Ethics in CSR

Group 6
Section A
What is CSR?
Definition:

World Business Council for Sustainable Development

“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”

● Refers to the need for businesses to be good
corporate citizens.
● Operating a business in a manner that meets
or exceeds the ethical, legal, commercial and
public expectations that society has of
business
● Belief that companies should pursue
a deeper purpose beyond simply
maximizing profits.
● Concerned with protecting the
interests of all stakeholders, such as
employees, customers, suppliers, and
the communities
Levels of CSR
Strategic alignment towards CSR,
Community involvement, stakeholder
dialogue, multi-sector partnerships, social
investment, institution building,
Value CSR-oriented advocacy.
Creation
Social and environmental auditing and
reporting, voluntary standards
codes of conduct
Multi sector partnerships, stakeholder
Harm Minimisation dialogue, eco efficiency measures.

Legislation, inspection,
criminal and civil prosecution,
Compliance Foreign direct liability (for
overseas subsidiaries), industry
standards.
Phases of CSR in India
1st Phase 2nd Phase 3rd Phase 4th Phase
(1850 – 1914) (1914– 1960) (1960 – 1990) (1990 onwards)

Focus mainly on During the CSR under the aegis CSR in a globalized
Philanthropy and Independence struggle of mixed economy. world in a puzzled
Charity during CSR was used as a tool state.
Industrialization. for Social Organization’s
Development. responsibility is Organization’s
Organization solely towards proprietor, responsibility is
responsible Organization is for managers towards proprietor,
proprietor,manag and other
to Proprietor and managers,
ers and environmental
Manager. environment and
factors.
employees public in general.
Benefits of CSR
● Improved brand image ● Reducing non finance
● Customer loyalty risk
● Employee Retention ● Maximise the social
● Fund raising impact of investment
● Building Value chain
relationships Company Investors

Employees Communities
● Improved quality of life
● Better Infrastructure and ● Education
welfare facilities ● Employment
● Healthcare
● Environmental benefits
Models of CSR
Primary Responsibility Produce Good and
Economic Model services (seek profit ) within the law

Contribution to social needs as a matter of philanthropy

Philanthropic Model 1.Reputational Benefits 2.Right thing to do

Business is embedded within a web of social

Social Web Model relationships of mutual rights and responsibilities

Part ,or all ,of the mission of the company

Integrative Model is to achieve important social goals
Philanthropic Model Social Web Model Integrative Model

● Seeking Reputational Benefits ● Duty to respect human ● Social Goals into the core
contribution=investment rights-moral minimum of business

● Overlap with economic model ● Stakeholder ● No tension between

theory:Benefiting some and profit and social
● Company’s level of social imposing cost on others responsibility
responsibility -important factor
● Do not give primacy : ● Social entrepreneurship
● From the Perspective of Balance between different
Economic view : which is stakeholders ● Triple bottom line
ethical?
 Companies Act, 2013
● In 2013, Section 135 of the Indian
Companies Act prescribing a mandatory
“CSR spend of 2% of average net profits
Applicable to companies with:
● net worth of >=Rs 500 crore or
● turnover of >=Rs 1000 crore or
● a net profit of >= Rs 5 crore
during any three preceding financial years
What Would not qualify as a CSR :
● Programs that benefit only the employees
of the company and their families.
● One-off events such as marathons/
awards/charitable contribution of
programmes etc.
● Contribution of any amount directly or
indirectly to any political party.
● The project or programmes or activities
undertaken outside India.
 Issues

● Poor design and lack of clear obligations.

● Poor law enforcement (the provision stipulates minimal penalties for non-compliance and relies
on a comply-or-explain philosophy)

● It is not absolutely clear whether a company will need to create a provision in its financial
statements for the unspent amount if it fails to spend 2% on CSR activities in a particular year
Ethical Concerns in CSR
● Geographical Inequity
● Lack of transparency with reported CSR expenditure
● Company determined priorities

Eg: Of the nine different schedules prescribed by The Companies Act, 2013 two
schedules: combating various diseases and promotion of education accounted for 44%
of the total CSR expenditure while reducing child mortality received no funding and
eradicating extreme hunger and poverty received only 6% of the total CSR
expenditure

● Use of charitable trusts to fabricate CSR spending

● Discrimination by companies in implementing CSR initiatives
Failure of CSR at Puma

● Two Puma suppliers: Dongguan Surpassing Shoe Co. Ltd and Taiway
● Separated 8 miles apart but still disparate work conditions
● While workers at Taiway are benefiting from PUMA's corrective actions, Surpassing
was still suffering from poor practices
● Portraying itself as socially responsible by just focusing on one supplier

Practices at Surpassing:
A. Poor Contract Procedure
B. Overtime
C. Discrimination
D. Violence
E. Pitiable food quality
Failure of CSR at Starbucks

Its website states: “We’ve always believe that businesses can and should have a positive
impact on the communities they serve.”

“By being responsible and doing things that are good for the planet and each other”

Ethical Consumer accused Starbucks of : Union-busting, being ‘trademark colonialists’, &

serving genetically engineered growth hormone in US milk.

Apparently, Starbucks also trademarked the term “Shared Planet”. Ironic? Maybe not for
a ‘trademark colonialist’.
Timespass slide

https://blog.ipleaders.in/csr-triumphs-failures/
Failure of CSR at Unilever
“as CEO of Unilever, my personal mission is to galvanize our company to be an effective force
for good.”

Basked in the glory of being called a “sustainability evangelist’

Unilever was mired in environmental and sexual harassment controversies.

Mercury exposure in India

2014 report by the Netherlands-based Centre for Research on Multinational Corporations

“claimed the existing system of checks and balances has failed to stop abuses of workers on
Unilever’s Kenyan estate, including sexual harassment and poor housing conditions.”
The Way Ahead…...

● Increase the transparency and create awareness

● Incorporate the understanding and active participation of business in equitable social
development as an integral part of good business practice.
● Strict enforcement of Law
● The role of media in highlighting good cases of successful CSR
Initiatives

● Role of government and consensus among various stakeholders

Thank You