CSR just Marketing or really for a better World?
The ConceptDefinitions1. Corporate social responsibility (CSR) can be defined as the "economic, legal, ethical, and discretionary expectations that society has of organizations at a given point in time" (Carroll and Buchholtz)2. The World Business Council in its publication wrote that "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“ CSR is a form of corporate self-regulation integrated into a business model. It is when a corporation realizes its responsibility towards its stakeholders and other members in the public sphere. An ethical and moral component is underpinned in this rapidly developing concept. The concept of CSR means that organizations have moral, ethical, and philanthropic responsibilities in addition to their responsibilities to earn a fair return for investors and comply with the legal norms.
It emphasizes on the realization of the ethical responsibility towards the „stakeholders‟. According to Post, Lawrence, and Weber – “stakeholders are individuals and groups that are affected by an organizations policies, procedures, and actions.” The PRIMARY stakeholders, such as employees and owners have specific legal rights and expectations in regard to the organizations operations while the SECONDARY stakeholders not, but may perceive that they have moral rights. CSR is synchronized with the concept of “sustainability in Development”. In 1987, the UN appointed Brundtland commission which defined sustainable development as development which meets the needs of the present without compromising the ability of future generations to meet their own needs. Since then, the concept has caught up very fast. CSR introduces the concept of “sustainability” into business operations meaning that business organizations do not just become wealth hoarding chambers but also fulfill their duty towards the larger community by investing in socially benefiting concerns. Our planet has limited resources. Corporations and industrial houses cannot go on exploiting this wealth without significant efforts for its refurbishment. CSR is holistic in its approach. It does not include only one aspect but embraces all aspects that a corporate organization touches and affects.
SUSTAINABILITY IN BUSINESS It stresses the need to change from the old sector-centered ways of doing business to the modern approaches of high level integration, coordination and cooperation in the operations while at the same time addressing efficiently the environmental and social issues. An organization needs to be accountable for its actions. Of all forms of social accounting, the most widely used is called the „Triple Bottom Line‟ accounting. This term was coined by John Elkington in 1994. It measure the success of an organization as per the following three factors: economic, ecological and social. Later on, the concept of “People, Planet, Profit” was added to the triple bottom line.• In other words, today‟s business operations do not limit itself to mere adherence to the legal norms while solely working on profit maximization. The whole idea of CSR ensures that organizations be pro-active in their efforts to be beneficial to the larger community as they use its resources to reach higher levels of profits.
HISTORY The concept of corporate citizenship has existed for a long time however it came to be recognized only since the 1970‟s. CSR in its contemporary shape is of recent origin. It is accurate to say that all societies at all points of time have had expectations that organizations would act responsibly. In the eighteenth century the great economist Adam Smith suggested that the needs and desires of society could best be met by the interaction of individuals and organizations in the marketplace. This view expressed more than 200 years ago still forms the basis of modern day economies. The industrial revolution brought in tremendous changes in the industry, especially in Europe and America. Business organizations and enterprises sprang up in large number. In the late 19th century many of these individuals believed and practiced a philosophy that came to be called "Social Darwinism". This type of philosophy justified cutthroat, even brutal, competitive strategies. Thus one finds that even though some of these tycoons were big philanthropists donating millions, the companies that made them rich were practicing business methods that, by todays standards at least, were exploitative of workers.
By the 1960‟s the business world gradually began to accept additional responsibilities other than making a profit and conforming to the laws. Furthermore, society began to expect business to voluntarily participate in solving societal problems. The phrase CSR was coined in 1953 with the publication of Bowens Social Responsibility of Businessmen„. Growing literacy, affluence, mass communication and many other factors paced up the development of significant corporate citizenship. In 1976, the OECD, a grouping of 30 powerful industrialised countries, recognising the complications associated with companies operating across borders, established a set of guidelines to ease the workings of globalisation. Such initiatives got a major boost when in 2000 the United Nations adopted the UNGC, a ten principle based framework for businesses to adopt sustainable and socially responsible policies. “We need business to give practical meaning and reach to the values and principles that connect cultures and people everywhere.” - Ban Ki-moon, Secretary-General of the United Nations
The 2002 session of the World Economic Forum witnessed the drafting of a joint statement entitled Global corporate citizenship: the leadership challenge for CEOs&boards. At its General Assembly in Stockholm, Sweden, in September 2002, the International Standardization Organization decided that the time had come to consider the value of developing management standards on CSR. This resolution recognized the value of the ISO 14000 environmental management system standard in improving the efficiency of corporate environmental management. Along with this, ISO 26000 is the recognized international standard for CSR which is currently being drafted.Arguments against CSR The company makes profit and the society benefits. Is it really possible ? The primary motive of business is to earn profits for its owners and investors and it should focus on profit-making. Giving away shareholder‟s money for charity purposes is wrong. Assuming social responsibility leads to a competitive disadvantage. Those in the corporate world are not equipped to deal with social problems. CSR is a strategy for avoiding regulation and also to gain competitive advantage. Highlighting their „best‟ practices to divert attention from their „bad‟ practices.
Arguments in favor of CSR The rise of the modern corporation created and continues to create many social problems. Therefore, the corporate world should assume responsibility for addressing these problems. In the long run, it is in corporations best interest to assume social responsibilities. Large corporations have huge reserves of human and financial capital. They should devote at least some of their resources to addressing social issues. The corporate world has some of the brightest minds in the world, and it possesses tremendous financial resources. „Ethical consumerism‟ is catching up with people. CSR can serve as the USP that companies look for their products. Corporations are keen to avoid interference in their business through taxation or regulations.CSR in contemporary times CSR has continued to grow with almost all the major business houses joining the bandwagon. Though, all this is really skeptical. There have been cases of companies giving up their CSR contributions in times of financial crisis. Also, critics argue that it has just been a deception without any major contribution to the welfare of the society.
The twentieth century has been characterised by three developments of great political importance: the growth of democracy, the growth of corporate power and the growth of corporate propaganda to protect corporate power against democracy. – Alex Carey. On the other hand, a significant number of investors are keeping track of a company‟s social decisions in order to decide of their investment. Many believe that it adds to the company‟s reputation more than the brand image. This is pretty obvious in the first world. In the rich countries, the consumer trend is marked by a growing consciousness regarding a company‟s social responsibility. Socially Responsible Investment (SRI) is being highly emphasized upon these days. Scenario in India Corporate Social Responsibility (CSR) has been on the agenda in India for a considerable period. Most big Indian corporations are engaged in some CSR activities. As is the case in many countries, the private sector is generally more active in this area than the governmental/public sector. A National Foundation for Corporate Governance (NFCG) has been established by the Ministry of Corporate Affairs. India being a member of the International Labour Organization (ILO) has ratified 40 of its conventions. However in certain areas of key concern India is still lagging behind.
Labour laws India has altogether ratified 333 labour laws. However, these vary in terms of implementation. The Minimum Wage Act was implemented in 1948. Since, most of the labour is in the informal sector its implementation still remains a far-fetched reality. Bonded labour is another serious issue to be dealt with. Environment laws The main law on environment and production is The Environment (Protection) Act (1986). This law gives the central government the authority to protect and improve environmental quality, as well as control and reduce pollution.Many bodies like the CII and the Indian Chamber of commerce have taken several energy efficient initiatives. Right to Information and Corruption India currently ranks 84th in the Corruption Perceptions Index devised by Transparency International. The introduction of RTI in 2005 has led to changes in the transparency regarding establishment and implementation of strategies, programmes and laws.• Even much before the issue became a global concern, India was aware of corporate social responsibility (CSR), due to the efforts of organisations such as the Tata Group. Corporate companies like ITC have made farmer development a vital part of its business strategy, and made major efforts to improve the livelihood standards of rural communities.
IT companies like TCS and Wipro have developed software to help teachers and children in schools across India to further the cause of education.• Banks and insurance companies are targeting migrant labourers and street vendors to help them through micro-credits and related schemes.• In June 2008, a survey was carried out by TNS India (a research organization) and the Times Foundation with the aim of providing an understanding of the role of corporations in CSR. The findings revealed that over 90 per cent of all major Indian organizations surveyed were involved in CSR initiatives. An estimated 100 corporate foundations and 25 foreign firms are involved in CSR activities in India, but statistics on input and output are elusive.• The Indian corporate sector spent US$ 6.31 billion on social expenditure during 2007-08, up from US$ 3.68 billion spent during the previous fiscal. The need is for a better tie-up between corporations and government so that significant betterment is achieved. This is not merely a game of expenditure and revenue but of „real‟ change. It is time that businesses play their proactive role with this realization.
• India based Satyam Computers which is a leading global consulting and IT service company leverages its core business namely Information Technology to bridge the yawning digital divide between the urban and rural areas. Satyam has integrated its business with in built social values and is a staunch community reformer. Satyam views its socially responsible initiatives as an important strategic aspect for the long term sustainability of the organization. This case focuses on the Gram IT approach, an initiative taken by the Byrraju Foundation, an NGO promoted by Satyam Computers. Gram IT takes business process outsourcing to the educated unemployed youth in villages. It is an initiative that enables rural youth to create wealth by honing their computer and English skills for world class service delivery. Gram IT was such a unique model that it is found near perfect for rural India. For this venture, Satyam bagged the Asian CSR award under poverty alleviation category in 2007. The case examines how this unique technology platform can endure the teething troubles usually associated with growing economies.
• The case discusses about carbon credit trading, one of the most controversial trade in the world. Post industrial era of human civilization had collided with the earth’s environmental system resulting in disastrous effects that are strong enough to threaten the biodiversity of the earth. Emission of GHGs and toxic co-pollutants had made earth a boiling pot as the heat-trapping CO2 concentration in the atmosphere is rising steadily to 450 parts per million. With the concern of scientists and environmentalists increasing, countries of the world were forced to make a collective effort through Kyoto Protocol in 1997. Though many global initiatives have been taken with the mission of reducing GHG emissions, lack of co- operation from major polluters like US and China have affected the effective implementation of protocol.• However, as emission reductions became a major concern, Kyoto Protocol initiated mechanism of carbon trading. Though carbon trading helps in the reduction of GHG emissions, many activists and analysts who point to the other side of it are afraid about the negative effects it can have. However, carbon credit trading has opened a new arena of profit making for developing countries that have lesser emission levels. Sustainability being taken to the core strategy to gain competitive advantage, developing climate related strategies would become a critical success factor of corporate bodies.
CSR is at the juncture of its development. CSR canbecome a tool of corporations to be usedtactically to defuse criticism and protect theirimage or it can become an effective tool in trulydemocratic societies to make corporationssocially and environmentally responsible bycreating a sustainable business ethos. In thinkingabout probable outcomes, Allen White recentlyprepared a paper addressing the future of CSRten years from now by imaginatively ponderingon the characteristics and implications of threeplausible outcomes.
The fad-and-fade scenarioWhite depicts this scenario, under a severeeconomic global crisis, where “CSR, once viewedas irreversibly destined to become integral tocorporate strategy, management andgovernance, has proven to be fragile andtransient. Attention of business and governmentturns to basic economic survival and recoveryfrom the crisis. CSR moves quietly into hibernationwith an uncertain future, characterized bypractices associated with its earliestphase, namely compliance and philanthropy.
The transition-and-transformation scenarioIn this scenario, White envisions the failure ofCSR as an instrument of corporations to behaveresponsibly due to intensifying ecological stressesand social inequalities16 despite the incrementalprogress achieved in labour, human rights andenvironmental practice. The implication is that abusiness-driven CSR, voluntary and self-regulated, was not up to the job of building asocial, economic and environmentally-sustainableethos and was deemed a failure by moststakeholders.
The embed-and-integrate scenarioThis scenario is depicted as the triumph of theCSR movement, for companies have moved toembed CSR as a core part of corporate strategyand operations. As White asserts, For large andsmall, public and private companies alike, CSR isthe rule; the small fraction of firms that fail tograsp this find themselves increasingly at acompetitive disadvantage.