Save the Children in Vietnam. In 2001, BP invested about $100 million in social initiatives globally and its employees had donated a further $13 million. The shift to CSR has indeed helped the company increase its stock price.

In the United Arab Emirates

Corporate Social Responsibility is the core purpose and value at Emirates National Oil Company (ENOC), a wholly-owned company of the Government of Dubai, UAE. ENOC in association with Ministry of Social Affairs aims to inspire people to engage, develop and learn to build a healthy, educated and socially-responsible community. It worked together with logistics provider Aramex to organize the collection and shipping of donations from ENOCs customers for the relief effort in the aftermath of the devastating Pakistan floods. ENOC and Tasjeel also introduced the Dirham waBas campaign, which donates AED 1 to the Bait Al Khair Society, a charity organization, for every car registered. ENOC has teamed up with Dubai Cares for the Thirst for Education campaign by placing donation boxes across service stations in Dubai and the Northern Emirates

Corporate Wrong Doings

Not all practices are believed to be undertaken by companies as a pure means for social service. Experts opinioned that CSR programs by few companies such as Reliance Petrochemical Company, Nike, McDonalds, British American Tobacco at one time in their history have been taken up as a means to distract the public from possible ethical questions posed by their core operations. The argument is that CSR programs are initiated at times by companies only for the commercial benefit they can gain from the public and government. It is a proven theory that such corporations which exist solely to maximize profits are unable to make any real impact upon the society.

The Unrighteous Path

For example, since the 1970s, the McDonalds Corporations association with Ronald McDonald House has been viewed as CSR and relationship marketing. All the same, in McDonalds Restaurants vs. Morris & Steel case, Justices Lord Pill, May and Keane ruled that it was fair comment to say that McDonalds employees worldwide do badly in terms of pay and working conditions and if one eats enough McDonalds food, his diet may well become high in fat with the very real risk of heart disease. Royal Dutch Shell has a much-publicized CSR policy and was a pioneer in triple bottom line reporting, but this did not prevent the 2004 scandal concerning its misreporting of oil reserves, which seriously damaged its reputation and led to charges of hypocrisy. Since then, the Shell Foundation has become involved in many projects across the world, including a partnership with Marks and Spencer (UK) in three flower and fruit growing communities across Africa. Nike faced an extensive consumer boycott after the New York Times and other media outlets reported abusive labor practices at the plants of some of its Indonesian suppliers in the early 1990s.Shell Oils decision to sink the Brent Spar, an obsolete oil rig, in the North Sea led to Greenpeace protests in 1995 and made international headlines. Nestl, the worlds largest purveyor of bottled water, has become a major target in the global debate about access to fresh water.General Electric failed to clean up the Hudson River after contaminating it with organic pollutants. The company continues to argue via the legal process on assignment of liability, while the cleanup remains stagnant (Sullivan & Schiafo 2005). The lead poisoning paint used by toy giant Mattel, required a recall of millions of toys globally and caused the company to initiate new risk management and quality control processes. Toyotas product safety recall grabbed a lot of headlines in 2010, mostly because of the very scale of the recall and Toyotas previously unblemished safety reputation. Deepwater Horizon was one of the worlds largest ever oil spills, and

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understandably this story absolutely dominated 2010. BPs oil spill in the Gulf of Mexico not only put a final nail in the coffin for BPs once vaunted sustainability reputation, but heralded a major rethink about the viability of deep-sea drilling. The rampant violence committed against Cokes unionized workforce by paramilitary forces in Columbia is well documented. The 2004 April report from a factfinding delegation headed by Hiram Monserrate, New York City Council Member contends: To date, there have been a total of 179 major human rights violations of Coca-Colas workers, including nine murders. Family members of union activists have been abducted and tortured. Union members have been fired for attending union meetings. The company has pressurized workers to resign their union membership and contractual rights, and fired workers who refused to do so. Allegations such as these formed the basis of a lawsuit filed in 2001 by the International Labor Rights Fund and the United Steelworkers of America in U.S. courts against Coke. Wal-Mart in 2004 had to face a class action lawsuit on behalf of 1.6 million women workers, for the alleged rampant employment discrimination. A February 2004 report issued by Representative George Miller, D-California, accused Wal-Mart of unruly blocking of union organizing efforts, paying employees a mere $8.23 on an average per hour (which is lower when compared to the $10 on an average of a supermarket worker), providing inadequate and unaffordable health care packages for employees, extracting off the clock work and gender discrimination regarding pay and promotion. Rupert Murdochs British tabloid News of the World (NoW) has been in the headlines for a while for hacking into voicemail accounts, cell phones, bank accounts and legal files of some 4,000 celebrities including many senior British politicians and the Royal Family.

When should a Company Consider CSR?

When a company has been offered a financial incentive to differ a business practice for the good of environment, mostly through an external agency (Ciscos incentive from the local energy supplier to meet or exceed guidelines for energy conservation). If it helps to reduce operational costs (McDonalds had saved 35 million pounds per year due to their shift from styra foam packaging to paper) When the money put in and the changes brought about from it would help strengthen the equation between suppliers or distributors (Starbucks providing training and economic opportunities to ensure a long-term sustainable supply of excellent coffee). If strategic corporate philanthropy actually improves the product quality or performance (compact fluorescent light bulbs that use less energy and last longer). If it contributes to desired Brand Positioning and point of differentiation in a crowded, undifferentiated marketplace (the Body Shop brand is built on ethical values). If it leads to an increase in Employee Retention and employee engagement (Coca Colas stretching out for HIV/AIDS people in Africa). When it helps to build influential partnerships (AT & Ts alliance with Ronald McDonalds foundation to support families of sick children or Coca Cola partnering with NDTV India for Support My School initiative, to help every child go to school.) When a current business practice can be identified in part as contributing to an important social problem, and modifications and improvements would help address the issue. (By addressing the AIDS pandemic in Africa, Anglo American Company could improve the productivity of the African labor). (http://www.salesforcefoundation.org)

Impact of Global Financial Crisis on CSR

Not surprisingly, the resources available to non-profit organizations during the global financial crisis

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are likely to shrink and that is a problem because recession is a point at which the demand for their services is going to increase. The large corporates would see their net worth decrease and therefore the funds they would allocate to non-profit organizations tends to decline. The best long term study has been done in United States of America, looking at philanthropy over 40 years. It suggested that philanthropic giving over those 40 years has increased about 3% a year. But in years where there were at least eight months of reduced economic growth, the reduction in funding was 2.7%. In other words, there was around 6% difference between an average year and a bad year. CSR covers a wide range of activities that go beyond the economic goals of the organization. Increasingly it involves looking at human rights, fair labor standards and product safety, not just at the first level but right along the supply chain. Large businesses present Corporate Sustainability report or Corporate Citizenship report. Will the organizations carry on when businesses are facing losses, lay-offs, shrinking in profits, declining share holder value? There are two schools of thought on this, the pessimists and the optimists. The pessimists argue that CSR has always been a fad, it was a public relations exercise, it was a green washing of activities and it was not surprising that it could sustain when economic times were good, in a time of down turn it will simply be sacrificed. The other school of thought, the optimists, counter this by saying that CSR is a part of what the business does and it will want to sustain it now more than ever. Reputation, Corporate Sustainability in the long term and Transparency the three important factors which underlie CSR activities were found to be missing in some businesses leading onto the Global Financial crisis. Corporate Responsibility needs to upgrade itself in which internal behavior, ethics and values of corporate enterprise reflect the externally focused values and ethics of the corporate enterprise. The ever changing times had a greater reflection on the public and they have begun to emphasize on four important factors; reputation, greater sustainability, transparency and profitability of a corporation. Three of these four factors are an integral part of CSR and thus there is a reason to believe that CSR will survive the economic downturn and indeed is central to the responses of business during all economic situations including the downturn.

References
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