2. Three main theories of the firm
• The present practice of corporate social
responsibility (CSR) has been depicted and
informed by three CSR theories:
• The stakeholder theory of CSR.
• The business ethics theory of CSR.
• And the shareholder value theory of CSR.
3. The stakeholder theory of CSR
• Since 1990s’ the stakeholder theory has become
famous as a direct alternative and challenge to the
shareholder value theory (Freeman 1984). It argues
that the number of stakeholder pressure groups has
developed widely since the 1960s’ and the stakeholder
forces impact on business must not be underestimated.
Ethical and pragmatic as it ought to be business success
assume vast interests of stakeholders than the
shareholders interest alone. The stakeholder theory
emphasizes special social rather than any others
unrelated to the corporation. Thus CSR is denoted as a
company stakeholder responsibility.
4. Examples of a company's internal and
external stakeholders.
5. Stakeholder Approach
• A Stakeholder Approach. identifies and models the groups which
are stakeholders of a corporation, and both describes and
recommends methods by which management can give due regard
to the interests of those groups.
• In short, it attempts to address the "principle of who or what really
counts.
• In the traditional view of a co, the shareholder view, only the
owners or shareholders of the company are important, and the
company has a binding fiduciary duty to put their needs first, to
increase value for them.
• Stakeholder theory instead argues that there are other parties
involved, including employees, customers, suppliers, financiers,
communities, governmental bodies, political groups, trade
associations, and trade unions.
6. Business ethics theory of CSR
• The business ethics theory is based on wider social obligation and
the moral duty that business has towards society (Bigg, 2004). This
theory justifies CSR on 3 varied but interrelated ethical grounds:
• Changing and emerging social responsiveness and social
expectations to particular social problems.
• Eternal or intrinsic ethical values always inspired by Kantian ethics
and denoted as some normative and universal principles like social
justice, fairness and human rights
• Corporate citizenship i.e. corporation as a better citizen in a society
to contribute to social well being.
• The business ethics theory views CSR more as philanthropic and
ethical responsibilities rather than legal and economic
responsibilities. CSR initiates where legal obligation declines.
7. EMERGING TRENDS
• Drivers Are –
• Philanthropy, Image Building, Employee Morale And
Ethics (in That Order)
• CSR An Extension Of Philanthropy
• Four Models Co-exist In India-
The Ethical Model, The Statist Model, the Liberal Model
And The Stakeholder Model
• Brand Quality More Important Than CSR
• Banking Tops In The List Of CSR Activities While
Construction Is At The Bottom
• Inclusive Growth
8. CARROLLS 4 PART MODEL
philanthropic
ethical
Legal
economic
• Desired by society
• Expected by society
• Required by society
• Required by society
9. Case- Is Apple Inc. really a responsible
corporate citizen?
• Apple Inc., the world leader in computers enjoys the status of being a
premium and a trusted brand across the globe.
• The company is well aware of the social aspects of a business and
therefore corporate social responsibility (CSR) is given due
importance in the company.
• Apple claims to be a socially responsible citizen through its varied
business activities.
• The details of environment-friendly manufacturing and supply chain
activities can be well found on the company’s website.
• But the reality somehow differs.
• It is not that the company is not carrying out any CSR but the fact is
Apple has a reactive CSR strategy.
• Time and again the company has undertaken CSR when problems
occur and the company’s goodwill is at stake.
• The question therefore arises if Apple is really concerned about the
society?
10. Apple Inc. & CSR
• A recent example of the company’s reactive approach to CSR is the
apology letter of its CEO Mr. Tim Cook.
• The latest product from the company iPhone 5 is not using Google maps;
rather has distinct mapping software of its own.
• But as soon as the product is launched, the customers started
complaining about the faults in the software.
• There were misplaced location markers and a few images were also not
clear.
• The CEO apologized publicly and revealed and accepted the faults in the
product.
• Though it is a sign of being socially responsible business, the same could
have been done as soon as the product was launched.
• It is only when the customers found the fault and company feared the
rejection of its newly launched iPhone 5, the step was taken.
• The business-oriented approach of Apple in the name of CSR is clearly
visible in Mr. Cook’s statement, “The more our customers use our Maps
the better it will get and we greatly appreciate all of the feedback we
have received from you.”
11. CSR or business promotion?
• This is however a common scenario at most companies &
the corporate social responsibility activities are undertaken
more as a means of business promotion, rather than social
welfare.
• CSR is more often used as a strategy for growth & the real
purpose of CSR is mostly neglected.
• Though there are laws & provisions that require every
corporate to do good to the society in which they flourish,
but instead of adopting a proactive approach to CSR &
recognizing areas of social crisis, the corporate houses find
it simpler to cash an ongoing social issue for profit-making.
• The need of the hour is to aware the consumers also about
what a socially responsible business really mean.
• Any business investing into philanthropy or any other form
of CSR may not necessarily be socially responsible.
12. The shareholder value theory of CSR
• The shareholder value theory a perspective denoted by the Nobel
Laureate Milton Friedman (1970) argues that only social
responsibility of business is to develop its profits while following
legal norms. Neoclassical economists like Hayek assert that the
function of business is doing business that contributes to society
and economy and its function must not be confused with other
social functions performed by not for profit organizations and
governments. Otherwise it is not the most effective way of
allocating resources in a free market. Economists like agency
theorists believe that the corporation owners are its managers and
stakeholders as agents have fiduciary duty to serve the
shareholders interest rather than any others.
• Although maximizing the profit of shareholder is justified as the
most significant or only corporate responsibility, corporate social
obligations are regarded often as strategic instrument for
corporate competitive benefit and more profit gain.
13. • Theory states that the sole responsibility of buz is to increase profits.
• It is based on the premise that management are hired as the agent of
the shareholders to run the company for their benefit, & therefore
they are legally and morally obligated to serve their interests.
• The only qualification on the rule to make as much money as possible
is “conformity to the basic rules of the society, both those embodied
in law & those embodied in ethical custom.”
• The shareholder theory is now seen as the historic way of doing
business with companies realizing that there are disadvantages to
concentrating solely on the interests of shareholders.
• A focus on short term strategy & greater risk taking are just two of
the inherent dangers involved.
• The role of shareholder theory can be seen in the demise of
corporations such as Enron & Worldcom where continuous pressure
on managers to increase returns to shareholders led them to
manipulate the company accounts.
14. Enlightened Shareholder Value - A
Happy Medium?
• Enlightened shareholder value (ESV) states that
“corporations should pursue shareholder wealth with a
long-run orientation that seeks sustainable growth and
profits based on responsible attention to the full range of
relevant stakeholder interests”.
• Essentially, it focuses on generating shareholder value,
whilst having regard to the long term external impacts of
the wealth generation.
• The importance of the concept was recognised in the UK
when it was adopted into law in the Companies Act 2006.
The move represents an important development in
corporate governance and a clear move away from the
shareholder theory.
15. IMPACT OF GLOBALIZATION
• INTEGRATION OF FINANCIAL MARKETS
• CHANGES IN GOVERNANCE STRUCTURES
• IT REVOLUTION
• MULTI COUNTRY PRODUCTION OF GOODS
• EFFECT ON SMES
• MIGRATION OF WORK FORCE
• INJUDICIOUS USE OF RESOURCES
• CLOUT DISPLAYED BY FINANCIAL INSTITUTIONS
• IRRESPONSIBLE BEHAVIOUR BY MNCS
16. ROLE OF BUSINESS IN
SUSTAINABLE DEVELOPMENT
• Collaboration With Society And Govt To Create
A Qualitatively Better World To Live In
• Business Is Dependent On Society For Growth
And Prosperity
• Stakeholder Concept, Systems Approach, Ownership Concept
Stakeholder Types -Latent-dormant, Discretionary, And
Demanding, Expectant-dominant, dangerous, Dependent,
Definitive, Non-stakeholders
17. CHALLENGES IN STAKEHOLDER
ENGAGEMENT
• Assessing Key Stakeholders And Their Concerns
• Effective Management Programmes-Measurement
And Communication Of Performance
• Response To Stakeholder Views
• Communication Of Values
• Consistent And Accurate Information
• Commitment And Accountability
18. Millennium Development Goals
• Eradicate Extreme Poverty And Hunger
• Achieve Universal Primary Education
• Promote Gender Equality And Empower Women
• Reduce Child Mortality
• Improve Maternal Health
• Combat HIV/Aids, malaria And Other Diseases
• Ensure Environmental Sustainability
• Global Partnership For Development
19. WHAT IS CSR?
• Corporate Social Responsibility Encompasses The Economic,
Legal ethical And Philanthropic Expectations Placed On
Organizations By Society At A Given Point Of Time
• Corporate Social Responsiveness Refers To The Capacity Of A
Corporation To Respond To Social Pressures
• 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.
World Business Council For Sustained Development
20. SOME FACTS
• While 94% Of The Companies Believe That
Development Of CSR Strategies Can Deliver Real
Business Benefits
• Only 11% Made Any Significant Progress In
Implementing Strategy In The Organization
• CEOs Are Failing To Recognize The Benefits Of
Implementing CSR Strategies Despite Increasing
Pressures To Do So
• CSR Programmes Influence 70% Of All Customer
Purchasing Decisions
21. CASE FOR CSR
•Governmental Failure/Decrease In Governmental
Influence
•Increasing Power And Influence Of Corporations
•Need For Corporate Accountability
•Need For Transparency
•Corporate Citizenship
22. THE STAKEHOLDER CONCEPT
•Legally Binding Contracts
•Rights And Claims To Corporations
•Protection Of Employee Rights
•Speculative Interests Of Shareholders
•Stakeholder’s Ability To Influence Corporate
Decisions
•Corporate Governance
23. Drivers of CSR in India
• Stakeholder management
• Corporate Environment Management
• Consumer Pressure
• Risk Management & Sustainability
• Business Ethics
• Attracting Employees
• Personal Values
24. Corporate social responsibility (CSR) is about
how businesses align their values and
behaviour with the expectations and needs of
stakeholders - not just customers and
investors, but also employees, suppliers,
communities, regulators, special interest
groups and society as a whole. CSR describes a
company's commitment to be accountable to
its stakeholders.
Source: http://www.csrnetwork.com/csr.asp
25. How Does CSR benefit Business
Reputation
Loyal Employees
&
Customers
Less Law Suits
Less Media
Harassment
Access to
Capital
Improves
Improves
Productivity
Community
Goodwill
Better
Environment
26. Review Of Successful Corporate
Initiatives & Challenges Of CSR
NOVARTIS
• Corporate Citizenship At Novartis Begins With
The Success Of Our Core Business.
• The More We Are Successful In The Discovery,
developing, Manufacturing And Marketing Of
New Medicines, the Greater The Benefits We
Can Offer To Associates And Shareholders,
Patients, Health Care Professionals And Other
Key Stakeholders.
27. THIS IS HALLMARK
• We Believe
• That Our Products And Services Must Enrich
Peoples Lives And Enhance Their Relationships
• That Creativity And Quality Is Essential To Success
• That The People Of Hallmark Are Our Company’s
Most Valuable Resource
• That Distinguished Financial Performance Is A
Must
• That Our Private Ownership Should Be Preserved
28. THE VALUES THAT GUIDE US ARE---
• Excellence In All We Do
• Ethical And Moral Conduct At All Times
• Innovation In All Areas Of Business As A
Means Of Attaining And Sustaining Leadership
• CSR To Each Community In Which We Operate
29. Case Studies of Major CSR initiatives
COMPANIES TAKING CSR INITIATIVES
• TATA GROUP
• INFOSYS
• BHARTI ENTERPRISES
• HCL
• ITC WELCOME GROUP
• ONGC
• SAIL
• ORCHID CHEMICALS AND PHARMA
• NDTV
• AIRCEL
30. SOME INITIATIVES
• IBM- Upliftment Of Tribals In Sasan
• INDIAN PAINT INDUSTRY - Making Paints More Environment
Friendly
• FINANCIAL SERVICES- reducing amount of Carbo
nFootprints, Renewable Energy Etc- HSBC, MAX NEWYORK
LIFE, SCB, E CHAUPAL
• ADOBE, KPMG, - Promoting Entrepreneurship
• RELIANCE- Project Drishti
• NDTV-Greenathon
• AIRCEL- Save The Tiger
• COPENHAGEN- Environment Issues, E Waste Management
31. DEVELOPING A CSR STRATEGY
CSR ASSESSMENT
• Organization’s Values And Ethics
• External And Internal Drivers
• Key CSR Issues That Could Affect The
Organization Key Stakeholders
• Current Corporate Decision Making Structure
• Human Resources And Budgetary Implications
• Existing CSR Initiatives
32. ASSESS BY---
• Assembling A CSR Team
• Develop A Working Definition Of CSR
• Review Corporate Documents, Processes And
Activities
• Identify And Engage Key Stakeholders
33. DEVELOP STRATEGY BY---
• Build Support with Senior Management and
Employees
• Research what Business is doing
• Prepare a Matrix of Proposed CSR actions
• Develop actions and the Business Case for
them
• Decide on Direction, approach and Focus
areas.
34. POSSIBLE BUSINESS CASE
• Leveraging CSR Competitive Advantage
• Stakeholder Influence
• Short And Long Term Goals
• Costs Vs Benefits
• Changes Org May Be Reqd To Make
• Risks/Threats
35. IMPLEMENTING CSR STRATEGY
• Develop An Integrated CSR Decision Making
Structure
• Prepare and Implement CSR Business Plan
• Set Measurable Targets And Identify Performance
Measures
• Engage those to whom CSR commitments apply
• Design and conduct CSR training
• Establish Mechanisms For Addressing
Problematic Behaviour
• Create Internal And Ext Communication Plan
36. AREAS OF CSR IMPLEMENTATION
• ACCOUNTABILITY
• ECO DEVP
• ENVIRONMENT
• LABOUR/HUMAN
• HR
• CG
• ETHICS
37. CSR AT WORKPLACE
• Remuneration
• Ethical HR Practices
• Health/Safety
• Work Life Balance
• Age Of Employees
• downsize
• Diversity In Work Culture
• Privacy Concerns For Freedom
• Consistency Across Different Work
• Environments
• Telecommuting/Working From Home
• Women At The Workplace
38. CSR AND THE ENVIRONMENT
• Air Pollution
• Water Pollution
• Soil Pollution
• Degradation Of The Environment
• Destruction Of Livelihood
• Industrial Accidents/Waste Disposal
• E Waste
39. CSR INTERVENTIONS
• Employee Volunteering
• Infrastructural Support
• Financial Support
• Product/Service Support
40. IMPORTANCE OF NGO PARTNERSHIPS
• Involve Govt And NGOs
• Choose NGOs Displaying Competence And
Good Results Over Time
• Capability To Advance Projects On A Large
Scale Reputation/Reliability
• Professionally Managed Predominant Position
In Sector
• Independence From Company And Authorities
41. MONITORING AND MEASUREMENT
• Monitoring Through NGOs
• Employee Loyalty
• CSR Committee
• Performance
• Performance Indicators
• Global Reporting Initiatives
• KPIs
• Accountability 1000 Series
• TBL
42. REPORTING
• Corporate Sustainability Report
• Internal And External Stakeholders Information
About Challenges And Achievements
• Commitment To Environmental And Social
Responsibility
• Performance-code Of Conduct, CG, mitigation Of
Risks
• Environment Mgt
43. MEASUREMENT AND MONITORING
TOOLS
• Employee And Customer Surveys
• Public Attitude And Trust
• Employee Safety
• Waste Mgt
• Positive And Negative Media Coverage
• Peer And Expert Evaluation
• Image Among Financial Analysts And Regulators
• Perception Amongst Stakeholders
44. CSR PROGRAMMES
• Education
• Health
• Livelihood Creation
• Skill Development
• Empowerment Of Weaker Sections
• Environment
Thank you
45. CHALLENGES OF CSR
• 1. Lack of Community Participation in CSR Activities:
• There is a lack of interest of the local community in participating and contributing to CSR
activities of companies. This is largely attributable to the fact that there exists little or no
knowledge about. CSR within the local communities as no serious efforts have been made
to spread awareness about CSR and instill confidence in the local communities about such
initiatives. The situation is further aggravated by a lack of communication between the
company and the community at the grassroots.
• 2. Need to Build Local Capacities:
• There is a need for capacity building of the local nongovernmental organizations as there is
serious dearth of trained and efficient organizations that can effectively contribute to the
ongoing CSR activities initiated by companies. This seriously compromises scaling up of CSR
initiatives and subsequently limits the scope of such activities.
• 3. Issues of Transparency:
• Lack of transparency is one of the key issues brought forth by the survey. There is an
expression by the companies that there exists lack of transparency on the part of the local
implementing agencies as they do not make adequate efforts to disclose information on
their programs, audit issues, impact assessment and utilization of funds. This reported lack
of transparency negatively impacts the process of trust building between companies and
local communities, which is a key to the success of any CSR initiative at the local level.
• 4. Non-availability of Well Organized Non-governmental Organizations:
It is also reported that there is non availability of well organized nongovernmental
organizations in remote and rural areas that can assess and identify real needs of the
community and work along with companies to ensure successful implementation of CSR
activities. This also builds the case for investing in local communities by way of building
their capacities to undertake development projects at local levels.
46. • 5. Visibility Factor:
• The role of media in highlighting good cases of successful CSR initiatives is
welcomed as it spreads good stories and sensitizes the local population about
various ongoing CSR initiatives of companies. This apparent influence of
gaining visibility and branding exercise often leads many nongovernmental
organizations to involve themselves in event-based programs; in the process,
they often miss out on meaningful grassroots interventions.
• 6. Narrow Perception towards CSR Initiatives:
• Non-governmental organizations and Government agencies usually possess a
narrow outlook towards the CSR initiatives of companies, often defining CSR
initiatives more donor-driven than local in approach. As a result, they find it
hard to decide whether they should participate in such activities at all in
medium and long run.
• 7. Non-availability of Clear CSR Guidelines:
• There are no clear cut statutory guidelines or policy directives to· give a
definitive direction to CSR initiatives of companies. It is found that the scale of
CSR initiatives of companies should depend upon their business size and
profile. In other words, the bigger the company, the bigger is its CSR program.
• 8. Lack of Consensus on Implementing CSR Issues: There is a lack of consensus
amongst local agencies regarding CSR projects. This lack of consensus often
results in duplication of activities by corporate houses in areas of their
intervention. This results in a competitive spirit between local implementing
agencies rather than building collaborative approaches on issues. This factor
limits company‘s abilities to undertake impact assessment of their initiatives
from time to time
