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Corporate Social Responsibility : Overview and Its Importance

Col. P. S. Sandhu, Registrar

National Institute of Technology Durgapur West Bengal - India 713209.

Definition of CSR
Corporate Social Responsibility can be defined as the ethical behavior of business towards its constituencies or stakeholders.

Corporate Social Responsibility is a concept that organizations, especially corporations, have an obligation to consider the interests of customers, employees, shareholders, communities, and ecological considerations in all aspects of their operations.

European Commission Definition of CSR :


Two Concepts of CSR : 1ST Concept :
A concept whereby companies decide voluntarily to contribute to a better society and a cleaner environment.

2nd Concept :
A concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis.

CSR is not mere philanthropy


Philanthropy often is translated as one time financial grant. And hence there is no commitment on the part of the company as a regular provider. Since it is an act of charity, company does not feel the need to involve the community in the designing and management of such initiatives and people participation if any is restricted to limited implementation aspect reducing the efficiency and effectiveness of CSR measures at the ground level. The lack of the involvement from the primary resource providers the company leads to low levels of accountability and transparency at the implementation level.

Stake Holders
Primary Stakeholders Shareholders Secondary Stakeholders Local, state and union Govt Special Interest Parties Trade and Industry Groups

Employees
Business Partners

Regulatory Bodies
Civic Institutions

Media
Competitors

Communities Natural environment Bankers, lenders, and those providing Insurance Customer

UN Global Compact
1)Human Rights Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights; and Principle 2: make sure that they are not complicit in human rights abuses. 2)Labour Standards Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining

Contd .
Principle 4: Elimination of all forms of forced and compulsory labour. Principle 5: Effective abolition of child labour. Principle 6: Elimination of discrimination in respect of employment and occupation. 3)Environment Principle 7: Businesses should support a precautionary approach to environmental challenges

Contd .
Principle 8: Businesses should undertake initiatives to promote greater environmental responsibility; and Principle 9: Businesses should encourage the development and diffusion of environmentally friendly technologies 4) Anti-corruption Principle 10: Businesses should work against all forms of corruption, including extortion and bribery

Pyramid of CSR

Why CSR ?
The Companies have a responsibility for their impact on society and natural environment, sometimes beyond compliance and liability of individuals. The companies have a responsibility for the behavior of others with whom they do business (for example with supply chain) and Business needs to manage their responsibility with wider society, whether for reasons of commercial viability, or to add value to the society.

Some Features of CSR


CSR is behavior by business over and above legal requirements, voluntarily adopted because business deem it to be in their long-term interest. CSR is intrinsically linked to the concept of sustainable development: businesses need to integrate the economic, social and environmental impact in their operations.

CSR is not an optional add-on to business core activities but about the way in which business is managed.

Drivers of CSR in Developing Countries


Internal Drivers External Drivers

Cultural Traditions

International Pressure

Socio Economic Priorities

Investment incentives

Government Initiatives

Stakeholders activism

Market driven Priorities

Supply Chain

Models of CSR
Model Focus Constructed and Championed by M.K.Gandhi Ethical ( Trusteeship) Voluntary commitment by Businessmen to public well being

Statist ( socialistic pattern of Society


Liberal

State Ownership and legal Jawaharlal Nehru requirements determine corporate responsibility
Corporate Responsibility limited to private owners (Shareholders) Companies respond to the need of stakeholders Customers , employees, communities etc. Milton Friedman

Stakeholder

R.Edward Freeman

HOW TO OPTIMIZE CSR SPENDING ?

Articulation of CSR in India


Issue Community Development Company Hindalco Action Asian CSR Award for its Integrated Rural Poverty Alleviation Programme Indian Oil Corporation Dedicating .75% of the net profit to community development initiatives Larsen and Toubro One of first companies to launch an HV/AIDS Programme.
National Thermal Power Corporation Indian Tobacco Company One of the few organizations to have a policy for grant of paternity leave First company in India to be certified to the SA 8000 social accountability standard for the Chirala facility.

Corporate Giving

Health

Gender equality

Labour Standards

Issue

Company

Human Capital

Infosys

Contd

Action

Environmental Management

Bharat Heavy Electrical Limited

Energy Conservation

Reliance

Pioneering evaluation of Human Capital using an education index for its employees. All units in this company are certified to the ISO 14001 environmental management system. Energy conservation measures are saving the company 1150 million rupees per anum. Reduced flushing WC is estimated to save 2 billion litres of water. First Indian company to publish a sustainability report in line with Global Reporting Initiative Guidelines

Water Conservation

Hindustan Sanitary ware

Disclosure

Tata Iron and Steel

Evolving of CSR Paradigm


PHASE 1 Awakening
Marketing to consumers

PHASE 2 Compliance Dependency


Regulation and compliance Do no Harm

PHASE 3 Citizenship Partnership


Rights and Responsibility

PHASE 4 Reset Strategic engagement

Free Enterprise and Competition Business of business is business Individual responsibility Advertising and self interest Denial or prove it Shareholder Value Peripheral Rule of Society

Transparency and Accountability Align with core competence

Guarantee + ve good

Crisis Management Public Relation


Description or we are Regulatory Drivers Tangential Human Rights

Precautionary Approach

Integrated risk Management Substantive ongoing dialogue Impact and outcome or you are Profitability and Cost effectiveness Main stream business process Societal well being

Social Reporting
Indicators or we are

Financial Drivers Strategic Development rights

Range of Corporate position towards CSR


Field
Organization

Negative
Suppresses all discussion of responsibility issues

Positive
No Fixed policy

Active
Upgrades business to ensure high social responsiveness.

Pro- Active
Structures organization around trying to shape as well as anticipate emerging social issues Tries to shape future CSR- related taste development.

Market

Seek price advantages by avoiding all cost imposed by responsibility appeals

Responds to become strongly expressed employer/customer/ Shareholders

Shapes market strategy in response to Perceived concerns

Polity

Evades law and regulation : lobbies against legislation Rejects and contests any assertion that value consideration .

Accepts regulation and obey law: plays no active part in politics Avoids becoming involved in controversies by confirming to dominant values

Counter regulatory threats with offer of CSR. Takes part in debates over application of vales to business .

Shapes and even provides, general governance. Tries to shape terms of values Debates relevance of them to business.

Values

Challenges Faced by the Corporate in 21st Century


To bring corporate governance into the realm of corporate citizenship and address the key element of social justice in respect of employees rights : to integrate corporate citizenship as a proven part of a companys failure. To broaden risk and impact assessment and communication to include intangible and long term consideration across the environment, economic and social dimension. To maintain consumer confidence through embedding corporate responsibility in all organization policy and procedures.

Contd .
To manage a company supply chain ethically and to
avoid complicity in human right violation. To systematically address business accountability using tools such as internal review ,corporate governance principle, key performance indicators. To develop management system and tools which focus on capacity to manage than to audit. To ensure transparent , accountable and strategic engagement with government. To align community investment programmes through a companys CSR as a extension of core business practice.

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