Csr in indian companies


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Csr in indian companies

  1. 1. Graduate Business School Assignment Cover Sheet Student name: Sumeet Duhan Student number: 2804324 Course: MSC INTL Business Subject: Business Research Methods-1 Study Mode: Full time Lecturer Name: Aine McManus Assignment Title: CSR in Indian Companies (private or public) No. of pages: 10 Disk included? Yes Additional Information: (ie. number of pieces submitted, size of assignment, A2, A3 etc) Date due: 15th Nov 2011 Date submitted: 15th Nov 2011 Yes Stage/year: 1 Part-time No 1
  2. 2. Table of content 1. Introduction………………………………………………………………………………….3 2. Aims and Objectives…………………………………………………………………………6 3. Literature review……………………………………………………………………………..6 4. Advantages of CSR in Indian Companies……………………………………………………7 5. Conclusion……………………………………………………………………………………8 6. References……………………………………………………………………………………9 7. Bibliography………………………………………………………………………………….10 2
  3. 3. CSR IN INDIAN COMPANIES (Private or Public) INTRODUCTION Corporate social responsibility is very wide and it has different meaning to everyone and different in each country. According to Lord Holme and Richard Watts, “CSR 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”. ’Bowen has defined ‘Corporate Social Responsibility’ as “Obligation to pursue those policies, to make those decisions, or to follow those lines of action which are desirable in terms of the objectives and values of our society.” (H.R.Bowen, 1953, cited in C. Gopala Krishna, 1992, p.63) This definition given by Bowen emphasizes the societal aspect of business decisions and activities and presents that corporate social responsibility is a compulsion or an obligation (Baker 2004). Without society business cannot exist. They provide better and useful services and products to the society in exchange of a money price. For their survival, both business and society depend completely on each other. At present, due to globalization and consumers’ expectations, companies are facing very high and tough competition in the market. In this type of situation, it is essential for a business to survive in market that is to increase its connectivity to the society in a positive manner. So CSR is an idea that refers to a business’ responsibilities towards different groups of the society in which it exists and grows. The main and important objective for every company is to profit-maximization. But it is indispensable for every business that these profits have not been gained in an unethical manner and contributes a part of these profits to the society. The scope of CSR is just beyond any limitations. 3
  4. 4. Fig 1.1 (Lawrence J. Gitman and Carl McDaniel, 2208, p.46) This pyramid gives a better view of the concept CSR. This is given in the book “corporate social responsibility pyramid” written by Lawrence J. Gitman and Carl McDaniel. It has four levels and each level shows a set of responsibilities. In the bottom (blue level), economic responsibilities are important for the existence of the business. The main and important aim of every business is to gain profit because these profits help them to keep running in the market. So firstly the survival has to be assured to go into the next level. The second level (green level) shows the legal responsibilities. These responsibilities are very essential to stand by the law of the country and particular industry to which the corporate belongs. The next level is ethical responsibilities. After the assurance of survival and legality of the company, it can concentrate on working ethically. Ethics generally represent a set of principles that prescribe a distinct behavior code and tell what is right or wrong. In an ethical manner 4
  5. 5. conducting the activities of business is always prescribed (Lawrence J. Gitman and Carl McDaniel, 2008, p.46). The last and the highest level of CSR pyramid is capture by philanthropic responsibilities. These responsibilities can be fulfilled in different ways such as donating company equipments and products, making charity at causes like drought relief, flood relief, education for poor people, making cash contributions in social events and many more this type of causes. These activities are not a part of daily activities of business. These activities are carried out for the welfare of society differently (Lawrence J. Gitman and Carl McDaniel, 2008, p.46). BIRLA and TATA are the famous and leading companies in India that are contributed towards the corporate social responsibility till when this concept was not famous in India. Today India is considered to be one among the top Asian countries as far as CSR are concerned. In 2009, India ranked fourth among Asian countries surveyed by ASR (Asian Sustainability Ranking). On individual level also, there are four Indians out of ’48 Heroes of Philanthropy’ according to 2009 and 2010 list of Forbes Asia (The Hindu dated March 5, 2010). Mukesh Ambani the Chairman of Reliance Industries defines CSR as “Continuous Social Responsibility” and also said it is a combined effort of corporate world, government and people together. Also he said that businesses should not be calculated only on the basis of financial returns but on social returns as well (The Economic times Dated 11 July 2011). The giant of cola industry, coca cola India won the Golden Peacock Global Award for corporate social responsibility. This award has been given by the Deputy Minister of Economy and Innovation, Government of Portugal, Antonio Castro Guerra recently. This award has been gifted to this company in community development-for replenishment of ground water and setting goals to reach a ‘net zero’ balance with respect to groundwater usage in 2009. In partnership, coca cola with Rotary International has launched ‘Elixir of Life’ which is a project to provide potable water to 30,000 underprivileged children in and around Chennai (Erin Lyon 2009). The Indian corporate sector spent around US$6.31 billion on social expenditure in the year of 2007-08, up from US$3.68 billion from the last year. The country’s largest steel manufacturing 5
  6. 6. company SAIL spent US$ 21.05 million on CSR; TATA Steel Ltd spent US$31.58 million as part of its annual revenue expenditure (Prasad 2009). Aims and objectives What is the basic idea of CSR? What are the advantages of CSR to the Indian corporate sector? What are the affects of mandatory CSR in public sector units? What are the arguments for and against making CSR mandatory for private sector units? Literature Review The term ‘corporate social responsibility’ is very wide and complex and it has different meaning to different academicians and researchers. But generally, it is commonly used to mention those activities taken by the corporate with the aim of the welfare of society. This term become an essential part of every corporate structure and nobody neglect this fact to survive in the market then they never neglect their responsibilities towards the society. CSR has so many dimensions. According to the C.krishna , this term has positive and negative side. The aim of positive side is to solve society problems and making the society a better place to live. And the negative side aims of neglect public criticism and no welfare. Social reform and social movement, he mentioned further. In other way, CSR states that it is as a moral duty, civic responsibility, natural obligation and as legal compulsion (C. Gopala Krishna, 1992, p.57). According to Adolf Berle, he states that CSR AS “The corporation’s is not purely economic, though to be so indeed its primary functions; not purely economic, though profit is surely its purpose” (Adolf Berle, 1932 cited in C. Gopala Krishna, 1992, p.59). He clearly stressed on the fact that though the main aim of the company is to making profits, yet this is not only the purpose and there are responsibilities beyond economic responsibilities. 6
  7. 7. On the other hand Bowen defines that CSR is indispensable for the sake of survival of business in its existing form. “it’s becoming increasingly obvious that the freedom of choice and delegation of power such as businessmen exercise would hardly be permitted to continue without some assumption of social responsibility” (Bowen, 1953 cited in C. Gopala Krishna, 1992, p.59). If a business neglects its duties towards the society in which it exists, the society will not allow enjoying freedom in its activities. Everybody has different meaning of corporate social responsibility but the most common definition accepted by many researchers that is “CSR is a commitment to improve community well being through discretionary business practices and contributions of corporate resources”. This is the very simple but complete definition of the term corporate social responsibility (Philip Kotler and Nancy Lee, 2005, p.3). Advantages of CSR in Indian Companies The term CSR becoming famous and earning importance all over the world. The corporate is getting aware of the benefits of adopting corporate social responsibility. These can be long-term and immediate in nature. The government has mentioned a share/percentage of net profit to be mandatory allocated for CSR activities by the public sector units. On the other way, in private sector there is no such mandatory requirement in India but the government is planning to make it mandatory to some extent. There are some benefits of CSR for Indian companies: (Fernando, 2009, p.p. 8.11 and 8.12) 1. Enhanced Brand Image and Goodwill: The term CSR is very powerful in India and it is helping the Indian companies to enhance their brand image and the goodwill of their company. Customers do more trust only on those companies which are socially responsible. Today due to competition in market place it is very tough to build goodwill but CSR is the helping tool towards this. 2. Increased sales: Indian companies are facing high competition to their local competitors and foreign as well. It has become very difficult for Indian companies to increase their sales due to globalization and economic liberalizations. The companies which undertake pollution free production and protect the environment, products not tested on animals, 7
  8. 8. undertake legal activities etc. getting good response from customers and secure the larger sales. 3. Easier access to capital: The very important benefit of CSR to Indian companies is easier access to capital. The companies which are involved in CSR activities are more trustworthy in the eyes of financing agencies and investors. The above discussion revels that the companies that are engaged in CSR do not get only profit or economic advantage but also secure lot of trust and loyalty by their customers. These companies gain positive brand image and make strong goodwill for the company. Also the government does not put strict laws to these companies in getting licenses etc. From Human Resource side also, they can attract best human talent available in the industries compared to other companies not adhering corporate social responsibility. Conclusion The term corporate social responsibility has earned prominence from all avenues. Organizations or companies must realize that government cannot uplift the society alone. They have to contribute something and help the government and take advantage from government in several issues. It is the benefit of companies, government and society. Duet to this the companies can increase their brand image in the society and think for the future planning. The competitor risks also reduced for those companies which are doing these activities. 8
  9. 9. References: Baker, M., 2004. Definitions of corporate social responsibility - What is CSR? Available at: http://www.mallenbaker.net/csr/definition.php [Accessed November 11, 2011]. C. Gopala Krishna, Corporate social responsibility in India: a study of management attitudes; 1992, Mittal Publications, New Delhi [Accessed November 13, 2011]. Lawrence J. Gitman and Carl McDaniel, The Future of Business: The Essentials; 2008, South-Western Cengage Learning, USA [Accessed November 13, 2011]. Need to make corporate social responsibility more meaningful: Reliance Industries Chairman Mukesh Ambani - Economic Times. Available at: http://articles.economictimes.indiatimes.com/2011-07-11/news/29761203_1_csr-corporatesocial-responsibility-industries-chairman-mukesh-ambani [Accessed November 13, 2011]. Philip Kotler and Nancy Lee, Corporate Social Responsibility: Doing the Most Good for Your Company and Your Cause”, 2005. Wiley India Pvt Ltd., New Delhi [Accessed November 13, 2011]. Corporate Social Responsibility Practices in India - Corporate Social Responsibility Practices in India - E-book - Times Foundation. Available at: http://timesfoundation.indiatimes.com/articleshow/4662536.cms [Accessed November 12, 2011]. Corporate Social Responsibility in India – Putting Social-Economic Development on a Fast Track: CSRIndia.Info. Available at: http://www.csrindia.info/story.php?aid=168 [Accessed November 13, 2011]. Prasad, 2009. CSR Initiatives of Indian Companies - A Study. Available at: http://www.indianmba.com/Faculty_Column/FC955/fc955.html [Accessed November 13, 2011]. Erin Lyon, 2009. Coca-Cola India Bags Golden Peacock for Social Service. Available at: http://www.medianewsline.com/news/135/ARTICLE/4234/2009-03-20.html [Accessed November 14, 2011]. Fernando A C, Business Ethics and Corporate Governance; 2009. Dorling Kindersley (India) Pvt. Ltd [Accessed November 14, 2011]. 9
  10. 10. Bibliography: Pradhan, S. & Ranjan, A., 2010. Corporate social responsibility in rural development sector: evidences from India. Available at: http://www.iiuedu.eu/press/journals/sds/SDS_2010/SSc_Article1.pdf [Accessed November 11, 2011]. “CSR spending should be made mandatory for private firms”; dated April 5, 2011; accessed on May 15, 2011; available: http://www.rediff.com/business/report/csr-spending-should-bemade-mandatory-for-private-firms/20110405.htm [Accessed November 13, 2011]. Corporate Social Responsibility in India: Past, Present and Future. Available at: http://www.easternbookcorporation.com/moreinfo.php?txt_searchstring=16156 [Accessed November 11, 2011]. Jain, I., 2011. Corporate Social Responsibility Practices in India - Corporate Social Responsibility Practices in India - E-book - Times Foundation. Available at: http://timesfoundation.indiatimes.com/articleshow/4662536.cms [Accessed November 14, 2011]. Lyon, E., 2010. CSR Asia - Corporate Social Responsibility in Asia. Available at: http://www.csr-asia.com/index.php?cat=31 [Accessed November 14, 2011]. 10
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