Company social responsibility

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Company social responsibility

  1. 1. Introduction : Within the world of business, the main“responsibility” for corporations hashistorically been to make money and increase shareholder value. In other words, corporatefinancial responsibility has been the sole bottom line driving force. However, in the lastdecade, a movement defining broader corporate responsibilities– for the environment, forlocal communities, for working conditions, and for ethical practices–has gathered momentumand taken hold. This new driving force is known as corporate social responsibility (CSR).CSR is oftentimes also described as the corporate “triple bottom line”–the totality of thecorporation’s financial, social, and environmental performance in conducting its business.Corporate Social Responsibility (CSR) is becoming an increasingly important activity tobusinesses nationally and internationally. As globalisation accelerates and large corporationsserve as global providers, these corporations have progressively recognised the benefits ofproviding CSR programs in their various locations. CSR activities are now being undertakenthroughout the globe.As the commercial sector increases its investments in corporate social responsibility in itsthree usual venues (the workplace, the marketplace, and the community), USAID is presentedwith the unique opportunity to create corporate partnerships that can help expand, enhance,and sustain its health efforts in developing countries.Defination:The World Business Council for Sustainable Development in its publication Making GoodBusiness Sense by Lord Holme and Richard Watts, used the following definition.“Corporate Social Responsibility is the continuing commitment by business to behaveethically and contribute to economic development while improving the quality of life of theworkforce and their families as well as of the local community and society at large.”For instance, the CSR definition used by Business for Social Responsibility is:“Operating a business in a manner that meets or exceeds the ethical, legal, commercial andpublic expectations that society has of business.”Meaning:While there is no universal definition of corporate social responsibility, it generally refers totransparent business practices that are based on ethical values, compliance with legalrequirements, and respect for people, communities, and the environment. Thus, beyondmaking profits, companies are responsible for the totality of their impact on people and theplanet. “People” constitute the company’s stakeholders: its employees, customers, businesspartners, investors, suppliers and vendors, the government, and the community. Increasingly,stakeholders expect that companies should be more environmentally and socially responsiblein conducting their business. In the business community, CSR is alternatively referred to as 1
  2. 2. “corporate citizenship,” which essentially means that a company should be a “good neighbor”within its host community.A company’s sense of responsibility towards the community and environment (bothecological and social) in which it operates. Companies express this citizenship(1) through their waste and pollution reduction processes,(2) by contributing educational and social programs, and(3) by earning adequate returns on the employed.Asia Pacific PerspectiveCorporate social responsibility is represented by the contributions undertaken by companiesto society through its core business activities, its social investment and philanthropyprogrammes and its engagement in public policy. In recent years CSR has become afundamental business practice and has gained much attention from chief executives,chairmen, boards of directors and executive management teams of larger internationalcompanies. They understand that a strong CSR program is an essential element in achievinggood business practices and effective leadership. Companies have determined that theirimpact on the economic, social and environmental landscape directly affects theirrelationships with stakeholders, in particular investors, employees, customers, businesspartners, governments and communities.The Asia Pacific context is distinct. On the one hand, there are long-standing traditions ofrespect for family and social networks, and high value placed on relationships, social stabilityand education. Diverse religions and cultures also bring distinct attitudes towards communitysocial behaviour and engagement as well as support and philanthropic contributions.Governments in the region also play distinct roles – often stronger in terms of influence oneconomic and social priorities, yet not as advanced in terms of social safety nets. This hasresulted in the drivers for corporate citizenship being very different from those in otherregions.Many of the large corporations in Asia Pacific are private, and many do not have the samepublic pressures on corporate behaviour that public companies in Europe and North Americahave for progress on corporate social responsibility, although this is changing. Yet many ofthe larger companies in Asia Pacific have strong localized philanthropic programmes. Also,regional companies that are engaged in supply chains of major global corporations, and localaffiliates of global corporations from Europe and America have significant pressures and astrong business case to develop corporate citizenship policies and practices within theregion, not least on the environment, human rights and labour standards.Is CSR the same as business ethics? There is clearly an overlap between CSR and business ethics 2
  3. 3. Both concepts concern values, objectives and decision based on something than the pursuit of profits And socially responsible firms must act ethicallyThe difference is that ethics concern individual actions which can be assessed as right orwrong by reference to moral principles.CSR is about the organisation’s obligations to all stakeholders – and not just shareholders.There are four dimensions of corporate responsibility Economic - responsibility to earn profit for owners Legal - responsibility to comply with the law (society’s codification of right and wrong) Ethical - not acting just for profit but doing what is right, just and fair Voluntary and philanthropic - promoting human welfare and goodwill Being a good corporate citizen contributing to the community and the quality of life.Concept of Social ResponsibilityWe all know that people engage in business to earn profit. However, profit making is not thesole function of business. It performs a number of social functions, as it is a part of thesociety. It takes care of those who are instrumental in securing its existence and survival like-the owners, investors, employees, consumers and government in particular and the society andcommunity in general. So, every business must contribute in some way or the other for theirbenefit. For example, every business must ensure a satisfactory rate of return to investors,provide good salary, security and proper working condition to its employees, make availablequality products at reasonable price to its consumers, maintain the environment properly etc.However, while doing so two things need to be noted to view it as social responsibility ofbusiness. First, any such activity is not charity. It means that if any business donates someamount of money to any hospital or temple or school and college etc., it is not to beconsidered as discharge of social responsibility because charity does not imply fulfillingresponsibility.Secondly, any such activity should not be such that it is good for somebody and bad forothers. Suppose a businessman makes a lot of money by smuggling or by cheating customers,and then runs a hospital to treat poor patients at low prices his actions cannot be sociallyjustified. Social responsibility implies that a businessman should not do anything harmful tothe society in course of his business activities. The obligation of any business to protect andserve public interest is known as social responsibility of businessWhy do companies decide to get involved in CSR, and how do they benefit? 3
  4. 4. Today, more and more companies are realizing that in order to stay productive, competitive,and relevant in a rapidly changing business world, they have to become socially responsible.In the last decade, globalization has blurred national borders, and technology has acceleratedtime and masked distance. Given this sea change in the corporate environment, companieswant to increase their ability to manage their profits and risks, and to protect the reputation oftheir brands. Because of globalization, there is also fierce competition for skilled employees,investors, and consumer loyalty. How a company relates with its workers, its hostcommunities, and the marketplace can greatly contribute to the sustainability of its businesssuccess.Thus, the concept of social responsibility discourages businessmen from adopting unfairmeans like black-marketing, hoarding, adulteration, tax evasion and cheating customers etc. toearn profit. Instead, it encourages them to earn profit through judicious management of thebusiness, by providing better working and living conditions to its employees, providing betterproducts, after sales-service, etc. to its customers and simultaneously to control pollution andconserve natural resources.Why should business be socially responsible?Social responsibility is a voluntary effort on the part of business to take various steps tosatisfy the expectation of the different interest groups. As you have already learnt, the interestgroups may be owners, investors, employees, consumers, government and society orcommunity. But the question arises, why should the business come forward and beresponsible towards these interest groups. Let us consider the following points:i. Public Image - The activities of business towards the welfare of the society earn goodwilland reputation for the business. The earnings of business also depend upon the public imageof its activities. People prefer to buy products of a company that engages itself in varioussocial welfare programmes. Again, good public image also attracts honest and competentemployees to work with such employers.ii. Government Regulation - To avoid government regulations businessmen should dischargetheir duties voluntarily. For example, if any business firm pollutes the environment it willnaturally come under strict government regulation, which may ultimately force the firm toclose down its business. Instead, the business firm should engage itself in maintaining apollution free environment.iii. Survival and Growth -Every business is a part of the society. So for its survival andgrowth, support from the society is very much essential. Business utilizes the availableresources like power, water, land, roads, etc. of the society. So it should be the responsibilityof every business to spend a part of its profit for the welfare of the society. 4
  5. 5. iv. Employee satisfaction - Besides getting good salary and working in a healthy atmosphere,employees also expect other facilities like proper accommodation, transportation, educationand training. The employers should try to fulfill all the expectation of the employees becauseemployee satisfaction is directly related to productivity and it is also required for the long-term prosperity of the organisation. For example, if business spends money on training of theemployees, it will have more efficient people to workand thus, earn more profit.v. Consumer Awareness - Now-a-days consumers have become very conscious about theirrights. They protest against the supply of inferior and harmful products by forming differentgroups. This has made it obligatory for the business to protect the interest of the consumers byproviding quality products at the most competitive price.Benefits:CSR behaviour can benefit the firm in several ways It aids the attraction and retention of staff It attracts green and ethical investment It attracts ethically conscious customers It can lead to a reduction in costs through re-cycling It differentiates the firm from its competitor and can be a source of competitive advantage It can lead to increased profitability in the long run Responsibility Towards Different Interest Groups After getting some idea about the concept and importance of social responsibility of business let us look into the various responsibilities that a business has towards different groups with whom it interacts. The business generally interacts with owners, investors, employees, suppliers, customers, competitors, government and society. They are called as interest groups because by each and every activity of business, the interest of these groups is affected directly or indirectly. i. Responsibility towards ownersOwners are the persons who own the business. They contribute capital and bear the businessrisks. The primary responsibilities of business towards its owners are to:a. Run the business efficiently.b. Proper utilisation of capital and other resources.c. Growth and appreciation of capital.d. Regular and fair return on capital invested. 5
  6. 6. ii. Responsibility towards investorsInvestors are those who provide finance by way of investment in debentures, bonds, depositsetc. Banks, financial institutions, and investing public are all included in this category. Theresponsibilities of business towards its investors are :a. Ensuring safety of their investment,b. Regular payment of interest,c. Timely repayment of principal amount.iii. Responsibility towards employeesBusiness needs employees or workers to work for it. These employees put their best effort forthe benefit of the business. So it is the prime responsibility of every business to take care ofthe interest of their employees. If the employees are satisfied and efficient, then the onlybusiness can be successful. The responsibilities of business towards its employees include:a. Timely and regular payment of wages and salaries.b. Proper working conditions and welfare amenities.d. Opportunity for better career prospects.e. Job security as well as social security like facilities of provident fund, groupinsurance, pension, retirement benefits, etc.f. Better living conditions like housing, transport, canteen, crèches etc.g. Timely training and development.iv. Responsibility towards suppliersSuppliers are businessmen who supply raw materials and other items required bymanufacturers and traders. Certain suppliers, called distributors, supply finished products tothe consumers. The responsibilities of business towards these suppliers are:a. Giving regular orders for purchase of goods.b. Dealing on fair terms and conditions.c. Availing reasonable credit period.d. Timely payment of dues.v. Responsibility towards customersNo business can survive without the support of customers. As a part of the responsibility ofbusiness towards them the business should provide the following facilities:a. Products and services must be able to take care of the needs of the customers.b. Products and services must be qualitativec. There must be regularity in supply of goods and servicesd. Price of the goods and services should be reasonable and affordable.e. All the advantages and disadvantages of the product as well as procedure to use 6
  7. 7. the products must be informed do the customers.f. There must be proper after-sales service.g. Grievances of the consumers, if any, must be settled quickly.h. Unfair means like under weighing the product, adulteration, etc. must be avoided.vi. Responsibility towards competitorsCompetitors are the other businessmen or organizations involved in a similar type of business.Existence of competition helps the business in becoming more dynamic and innovative so asto make itself better than its competitors. It also sometimes encourages the business to indulgein negative activities like resorting to unfair trade practices. The responsibilities of businesstowards its competitors arei. not to offer exceptionally high sales commission to distributers, agents etc.ii. not to offer to customers heavy discounts and /or free products in every sale.iii. not to defame competitors through false or ambiguous advertisements.vii. Responsibility towards governmentBusiness activities are governed by the rules and regulations framed by the government. Thevarious responsibilities of business towards government are:a. Setting up units as per guidelines of governmentb. Payment of fees, duties and taxes regularly as well as honestly.c. Not to indulge in monopolistic and restrictive trade practices.d. Conforming to pollution control norms set up by government.h. Not to indulge in corruption through bribing and other unlawful activities.viii. Responsibility towards societyA society consists of individuals, groups, organizations, families etc. They all are themembers of the society. They interact with each other and are also dependent on each other inalmost all activities. There exists a relationship among them, which may be direct or indirect.Business, being a part of the society, also maintains its relationship with all other members ofthe society. Thus, it has certain responsibilities towards society, which may be as follows:a. to help the weaker and backward sections of the societyb. to preserve and promote social and cultural valuesc. to generate employmentd. to protect the environmente. to conserve natural resources and wildlifef. to promote sports and cultureg. to provide assistance in the field of developmental research on education, medicalscience, technology etc. 7
  8. 8. Environmental Pollution and Role of BusinessTo preserve the society it is important to protect the environment. And, therefore, everybusiness must take measures to protect the environment rather than damaging it. In thissection let us learn more about different types of environmental pollution and role of business.Nature has given us air, land including mountains, hills, forests etc. and water in the form ofrivers, lakes, sea etc., which create an environment in which we live. Our health and wellbeing largely depend on the quality of such environment. However, it is observed that thequality of this environment is deteriorating day by day. We are getting neither pure water todrink nor clean air to breathe. We are having untimely rains, storms, cyclones, floods,extended summer, etc. We are also suffering from various diseases because of such lowerquality of environment. When the quality of environment deteriorates, it is said that theenvironment is getting polluted. Thus, environmental pollution refers to contamination ofenvironment by various substances that have adverse effects on living and non-living matters.Environmental pollution is of three types:i) Air pollution,ii) Water pollution, andiii) Land Pollution.Let us have a brief discussion about these three types of pollution.i. Air PollutionAs we know the air we breathe contains several gases, dust particles etc. Our body mechanismhelps us in filtering the unwanted ones and retaining those required for our survival. However,if there is an imbalance in the proportion of gases and dust particles in air, beyond a certainpoint, our body mechanism fails to filter them and we face problem. This is also true in careof other natural things like forests, river etc. Thus, air pollution refers to the presence of anyunwanted gases, dust particles etc. in the air, that can cause damage to people as well asnature.Causes of Air PollutionLet us know how air gets polluted. Some of the common causes of air pollution arei.. Pollution simply means presence of any unwanted substance that creates inconvenience inthe natural behaviour of living and non-living matter.i. Emission of fumes from vehiclesii. Emission of smoke dust and chemicals from manufacturing plants.iii. Emission of gases and dust arising from atomic plantsiv. Emission of smoke from oil refineries, burning of trees and plants in forests,buring of coal, etc.Impact of Air PollutionAir pollution has a lot of impact on our surroundings and on us. Some of them are- 8
  9. 9. Presence of gases in air, which are not required by human beings, animals and birds,creates serious health problems. It can create diseases like asthma, cough and cold, blindness,hearing loss, skin disease etc. It also causes genetic disorders. In the long run and in extremecases it can also be fatal.Air Pollution creates smog in the winter, which is caused by smoke and dust when theymix with fog. It reduces natural visibility and irritates the eyes and respiratory tract.Ozone layer is a protective layer of gases around our earth, which protects us fromharmful ultraviolet rays that come from the sun. It gets depleted because of air pollution andthereby causes gene mutation, genetic defects and skin cancer.The temperature of the earth increases due to air pollution. This is because whateverheat our earth receives from the sun is not radiated to the atmosphere due to the excessivepresence of gases like carbon dioxide, methane, nitrous oxide, etc.Air pollution causes acid rain which means excessive presence of various poisonous gaseslike sulphur dioxide, nitrogen oxide etc. in the rainwater. This causes lot of damage tovegetation, trees and marine life, buildings and monuments etc.ii. Water PollutionHave you seen river Yamuna near Delhi? Are you aware about the clean Ganga project?These two questions almost immediately remind us about the extent to which the water ofour rivers has been polluted. Water pollution refers to contamination of water due to presenceof unwanted and harmful substances thus, making water unfit for use.Causes of Water PollutionThe various reasons of water pollution arei.i.Drainage of human excreta into rivers, canals etc.ii. Improper sanitation and sewage system.iii. Dumping of wastes and effluents by various industrial units into the rivers andcanals.iv. Drainage of toxic substances like chemicals and fertilizers used in cultivation, intostreams and rivers.v. Dumping of garbage, dead bodies and almost every thing used in rituals to the nearby watersource by households.Effects of Water PollutionThe effects of water pollution are:a. It can create health hazards among human beings, animals and birds. Diseaseslike typhoid, jaundice, cholera, gastroentytis etc. are common.b. It can endanger lives of various aquatic species. 9
  10. 10. c. It can lead to scarcity of drinking water as the water of rivers and canals as welliii. Land PollutionLand Pollution refers to dumping of useless, unwanted as well as hazardous substances onthe land that degrades the quality of soil we use. Our land gets polluted because of the humancarelessness towards the soil.Causes of Land PollutionThe main causes of land pollution are:(i) Excessive use of fertilizers, chemicals and pesticides in cultivation.(ii) Disposal of solid waste of industries, mines and quarries.(iii) Disposal of solid waste from construction of roads, buildings etc.Effects of Land PollutionLand Pollution has the following harmful effectsa.Reduces the quantum of cultivable land area.b. Causes health hazards as it contaminates the sources of food.c. Causes damage to the landscape.d. Leads to water and air pollution.Role of Business in Environmental PollutionFrom the above discussion on environmental pollution, one thing can clearly be seen that, it isbusiness that mainly contributes to all sorts of pollution -air, noise, water and land.Business causes pollution in the following ways:- Emission of gas and smoke from manufacturing plants;- Use of machines, vehicles etc. contributing to noise pollution;- Deforestation due to acquisition of forest lands for setting up plants;- Growth of urbanization and industrialization;- Disposal of wastes and effluents into rivers and canals;- Disposal of solid wastes in the open space;- Mining and quarrying activities; and- Increasing use of transport.Government has taken a major step in protecting the environment by passing the EnvironmentProtection Act, 1986 in addition to having Water (Prevention and Control of Pollution) Act,1974, Air (Prevention and Control of Pollution) Act, 1981 and several other Acts. Businesscan equally be instrumental in fighting pollution and protecting the environment. Businesscan have three types of role - preventive, curative and awareness.i. Preventive RoleIt means business should take all steps so that no further damage is done to the environment.For this, business must follow the regulations laid down by government to control pollution.For example, more and more environmental friendly products can be produced, filters canbe used in chimneys; silencers can be fitted in generators; instead of dumping industrial 10
  11. 11. wastes into river and land it can be treated properly for further productive use etc.Businessmen should come forward to play a major role in preventing further damage doneto the environment by human beings. Sulabh International is the leading example of how toprovide proper sanitation facilities to the public.ii. Curative RoleIt means business should rectify whatever damage has been done to the environment. Inaddition, if it is not possible to prevent pollution then simultaneous curative measures can betaken. For example, planting of trees (afforestation programmes) can substantially reduceair pollution near the industrial area.iii. Awareness RoleIt means making people (both the employees as well as the general public) aware about thecauses and consequences of environmental pollution so that they voluntarily try to protectrather than damage the environment. For example, business can undertake public awarenessprogrammes. Now-a-days, we find that some business houses have taken the responsibilitiesto develop and maintain parks and gardens in cities and towns, which shows that they carefor the environment.ConclusionCR is a difficult and elusive topic for companies to deal with. It can often be very costly and yieldbenefits that are hard to quantify. Perhaps this is one reason why companies, according to the survey,have put so much focus on the internal improvements that can be made, such as improving corporategovernance and transparency. This could also explain why the most important stakeholders, aftercustomers, are the traditionally important employees and shareholders. 11
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