corporate social responsibility

1. By
CORPORATE SOCIAL
RESPONSIBILITY AND
FINANCIAL PERFORMANCE

2. MEANING OF CSR
The World Business Council for Sustainable Development defines
Corporate Social Responsibility (CSR) as the continuing
commitment by business to behave ethically and contribute to
economic development while improving the quality of life of the
workforce, their families and the local community and society at
large. It is an attempt by organisations to take responsibility for
the impact of their activities on customers, suppliers, employees,
shareholders, communities and other stakeholders, as well as
the environment.

3. Corporate Philanthropy
Corporate philanthropy (CP) refers to the practice of
companies of all sizes and sectors making charitable
contributions to address a variety of social, economic and
other issues as part of their overall corporate citizenship
strategy. Companies make philanthropic donations through
either company-sponsored foundations or direct giving
programs. These are different in their relationship to the
company and it is important to understand the difference.

4. CSR vs CP
The difference between CSR and CP is therefore that
while CP consists of mainly donations and charity,
CSR involves a more involved approach of ongoing
community involvement. Corporate philanthropy is
often a component of a corporation’s broader social
responsibility and includes cash gifts, product
donations and employee volunteerism. So in fact,
Corporate Philanthropy is one component of CSR.

5. Triple Bottom Line
The sustainability movement and the social
responsibility movement joined forces on a corporate
level to give birth to the concept of the Triple Bottom
Line (3BL) of “People, Planet and Profit” and the new
face of CSR – “Doing well by doing good”.
The Triple Bottom Line is made up of "Social, Economic
and Environmental" indicators.

6. Traditional view to modern view
 Shareholders to Stakeholders.
 Pure economic benefits to economic, social and
environmental benefits.
 Present needs to future needs.
 Development to Sustainable Development.
 Short and medium term to long term benefits

7. Pioneers of CSR in India
 TATA STEEL LIMITED.
 INFOSYS TECHNOLOGIES LIMITED.

8. TATA STEEL LIMITED
 Tata Group, considered as a pioneer in CSR, have
played a major role in nation-building and socio-
economic development since they began operating in
the early part of the twentieth century. Since its
inception , the company was aware of its obligations
to the society, as its founder J.N.Tata announced in
1895 that “we do not claim to be more unselfish, more
generous or more philanthropic than other, but we
think we started on a sound and straightforward
business principles considering the interests of the
shareholders , our own and the health and welfare of
our employees”.They only introduced the concept of
‘triple bottom line’.

9. CSR areas of the Tatas
 Ethics, Transparency
and Accountability
 Products Contributing
to Sustainability
 Employee Welfare
 Stakeholder
Engagement
 Human Rights
 Environment
 Policy Advocacy
 Inclusive Growth
 Value to Customers

10. Motivations
 As a conscious Corporate Citizen, Tata Steel Ltd
is committed to improving the quality of life of its
employees and also of the citizens residing in and
around the Steel Works in Jamshedpur and the
various out locations scattered in different states
in the country as well as abroad.

11. Motivations
 These dual interventions in workplace and
community have a far reaching impact. This
responsible corporate citizenship is reinforced by
the organisation by being a signatory to Global
Compact and accepting and practicing the “Ten
Principles” in total as well as being a Member of
Global Business Coalition on HIV/AIDS.

12. Infosys Technologies Ltd.
 Infosys was founded in 1981 with the view that sustainability
and the success of the organisation would depend on how
much wealth they create for their customers, employees and
the society in which they operate.
 They have been responsible for creating multiple frameworks
involving corporate governance, education, infrastructure,
and inclusive growth.

13. The Five major CSR themes
Education Healthcare Art & Culture
Rural Upliftment Inclusive Growth

14. CSR practices
 Their CSR activities are carried out at 4 different levels – at
the Infosys group level, through the Infosys Foundation,
through the Internal Board of Directors and by the Infosys
Employees at an individual or team level
 They are the first Indian company to emphasise strong
Corporate Governance practices and they have expanded
their practices significantly beyond the norms.

15. Relationship between CSR and
financial performance of a firm.
 In our study, the sign of the relationship between
corporate social responsibility and financial
performance is tested. The sign may imply negative,
neutral or positive linkages. The argument for a
negative relationship follows the thinking of those
such as Friedman (1970) and other neoclassical
economists. According to their view, socially
responsible firms have a competitive disadvantage
(Aupperle et al., 1985), because they incur costs that
fall directly upon the bottom line and reduce profits,
while these costs could be avoided or borne by
individuals or the government

16. Relationship between CSR and
financial performance of a firm.
 On the other hand, many empirical results reveal
no significant relationship between CSR and
financial performance. According to this line of
thinking(e.g., Ullman, 1985), there are so many
variables that intervene between the two that a
relationship should not be expected to exist.

17. Relationship between CSR and
financial performance of a firm.
 The third view proposes that there is a positive
linkage, since the actual costs of CSR are covered by
the benefits. A firm that attempts to decrease its
implicit costs by socially irresponsible behavior—by,
for example, neglecting to take measures against
pollution—will eventually incur higher explicit costs.
Socially responsible companies have less risk of
negative events. It is less likely for these companies
to pay heavy fines for excessive polluting, to have
costly lawsuits against them, or to experience socially
negative events that would be destructive to their
reputation.

18. Objectives of the study
 In our study, 28 indian companies from different sectors
were considered.
 To study and find out the nature of relationship between
Corporate Social Responsibility and financial performance
i.e.
CSR expenditure and its effect on ROCE, Operating Cash
flow, Market revenue and Market price of outstanding
shares.

19. RESEARCH METHODOLOGY
 This study is based on secondary data.
 The statistical model used for the testing of
relationship :
1)Simple Correlation. (Karl Pearson’s)
2)Bivariate Regression.
For the above analysis STATA 11 is used as a
statistical tool.

20. Analysis(Case-1)
Correlation Results between CSR expenditure and
Operating Cash Flow i.e. OCF
| csrmil~n ocf
-------------+------------------
csrmillion | 1.0000
ocf | 0.5140 1.0000
There exists a positive correlation.

21. Analysis(Case-2)
Correlation Results between CSR expenditure and
Return on Capital employed i.e. ROCE
| csrexp~n patce
-------------+------------------
csrexpened~n | 1.0000
patce | 0.0459 1.0000
There exists a positive correlation.

22. Analysis(Case-3)
 Correlation Results between CSR expenditure and
Market revenue.
| csrexp~n revenu~s
-------------+------------------
csrexpened~n | 1.0000
revenueinm~s | 0.5598 1.0000
There exists a positive correlation.

23. Analysis(Case-4)
Correlation Results between CSR expenditure and
Market value.
| csrexp~n mv
-------------+------------------
csrexpened~n | 1.0000
mv | 0.5823 1.0000
There exists a positive correlation.

24. Hypothesis
Ho: There exists no relationship between CSR
expenditure and other financial performance
variables.
H1: There exists a relationship between CSR
expenditure and other financial performance
variables.
Regression analysis was applied taking the variables as
CSR expenditure, ROCE, Operating Cash flow,
Market revenue and Market price of outstanding
shares.

25. Result
It was found that other than ROCE, CSR expenditure
has got some effect on all other financial variables.
That is null hypothesis was rejected and alternate
hypothesis was accepted in all the cases other than
ROCE.
We have found significant results between the variables
which in turn establishes a strong relationship
between CSR expenditure and other financial
variables.
This means the more a company spends in CSR
activities, the chances that its profitability will increase
is significant.

26. QUESTIONS