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Corporate Social Responsibility

Introduction
Corporatesocialresponsibility(CSR)isthewayacorporationachievesabalanceamongitseconomic,
social,andenvironmentalresponsibilitiesinitsoperationssoastoaddressshareholderandother
stakeholderexpectations.

7KeyCharacteristics RelevanceofCSRwithinanOrg

Strengtheningrelationshipswith
stakeholders.
Enablecontinuousimprovement.
Encourageinnovation.
Attractbestindustrytalent.
Employeemotivation.
Riskmitigation.

ArgumentsforCSR ArgumentsagainstCSR
Changingsocialvalues Difficulttomeasure
Longrunbenefits Againstprofitmaximizationprinciple(MiltonFriedman).
Imageforcompany Highcost
Benefitforsociety Lackofsocialskills
Welfarestate Lackofpublicsupport
Givingbacktosociety. Notsupportedbyboardofdirectors
Stockholdersdelight
Stakeholdershappiness
Solutiontosocialproblems
Overallgrowth
CSR Dimensions
Customer Qualityofgoods.
Fair&reasonableprice.
Relevant&meaningfuladvertisement.
Fairtreatmenttocustomers,nodiscrimination.
Providerelevant&recentinformation.
Excellentcustomerservice.
Employee Fairwages.
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Safe&conduciveworkenv.
Policiestoincreaseefficiency.
Training&educationalopportunities.
Supportforphysical,mental&emotionalproblems.
Laborwelfareprograms.
Employeeempowerment.
Environment Reduced&controlledpollution.
Provisionforrecyclingwastes.
Government Paymentoftaxes.
Implementthepoliciesformulatedbygovt.
Community Localcommunitydevelopmentprograms.
Rehabilitationofdisplacedpopulation.
Improvedbusinessstandards.
Developmentofbackwardareas.
Promotionofresearch&development.
Promotionofancillaryunitsandsmallscaleindustries.
Socialcauseslikeadulteducation,healthawareness,populationcontroletc.
Identification of Areas for CSR
SocialForecastingobservingcurrentsocialconditions&practices(ICTeChoupal)
OpinionSurveys
NationalIssuespoverty,unemployment,inequalityetc.
SocialScanning
SocialAudit
Pyramid Model of CSR
AsperArchieCarroll,thereare4kindsofsocialresponsibilityeconomic,legal,ethical&philanthropic
whichcanbedepictedinapyramidasshownbelow.
EconomicalResponsibilityBeprofitable.Thisisthefoundation.
LegalResponsibilityObeythelaws.Playbytherulesofthegame.
EthicalResponsibilityBeethical.Avoidharm.
PhilanthropicResponsibilityBeagoodcorporatecitizen.Contributeresourcestocommunity.
Improvethequalityoflife..
2 Dimensional Model of CSR
CapturescostbenefitconsiderationsofCSRactivities.
ClassicalViewNoprovisionforbusinesstolookbeyondprofitmaking&CSRisseento
generateonlycostsbutnobenefitsatall.
SocioEconomicViewBusinesswillcontinuetopursueprofitmaximizationasaprimary
objective,whileitalsotrytomeetsocialdemandsandderivessomebenefitintheprocess.The
benefitcanbegoodcustomersandbettersupplierrelations.
ModernViewPerceivingnetbenefitsfromsociallyresponsibleaction.
PhilanthropicViewBusinessagreestoparticipateincharitableactivitieseventhoughperceived
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asanetloss.

PyramidModel 2DimensionalModel

3 Dimensional & Stakeholder Model of CSR

3dimensionalmodelisanextensionofPyramidmodel.Withthismodel,overlapofthethreedomains
Economical,Legal&Ethicalcreates7possiblecategoriesforCSRactivities.

3DimensionalModel StakeholderModel

Triple Bottom Line Model of CSR - PeoplePlanetProfit

Socialimprovingtheimpactonitsemployeesandthecommunitiesinwhichitoperates,for
examplebypayingworkersafairsalary,askingthemtoworkreasonablehourswithinasafe
environment,notusingchildlabour,payingsuppliersafairpriceandpromotinghealthcareand
educationthroughoutthesupplychain.
Environmentalreducingthelevelofenergyandnonrenewableresourcesitconsumes,the
wasteitproducesandtheenvironmentalimpactoftheservicesandproductsitprovides.
Economicincreasingitseconomicvalueforsocietynotonlybytheprofititmakes,butalsoits
contributiontotheprofitsoftheotherentitieswithwhichitinteracts.
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CSR Examples
InIndia,manyfirmshavetakentheinitiativesofCSRpracticeswhichhavemetwithvaryingneedsofthe
society.Mostcommonthematicareascoveredbycompaniesincludehealth,education,livelihoods,env&
ruraldevelopment.

Infosys
Healthcare Donationofblood,medicines.
Infrasupport(newbuilding,wards,facilitieslikeairconditioning).
Constructionofnewhospitals,resthousesetc.
Education Donationofstudymaterials.
Reconstructingschoolsinruralareas.
ALibraryforEverySchoolproject.
Culture Organizationofculturalprogramstopromoteruralartists.
Financialassistance.
Publication(Kanthabook)
RuralDevelopment Nationalcalamityassistance(tsunami,floodetc).
Sponsoringmiddaymealprogram.
Donationofsewingmachines.
Constructionofruralinfralikesanitary,rainwaterharvestingetc.
DestituteCare Rehabilitationofstreetchildren.
Trainingtotribalcommunities.
Vocationaltraining.

ITC
Employee Minorityemployment.
Familyalignment
Flexibleworkhours
Diversityprograms.
Customer Powerefficiency.
Carbonaudit.
Recycling.
Community Communityprojects.
NGOsupport.
Philanthropy.
Economicaldevelopment
Environment Carbontrading
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Supplychainethics
Alternateenergy

Maruti
Community Sanitation
Education
Skilltraining
Localtrafficmanagement
RoadSafety Drivingtraining&awareness.
InstituteofDriving&TrafficResearch.
MarutiDrivingSchools.
RoadSafetyKnowledgeCenters.
RoadSafetyforTruckDrivers(Jagriti)
SkillDevelopment
PublicPolicy

CSRforcesbusinessesnotonlytoconsidertheshortterminterestsoftheirshareholders,butalsoto
determinehowtomeetthelongtermneedsofalltheirstakeholderswithoutcompromisingfuture
generationsabilitytomeettheirownneeds.
Social Audit
SAisamanagementtoolandaccountabilitymechanismwhichcanenhanceanorgcapacityto
Evaluatetheirimpactonstakeholders.
Determinehowwelltheyliveuptothevaluestheyespouse.
Improvetheirstrategicplanningprocessbyidentifyingpotentialproblemsinadvance.
Increasetheiraccountabilitytothegroupstheyserveanddependon.

SocialAuditingistheprocessofmeasuringandreportingperformanceonfulfillingtheeconomic,legal,
ethicalandphilanthropicsocialresponsibilitiesexpectedbystakeholders.

6keyelementsofSocialAuditare

StepsinconductingSAare
1. Assembleorganizationandsecureagreementandcommitment.
2. Defineandprioritizetheorganizationsobjectivesandestablishtheactionitintendstoperformto
meetthem.
3. Identifytheorganizationsstakeholders
4. Agreeuponindicators,information,benchmarksandtargets.
5. Datagatheringsystemsputinplace.
6. Collating,analyzingandinterpretingresults
7. Externalverificationprocess
8. Disclosureandactonresults

MainreasonstoconductaSAare
Knowwhatishappening.
Understandwhatpeoplethink&want.
Tellpeoplewhatyouareachieving.
Strengthenloyalty/commitment.
Enhancedecisionmaking.
Improveoverallperformance.

SAhasanexcellentpromiseasamanagementtool,butsomepotentialproblemsremainssuchas
Reportingorganizationcandeliberatelylimitauditscopeinordertoavoidcontroversies.
Processcanbemanagedinternallytothedisadvantageofsomeexternalstakeholders.
Somesignificantstakeholdersmaybeomitted.
Organizationmayusearbitraryorinappropriateindicatorstoevaluateoutcomes.
Thestandards,independenceandhonestyoftheauditormaybeopentoquestion.

Ethics & Government

Governmentplaysanimportantroleinencouragingbusinessestobehaveinanethicalmanner,bothby
encouragementandcoercion,asitcannotbeassumedthatallbusinesseswillbehaveethicallywithout
enforcementofregulations.

LegislatingRole
SupervisoryRole
IncentivizingRole

Somedegreeoflegislationisnecessarytoensurethatbusinessescomplywiththeirethicalobligationsand
thepublicdoesnotsufferasaresultofdishonestbusinesspractices.Rulesaimtopreventthepracticeof
bribingplanningauthoritiestocircumventplanningandzoninglaws,forexample.Manyunethical
businesseshaveengagedinsuchpractices,andwithoutexplicitlawsrestrictingcheating,smallbusinesses
thatdonotengageinillegalactivitieswouldbeplacedatacompetitivedisadvantage.
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Thegovernmenthasasupervisoryroleinthefieldofbusinessethics.Anticompetitivebehaviorcanoccur
whenlargeorganizationsmergeoraretakenover,andwhenalargeorganizationhasaverysubstantial
marketshareoramonopoly,thereisalwaysthetemptationforittoactinanunethicalmanner,whichwill
bedetrimentaltothepublic.Thegovernmentmustmonitorandsupervisesuchmergerswhichare
subjecttoantitrustlawtoensurethattheyareactingethicallyandarenotabusingapositionof
dominance.

Thegovernmentcanencourageethicalbehaviorbyincentivizingitwithtaxbreaks,orbyimposing
surchargesoncompanieswithhighlevelsofemissions."Greencompanies"thatadheretoenvironmentally
friendlypracticesanddemonstrategreenawarenessshouldbeencouragedtodosoandrewardedby
governmentaspartofitsenvironmentalpolicy.Ifcompaniesarefinanciallypenalizedforwastingenergy
orforimproperwastedisposal,theyarelesslikelytoengageinthesepractices.

Althoughgovernmentplayanimportantroleinensuringthatbusinessoperateinanethicalmatter,
ultimately,theresponsibilitytodosolieswiththebusiness.Itwouldbeimpossibleforgovernmentto
overseealloperationstosuchanextentthattheycouldforceallbusinessestobehaveethically.Suchstrict
supervisionwouldmostlikelyadverselyaffectthesmoothoperationofthemarket.Governmentagencies
holdthedutytopromoteethicsasmuchaspossiblewithoutundulyrestrictingbusinesses.

Examples
BanofTobaccoads
BanofPanMasala
AgerestrictionforSmoking.
Minimumwages.
International Business Ethics
Manyoftheethicalissuesanddilemmasininternationalbusinessarerootedinthefactthatpolitical
system,law,economicdevelopmentandculture varysignificantlyfromnationtonation.

Intheinternationalbusinesssetting,themostcommonethicalissuesinvolvedare
EmploymentPractices.
HumanRights.
EnvRegulations.
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Corruption
MoralObligationofmultinationaloperations.

EmploymentPractices
Employmentpracticesareafrequentsourceofethicaldilemmaforcompanies.Suppose,workconditions
inahostcountryareinferiortothoseinthehomecountry.Whichstandardsshouldyouapplythehome
countrystandardsorthehostcountrystandards?Isitoktoemployminorstoworka50hourweekifit
doesntviolatelocallaws?Doyouhavetosupplysafetygeartoemployeesifitsnotrequiredbylaw?

Levisbelievesthatitsimportanttomaintainstandardsthatpreservethebasicrightsanddignityof
employees.So,whenitdiscoveredthatoneofitssupplierswasforcingwomentoworkmorethan70
hoursaweekinguardedcompounds,thecompanyendeditsrelationshipwiththesupplier.

ApplefounditselfinthemiddleofasimilartypeofcontroversywhenasuppliermakingtheiPodwas
accusedoflaborabuses.

HumanRights
Thingslikefreedomofassociation,freedomofspeech,freedomofassembly,andsoonareoftentakenfor
grantedindevelopedcountries.But,itsimportanttorememberthatthesefreedomsarenotrespectedin
manycountries.ThinkabouttheapartheidsystemthatdeniedbasicpoliticalrightstoblacksinSouth
Africa,forexample,ortheongoingsituationintheDarfurregionofwesternSudanwheretheSudanese
governmenthasbeenaccusedofgenocidebytheU.S.andothercountries.

Shouldcompaniesdobusinessincountrieswithrepressiveregimes?Somepeoplearguethatthepresence
ofmultinationalcompaniesactuallyhelpsbringchangetothesecountries.Somepeoplebelievethat
changeisoccurringinChinaforexample,becauseinvestmentsbymultinationalsarehelpingtoraiseliving
standards.Others,however,arguethatsomecountrieslikeMyanmar,whichhasoneoftheworsthuman
rightsrecordsintheworld,aresobrutallyrepressivethatnoinvestmentcanbejustified.Infact,many
companiesleftthecountryinthemid1990sbecauseofitsdismalhumanrights.

EnvPollution
Manycountriesareestablishingstrongenvironmentalregulationstotrytolimitenvdamage,forcing
companiestoadoptnewmeasuresthatcanbequitecostly,toabidebythelaws.So,newregulationsare
forcingyourcompanytotakecostlystepstostaywithinthelaw.Youknowthattheseregulationshavent
beenimposedinsomeothercountries,particularlythosethatarelesserdeveloped.Shouldyoushiftyour
productiontoanothercountrywherethelawsdontexist,orareonlylooselyenforced?

Yourfirstresponsemightbethatthemoralandethicalthingtodoistostayhomeandadoptthecostly
compliancemeasures.But,youmightworrythatcompetitorsthatdonttakethehighroadwillhavean
advantage.Thisbringsupaphenomenoncalledthetragedyofthecommons.Itoccurswhenaresource
heldincommonbyeveryone,liketheoceanortheatmosphere,isoverusedbyindividuals,anddegraded.
Whatarethesocialconsequencesofthis?Ifeveryoneelseispumpingpollutantsintotheocean,should
youdootherwise?
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BPhasbeenwidelycriticizedforitsslowresponsetotheleakatitsfacilitiesintheGulfofMexiconear
Louisiana.Infact,somepeoplehavesuggestedthatBPdidntfollowpropersafetyprocedureswhenit
builtitspumpandthattheleakwasaresultofthatfailure.WhileitstoosoontoknowwhetherBP
actuallyviolatedanylaws,thecontroversywillsurelyimpactthecompanyinthefuture.

Corruption
Corruptgovernmentshavealwaysbeenaround,anditsimportantforinternationalcompaniestoconsider
theireffectoncompanystrategies.Atwhatpointdoesgiftgivingbecomebriberyforexample?
Well,fromagovernmentperspective,briberyshouldntbeallowed.

IntheU.S.,theForeignCorruptPracticesAct,whichwaspassedin1977,outlawsthepayingofbribesto
foreigngovernmentofficialsinordertogainbusiness.Theactdoesallowforfacilitatingorgrease
paymentswhicharebasicallypaymentsthataremadetospeedupstandardprocedures.

However,someeconomistsbelievethatinsomecasesspeedpayments,orpaymentsmadetospeedup
approvalforbusinessinvestments,canbejustifiediftheyenhancepublicwelfarebycreatingjobs,andso
on.Othersarguehowever,thatcorruptionisalittlelikegamblingitshardtostop!Ifyoudoitonce,
yourelikelytodoitagain.BPbelievesthistobetrueandmaintainsastrictnobriberypolicy,regardless
oftheimplications.

MoralObligations
So,whatarethemoralobligationsofcompanies?Docompanieshavearesponsibilitytotakeintoaccount
thesocialconsequencesoftheiractionswhentheymakebusinessdecisions?Shouldcompaniesalways
choosethepaththathasbothgoodeconomicandgoodsocialconsequences?

Youmightansweryesfirmshaveasocialresponsibilitysimplybecauseitstherightwaytooperate.
Manypeoplebelievethatcompaniesneedtorecognizetheirnoblesseobligeandgivesomethingbackto
thesocietiesthathavemadetheirsuccesspossible.BPsupportsthisnotion,andhasmadeitcompany
policytogivebacktothecommunity.So,inAlgeriaforexample,thecompanybuilttwodesalination
plantstoprovidedrinkingwatertoresidentsinSalah.

Othercompanies,however,dontsharethisview.AstheManagementFocusinyourtextpointsout,
RobertMurdoch,founderandCEOofNewsCorporationprobablyusedthepowerofhiscompanytogain
accesstotheChinesemarket,andactedinanunethicalwayindoingso.Aspartofthedeal,News
CorporationsuppressedmediacontentthatwascriticalofChina.Googlehasbeenaccusedofchoosinga
similarpathinChina,muchtotheannoyanceofsomeofitsstakeholders.

Workforce Diversity

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Companies Act, 2013
CSRisgovernedbyclause135ofcompaniesact,2013.
Encouragescompaniestospendatleast2%oftheiraveragenetprofitinthepreviousyears.
Schedule7detailsindicativelistofactivities.

Eradicationofextremehunger&poverty.
Promotionofeducation.
Genderequity&womenempowerment.
Reducingchildmortality&improvingmaternalhealth.
CombatingHIV,Malaria&otherdiseases.
Envsustainability.
Socialbusinessprojects.
ContributiontoPrimeMinistersrelieffunds.
Vocationalskills.