CSR

Created @November 29, 2023 7:48 PM

Reviewed

MIDSEM

Unethical issues in marketing strategies-

Unethical issues in marketing strategies can take various forms, and they often involve
practices that manipulate or deceive consumers. Here are some common unethical
issues in marketing:

1. False or Misleading Advertising:

Explanation: Providing inaccurate information about a product's features,

benefits, or performance can mislead consumers. False advertising creates
false expectations and can result in dissatisfaction when customers realize the
product does not live up to the claims.

2. Price Gouging:

Explanation: Unethically raising prices during times of high demand or

emergencies can be considered price gouging. This practice takes advantage of
consumers' urgent needs, often leading to excessive profits and negative public
perception.

3. Privacy Violations:

Explanation: Unethical marketing practices may involve the unauthorized

collection, use, or sale of consumers' personal information. This includes not
being transparent about data practices or failing to secure sensitive information.

4. Stereotyping and Exploitative Targeting:

Explanation: Using stereotypes or exploiting vulnerable groups in marketing

can contribute to social discrimination. This includes reinforcing gender, racial,
or cultural stereotypes, or targeting children with manipulative advertising.

5. Unfair Competition:

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 Explanation: Engaging in practices that undermine fair competition, such as
spreading false information about competitors or sabotaging their operations, is
considered unethical. Unfair competition harms the integrity of the market and
can lead to legal consequences.

6. Bait-and-Switch Tactics:

Explanation: Bait-and-switch involves advertising a product or service at a low

price to attract customers but then redirecting them to a more expensive or
different item. This deceptive practice can result in customer frustration and
distrust.

7. Environmental Greenwashing:

Explanation: Greenwashing occurs when companies exaggerate or falsely

claim their commitment to environmental sustainability. This can mislead
consumers who are seeking environmentally friendly products or services.

8. Exploitative Marketing to Children:

Explanation: Marketing practices that exploit children's vulnerability, such as

using misleading or manipulative tactics to sell products, are considered
unethical. This includes advertising unhealthy foods or products to children.

9. Influencer Deception:

Explanation: Companies may engage in unethical practices by paying

influencers to endorse products without disclosing the financial arrangement.
This lack of transparency can mislead consumers who trust the authenticity of
influencer recommendations.

UNIT 4

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 UNIT 5
The term Corporate Social Responsibility consists of three words, each one
carrying a significant importance.
➢ Corporate- refers to the companies/organizations/ firms;
➢ Social- refers to society at large;

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 ➢ Responsibility- meaning the duty.
So the term corporate social responsibility refers to the responsibility of
corporates/companies towards the society.

Understanding the Meaning of Corporate Social Responsibility

1. Bowen (1953) defined Social Responsibilities of business as “ it(social
responsibility) refers to the obligations of businessmen to pursue those
policies, to make those decisions, or to follow those lines of action
which are desirable in terms of objectives and values of our society.

2. The United Nations Industrial Development Organization defines CSR as a “

management concept whereby companies integrate social and environmental
concerns in their business operations and interactions with their stakeholders”

3. Voluntary Actions: CSR is about companies choosing to do more than just what
the law requires. It involves voluntary efforts beyond basic legal obligations.

4. Helping Society: Companies practicing CSR want to contribute positively to

society. This can mean supporting communities, the environment, and social
causes.

5. Beyond Profits: While making money is important, CSR recognizes that

companies have a responsibility to consider their impact on people and the planet,
not just their profits.

6. Environmental Care: CSR includes efforts to reduce a company's impact on the

environment. This might involve using sustainable practices, reducing waste, and
being mindful of resource consumption.

7. Social Well-being: CSR aims to improve the well-being of people. This could
involve supporting education, healthcare, and other social initiatives that benefit
communities.

8. Ethical Practices: Companies practicing CSR follow ethical business practices.

This means treating employees, customers, and partners fairly and with integrity.

9. Stakeholder Engagement: CSR involves listening to and working with various

stakeholders like customers, employees, and communities to understand and
address their needs and concerns.

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 10. Transparency: Companies practicing CSR are open about their initiatives. They
share information about what they are doing, why it matters, and the impact it has.

11. Global Impact: In some cases, CSR extends beyond local communities.
Multinational corporations may engage in global initiatives to address broader
issues affecting the world.

12. Overall Responsibility: CSR is a way for companies to take responsibility for their
actions and contribute positively to the world, aligning their business goals with
societal and environmental well-being.

Arguments in support of CSR:

1. Enhanced Reputation and Brand Image:

Argument: Companies engaging in CSR activities build a positive reputation

and enhance their brand image. Consumers often prefer to support businesses
that demonstrate a commitment to social and environmental responsibility.

Explanation: CSR can create a favorable public perception, leading to

increased customer loyalty and trust.

2. Attracting and Retaining Talent:

Argument: Employees, particularly from younger generations, are increasingly

seeking purpose-driven workplaces. CSR initiatives help attract and retain top
talent by providing a sense of fulfillment and alignment with personal values.

Explanation: CSR contributes to a positive workplace culture, making the

company more attractive to prospective employees.

3. Competitive Advantage:

Argument: Companies that integrate CSR into their business strategies gain a
competitive advantage. CSR can be a differentiator in the market, influencing
consumer choices and attracting socially conscious investors.

Explanation: Being socially responsible can set a company apart from

competitors and positively impact its bottom line.

4. Long-Term Sustainability:

Argument: CSR promotes sustainable business practices that consider

environmental and social impacts. Businesses that prioritize sustainability are

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 better positioned for long-term success, as they mitigate risks associated with
resource depletion and climate change.

Explanation: Addressing environmental and social issues contributes to the

long-term resilience and viability of the business.

5. Mitigation of Risks:

Argument: CSR helps companies identify and address potential risks

associated with environmental, social, and governance issues. Proactive
management of these risks can prevent legal issues, reputation damage, and
financial losses.

Explanation: By addressing potential issues upfront, companies can avoid

negative consequences and enhance overall risk management.

6. Improved Relations with Stakeholders:

Argument: Engaging in CSR fosters positive relationships with various

stakeholders, including customers, employees, communities, and investors.
This leads to better communication, trust, and support.

Explanation: Strong stakeholder relations contribute to the overall success and

sustainability of the business.

7. Meeting Regulatory Expectations:

Argument: Many countries and regions have established regulations and

standards related to corporate responsibility. Engaging in CSR helps companies
meet these expectations, avoid legal issues, and stay in compliance with
evolving standards.

Explanation: Demonstrating a commitment to responsible business practices

aligns with legal and regulatory requirements.

8. Contributions to Local Communities:

Argument: CSR initiatives often involve supporting local communities through

job creation, education, healthcare, and infrastructure development. This, in
turn, fosters positive community relations.

Explanation: By positively impacting local communities, companies can gain

community support and goodwill.

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 Arguments extended against Corporate Social Responsibility:
1. Profit Maximization as Primary Goal:

Argument: The primary objective of a business is to maximize profits for its

shareholders. Critics argue that diverting resources toward CSR initiatives may
interfere with this primary goal and reduce shareholder returns.

Explanation: The belief here is that businesses should focus solely on

economic activities, and any deviation may compromise financial performance.

2. Increased Costs for Businesses:

Argument: Implementing CSR initiatives can result in increased costs for

businesses. Critics contend that these additional expenses may lead to reduced
competitiveness and potential job losses.

Explanation: The concern is that businesses, especially smaller ones with

limited resources, may struggle to bear the financial burden of extensive CSR
programs.

3. Role of Government and Regulation:

Argument: Critics argue that the responsibility for addressing social and
environmental issues should primarily lie with governments and regulatory
bodies. Businesses should focus on complying with existing laws rather than
taking on additional social roles.

Explanation: Some believe that relying on businesses to voluntarily address

societal issues may lead to inconsistencies and uneven progress.

4. Potential for Greenwashing:

Argument: Critics highlight the risk of "greenwashing," where companies

engage in superficial CSR activities primarily for marketing purposes, without
making substantial changes to their core business practices.

Explanation: There is a concern that some companies may use CSR as a

public relations tool rather than genuinely committing to responsible business
practices.

5. Shareholder Value vs. Stakeholder Interests:

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 Argument: Critics argue that businesses should prioritize the interests of
shareholders over other stakeholders. They contend that maximizing
shareholder value indirectly benefits other stakeholders, such as employees
and communities.

Explanation: This perspective emphasizes a shareholder-centric approach

rather than a broader stakeholder approach.

6. Lack of Expertise:

Argument: Some critics suggest that businesses may lack the expertise to
address complex social and environmental issues effectively. They argue that
professionals in the public sector and non-profit organizations are better
equipped for such tasks.

Explanation: This viewpoint questions whether businesses have the necessary

knowledge and experience to make a meaningful impact in areas beyond their
core competencies.

7. Resource Allocation Challenge:

Argument: Critics argue that diverting resources toward CSR initiatives may
lead to a misallocation of resources. Businesses may be better served by
focusing on their core competencies and improving efficiency.

Explanation: This perspective questions whether businesses should be

involved in activities that are outside the scope of their primary expertise.

8. Potential for Mission Drift:

Argument: Engaging in CSR activities may lead to mission drift, where a

company loses focus on its core business objectives and dilutes its competitive
advantage.

Explanation: The concern is that businesses may become sidetracked by

diverse CSR initiatives, potentially compromising their core business functions.

Unit 6
CSR APPLICABILITY IN INDIA

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 Corporate Social Responsibility (CSR) applicability in India is governed by the
provisions of the Companies Act, 2013. The CSR provisions are outlined in Section 135
of the Act and further detailed in the Companies (Corporate Social Responsibility Policy)
Rules, 2014.

Key points regarding the applicability of CSR in India include:

1. Criteria for Applicability:

The CSR provisions apply to companies meeting specific criteria related to:

Net worth: Companies with a net worth of INR 500 crore or more, or

Turnover: Companies with a turnover of INR 1,000 crore or more, or

Net Profit: Companies with a net profit of INR 5 crore or more during any
financial year.

2. Mandatory Spending:

Companies meeting the criteria are required to spend at least 2% of their

average net profits over the preceding three financial years on CSR activities.

3. Constitution of CSR Committee:

Companies subject to CSR provisions are required to constitute a Corporate

Social Responsibility (CSR) Committee of the board. The committee is
responsible for formulating and monitoring the implementation of the CSR
policy.

4. CSR Policy:

Companies are required to formulate a CSR policy that includes the activities to
be undertaken, the manner of implementation, and the monitoring process. The
policy must be approved by the CSR Committee and disclosed on the
company's website.

5. Activities Covered Under CSR:

The Companies Act, 2013, provides a list of activities that qualify as CSR
expenditure. This list is specified in Schedule VII of the Act and includes areas
such as eradicating hunger, promoting education, gender equality,
environmental sustainability, and more.

6. Reporting Requirements:

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 Companies are required to disclose details of their CSR activities in their annual
reports. The report should include information on the CSR policy, the projects or
programs undertaken, the amount spent, and any unspent amount.

SCHEDULE VII

1. Eradicating Hunger, Poverty, and Malnutrition:

This category encompasses activities aimed at addressing food security issues,

poverty alleviation, and efforts to combat malnutrition. It may include initiatives
such as supporting food distribution programs, livelihood projects, and nutrition
education.

2. Promoting Education, Including Special Education and Vocational Training:

Activities under this category focus on promoting education at various levels. It

includes support for schools, scholarships, vocational training programs, and
initiatives that enhance educational opportunities, especially for underprivileged
sections of society.

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 3. Promoting Gender Equality and Empowering Women:

This involves activities aimed at promoting gender equality, empowering

women, and supporting initiatives that enhance the socio-economic status of
women. It may include projects related to education, skill development, and
healthcare for women.

4. Reducing Child Mortality and Improving Maternal Health:

This category involves initiatives focused on improving child and maternal

health. It may include supporting healthcare facilities, immunization programs,
and maternal care projects aimed at reducing child mortality and improving
maternal well-being.

5. Combating Diseases and Ensuring Preventive Healthcare:

Activities in this category address healthcare challenges and the prevention of

diseases. It may involve supporting healthcare infrastructure, medical research,
and awareness campaigns for disease prevention.

6. Ensuring Environmental Sustainability, Ecological Balance, and Conservation

of Natural Resources:

This category encompasses activities directed toward environmental

conservation, sustainability, and ecological balance. It may include projects
related to afforestation, waste management, water conservation, and renewable
energy initiatives.

7. Social Business Projects:

This term refers to projects with a social impact that align with the company's
CSR objectives. Social business projects typically aim to address social or
environmental challenges while maintaining financial sustainability.

8. Contribution to the Prime Minister's National Relief Fund or Any Other Fund
Set Up by the Central Government for Socio-Economic Development:

This category involves making contributions to government-established funds

that are dedicated to socio-economic development and relief efforts. One such
fund mentioned is the Prime Minister's National Relief Fund.

UNIT 7

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 FRIEDMAN’S MODEL
His famous statement: "The social responsibility of business is to increase its
profits."

He argued that a corporation's primary responsibility is to its shareholders, and its

main goal should be to maximize profits within the boundaries of the law and ethical
customs.

Friedman's model is often referred to as the "shareholder theory" or "stockholder

theory."

key aspects of the Friedman model in the realm of corporate social responsibility:

1. Primacy of Profit Maximization: Friedman argued that the primary goal of a

business is to maximize profits for its shareholders. He argued that companies
should allocate resources and make decisions that contribute to the financial well-
being of shareholders who have invested capital in the business.

2. Legal and Ethical Constraints: Friedman acknowledged that businesses should

operate within the legal and ethical framework of society. He argued that as long as
companies abide by the law and engage in ethical practices, they are fulfilling their
social responsibility.

3. No Social Activism: Friedman was critical of the idea that businesses should
engage in social or political activism. He believed that decisions on social issues
should be made by individuals or the government, not by corporate executives
acting on behalf of shareholders.

4. Accountability and Transparency: Friedman emphasized the importance of

accountability and transparency in business operations. He believed that companies
should be transparent about their activities and accountable for their financial
performance to shareholders.

5. Efficiency of the Free Market: Friedman had confidence in the efficiency of the
free market system. He believed that the pursuit of self-interest by businesses within
a competitive market would lead to optimal economic outcomes. In his view, the
invisible hand of the market would align individual actions with broader social
interests.

SHORTCOMING’S OF FRIEDMAN’S MODEL

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 1. Narrow Stakeholder Focus:

He emphasis on shareholder value neglects the broader impact of businesses

on stakeholders such as employees, customers, and communities, potentially
undermining long-term relationships and societal trust.

2. Limited Consideration of Externalities:

The model fails to address externalities, such as environmental degradation or

social inequality, as businesses may prioritize profit without accounting for the
unintended consequences of their activities on society and the environment.

3. Short-Term Orientation:

Friedman's focus on short-term profit maximization may lead to decisions that

sacrifice long-term sustainability, overlooking the importance of responsible,
forward-looking business practices for lasting success.

4. Inadequate Response to Global Challenges:

The model does not adequately address pressing global challenges like climate
change, ignoring the interconnected nature of economies and the need for
businesses to contribute to solving complex, worldwide issues.

5. Underestimation of Reputation Value:

Ignoring the influence of corporate reputation and brand value, the model may
undervalue the long-term significance of a positive image, potentially leading to
reputational risks and loss of market share.

Freeman's Stakeholder Theory

It become widely influential in shaping how businesses approach their relationships
with various stakeholders.

1. Stakeholder Definition:

Definition: Stakeholders are individuals or groups who can affect or are

affected by the actions, decisions, policies, or goals of an organization.

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 CSR Connection: Freeman's theory broadens the traditional focus on
shareholders and recognizes that businesses have responsibilities to a wider
set of stakeholders, including employees, customers, suppliers, communities,
and the environment.

2. Interconnected Relationships:

Concept: Stakeholder relationships are viewed as interconnected and

interdependent, forming a complex network.

CSR Connection: CSR efforts should consider the impact on and expectations
of multiple stakeholders. Positive relationships with stakeholders are essential
for long-term business success.

3. Value Creation:

Concept: Businesses should focus on creating value for all stakeholders rather
than prioritizing the interests of one group over others.

CSR Connection: CSR activities should contribute to the well-being of

stakeholders and society at large. This goes beyond profit maximization to
consider the broader impact and value generated for stakeholders.

4. Ethical Considerations:

Concept: Stakeholder Theory emphasizes ethical decision-making and

responsible behavior.

CSR Connection: CSR initiatives should align with ethical principles, ensuring
that businesses operate ethically and consider the ethical implications of their
actions on stakeholders.

5. Decision-Making Framework:

Concept: Stakeholder Theory provides a framework for decision-making that

considers the interests and concerns of all relevant stakeholders.

CSR Connection: CSR strategies and decisions should be informed by a

comprehensive understanding of how they affect stakeholders. This includes
engaging with stakeholders to understand their perspectives and concerns.

6. Corporate Citizenship:

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 Concept: Businesses are seen as citizens in society, with responsibilities
beyond profit-making.

CSR Connection: CSR activities are seen as a way for businesses to fulfill their
role as responsible corporate citizens. This involves contributing positively to
societal well-being and addressing social and environmental challenges.

CARROLL’S PYRAMID OF CSR

1. CSR became popular after it was defined by Archie Carroll’s “Pyramid of Corporate
Social Responsibility” in 1991

2. Its simplicity and ability to describe the idea of CSR with four areas, has made the
pyramid one of the most accepted corporate theories of CSR.

3. Carroll’s pyramid suggests that corporate has to fulfil responsibility at four levels –
Economic,
Legal, Ethical and Philanthropic

1. ECONOMIC RESPONSIBILITIES (Making Money)-

It refers to the fundamental obligation of a business to be profitable and generate

value for its shareholders.

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 It recognizes that the primary purpose of a company is to engage in economic
activities, create wealth, and ensure financial well-being.

At this level, the focus is on the basic function of a business—making money

through the production and sale of goods or services. Without economic viability, a
company may struggle to fulfill its other responsibilities.

Examples of Economic Responsibilities: Wealth Creation, Financial

Sustainability and Profit generation.

2. Legal Responsibilities (Following the Rules):

It involve a company's obligation to comply with laws and regulations.

It recognizes that businesses operate within a legal framework, and adherence to

established norms and standards is essential for ethical business conduct.

Important expectations of business include their

Performing in a manner consistent with expectations of government and law
Complying with various federal, state, and local regulations
Conducting themselves as law-abiding corporate citizens
Fulfilling all their legal obligations to societal stakeholders
Providing goods and services that at least meet minimal legal requirements.

Examples - Consumer Protection, Labor Law, Environmental Regulations.

3. Ethical Responsibilities (Being Fair and Honest):

This level involves conducting business in a manner that is fair, just, and morally
right, even when there is no specific legal obligation to do so.

The focus is on making decisions and engaging in actions that align with principles
of fairness, honesty, and integrity.

Ethical responsibilities consider the broader impact of business decisions on various

stakeholders.

Important expectations of business include their

- Performing in a manner consistent with expectations of societal morals and
ethical norms
- Recognizing and respecting new or evolving ethical/ moral norms adopted by
society
- Preventing ethical norms from being compromised in order to achieve business

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 goals
- Being good corporate citizens by doing what is expected morally or ethically
- Recognizing that business integrity and ethical behavior go beyond mere
compliance with laws and regulations.

Examples of Ethical Responsibilities: Fair Treatment of Employees, Honest

Marketing Practices, Transparency in Financial Reporting

4. Philanthropic Responsibilities (Giving Back):

This level involves voluntary contributions and activities that a company undertakes
to make a positive impact on the community and society.

Unlike economic, legal, and ethical responsibilities, philanthropic responsibilities are

not obligations or requirements but actions that companies choose to take for the
betterment of society.

The focus here is on contributing to the well-being of communities and addressing

societal needs beyond the core business activities.

Examples of Philanthropic Responsibilities: Donations to Charities,

Community Development Projects, Environmental Conservation and
Employee Volunteer Programs

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