Corporate social Responsibility and Business Ethics

CSR activities adopted by Indian companies and business ethics followed by Indian companies

1. CORPORATE SOCIAL RESPONSIBILITY

2. CSR Lecture Outline: Corporate Social responsibility. Types and nature of social responsibilities. CSR principles and strategies. Models of CSR. Best practices of CSR. Need of CSR. Arguments for and against CSR.

3. The message is that whatever we do today will have an impact on future generations. We should not hope that the walls we build to protect ourselves will be tall enough to protect our children. Only with very conscious effort we can make the world for them a better place to live…even if we address our most selfish needs we have to address the needs of the next generation. That’s what CSR is about.”

4. Meanin g and Definition: : Corporate social responsibility is a gesture of showing the company’s concern & commitment towards society’s sustainability & development . CSR is the ethical behaviour of a company towards society . CSR can be described as the continuous commitment by corporations towards the economic and social development of society in which they operate.

5. Difference Between Ethics and CSR Ethics: Good or bad conduct according to moral standards CSR: Integrating economic, social and environmental targets in one strategy.

6. Basic Constituents of CSR Contribute towards a sustainable economic develop m ent Make desirable social changes I m prove m ent of social environment Towards Business & Society

7. Need for Corporate Social Responsibility To enhance the performance of employees. It a type of investment. It leads to industrial peace. It improves the public image. Can generate more profit. To provide moral justification. It satisfies the stakeholders. Helps to avoid government regulations & control. Enhance the health by non polluting measures.

8. Arguments in favour of CSR Corporate should have some moral & social obligations to undertake for the welfare of the society. Long term self Interest of business Proper use of resources, capability & competence . The expenditure on CSR is a sort of investment . Profitable environment . It create a better impression in the minds of prospective buyers and on society in general . Corporate should return a part of wealth.

9. Fundamental principles of business gets violated . It vey expensive for business houses. Loss of Incentive : Motivation to use resources effectively is decreased when social responsibility is considered important. CSR is to induce them to steal away the shareholders money. Dilution of profit maximization. Arguments against the CSR

10. Indian Perspective. The Sachar committee was appointed in 1978 to look into corporate social responsibility issues concerning Indian companies . The company must behave & function as a responsible member of society. Committee suggests openness in corporate affairs & behaviour. Some business houses have established social institutions like Schools, colleges, charitable hospitals etc. Corporate sectors have not made significant contributions. (Polluting Environment).

11. CURRENT CSR TRENDS India is the first country in the world to make corporate social responsibility (CSR) mandatory, following an amendment to the   Companies Act, 2013  in April 2014. Businesses can invest their profits in areas such as education, poverty, gender equality, and hunger as part of any CSR compliance. In the new Companies Act 2013, there is the new provision for the “ Corporate Social Responsibility”  under the Section 135 of the Companies Act 2013.  By following the provision of the CSR, the companies are giving something back to the society. APPLICABILITY OF THE CSR: The applicability of the CSR provisions on the certain class of Companies having: (a)  net worth  of the company rupees Five hundred crore or more; OR (b)  turnover  of the company rupees One thousand crore or more; OR (c)  net profit  of the company rupees five crore or more. Remember: Net worth: Value of all the non-financial and financial assets owned by company.   turnover: the value of sales you make in a set period. Generally measured over one year and more commonly known as total income received. net profit: Actual profit after working expenses not included in calculation of gross profit.

12. Types of Social Responsibility

13. Responsibility towards Society Carrying on business with moral& ethical standards. Prevention of environmental pollution. Minimizing ecological imbalance. Contributing towards the development of social health, education Making use of appropriate technology. Overall development of locality.

14. Responsibility towards Government Obey rules & regulations. Regular payment of taxes. Cooperating with the Govt to promote social values. Not to take advantage of loopholes in business laws. Cooperating with the Govt for economic growth & development.

15. Responsibility towards Shareholders To ensure a reasonable rate of return over time. To work for the survival & the growth of the concern. To build reputation & goodwill of the company. To remain transparent & accountable.

16. Responsibility towards Employee To provide a healthy working environment. To grant regular & fair wages. To provide welfare services. To provide training & promotion facilities. To provide reasonable working standard & norms. To provide efficient mechanism to redress worker’s grievances. Proper recognition of efficiency & hard work.

17. Responsibility towards consumers Supplying socially harmless products. Supplying the quality, standards, as promised. Adopt fair pricing. Provide after sales services. Resisting black-marketing Maintaining consumer’s grievances cell. Fair competition.

18. DRIVERS OF CORPORATE SOCIAL RESPONSIBILITY (CSR) In recent years, there has been a trend, particularly among large organizations, to adopt a more socially responsible approach to their business activities. There are numerous drivers in the marketplace that have encouraged larger companies  to be more socially responsible: 1. GOVERNMENT LEGISLATION In many countries across certain industries, the government has imposed legislation that requires companies to conform and behave in a certain manner. In this case, however, the organizations impacted by this legislation are only complying with various requirements because of regulation. They may or may not be willing to incorporate social responsibility initiatives into their day-to-day operations of an overall strategy. Examples here would include legislation relating to environment, pollution, use of workers and conditions, product disposal, materials used in production, and so on. Therefore, this is not necessarily a driver of corporate social responsibility, but is adopted and followed by companies as it is a requirement imposed upon them by government.

19. DRIVERS OF CORPORATE SOCIAL RESPONSIBILITY (CSR) 2. CUSTOMERS’ EXPECTATIONS OF FIRMS Consumers are becoming more aware of social and environmental issues and the consideration of the future is becoming slightly more important when consumers consider purchase decisions. As a result, some consumers will have an expectation that certain companies behave in an appropriate manner, relative to society and the communities. 3. THE EXTENT OF COSTS INVOLVED A shift to increase social responsibility may come at a reasonable cost to the organization. For example, a bank can shift its customer bank statements from paper-based to electronic (known as e-statements) on the basis that they are saving lots of paper – but this has the impact of reducing costs for the organization. Likewise, a major hotel chain can encourage its customers to reuse their bath towels each day. Again the hotel can claim an environmental benefit of reduced water and power usage, all the while delivering themselves a reduction in costs and increase in profitability. Therefore, where the social responsibility initiative represents a win-win scenario, an organization is far more likely to implement it.

20. DRIVERS OF CORPORATE SOCIAL RESPONSIBILITY (CSR) 4. THE TYPE OF INDUSTRY IN WHICH THEY OPERATE There are a number of more significant industries where there is greater pressure an expectation on the firms to become responsible corporate citizens. Obviously manufacturing is an industry that has greater pressure on it – particularly heavy manufacturing where there could be significant pollution, or large companies deciding to manufacture in developing countries, or manufacturers who have issues with product disposal (e.g. mobile phones and batteries and chemicals). 5. POTENTIAL FOR A COMPETITIVE ADVANTAGE BY IMAGE There are some companies that are attempting to build their core image, or at least parts of their brand association around their socially responsible behavior. Some companies usually highlight that they are ethical manufacturers .  In this case, these types of organizations are truly practicing the societal marketing concept. They are foregoing some profitability in order to contribute to society or to certain communities.

21. Perspectives Of CSR There are two perspectives on the role of business in society. There is the classical view which is also known as the shareholder theory which is purely economic profit making terms, focusing on the profit of the shareholders. On the other hand, the stakeholder theory implies that company has a social responsibility that requires them to consider the interests of all the parties affected by their actions.

22. Perspectives Of CSR Stakeholder Theory The conventional definition of a stakeholder is "any group or individual who can affect or is affected by the achievement of the organization’s objectives" (Freeman, 1984). However with time, the definition of the theory of stakeholder changed and in one of his latest definitions Freeman (2004) defined stakeholders as "those groups who are vital to the survival and success of the corporation". Stakeholder theory is based on the notion that beyond shareholders there are several agents with an interest in the actions and decisions of companies. Stakeholders are ‘groups and individuals who benefit from or are harmed by, and whose rights are violated or respected by, corporate actions’ (Freeman, 1998). In addition stakeholders include creditors, employees, customers, suppliers, and the communities at large.

23. Perspectives Of CSR ( contd ….) Shareholder Theory The essence of this theory is that the purpose of any business is to make profit for their shareholders i.e. to maximize shareholders’ wealth. Therefore, managers and owners have an implicit obligation to ensure that firms are run in the interests of shareholders. The idea which underlined the shareholder perspective is that the only responsibility of managers is to serve the interests of shareholders in the best possible way, using corporate resources to increase the wealth of the latter by seeking profits (Jensen, 2001). In other words, the theory proposed that corporation should legally maximize long-term shareholder wealth. The theory saw the primary responsibility of firms as that of generating profits for shareholders and working hard to raise their stock values. The perception on the performance of social activities by firms for society is that such activities are not necessary except the laws specify otherwise since business firms are created primarily to enhance shareholder value. In the words, the fundamental distinction between the shareholder and stakeholder model is that: ‘the stakeholder theory demands that interests of all stakeholders be considered even if it reduces company profitability. In other words, under the shareholder theory, non-shareholders can be viewed as "means" to the "ends" of profitability; under the stakeholder theory, the interests of many non-shareholders are also viewed as "ends"’.

24. Impact of CSR Companies engage in CSR for many reasons that include the ability to operate now and into the future by acknowledging areas of harm, risk or opportunity that affect their well-being. By effectively managing CSR in both internal and external activities, companies benefit through improved research and development, market position, employee development, government relations by following regulations

25. Advantages and Disadvantages of CSR Advantages Improved corporate reputation and brand image Improve sales Strengthen financial relations Harmonize employee relations and boost recruitment Disadvantages CSR reduce the focus on profit CSR used as a window dressing tactic Puts burden on the customer pocket in the other way

26. Summary Corporate Social Responsibility (CSR) may be described as an approach to decision making which encompasses both social and environmental factors. CSR means that companies do not only have one objective, profitability, but that they also have objectives of adding environmental and social value to society ( Mirfazli , 2008). CSR remains a beaming light of success for improving the role of business in society but is also an ongoing challenge to which companies must remain vigilant, especially in emerging markets.

27. Models of corporate social responsibility

28. Friedman Model(1962) Friedman (An American economist ) argues against the concept of social responsibility . A businessmen should perform his duty well, he is performing a social as well as a moral duty. A businessmen has no other social responsibility to perform except to serve his shareholders & s take holders.

29. Friedman Model (1962) Friedman argues that a business person who acts “responsibly” by cutting the price of the firm’s product to prevent inflation, or by making expenditures to reduces pollution, according to Friedman, is spending the shareholders money for social interest. Friedman further his argument with this assertion “ There is one and only social responsibility of business-to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud .

30. Ackerman Model (1976) The model has emphasized on the internal policy goals & their relation to the CSR. Ackerman was among the earliest people to suggest that responsiveness should be the goal of corporate houses. Important stages involved in CSR. Managers of the company get to know the most common social problem & then express a willingness to take a particular project which will solve some social problems. Intensive study of the problem by hiring experts & getting their suggestions to make it operational. Managers take up the project actively & work hard. Evaluating of the project by addressing the issues.

31. Co n td…. Ackerman’s three phase model: Phase one -- Top management recognizes the existence of a social problem and acknowledges the company’s policy by making it an oral or written statement. Phase two -- Characterized by the company appointing staff specialists to study the problem and provide recommendations. Phase three -- Implementation of the social responsibility programmes .

32. Carroll Model(1991)

33. Archie Carroll’s Main Points Archie Carroll proposes that the managers of business organizations have four responsibilities: economic, legal, ethical, and discretionary. ECONOMIC responsibilities of a business organization’s management are to produce goods and services of value to society so that the firm may repay its creditors and shareholders. LEGAL responsibilities are defined by governments in laws that management is expected to obey. ETHICAL responsibilities of an organization’s management are to follow the generally held beliefs, about the behavior in a society.

34. Archie Carroll’s Main Points (Contd.) DISCRETIONARY responsibilities are purely voluntary obligations a corporation assumes. Examples are philanthropic contributions, training the hard-core unemployed, and providing day-care centers. Carroll lists these four responsibilities in order of priority.

35.    Philanthropic requirements: Donation, gifts, helping the poor. It ensure goodwill & social welfare. Ethical responsibility: Follow moral & ethical values to deal with all the stakeholders . Economic responsibility: Maximize the shareholders value by paying good return . Legal responsibility: Abiding the laws of the land. Carroll Model(1991)

36. Environmental Integrity & Community Health Model. This model developed by Redman It focuses more on environmental integrity and human health. Many corporate in US adopted this model. Corporate contribution towards environmental integrity & human health, there will be greater expansion opportunities. Healthy people can work more & earn more. CSR is beneficial for the corporate sector.

37. Corporate Citizenship Model To be a corporate citizen, a corporate firm has to satisfy four conditions : Consistently satisfactory Sustainable economic performance Ethical actions Behaviour. A particular firm’s commitment to corporate citizenship requires the fulfillment of certain social responsibilty.

38. Stockholders & Stakeholders Model 1 Productivism 2 Progressivism 3 Philanthropy 4 Ethical Idealism Self Duty Int e re st Stak e hold er Model Stockho l der s Model Moral ORIENTATION MOTIV E S

39. Contd…………. Productvists believe that the only mission of a firm is to maximize the profit. Philanthropists who entertain the stockholders. CSR is dominated by moral obligations & not self-interest. Progressivists believes the corporate behaviour basically motivated by self interest & should have ability to transform the society for good. Ethical Idealism concern with sharing of corporate profits for humanitarian activities.

40. New Model of CSR CSR (+) CSR(-) CSR(-) CSR(-) Financial Capability Strong Ethical Rooting Poor Str o ng P o or

41. Best Practices of CSR To set a feasible, Viable & measureable goal. Build a long lasting relationship with the community. Retain the community core values. The impact of the CSR needs to be assessed. Reporting the impact. Create community awareness.

42. CSR EXAMPLES IBM UK - Reinventing Education Partnership programme Interactions and sharing of knowledge through a web-based technology - the “Learning Village” software. Culture of openness and sharing of good practice AVON - a partnership with Breakthrough Breast Cancer, and its Breast Cancer Crusade has raised over 10 million pounds since its launch 12 years ago TOI’s Lead India campaign, campaign for contribution towards educating the poor

43. Companies in trouble Dasani mineral water (part of Coca-Cola ). Coke’s sale was banned as the result of tests, including those by the Indian government, which found high concentrations of pesticides. Communities in India , around Coca-Cola's bottling operations are facing severe shortages of water as a result of the cola major sucking huge amounts of water from the common groundwater source .

44. Issues at NIKE  Nike Inc producer of footwear, clothing, equipment and accessory products for the sports and athletic market. Selling to approximately 19,000 retail accounts in the US, and approximately 140 countries around the world. Manufactures in China, Taiwan, Korea, Indonesia , Mexico as well as in the US and in Italy. People working - 58% young adults between 20 and 24 years old, 83% - women. Few have work-related skills when they arrive at the factory. Issue- unhealthy work environment – debates heated arguments, verbal abuse , 7.8% of workers reported receiving unwelcome sexual comments, and 3.3% reported being physically abused. In addition, sexual trade practices in recruitment and promotion were reported

45. Case Study Jack Cohen founded Tesco in 1919 when he began to sell surplus groceries from a stall in the East End of London. The Tesco brand first appeared in 1924. The name came about after Jack Cohen bought a shipment of tea from T.E. Stockwell . He made new labels using the first three letters of the supplier's name (TES), and the first two letters of his surname (CO), forming the word TESCO. The first Tesco store was opened in 1929 in Burnt Oak, Edgware, Middlesex. Tesco was floated on the London Stock Exchange in 1947 as Tesco Stores (Holdings) Limited .

46. Corporate Social Responsibility of Tesco Tesco has made a commitment to corporate social responsibility, in the form of contributions of 1.87% in 2006 of its pre-tax profits to charities/local community organisations. In 1992 Tesco started a "computers for schools scheme", offering computers in return for schools and hospitals getting vouchers from people who shopped at Tesco. Until 2004, £92 million of equipment went to these organisations. The scheme has been also implemented in Poland. Starting during the 2005/2006 football season the company now sponsors the Tesco Cup, a football competition for young players throughout the UK. The cup now runs a boy's competition at Under 13 level and two girl's cups at Under 14 level and Under 16 level. Over 40,000 boys alone took part in the 2007/08 competitions. In 2009 Tesco used “Change for Good” as advertising, which is trade marked by Unicef for charity usage but is not trademarked for commercial or retail use which prompted the agency to say "it is the first time in Unicef’s history that a commercial entity has purposely set out to capitalise on one of our campaigns and subsequently damage an income stream which several of our programmes for children are dependent on”.

47. Vodafone promised to cut down their carbon dioxide emissions in half by 2020 through improving the energy efficiency of its global mobile -phone networks. Additional points for Vodafone on CSR because they are constantly updating us with the results of the campaign; no matter whether it’s going well or not. Future promises includes pledging to recycle 95% of network equipment waste and plans to reduce work-related accidents that cause lost time by 10%. On top of that, Vodafone is a leading business in socially responsible products such as the text-to-speech software for blind people and easy-to-use handsets for the elderly.

48. The bank’s head of corporate sustainability, Teresa Au, has said that despite the economic situation, HSBC would continue to support its sustainability campaign. Initiatives include providing small businesses with sustainability insurance options and developing an index for climate change. The business has also boosted its management of ethical and socially responsible investing funds by 60% over the last two years. HSBC has an American unit that is dedicated to assisting local communities by promoting affordable homeownership, among other goals.

49. CSR Principles & Strategies. Respect for human rights. Respect for the differences of views. Diversity & non-discrimination should be the guiding principle. Make some social contribution. Enter into e dialogue Self-realization & creativity. Fair dealings & collaboration. Feedback from the community. Positive value- added Long term economic & social development.

50. https://blog.ipleaders.in/corporate-social-responsibility-2/ https://www.soulace.in/blog/evolution-of-csr-in-india/ https://crossbarriers.org/indias-top-companies-for-csr-initiatives-in-2018/