This document defines corporate social responsibility and outlines its key types and arguments for and against it. CSR refers to businesses going above legal and profit obligations to benefit society. Types include environmental, community, and employee initiatives. Arguments for CSR are that it protects stakeholders, ensures long-term survival and avoids regulation by addressing social issues. However, critics argue CSR shifts focus from profits, increases costs, and may damage reputation if initiatives do not show quick results.

1. Corporate Social Responsibility
Definition of Corporate Social Responsibility
What CSR basically means is that a business does more for the wellbeing of others
than required in an economical (make a profit) and legal (obey the law) sense.
Different types of CSR
 Environmental CSR: focuses on eco-issues such as climate change.
 Community based CSR: businesses work with other organizations to improve the
quality of life of the people in the local community.
 HR based CSR: projects that improve the wellbeing of the staff.
 Philanthropy: businesses donate money to a good cause, usually through a
charity partner.
Arguments in favour of CSR:
The following arguments favour corporate social responsibility:
1. Protect the interests of stakeholders:
Labour force is united into unions which demand protection of their rights from business
enterprises. To get the support of workers, it has become necessary for organisations to
discharge responsibility towards their employees.
Caveat emptor (‘let the buyer beware’), no more holds true. Consumer today is the
kingpin around whom all marketing activities revolve. Consumer does not buy what is
offered to him. He buys what he wants. Firms that fail to satisfy consumer needs will
close down sooner or later. Besides, there are consumer redressal cells to protect
consumers against anti-consumer activities. Consumer sovereignty has, thus, forced
firms to assume social responsiveness towards them.
Firms that assume social responsibilities may suffer losses in the short-run but fulfilling
social obligations is beneficial for long-run survival of the firms. The short-term costs
are, therefore, investments for long-run profitability.

2. 2. Long-run survival:
Business organisations are powerful institutions of the society. Their acceptance by the
society will be denied if they ignore social problems. To avoid self-destruction in the
long-run, business enterprises assume social responsibility.
3. Self-enlightenment:
With increase in the level of education and understanding of businesses that they are
the creations of society, they are motivated to work for the cause of social good.
Managers create public expectations by voluntarily setting and following standards of
moral and social responsibility.
They ensure paying taxes to the Government, dividends to shareholders, fair wages to
workers, quality goods to consumers and so on. Rather than legislative interference
being the cause of social responsibility, firms assume social responsibility on their own.
4. Avoids government regulation:
Non-conformance to social norms may attract legislative restrictions. Government
directly influences the organisations through regulations that dictate what they should
do and what not. Various agencies monitor business activities.
For example, Central Pollution Control Board takes care of issues related to
environmental pollution, Securities and Exchange Board of India considers issues
related to investor protection, Employees State Insurance Corporation promotes issues
related to employees’ health etc. Organisations that violate these regulations are levied
fines and penalties. To avoid such interventions, organisations have risen to the cause
of social concerns.
5. Resources:
Business organisations have enormous resources which can be partly used for solving
social problems. Businesses are the creation of society and must work in the best
interest of society, both economically and socially.

3. 6. Professionalisation:
Management is moving towards professionalism which is contributing to social
orientation of business. Increasing professionalism is causing managers to have formal
management education and qualifications. Managers specialise in planning, organising,
leading and controlling through their knowledge and subscribe to the code of ethics
established by a recognised body.
The ethics of profession bind managers to social values and growing concern for
society. Thus, there is increasing awareness of social responsibility. To grow in the
environment of dynamism and challenge, business concern does not decide whether or
not to discharge social responsibilities but decides how much social responsibility to
discharge. A good business anticipates developments and acts in accordance with the
currently conceived social responsibilities to achieve the future targets.
Arguments against CSR:
Corporate social responsibility is limited on the following grounds:
1. Business is an economic activity:
It is argued by the opponents of social responsibility that basic function of a business
enterprise is to look into economic viability of its operations. It is for the Government to
look after interests of the society. The prime responsibility of assuming social
responsibility should, therefore, be of the Government and not of the business
enterprises.
2. Quantification of social benefits:
What measures social responsibility and to what extent should a business enterprise be
engaged in it, what amount of resources should be committed to the social values,
whose interest should hold priority over others (shareholders should be preferred over
suppliers or vice versa) and numerous other questions are open to subjective
considerations, which make social responsibility a difficult task to be assumed.
3. Cost-benefit analysis:

4. Any social-benefit programme where initial costs exceed the benefits may not be taken
up by enterprises even in the short-run.
4. Lack of skill and competence: Professionally qualified managers may not have the
aptitude to solve the social problems.
5. Transfer of social costs:
Costs related to social programmes are adjusted by the business concerns in the
following ways:
(a) High prices:
The costs are passed to consumers by increasing prices of goods and services.
(b) Low wages:
If managers maintain the level of prices, the social costs may be reflected in reduction
of wages.
(c) Low profits:
If wages are stabilized, profits would be reduced, which will lower dividends to the
shareholders. Low profits will reduce managers’ desire to further engage in corporate
social responsibility
6. Sub-optimal utilisation of resources:
If scarce resources are utilised for social goals, this would violate the very purpose of
existence of an organisation.
Advantages Corporate Social Responsibility
Now that we know what CSR means and what its forms are, we will read about CSR’s
advantages.
o Improvement in the image of the Corporation
The most obvious advantage that a corporation can obtain by implementing CSR policies
is that of an increased goodwill value. This serves a dual purpose – Firstly, people will
want to buy the product that the corporation is selling because of its good and clean
image. Secondly, other enterprises will want to do business and be associated with the

5. corporation. This increases the corporation’s prestige to such a high level that its name
may become synonymous with reliability and goodness.
People always want to be associated with the best and the most popular, so in that
respect, the corporation rises in stature and becomes an important player in its market.
o Increased Attraction and Retention of Employees
Companies having solid CSR commitments find it easier to recruit and retain employees.
People want to work for companies that care about the well-being of their employees and
provide good working conditions. Compassionate attitude towards employees is highly
desired by both new recruits and old employees alike. Appraisals, financial assistance in
times of need, and attention given to personal achievements and special days (like
birthdays) make employees want to remain with the company.
This is a huge advantage when there is a tight labor market situation. This will reduce the
cost of training new recruits and free up incentives for existing employees. Incentives
induce efficient work out from employees. In short, if the company’s workforce is happy,
the company gets more profits due to increased efficiency in production.
o Regulatory Authorities become less hostile
A corporation with strong CSR programs will not be scrutinized by regulatory authorities
as much as companies without CSR programs. The authorities will be lenient in their
regulation because they feel that the company must be complying with all regulations as
it is supported by firms and people alike for its welfare work. A company with strong CSR
programs will always work within regulations to get benefits (other than profits) from these
CSR programs.
The authorities will give fast-track preference to this company. It may also forego
cumbersome paperwork that is required to set up projects if it thinks that this project is
going to help the community to improve.
o Attracts more Capital Inflow from Various Sources
A company’s image plays a huge role in attracting investors. If the company is engaged
in CSR programs, its image gets a massive boost, and so, people invest in its operations
heavily. This company will attract capital even from abroad in the form of FII, thus, helping

6. the country to get valuable foreign exchange. It will also attract investment from other
firms and industries, and it will become a name that can be trusted easily.
Even the Government of the country may be willing to invest in the company, leading to
lesser regulation and red-tapism.
o Generation of Clean and Renewable Energy from Environmental CSR
If the company has invested in an environmental CSR program, it will make sure that its
operations do not harm the environment in any way. Inventing machines and techniques
to reduce the harmful effects of its operational activities will give the community a clean
environment. It will also give the company a chance to explore the usage of renewable
energy for its operations.
This will reduce the cost of acquiring fossil fuels and can reduce the cost of production by
a one-time investment in renewable energy production.
o Positive Publicity
A popular business principle is that any publicity is good publicity. You should be known
to the people to sell your product. A good CSR program will always give good publicity
and even act as an advertisement for the company.
It also sets the company apart from its competitors. They may be selling a similar product
at lower rates, but you are keeping the interests of your environment and community
intact, and so the people do not mind a little extra charge for this thoughtfulness.
Disadvantages Corporate Social Responsibility
o Shift from the Profit-Making Objective
Milton Friedman, an economist, is the biggest critic of CSR. He says that CSR shifts the
focus of the company from the objective that made it a financial entity in the first place –
profit-making. The company forgets about its obligations towards its shareholders that
they have to make profits for them. Instead of focusing on making profits, they engage in
CSR programs and use up funds for community welfare.
So basically, instead of an income, the company is effecting an outflow of cash and not
fulfilling its profit-making obligations.

7. o Company Reputation takes a hit
According to CSR policies, companies have to disclose shortcomings of even their own
products if they are found to violate the CSR program. For example, car manufacturing
companies calling back their vehicles in large numbers when they find glitches in the
model after having sold them wallops their reputation.
This creates inconvenience to the customers, and they lose trust in the manufacturer.
o Customer Conviction
Initially, customers like to see the companies that they trust are engaged in social welfare
programs. They like the fact that these programs are for a good cause. Later, they grow
wary of it. If they don’t see instant results from these programs, they think that these are
nothing but PR stunts. So it becomes difficult to convince customers that the results will
take some time in coming and that they should continue believing in the good intentions
of the company.
These attempts of convincing become fruitless day by day because some customers are
impatient and have a constant desire to be appeased.
o Increase in Cost of Production
More often than not, CSR programs increase the expenditure of the company. This
increased expenditure is reflected in the increased prices of the product for which,
ultimately, the customers have to pay.
Large corporations can absorb this increased expenditure. They may not increase their
products’ prices, but small businesses have no other option but to increase their products’
prices to meet their increased expenses.