CORPORATE SOCIAL RESPONSIBILITY

Corporate social responsibility is a much misunderstood concept. It contradicts the

corporate objectives of profit motive. But it is difficult to overlook the prime objective of the
business for the purpose of 'do good activity'. Today consumer is not only ready to accept
the role of a corporate house only to satisfy their demand to produce the goods according to
their requirement. According to Kotler and Lee - it is" a commitment to improve community
well being through discretionary business practices and contributions of corporate
resources."

The world business council on Sustainable Development has defined corporate social
responsibility as the "commitment of business to contribute to sustainable economic
development, working with employees, their families, the local community and society at
large to improve their quality of life." It is the backbone of today's business sustainability.
Kotler cites several benefits of corporate social initiatives on the part of corporates. It
includes-

1. Increase in sales
2. Increase in market share
3. Strengthened brand positioning
4. Improve corporate image
5. Increased appeal for customers, employees and investors
6. Reduced operating cost

Corporate Social Responsibility

Indian companies are now expected to discharge their stakeholder responsibilities and societal
obligations, along with their shareholder-wealth maximisation goal.

Nearly all leading corporates in India are involved in corporate social responsibility (CSR)
programmes in areas like education, health, livelihood creation, skill development, and
empowerment of weaker sections of the society. Notable efforts have come from the Tata Group,
Infosys, Bharti Enterprises, ITC Welcome group, Indian Oil Corporation among others.

The 2010 list of Forbes Asia’s ‘48 Heroes of Philanthropy’ contains four Indians. The 2009 list
also featured four Indians. India has been named among the top ten Asian countries paying
increasing importance towards corporate social responsibility (CSR) disclosure norms. India was
ranked fourth in the list, according to social enterprise CSR Asia's Asian Sustainability Ranking
(ASR), released in October 2009.

According to a study undertaken by an industry body in June 2009, which studied the CSR
activities of 300 corporate houses, corporate India has spread its CSR activities across 20 states
and Union territories, with Maharashtra gaining the most from them. About 36 per cent of the
CSR activities are concentrated in the state, followed by about 12 per cent in Gujarat, 10 per cent
in Delhi and 9 per cent in Tamil Nadu.

The companies have on an aggregate, identified 26 different themes for their CSR initiatives. Of
these 26 schemes, community welfare tops the list, followed by education, the environment,
health, as well as rural development.
Further, according to a study by financial paper, The Economic Times, donations by listed
companies grew 8 per cent during the fiscal ended March 2009. The study of disclosures made
by companies showed that 760 companies donated US$ 170 million in FY09, up from US$ 156
million in the year-ago period. As many as 108 companies donated over US$ 216,199, up 20 per
cent over the previous year.

Although corporate India is involved in CSR activities, the central government is working on a
framework for quantifying the CSR initiatives of companies to promote them further. According
to Minister for Corporate Affairs, Mr Salman Khurshid, one of the ways to attract companies
towards CSR work is to develop a system of CSR credits, similar to the system of carbon credits
which are given to companies for green initiatives.

Moreover, in 2009, the government made it mandatory for all public sector oil companies to
spend 2 per cent of their net profits on corporate social responsibility.

Besides the private sector, the government is also ensuring that the public sector companies
participate actively in CSR initiatives. The Department of Public Enterprises (DPE) has prepared
guidelines for central public sector enterprises to take up important corporate social
responsibility projects to be funded by 2-5 per cent of the company's net profits.

As per the guidelines, companies with net profit of less than US$ 22.5 million will earmark 3-5
per cent of profit for CSR, companies with net profit of between US$ 22.5 million - US$ 112.5
million, will utilise 2-3 per cent for CSR activities and companies with net profit of over US$
112.5 million will spend 0.5-2 per cent of net profits for CSR.

CSR Initiatives and Green Measures

India Inc has joined hands to fine-tune all its activities falling under CSR. For this, it has set up a
global platform to showcase all the work done by Indian firms. Confederation of Indian Industry
(CII) and the TVS Group collaborated to form the CII-TVS Centre of Excellence for Responsive
Corporate Citizenship in 2007. It provides consultancy services and technical assistance on
social development and CSR.

According to a National Geographic survey which studied 17,000 consumers in 17 countries,

Indians are the most eco-friendly consumers in the world. India topped the Consumer Greendex,
where consumers were asked about energy use and conservation, transportation choices, food
sources, the relative use of green products versus traditional products, attitudes towards the
environment and sustainability and knowledge of environmental issues.

 Reliance Industries and two Tata Group firms—Tata Motors and Tata Steel—are the
country's most admired companies for their corporate social responsibility initiatives,
according to a Nielsen survey released in May 2009.
 As part of its Corporate Service Corps (CSC) programme, IBM has joined hands with the
Tribal Development Department of Gujarat for a development project aimed at
upliftment of tribals in the Sasan area of Gir forest.
 The financial services sector is going green in a steady manner. With an eye on
preserving energy, companies have started easing the carbon footprint in their offices.
The year 2009 witnessed initiatives including application of renewable energy
technologies, moving to paperless operations and recognition of environmental standards.
Efforts by companies such as HSBC India, Max New York Life and Standard Chartered
Bank have ensured that the green movement has kept its momentum by asking their
customers to shift to e-statements and e-receipts.
 State-owned Navratna company, Coal India Ltd (CIL) will invest US$ 67.5 million in
2010-11 on social and environmental causes.
 Public sector aluminium company NALCO has contributed US$ 3.23 million for
development work in Orissa's Koraput district as part of its Corporate Social
Responsibility (CSR).

CSR in India: Govt bats for mandatory 2% CSR, industry not in

favour
 

 NEW DELHI: It has reported that the government is in favour of making it

mandatory for Indian companies to spend 2% of their profits on corporate social
responsibility (CSR).  The industry, however, is not in favour of the government
intervention on the issue, which was discussed in a meeting attended by Murli Deora,
corporate affairs minister, RPN Singh, minister of state, industry bodies and
representatives.

"My personal view is that it should be made mandatory,"  said Deora.

 "We are trying to get everyone on board for making 2% on CSR mandatory," said
Singh.
 The public sector enterprises are required to spend 5% of their net profit on CSR.
The government is keen to make it mandatory for the private sector to spend on
CSR.
 PSUs with net profit less than Rs 100 crore are mandated to contribute 3-5% of their
bottomline for CSR, while those with profits between Rs 100-500 crore direct 2-3%
on the same.
 "Everybody agreed that there should be CSR, the only point is that there should be
no government intrusion in that mechanism," Deora said.
 The parliamentary standing committee on finance, which vetted the Companies Bill,
2009, has said that companies would be required have to spend 2% of their average
net profits during on CSR. The bill may be brought up in Parliament in the
forthcoming budget session for approval.

Ramesh for CSR pacts between MoEF, PSUs for afforestation

 NEW DELHI: Environment Minister Jairam Ramesh today favoured re-defining
corporate social responsibility (CSR) initiatives to forge partnership between his
ministry and PSUs for afforestation activities.
 Pointing out that last year the state-owned oil and gas company ONGC's total accrual
to the CSR fund was Rs 400 crore, but the company could spend only Rs 200 crore,
the Minister said, "I think, we should re-define CSR to include environmental
management and afforestation."

"We should have partnership between MoEF and ONGC," Ramesh said adding, if he
gets partnership with five PSUs like ONGC, he will get a big budget for spending on
"good afforestation activities" particularly in wetland areas and mangrove areas.

Corporate Social Responsibility In India

 Corporate social responsibility is not a new concept in India. However, what is new
is the shift in focus from making profits to meeting societal challenges. Now-a-days,
employees are actively participating in the social activities even on holidays. This is
mainly because employees feel a sense of pride when they are involved in such
activities. Moreover, companies are having dedicated departments for CSR.

Giving a universal definition of Corporate Social Responsibility is bit difficult as there is

no common definition as such. However, there are few common threads that connect all
the perspectives of CSR with each other; the dedication to serve the society being most
important of them.

Most ideal definition of Corporate Social Responsibility (CSR) has been given by World
Business Council for Sustained Development which says,

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.

Thus, the meaning of CSR is two fold. On one hand, it exhibits the ethical behavior that
an organization exhibits towards its internal and external stakeholders (customers as well
as employees). On the other hand, it denotes the responsibility of an organization towards
the environment and society in which it operates.

Firms can no longer continue to exploit environmental resources and escape from their
responsibility by acting as separate entities regardless of the interest of the society.
Organizations, now, are realizing the need to shift their focus on the interest of society.
The sense of being socially responsible has to come from within.

CSR involves various voluntary efforts in which companies engage themselves in order
to give something back to the society. It involves providing innovative solutions to
societal and environmental challenges. Organizations generally believe that acting in a
socially responsible manner will create value for them.

The fact that an organization is committed to social causes, also gives employees a sense
that the company would also be committed to the welfare of its employees as well.

In India, CSR has evolved to encompass employees, customers, stakeholders and

sustainable development or corporate citizenship. The spectrum of CSR includes a
number of areas as human rights, safety at work, consumer protection, climate protection
and caring for the environment, and sustainable management of natural resources.

From the perspective of employees, CSR activities include providing health and safety
measures, preserving employee rights and discouraging discrimination at workplace.

This helps in fostering a healthy environment within the company. For example, after
1945, TATA implemented social welfare provisions for its employees that have since
become the legislative norm. From the perspectives of customers, CRS activities may
include commitment to product quality, fair pricing policies, and so.

CSR taken up by various genres of companies primarily focuses on poverty alleviation,

environmental protection and sustained development. Companies are taking initiatives for
developing infrastructure in rural areas, e.g., TATA Motors provides desks, benches,
chairs, tables cupboards, electrical fittings and educational and sports material to various
primary schools in Singur.

The company has also planned similar programmes to upgrade school infrastructure and
is also planning to set up a computer laboratory in one of the high schools. Similarly,
TVS Electronics was involved in CSR during the Tsunami to provide relief measures to
the victims. They have also participated with the government to improve sanitation in a
village called Tiruvidenthai.

Such initiatives will help in improving the conditions of rural people. Satyam Foundation
of Satyam Computer Services Ltd., Infosys Foundation of Infosys Technologies Ltd., GE
Foundation of the General Electric Company are exemplary instances of the
philanthropic commitment of the corporate sector in India. Irrespective of the profits they
make, these foundations are aiming at uplifting of the poor and enhancing the standard of
life in the rural sector.

Corporate social responsibility offers manifold benefits both internally and externally to
the companies involved in various projects. Externally, it creates a positive image
amongst the people for its company and earns a special respect amongst its peers. It
creates short term employment opportunities by taking various projects like construction
 of parks, schools, etc.

Working with keeping in view the interests of local community bring a wide range of
business benefits. For example, for many businesses, local customers are an important
source of sales. By improving the reputation, one may find it easier to recruit employees
and retain them. Businesses have a wider impact on the environment also. Plantation and
cultivation activities taken up by Intel India are a step towards the same. Recycling used
products also acts as a step towards minimizing wastes.

Internally, it cultivates a sense of loyalty and trust amongst the employees in the
organizational ethics. It improves operational efficiency of the company and is often
accompanied by increases in quality and productivity. More importantly, it serves as a
soothing diversion from the routine workplace practices and gives a feeling of
satisfaction and a meaning to their lives. Employees feel more motivated and thus, are
more productive. Apart from this, CSR helps ensure that the organization comply with
regulatory requirements.

Conclusion
Even though companies are taking serious efforts for the sustained development, some
critics still are questioning the concept of CSR. There are people who claim that
Corporate Social Responsibility underlies some ulterior motives while others consider it
as a myth. Is CSR really a stalking horse for an anti-corporate agenda?

The reality is that CSR is not a tactic for brand building; however, it creates an internal
brand among its employees. Indulging into activities that help society in one way or the
other only adds to the goodwill of a company.

Potential business benefits

The scale and nature of the benefits of CSR for an organization can vary depending on the nature
of the enterprise, and are difficult to quantify, though there is a large body of literature exhorting
business to adopt measures beyond financial ones (e.g., Deming's Fourteen Points, balanced
scorecards). Orlitzky, Schmidt, and Rynes[10] found a correlation between social/environmental
performance and financial performance. However, businesses may not be looking at short-run
financial returns when developing their CSR strategy.

The definition of CSR used within an organization can vary from the strict "stakeholder impacts"
definition used by many CSR advocates and will often include charitable efforts and
volunteering. CSR may be based within the human resources, business development or public
relations departments of an organisation,[11] or may be given a separate unit reporting to the CEO
or in some cases directly to the board. Some companies may implement CSR-type values
without a clearly defined team or programme.
The business case for CSR within a company will likely rest on one or more of these arguments:

[edit] Human resources

A CSR programme can be an aid to recruitment and retention,[12] particularly within the
competitive graduate student market. Potential recruits often ask about a firm's CSR policy
during an interview, and having a comprehensive policy can give an advantage. CSR can also
help improve the perception of a company among its staff, particularly when staff can become
involved through payroll giving, fundraising activities or community volunteering. See also
Corporate Social Entrepreneurship, whereby CSR can also be driven by employees' personal
values, in addition to the more obvious economic and governmental drivers.

[edit] Risk management

Managing risk is a central part of many corporate strategies. Reputations that take decades to
build up can be ruined in hours through incidents such as corruption scandals or environmental
accidents. These can also draw unwanted attention from regulators, courts, governments and
media. Building a genuine culture of 'doing the right thing' within a corporation can offset these
risks.[13]

[edit] Brand differentiation

In crowded marketplaces, companies strive for a unique selling proposition that can separate
them from the competition in the minds of consumers. CSR can play a role in building customer
loyalty based on distinctive ethical values.[14] Several major brands, such as The Co-operative
Group, The Body Shop and American Apparel[15] are built on ethical values. Business service
organizations can benefit too from building a reputation for integrity and best practice.

[edit] License to operate

Corporations are keen to avoid interference in their business through taxation or regulations. By
taking substantive voluntary steps, they can persuade governments and the wider public that they
are taking issues such as health and safety, diversity, or the environment seriously as good
corporate citizens with respect to labour standards and impacts on the environment.

[edit] Criticisms and concerns

Critics of CSR as well as proponents debate a number of concerns related to it. These include
CSR's relationship to the fundamental purpose and nature of business and questionable motives
for engaging in CSR, including concerns about insincerity and hypocrisy.

[edit] Nature of business

Milton Friedman and others have argued that a corporation's purpose is to maximize returns to its
shareholders, and that since only people can have social responsibilities, corporations are only
responsible to their shareholders and not to society as a whole. Although they accept that
corporations should obey the laws of the countries within which they work, they assert that
corporations have no other obligation to society. Some people perceive CSR as in-congruent
with the very nature and purpose of business, and indeed a hindrance to free trade. Those who
assert that CSR is contrasting with capitalism and are in favor of neoliberalism argue that
improvements in health, longevity and/or infant mortality have been created by economic growth
attributed to free enterprise.[16]

Critics of this argument perceive neoliberalism as opposed to the well-being of society and a
hindrance to human freedom. They claim that the type of capitalism practiced in many
developing countries is a form of economic and cultural imperialism, noting that these countries
usually have fewer labour protections, and thus their citizens are at a higher risk of exploitation
by multinational corporations.[17]

A wide variety of individuals and organizations operate in between these poles. For example, the
REALeadership Alliance asserts that the business of leadership (be it corporate or otherwise) is
to change the world for the better.[18] Many religious and cultural traditions hold that the
economy exists to serve human beings, so all economic entities have an obligation to society (see
for example Economic Justice for All). Moreover, as discussed above, many CSR proponents
point out that CSR can significantly improve long-term corporate profitability because it reduces
risks and inefficiencies while offering a host of potential benefits such as enhanced brand
reputation and employee engagement.

[edit] Motives

Some critics believe that CSR programs are undertaken by companies such as British American
Tobacco (BAT),[19] the petroleum giant BP (well-known for its high-profile advertising
campaigns on environmental aspects of its operations), and McDonald's (see below) to distract
the public from ethical questions posed by their core operations. They argue that some
corporations start CSR programs for the commercial benefit they enjoy through raising their
reputation with the public or with government. They suggest that corporations which exist solely
to maximize profits are unable to advance the interests of society as a whole.[20]

Another concern is that sometimes companies claim to promote CSR and be committed to
sustainable development but simultaneously engaging in harmful business practices. For
example, since the 1970s, the McDonald's Corporation's association with Ronald McDonald
House has been viewed as CSR and relationship marketing. More recently, as CSR has become
mainstream, the company has beefed up its CSR programs related to its labor, environmental and
other practices[21] All the same, in McDonald's Restaurants v Morris & Steel, Lord Justices Pill,
May and Keane ruled that it was fair comment to say that McDonald's employees worldwide 'do
badly in terms of pay and conditions'[22] and true that 'if one eats enough McDonald's food, one's
diet may well become high in fat etc., with the very real risk of heart disease.'[23]

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.

Critics concerned with corporate hypocrisy and insincerity generally suggest that better
governmental and international regulation and enforcement, rather than voluntary measures, are
necessary to ensure that companies behave in a socially responsible manner. Others, such as
Patricia Werhane, argue that CSR should be considered more as a corporate moral responsibility,
and limit the reach of CSR by focusing more on direct impacts of the organization as viewed
through a systems perspective to identify stakeholders.

[edit] Ethical consumerism

The rise in popularity of ethical consumerism over the last two decades can be linked to the rise
of CSR. As global population increases, so does the pressure on limited natural resources
required to meet rising consumer demand (Grace and Cohen 2005, 147). Industrialization, in
many developing countries, is booming as a result of both technology and globalization.
Consumers are becoming more aware of the environmental and social implications of their day-
to-day consumer decisions and are therefore beginning to make purchasing decisions related to
their environmental and ethical concerns. However, this practice is far from consistent or
universal.

[edit] Globalization and market forces

As corporations pursue growth through globalization, they have encountered new challenges that
impose limits to their growth and potential profits. Government regulations, tariffs,
environmental restrictions and varying standards of what constitutes "labor exploitation" are
problems that can cost organizations millions of dollars. Some view ethical issues as simply a
costly hindrance, while some companies use CSR methodologies as a strategic tactic to gain
public support for their presence in global markets, helping them sustain a competitive advantage
by using their social contributions to provide a subconscious level of advertising. (Fry, Keim,
Meiners 1986, 105) Global competition places a particular pressure on multinational
corporations to examine not only their own labor practices, but those of their entire supply chain,
from a CSR perspective.

[edit] Social awareness and education

The role among corporate stakeholders is to work collectively to pressure corporations that are
changing. Shareholders and investors themselves, through socially responsible investing are
exerting pressure on corporations to behave responsibly. Non-governmental organizations are
also taking an increasing role, leveraging the power of the media and the Internet to increase
their scrutiny and collective activism around corporate behavior. Through education and
dialogue, the development of community in holding businesses responsible for their actions is
growing [24].

[edit] Ethics training

The rise of ethics training inside corporations, some of it required by government regulation, is
another driver credited with changing the behavior and culture of corporations. The aim of such
training is to help employees make ethical decisions when the answers are unclear. Tullberg
believes that humans are built with the capacity to cheat and manipulate, a view taken from
(Trivers 1971, 1985), hence the need for learning normative values and rules in human behavior
[25]
. The most direct benefit is reducing the likelihood of "dirty hands" (Grace and Cohen 2005),
fines and damaged reputations for breaching laws or moral norms. Organizations also see
secondary benefit in increasing employee loyalty and pride in the organization. Caterpillar and
Best Buy are examples of organizations that have taken such steps[26].

Increasingly, companies are becoming interested in processes that can add visibility to their CSR
policies and activities. One method that is gaining increasing popularity is the use of well-
grounded training programs, where CSR is a major issue, and business simulations can play a
part in this.[citation needed]

One relevant documentary is The Corporation, the history of organizations and their growth in
power is discussed. Corporate social responsibility, what a company does to in trying to benefit
society, versus corporate moral responsibility (CMR), what a company should morally do, are
both important topics to consider when looking at ethics in CSR. For example, Ray Anderson, in
The Corporation, takes a CMR perspective in order to do what is moral and he begins to shift his
company's focus towards the biosphere by utilizing carpets in sections so that they will sustain
for longer periods. This is Anderson thinking in terms of Garret Hardin's "The Tragedy of the
Commons," where if people do not pay attention to the private ways in which we use public
resources, people will eventually lose those public resources.

[edit] Laws and regulation

Another driver of CSR is the role of independent mediators, particularly the government, in
ensuring that corporations are prevented from harming the broader social good, including people
and the environment. CSR critics such as Robert Reich argue that governments should set the
agenda for social responsibility by the way of laws and regulation that will allow a business to
conduct themselves responsibly.

The issues surrounding government regulation pose several problems. Regulation in itself is
unable to cover every aspect in detail of a corporation's operations. This leads to burdensome
legal processes bogged down in interpretations of the law and debatable grey areas (Sacconi
2004). For example, 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 second issue is the financial burden that regulation can place on a nation's economy. This
view shared by Bulkeley, who cites the Australian federal government's actions to avoid
compliance with the Kyoto Protocol in 1997, on the concerns of economic loss and national
interest. The Australian government took the position that signing the Kyoto Pact would have
caused more significant economic losses for Australia than for any other OECD nation (Bulkeley
2001, pg 436). On the change of government following the election in November 2007, Prime
Minister Kevin Rudd signed the ratification immediately after assuming office on 3 December
2007, just before the meeting of the UN Framework Convention on Climate Change. Critics of
CSR also point out that organisations pay taxes to government to ensure that society and the
environment are not adversely affected by business activities.

Denmark has a law on CSR. On 16 December 2008, the Danish parliament adopted a bill making
it mandatory for the 1100 largest Danish companies, investors and state-owned companies to
include information on corporate social responsibility (CSR) in their annual financial reports.
The reporting requirements became effective on 1 January 2009.[27] The required information
includes:

 information on the companies’ policies for CSR or socially responsible investments (SRI)
 information on how such policies are implemented in practice, and
 information on what results have been obtained so far and managements expectations for the
future with regard to CSR/SRI.

CSR/SRI is still voluntary in Denmark, but if a company has no policy on this it must state its
positioning on CSR in their annual financial report. More on the Danish law can be found at
CSRgov.dk

[edit] Crises and their consequences

Often it takes a crisis to precipitate attention to CSR. One of the most active stands against
environmental management is the CERES Principles that resulted after the Exxon Valdez
incident in Alaska in 1989 (Grace and Cohen 2006). Other examples include the lead poisoning
paint used by toy giant Mattel, which required a recall of millions of toys globally and caused the
company to initiate new risk management and quality control processes. In another example,
Magellan Metals in the West Australian town of Esperance was responsible for lead
contamination killing thousands of birds in the area. The company had to cease business
immediately and work with independent regulatory bodies to execute a cleanup. Odwalla also
experienced a crisis with sales dropping 90%, and the company's stock price dropping 34% due
to several cases of E. Coli spread through Odwalla apple juice. The company ordered a recall of
all apple or carrot juice products and introduced a new process called "flash pasteurization" as
well as maintaining lines of communication constantly open with customers.

[edit] Stakeholder priorities

Increasingly, corporations are motivated to become more socially responsible because their most
important stakeholders expect them to understand and address the social and community issues
that are relevant to them. Understanding what causes are important to employees is usually the
first priority because of the many interrelated business benefits that can be derived from
increased employee engagement (i.e. more loyalty, improved recruitment, increased retention,
higher productivity, and so on). Key external stakeholders include customers, consumers,
investors (particularly institutional investors), communities in the areas where the corporation
operates its facilities, regulators, academics, and the media.
[edit] Efforts to implement CSR

A very large number of social and voluntary organizations are contributing to the field of
Corporate social responsibility by making it an important agenda where they clearly harp for all
the corporate bodies to adhere to the norns of CSR at all costs. In fact, these voluntary
organizations always go on devising newer and more pragmatic/stringent norms of application of
the requirements of Corporate social responsibility. A few of them are ---[28] [29]

Examples (lead partner Equal) Community Action Dacorum (lead partner IiC Hertfordshire)
Council for Voluntary Service St Albans District BITC - Business In the Community CSR
(India)- a subsidiary of IRDS, a Lucknow based Voluntary organization