Principles Of Management (POM) Term paper

1. 1
TERM PAPER
CORPORATE SOCIAL
RESPONSIBILITY
Submitted to,
Professor Abhilash G N
On
August 22, 2014
In partial fulfillment of the requirements of the
course
Principles of Management
By
Nivin Vinoi
P14199
PGDM-B
RBS

2. 2
TABLE OF CONTENTS
EXECUTIVE SUMMARY…………………………………………..3
ANALYSIS……...……………………………………………………4
INTRODUCTION...…….....……………………………………...4
CSR THEORETICAL FRAMEWORK………………………………….4
CSR STANDARDS……………………………………………………...5
NGOs AND CSR………………………………………………………...6
CUSTOMERS AND CSR………………………………………………..6
CSR AND SOCIAL CHANGE…………………………………………..8
ENVIRONMENTAL CSR…………………………………………….....9
CONCLUSION……………………………………………………...10
REFERENCES……………………………………………………...10
Exhibit 1……………………………………………………………..11
Exhibit 2……..………………………………………………………12
Exhibit 3……………………………………………………………..13

3. 3
EXECUTIVE SUMMARY
This term paper deals with the evolution of Corporate Social Responsibility
CSR). A topic which has much interest within the managerial world is CSR. CSR
refers to “firm’s consideration and response to, issues beyond economical, legal
and technical requirements of the firm to accomplish legal and social benefits
along with economic gain which firm seeks”. To attain sustainable development
will be its ultimate goal. Sustainable development means equal development in
social, economic and environment. All corporates are profit motive and so their
CSR activities will be also in a way to achieve it. The framework of CSR and
relationships between CSR and customers, NGOs are all explained below. There
are lot of actors working for the progress of CSR throughout the world, like
employees, stakeholders, government, NGOs etc. Customers has an attitude to do
business with companywho do right. Due to this trend majority ofcompanies are
using CSR as their marketing strategy. NGOs are also doing a great job in
protecting our environmental resources by preventing its overexploitation
especially in developing and under developed countries. The attention of all
business Medias, investors, business community, customers are all in CSR. Inter-
governmental Institutions like International Finance Corporation (IFC) and UN
Global Compact are all trying to encourage CSR among corporates all over the
world. ISO 26000 is a standard which provides guidance on how businesses and
organizations can operate in a socially responsible way. All these factors shows
companies should work in an ethical and transparent way encouraging and
contributing to the welfare of society.
(Word count: 255)

4. 4
ANALYSIS
INTRODUCTION
CSR is the art of doing well by doing good. Forensuring a secure and safer mode
of living and to irradiate poverty, it is necessary to have a steady economic
progress. The benefit of this progress should reach all sectors of all countries.
Corporate Social Responsibility (CSR) is now an important part in the global
business strategy in which companies operate in a socialfriendly way where ever
they do business. Corporate Social Responsibility also called as corporate
conscience, corporate citizenship, social performance, or sustainable responsible
business/ Responsiblebusiness aims to embrace responsibility for the company’s
action and encourage a positive impact through its activities on the environment,
employees, consumers, communities, stakeholders and all other members of the
public who may also considered as stakeholders. CSR initiatives are classified
into two, actions within the firm and actions outside the firm. Action within the
firm includes changing labour relationships and changing production methods to
reduce environmental impact. Action outside the firm includes developing
philanthropic community initiatives and making infrastructure investments in
local communities. Now a days it is considered that the reputation ofthe company
and thereby stockholders wealth maximization depends on CSR. Organizations
usually take socialresponsibilities accordingto the willingness of consumers. For
example consumers buy products of companies which supports charitable
programs, they buy products of charitable organizations at very high prices
avoiding their usual brands. In 1999 within 250 largest companies in the world
only 30 percent supported CSR initiatives. But by 2011 almost 95 percent started
CSR activities.
CSR THEORETICAL FRAMEWORK
The three main motives for pressuring firms to engage in CSR is, (1)
Instrumental, (2) Relational, (3) Moral (Exibit-1). Instrumental motives is self-
interest driven. Relational motives concerned with relationships among group
members. Moral motives are concerned with ethical standards and moral
principles. At each level of analysis like (individual employee, organizational,
national, and transnational) actors and interest groups pressures these firms for
CSR. We can expand and refine multiple needs theory into two important ways.
First we are looking at intentional actions taken by firm in the name of social
responsibility and impact of these actions on employees. Second, the model is
more expansive. We should always think beyond employees perceptions so we
can theorize the needs and motives of top management, consumers, national
governments, and transnational entities so that they can be encouraged for CSR

5. 5
initiatives. This model makes several contributions to CSR literature. CSR
literature consists of (1) the field of organizational justice which resided
exclusively in the micro organizational behaviour literature and organizational
psychology literature, has much to offer CSR in considering the responsibilities
of firms, how firms treat people, both externally and internally, affects a variety
of actors, the degree of firms’ accountability. This analysis allows for a more
socially centered CSR. (2)The organizational justice literature experiences a shift
from socioeconomic models to models, instrumental that consider principled
moral obligations of organizational actors. With the help of this multiple needs
theory instrumental, relational and morality based motives put pressure on firms
to engage in CSR. This approach provides a powerful framework that leads
organizations to be more socially responsible and successful to impart social
change. (3) This model takes a different approach from existing CSR models. It
gives a unique treatment of CSR when majority of existing models look at the
consequences of CSR. Finally we add values to the model.
Actors consists of employees, Stakeholders (both internal and external),
governments (both domestic and IGOs) and NGOs. Each actors have different
mechanisms to influence social change (Exibit-2). Each actors have multiple
motives and relationships like instrumental, relational, moral, interactions.
According to the employees perceptions of distributive, procedural, interactional
relationships it can divided into two. First is through the pressure to increase the
level of CSR through employee participation and leadership. Second is through
organizational commitment, job satisfaction, employee citizenship, performance.
Internal stakeholders’ uses direct strategic decision mechanism where external or
outside stakeholders uses exercising voice through collective action. Domestic
governments’ mechanism will be law enactment, law enforcement, “bully pupit,”
education on best practices. IGos will do Bully pulpit policy. NGos mechanisms
will be campaigns, boycotts and multiparty dialogues. All these actors’
mechanisms will be targeted to make social change through CSR.
CSR STANDARDS
From 1990 to 2004 Domini 400 Social Index was recognized as CSR benchmark.
In Domini 400 index CSR criteria is analysed based on 8 categories: 1.
community, 2. diversity, 3. corporate governance, 4. environment, 5. employee
relations, 6. controversial business issues, 7. productquality, and 8. human rights.
In 2010 ISO 26000 the standard for CSR was launched byInternational Standards
Organization (ISO). ISO defines CSR as “boththephilosophy and practice offor-
profit organizations voluntarily acting to positively assistsociety in ways beyond
that required to obtain profit objectives”. Numerous intergovernmental

6. 6
organizations are also working for the promotion of CSR. Some examples are
The International Finance Corporation (IFC), which is the World Bank’s private
lending Division and UN Global Compact, an initiative to encourage businesses
worldwide to adopt sustainable and socially responsible policies like anti-
corruption, human rights, labour, and environment then to implement it.
NGOs AND CSR
There are a lot of nongovernmental organizations (NGOs) and networks of
cooperating organizations all around the world working and encouraging the
spread ofCSR initiatives. According to Companies Act (2013) CSR is mandatory
for companies with net worth of 500 crore or more, turnover of at least ‘1,000
crore and net profit of at least’ 5 crore. Each company should spend at least 2
percent oftheir profits on CSR. InApril 2013 this law was implemented and India
is the only country with legislated CSR. In India about 20 lakh NGOs are
operating across the country. To do CorporateSocialResponsibility (CSR)about
67 percent of domestic companies have chosen non-government organizations
(NGOs) as partners while 58 percent prefer government departments. There are
lot of trade unions and consumer groups which works for the elimination of child
labour and sweatshops.
CUSTOMERS AND CSR
Many customers have amind-set that they will do business with companies which
do right things. Corporates doesn’t want to lose their reputation. They always
want to keep their positive corporate image and to be in the favourite list of
customers. So corporates give great publicity to the social welfare things they do.
Even companies such as the tobacco and oil companies which have less social
respect are trying to change their negative image by implementing CSR
campaigns. For example, ITC is one of India’s leading FMCG (Fast Moving
Consumer Goods) company. They are top in country producing cigarettes. This
product gave them a bad image. For building a good image they started a rural
development initiative. When buying one ITC Classmate notebook, ITC will
contribute Rs.1to its rural development initiative that supports primary education
in villages. Another example is Phillips 66 Oil Company. This Houston-based
2011 spin-off of oil giant Conoco-Phillips, was ranked No.1 in socially
responsible companies.
Accountability has become main problem within international development
policies and researches. In different nations the government is not capable of
planning and developing there economy. Especially in developing countries
government is poorly handling different development programs and usually the

7. 7
money spend for the economic development go waste. This often results in
maldevelopment. Extractive industries is an example. Bureaucratic leaders and
politicians are only interested in money. They don’t care about these extractive
industries and don’t know how to manage them. Usually these extractive
industries will try to over exploit the natural resources of developing countries
which adversely affect the balance of ecosystem and people living nearby. An
example is the Coca-Cola Plachimada issue. Water in India is literally free of
cost. Due to the access of cheap ground water and low labour cost Coca-Cola
started a 40 acre bottling plant in 2000 at Plachimada which is in Palakkad
district. Ever since they opened the plant people started to face chronic drought
and polluted water. Coco-Coladraws up to 1.5million litres ofground water daily
through bore wells to bottle Coke, Fanta, Sprite and Thumps Up. Due to this
extraction of ground water nearly free of charge the company reaped enormous
profit. Making the situation worse the company was producing thousands of
gallons of toxic sludge reducing the fertility of soil resulting in pooragricultural
production. These all factors led the residents and farmers to unite together for
campaign in 2004 to evict Coca-Cola from their land which led to fierce battle
with the authorities and at last succeeded in closing the factory. It’s a trend in
CSR initiative to make companies responsible for the outcomes of their business
wherever they do business. NGOs have played an important role in bringing all
these environmental issues and maldevelopment issues to the discussion table.
Due to this many companies are now working together with NGOs to develop
policies and to study about the impact of their companies in local societies.
Always corporates will be profit motive. There all activities including CSR will
be aimed for it. So care should be taken to make all these activity realistic. If
customer feel suspicious towards company’s activities and find out that these
CSR activities are all for improving their positive image, it will backfire them,
actually giving them a negative image. Some examples are (e.g., Avon, Philip,
Morris, etc.). Consumers and critics started to criticize CSR campaign based on
youth smoking prevention by Philip Morris, they became surprised. The result
they gotwas somewhat contrary to what they expected. Consumers will bekeenly
watching every movements of the company and there sincerity is based on the
reasoning results in the following hypotheses:
H1a: When a company supports a CSR activity which give high benefit to them
and consumer learn about it through company source, consumer will likely
evaluate company more negatively than without the CSR activity.

8. 8
H1b: When a company supports a CSR activity which give high benefit to them
and consumer learn about it through a neutral source, consumer will maintain
their existing evaluations.
H2a: When a company supports a CSR activity which give low benefit to them
and consumers learn about it through a neutral region, consumers are likely to
maintain existing evaluation.
H2b: When a company supports a CSR activity which give low benefit to them
and consumers learn aboutthrough neutral source, consumers evaluate them more
positively.
H3a: CSR activities that have high (vs. low) benefit results in lower sincerity.
H3b: Consumers will have only less sincerity when CSR activities of company is
learned by them from company’s source rather than neutral source.
H3c: The influence of information source on company’s evaluation is mediated
by sincerity of motives.
H3d: The influence of benefit on company’s evaluation is mediated by sincerity
of motives.
CSR AND SOCIAL CHANGE
CSR will be always aimed with social change. Over half of the Fortune Global
500 MNCs publishes separate reports on CSR annually and most of the
responsibilities of CSR activities are assigned to senior executives. All CSR
activities focuses oncorporatesocialresponsibility and public’s reaction to it. For
example, in 1996, it was alleged that the execution of writer Ken Saro-Wiwa and
a number of other Ogoni community members by Nigerian military was
supported by Royal Dutch Shell, for organizing against them. The public outcry
and other environmental problems over Shell’s decision to discard the Brent Spar
oil drilling platform in the North Sea, caused Shell a bad image among public and
it made a relationship gap between the consumers and host countries. Due to this
Shell re-engineered and re-evaluated their policies and operating principles for
regaining their image. For this they established clearer human rights guidelines
and issued its first social report. This is also an example forreactive socialchange.
Corporate engaged in “triple bottom line” thinking is an example of proactive
socialchange. Triple bottomline shows thatthe organization’s success is attached
to its socialperformance, economic profitability and environmental sustainability
giving higher visibility to CSR ranking. In both reactive and proactive CSR
initiatives corporations are being pressured by external and internal actors to
engage in these social activities to meet the changing scenarios of social and

9. 9
business responsibilities. Somecompanies CSR practices ata superficial level for
window-dressing purposes whereas other companies embed CSR into their core
company strategy. Chiquita Company is an example for company’s CSR
initiative which lead to social change. They implemented living wage standards
for all their farm workers in every country in which it harvests fruit, and also they
introduced state-of-the-art environmental activities throughout its supply chain.
The initiative taken by Chiquita Company is replicated by a lot of companies
from apparel to pharmaceuticals to extractives to auto motives and other heavy
industries.
ENVIRONMENTAL CSR
Environmental CSR is the new trend in CSR and plays an important role in
corporate landscape. Environmental CSR has a great influence in the stock
market’s reaction. The most prominent example is the British Petroleum’s (BP)
oil spill incident in April 2010. It is the biggest off-shore oil spill in US history
and it contaminated a large marine environment area along the Gulf of Mexico.
Due to this disaster the stockpriceofBP dropped from$59.5to $28.9. Companies
are trying to be more concerned on environmental activities. Introduction of
recycling programs, preventing release of hazardous waste to environment are all
the examples for eco-friendly corporate initiatives. Environment-as-a-resource
depends on both external norms of environmental CSR and internal levels of
environmental CSR. External norms means the external pressure to become
green. For e.g., environmental regulations, customers sensitivity to environment
related issues, media attention to the environment etc. In the internal perspective
environmental CSR is a resourcewhere marginal returns decreases. Ifthe “stock”
of resource is high, additional investment in environmental CSR will be low and
hence lower the shareholders reward for eco-friendly initiatives. Similarly if
environmental CSR is donein avery high rate the punishment forthe eco-harmful
behaviour will be low. For a company having large stock of environmental
resources is like “insurance”. They will not worry until it deplete fully.
CSR efforts are potentially instrumental in obtaining resources and stakeholders
support. Forexample installation of a new recycling plant. It’s very expensive for
a firm to buy the machinery, practice employees for it etc. But in the long run the
reputation of companywill increase and due to this corporatesocialresponsibility
and financial performance will increase. Profitability and pollution are
interconnected. Pollution means wastage of resources (e.g., material, energy). By
reducing pollution it will reduce company’s environmental issues but also
increases competitiveness. Companies should become sustainable (i.e., “green”),
and this greening initiative will influence financial performance of the company.

10. 10
One of the visible example for sustainability program is Walmart. Walmart took
the initiative that (1) they will be powered by 100 percent renewable energy, (2)
create zero waste, (3) sell product that sustain people and the environment.
Now a days Media’s and shareholders are also concerned abouttheenvironmental
CSR. By looking at the graph (Exibit-3) we can know that there is a substantial
increase in the articles based on CSR over years. In 1980s the average number of
articles was only 20. But by 2000s it was about six times higher (117). In the
graph the dashed line shows the fraction of proposals done by shareholders on
environmental CSR. The fraction of proposals has increased substantially. By
the end of 2009 it became roughly four times greater than in 1997. One reason
for the increase of environmental consciousness is the rise of “green consumers”.
Green consumers are consumers who are supportive of environmental causes.
Due to this consciousness in environment “Green Marketing” was also
introduced.
CONCLUSION
CSR principles are becoming a new trend among the intergovernmental
organizations. Now bothUnited Nations and World Bank is involved in spreading
CSR initiatives. But still there are certain people who believes that CSR agendas
are not good for society. They believe that human services should only be
supported by individuals, not by corporations. Now CSR is the part of
corporations’ arsenal of advertising and public relations strategy. This also force
companies to do right things since customers have a strong desire to do right by
doing business with those companies that do right.
REFERENCES
1. Corporate Social Responsibility by Michael Erbschloe.
2. Corporate Social Responsibility and Shareholder’s Value: An Event Study
Analysis by Leonardo Becchetti, Rocco Ciciretti, and Iftekhar Hasan.
3. The Effect of Corporate Social Responsibility (CSR) Activities on Companies
With Bad Reputations by Yeosun Yoon (Ewha Womans University), Zeynep
Gurhan-Canli (Koc University) and Norbert Schwarz (University of Michigan).
4. CorporateSocial Responsibility and Shareholder reaction: The Environmental
Awareness of Investors by Caroline Flammer (University of Western Ontario).
5. Putting the S back in Corporate Social Responsibility: A multilevel theory of
social change in organizations by Ruth V Aguilera, Deborah E. Rupp, Cynthia A.
Williams, Jyoti Ganapathi (University of Illinois at Urbana-Champaign).

11. 11
Exibit-1

12. 12
Exibit-2

13. 13
Exibit-3