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From Periphery to Core

Outline: Historical Perspective


Evolution of CSR
Challenges Faced by CSR
Emerging Face of CSR & Corporate Sustainability
Beneficiaries of CSR
Impact of CSR on Indian Business Scenario
CSR- Global perspective
Contribution of CSR Practices in Organization Growth
Bad CSR means Long Term Ill effects
CSR Reporting
CSR Rebuilding Trust in Business- A Perspective on CSR in 21st Century
Rediscovering CSR: How is its Face & Pace expected to Change the
Concept of Business of Business is Business
Approach- Social Audit
CSR towards a Prolonged Prospect
Innovative CSRs
Recommendations
Conclusion

1. Kautilya, the father of Arthshashtra, has covered all possible theories of present day
CSR in 300 BC itself. According to him, the king was supposed to do four primary
actions:- i. to acquire what is not gained, ii. To protect what is gained, iii. To increase
what is protected, iv. To bestow the surplus upon the deserving. The political
organization was presented as consisting of stakeholders – the king, the ministers, the
territory, the fort, the treasury, the army & the ally. It was emphasised that happiness
of king rest in the happiness of subjects. Kautilya emphasised upon the correct &
fruitful utilization of land & equitable distribution of economic resources with social
welfare around to create a sustainable economic management system. Kautilya
developed his concepts after extensive study of Vedas. The Vedas present an
exhaustive commentary on all matters including the study of man made catastrophes
& effects of the same on ecology. “Don’t destroy forests with tigers & don’t make
forests devoid of tigers. Forests cannot be saved without tigers & tigers cannot live
without forests because forests protect tigers & tigers protect forests.”

Bishnoi: This community is famous for their compassionate approach towards


animals & their symbiosis with nature. Bishnoi settlements are like oasis in desert
with green belts, birds, bucks, rain water & present the best example of nature
preservation.

2. Evolution of CSR in Modern Era: In 50s, Howard Bowen’s Social


Responsibilities of the businessman illustrated the theory that the big corporations
should consider using their power & influence with social consequences &
responsibilities in mind. In this era only, Milton Friedman propounded the idea that
the only responsibility of a corporation is to its shareholders. In 70s, a theory was
developed connecting the corporation & shareholder’s interests. It was brought out

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that long term interests of corporation can be best served if the environment, to which
they belong to, is strengthened. I the environment is not preserved to the desired
extent, the interests of shareholders are bound to suffer. IN 80s & 90s, numerous
campaigns like friends of the earth, consumer boycotts & ethical product labelling
campaigns became increasingly effective in changing corporate perspective. In early
90s, Greenpeace – a pressure group facilitated a unit in Germany which manufactured
CFC –free refrigerator. Within six months, all mainstream units started producing
identical refrigerator. In the changing political paradigm, market forces started
defining new arrangements in which market forces emerged stronger defining state’s
boundaries of financial & social activity.
Corporations are involved in CSR practices through education, healthcare, rural
development, women empowerment, environment protection, & disaster
management. Most of the organisations in present scenario pursued CSR as charity &
philanthropic activity. As a result, CSR rested on the foundations of charity than
sustainability. The intentions of the corporations were to use limited resources, lesser
efforts, publicity, brand building & short term gains. Presently we are going through a
fast paced globalised approach which sees integration of other value additions thus
shaping CSR a holistic model affecting business & society together, where it is no
longer a mere charity oriented programme.

3. Emerging Face of CSR & Corporate Sustainability: CSR from charity &
philanthropic activity to board room activity is a long journey. CSR goes beyond
charity & requires the company to act beyond its legal obligations & integrate social,
environmental & ethical concerns into company’s business process. The emerging
concept of CSR moves from shareholder & profit centric approach to stakeholders
approach. This would include investors, employees, customers, regulators, supply
chain, local community & society. It is not the areas of activities but the intentions &
approach to the whole issue which appears making the difference. There is increasing
recognition of the the Triple Bottom Line- People, Planet & Profit. The triple bottom
line approach to CSR highlights a company’s commitment to operate in socially,
economically & environmentally sustainable manner. Society depends on the
economy; economy depends on the global eco system whose health represents the
ultimate bottom line. The three bottom lines are not stable; they are in flux because of
social, economic & political & environmental pulls, pressures, cycles & conflicts.
Corporate sustainability is foreseen only in context of corporate growth & social well
being.

4. Impact of CSR on Indian Business Scenario: The concept of CSR of


large industrial groups occupied prominent place since pre- independence era as
Gandhiji described big industrial houses as trustees of the wealth of the people & its
utilisation in nation building. Nehru ji foresaw & encouraged growth of gentle
socialism which promoted the role of private sector along with mammoth public
sector. Indira Gandhi’s radical approach in dealing with the private set up, forced
industries to exhibit their benevolent face to create safeguards against draconian state
policies & regulations. Post liberalisation era has witnessed major paradigm shift from
philanthropic approach to responsible approach – towards empowerment &
partnership. In the stakeholder model, the community appears important player
towards which the corporation has responsibilities & duties. Corporations have shown
interests in this subtle shift because of three reasons:

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a. Globalization has demanded more accountability & transparency in
business environment & so demanded social & environmental investment.
b. Prominence of eco – social stability ruling the attention of international
community & having far reaching impact on the survival of free market
economy.
c. New realization of involving all players- stakeholders to minimise any
investment risks & maximise profits.
5. Corporations have shifted from granting charity to produce products & services in a
manner that would make a real difference in the target communities:
a. IBM has joined hands with the tribal development department of Gujrat for
upliftment of tribals in Gir forests.
b. Lupin India ltd, India’s third largest manufacturer of pharmaceuticals has
started a project for providing sustainable development in 154 villages across
Rajasthan.
c. Cipla, another Indian pharmaceutical has found a novel approach to fulfil
CSR by selling a cocktail of three anti HIV drugs at lower rates through NGOs. This
led to significant decrease in the prices of these drugs world wide & increase in the
availability of these drugs in developing countries.

d. TCS has set up a fully equipped computer training lab for children from
the society for the welfare of physically handicapped & research centre, Pune
for imparting basic computer knowledge.
e. Bharat electronics Ltd built cyclone proof houses for the victims of super
cyclone with the help of the victims themselves so that the houses are built
according to their needs.
6. In post liberalisation era, with the enhanced role of private players in the market &
with the unshakling of monopoly & quota, CSR has acquired focused place with
tighter accountability norms.

8. Reinventing Business: Changing face of CSR:

a. Defensive: (It is not our job to fix that). In case of facing criticism, the
organisation resorts to rejection of criticism or denials of the links between the
organisation & alleged outcomes.
b. Compliance: (We will do as much as we have to) Embed. At the compliance
stage, it is clear that the corporate policy must be established & observed.
Compliance is understood as a cost of doing business. It creates value by
protecting organisation’s reputation & reducing the risk of litigation.
c. Managerial: It is the business. At the managerial stage, the organisation
realizes that it is facing a long term problem that cannot be resolved merely by
compliance or public relation exercise. The organisation will have to give
managers the core business responsibility for the problem & solution.
d. Strategic (It gives us competitive edge) integrate: An organisation learns how
realignment of business strategy can create competitive edge for long term
success. Automobile companies now realize that their future operations depend
on their ability to develop environmentally safer form of mobility.
e. Civil (We need to make sure every body does it): Promote. In the final stage,
organisations promote collective action to address society’s concerns. Diageo &
top alcohol companies chose to involve in educational initiatives to promote

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responsible drinking, knowing fully well that restrictive legislation will cause
problem at some or the other time in future.

9. CSR As a Business Strategy: Social concerns & business concerns cannot be


deemed two separate & independent issues. Business all over the world suffers from
immediacy of results little realizing the usefulness of long term sustainability. Based
on that perception, CSR is followed in the following ways;
a. CSR as a reactive strategy.
b. CSR as an image building exercise.
c. CSR for improving operational efficiency.
d. CSR as a source of competitive advantage.

10. CSR initiatives: Contribution of CSR Practices in Organization Growth:

a. ITC; ITC’s Agri Business Division – India’s largest exporters of agricultural


commodities conceived e-Chaupal as a more efficient supply chain aimed at
delivering value to its customers around the world. E- Chaupal unshackles
some segment of Indian farmers who remained trapped in vicious loop of low
risk taking ability- low investment- low productivity- weak market dynamics-
low value addition- low margin- low risk taking ability. e - Chaupal today
provides weather forecasts, latest farming technique, crop insurance issues etc.
b. Dabur India Ltd: Dabur promoted Sundesh- establishment of sustainable
development society in 1993- a non profit organization to carry out research &
welfare activities in rural area:
i. Health & hygiene amongst the underprivileged through a trust
activity.
ii. Organising the plant for life programme for alcohol children.
iii. Commitment to environment.

c. L&T: The organisation believes that the true & full measure of growth,
success & progress lies beyond balance sheets that make difference to the lives
of people. L&T addresses the issues related to health, education, environment,
conservation, community development along with government agencies &
NGOs.
d. Mahindra Group: Mahindra group conducted CSR by manufacturing socially
responsible products engaging in socially responsible employee relations &
making a commitment to community. In 2005, the group decided to set aside
1% of the profit for CSR activities. Out of number of CSR initiatives, one is
running courses like IT, Retail & Automotive Engineering with special
emphasis on employability.
e. Microsoft: Microsoft spends 60 bn $ towards various activities of social well
being.
f. Tata Group: The Tata group is most respected for its CSR orientation. Tatas
remain pioneer in introducing social audit for its programmes. A feeling of
healing is funded by Tatas for the revitalization of local health. They develop
tribal communities around Jamshedpur.
g. CSR initiatives through University Alumni: Through CSR initiatives, alumni
of BIT Pilani launched a programme named BIT Sunami as a five year
rehabilitation initiative, along with corporates like Wipro, Hewlett – Packard,

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Kanbay etc to transform rural communities having undergone sufferings due
to sunami. The activites are;
a. Geographical Information System (GIS) based resource mapping for the
villages, designed sanitation & water resource plans.
b. Building a calamity relief shelter- cum- community centre equipped
with communication & public address & warning system.
c. CSR at Isha foundation: Not only for spiritual & inner well being but
also to address rural education, health, child welfare & women
empowerment under the name of rural rejuvenation sustainability of
CSR.
d. A massive shift in the CSR approach from the days of plantation of
saplings as separate activity with advertisement tails, to this time when
the CSR is resorted to as integrated with business initiatives, is
noticeable. This was amply in evidence when seven multinational
companies like Coca Cola, Kellogg India, nestle India, Pepsi Co &
Hindustan Uniliver announced a common commitment to responsible
marketing to children & vowed not to advertise food & beverage
products to children under 12 years on TV, Internet or in the print.
Industry self regulation can be the best example of responsible CSR.

Organisational Growth:
a. L&T anticipated healthy growth in its order inflows of 25-30%in
financial year 2009-2010 even in the challenging environment. Finally
the company recorded growth of 24% in order inflows. This became
possible only due to committed employees & support of the society. The
commitment & support generated due to care, trust & continuous
learning.
b. Mr Kumar Manglam Birla, chairman, Aditya Birla group, one of the
fortune 500 companies aired his views on the growth of the organisation
by investing in people. He emphasised that a new brand of managers has
been nurtured. Employees welfare & building of right environment for
growth are effective CSR initiatives only.

CSR Rebuilding Trust in business


Building Intangible Assets through CSR: CSR issues are important not only
to the maintenance of a brand built over several years but also to the building of
new brands.
A company can suffer negative repercussions for not addressing socially
responsible issues. Nike – athletic shoes maker, suffered from the negative
publicity concerning pay & abusive work conditions of workers in Asia. Shell
suffered from publicity linking the company to human rights abuses in Nigeria
following oil spills in Alaska.
Positives:
a. A paper company manufactures paper from waste cloth to reduce the use of
pulp from trees.
b. A FMCG company is working to protect & conserve endangered plant specis in
India through reforestation programmes.
Negatives:
a. A construction company in Mumbai posted a 60% profit in 2008 & spent no
amount for any societal benefits.

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b. A drug manufacturer in India provides gifts & vacations abroad to doctors who
prescribe its product.
c. Media corporate houses who have practically no role in the domain of social
responsibilities, have suddenly publicised their great role in societal changes. For
them CSR is a step to build their brand.

Rediscovering CSR: How is its face & pace expected to change the business is
business is business approach:

With the limitations of ‘Business of business is business’ context of today lies an


outline of new approach. It means expanding the space in which the business has to
operate:
a. Redefining Success: Organisations have to redefine their statements of
purpose, their strategies & business models to integrate the needs of society &
environment.
b. Embedding Values: Values need to be defined in words & implemented in
actions.
c. Creating framework: Businesses have to introduce processes & suitable
platforms to take stocks of social issues side by side to the financial issues.

Positive CSR programs have a positive impact on business economic performance &
support shareholders. Some of the benefits which may accrue to the company are as
under:
a. improved financial performance
b. power operating costs
c. enhanced brand image
d. increased sales
e. greater productivity
f. environmental benefits
g. greater renewable resources
h. employee volunteer programmes

Stages of maturity of CSR activity:

Social audit: It is believed today that it is the duty of corporate enterprise to ensure
that it does not adversely affect the life of the community in which it operates. Social
audit is commitment to systematic assessment of & reporting of some meaningful
definable domain of a company’s activities that have social impact.
Towards a Prolonged Prospect: Surging economies, including India, are dealing
with issues related to poverty, education, community welfare & thus are hotbed for
innovative CSR scenario which is still maturing. As India traverses the wave of
economic boom & commercial success, CSR is presenting itself as a prospect &
prerequisite for corporates to be engaged in. Mahatma called it part of inclusive
growth. Dr Manmohan Singh described CSR as the issue which has galloped post
liberalisation era. Doing well by doing good’’ is mantra followed by many
corporates. It advocates business to be gauged in the context of working in the
broader positive interests of society & also in the narrower interests of shareholders.
Consumers expect much more from the companies whose product they buy. It is
believed that whatever profit is generated is from the same society in which the
organisation operates.

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Going Green: Jairam Ramesh made a key note address in 2007 on global warming
asserted, ‘if India wants to be global super power, it must also take on global
super responsibilities.’’
CSR in minimizing waste & E-Waste: Titan industries has established a high
quotient of eco friendliness in their core competency & manufacturing. The ISO
14000 certified company has focused on initiatives like eliminating the use of ozone
depleting substances, minimizing the use of plastic packaging, vermin composting &
piloting the conversion of industrial waste. As a result of their sustained efforts
towards environment friendly production, the company’s energy consumption per
watch reduced by 41% with cumulative energy savings of 26 lakh.

Beyond CSR: CSR is expenditure of some portion of a company’s profit spent on


social issues. CSR largely is followed & practiced from the portions of profits they
generate. As a holistic CSR practice, the companies must make an endeavour to bring
in accountability in business as to how they make profits. The example can be cited of
companies manufacturing drugs, alcohol & cigarettes also establishing trusts for
social responsibility for example charitable hospital. Was it responsible business
practice? In 21st century. The question is raised on to the means of generation of
profits as well as the effects the products of the business may have on the
environment & community. The concept of CSR applies equally to the individual as
well to the corporations & the state. It is a joint & shared responsibility of civil
society, activist group, government & corporate sector to create appropriate means &
avenues for marginalised & bring them to the mainstream. The success of CSR lies in
practising it as core part of company’s development strategy. Today CSR has gone
beyond merely charity & donations & has become integral part of corporate strategy.
Case1: To ensure sustainability with regard to the impact on the planet, Dr Reddy’s
centre of excellence for process engineering contributes through”Green Chemistry”.
Two aspects are addressed at one time; first to design products, processes & plants in
such a way that they have sensible environmental footprints. Second to minimize &
manage the adverse impacts of existing environmental footprints through treatment,
recycling & safe disposal. This approach contributes not only to the environmental
friendly products & processes but also to the personal health & safety of the
employees involved in manufacturing process.
During 2007-8, state of the art solvent recovery system –SRS were installed to distill
specific solvents in house instead of external recyclers. The organic residues
generated as a result of the SRS operations are sent for government incinerations or to
the cement industry. During 2008-09, 240 tons of organic residues was disposed to
the cement industry for use as feedstock in the cement manufacturing process. This
resulted in win – win situation. The cement industry benefits as it gets low cost raw
material. Environment benefits as the net emission comes down. The industry benefits
as the cost of disposal comes down.

Recommendations: Following are the few recommendations that can make CSR a
potent & viable happening:
a. Corporate along with non governmental agencies if pool the resources can
launch CSR activities at wider platform with bigger purpose for the
community.
b. CSR has to move inside rural pockets where poverty alleviation & health
are the real issues.

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c. CSR as an approach has to be developed at the business schools for larger
understanding to make it integral to the attitude & planning.
d. Companies require to pool in resources & utilise them as part of holistic
management instead of duplicating the allotment & utilisation of
resources.
e. CSR has to be addressed as agenda & potent tool of social justice agenda
in addressing issues related to livelihood of a big chunk of population.
f. CSR has to become an essential & compulsory part of business plan
instead of philanthropic & volunteer activity.
g. To change the perception of business as a privately deliberated upon
activity to earn profits. Business was envisaged to be innovative for long
term sustainability for the benefits of stakeholders.

CSR activities have to be launched as the mother of all activities be it production,


operations, sales or finance instead of another one of the activities. CSR is not an
activity but an approach which has to be unfolded as business strategy.
The possible benefits of comprehensive & core CSR approach may bring following
possible benefits:

a. Positive & long term relationship with communities


b. Nation building & prosperity of the region of their operations.
c. Providing support where government support is inadequate.
d. Helping supply chain management.
CSR requires to be launched as socially, environmentally & operationally viable
business strategy to sustain business as well as the environment in which it operates to
ultimately change the spectrum of lives rather than to save tax benefits. CSR is not to
do something but to be inherent in all the activities of operations, manufacturing ,
selling & logistics as the business of doing business has a huge impact on society
taxes & community development.

For the business leaders of today it is to be understood that business will change ever
faster, issues will become more complex. CSR will become even more complex issue
requiring deliberation & handling. Economic well being & empowerment to the
populace are the net outcome of CSR which can ensure better standards of living &
quality of life. CSR today is not a soft issue but hard edged business issue. The
globalisation is helping to raise standards of living in both developed & developing
world. Business must do more to help win the globalisation debate & reconnect to the
aspirations of the people. CSR has moved from periphery to the centre stage.

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