Unit 1. Introduction to Corporate Social Responsibility.ppt

CSR corporate Social Responsibility

1. Unit I:
Introduction to Corporate
Social Responsibility

3. Person going from one side of the canyon to the
other… a lot of clouds like fog. The point is going
from one way of doing business to another is
very tough. There’s a lot uncertainty. It takes a
lot of skill, but we have to lift ourselves beyond
that, above the fog, and that’s not going to be a
simple exercise. CSR is about seeing the forest,
the fog, and seeing how we can get on the other
side, and how we can be well-equipped for doing
that. So probably we need to develop additional
skills, knowledge, and understanding.”

5. Message
“The message is that whatever we do today will
have an impact on future generations. It’s not
just my kids or your kids or somebody else’s.
It’s 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.”

6. Reference Books
Corporate Social Responsibility
-C.V. Baxi
Corporate Social Responsibility
-Jayant Bhattacharya

7. Definition of Corporate Social
Responsibility
“CSR is about how companies manage the
business processes to produce an overall
positive impact on society.”

8. Definition
“Achieving commercial success in ways
that honour ethical values and respect
people, communities, and the natural
environment”

9. Definitions: Practice
WBCSD (World Business Council for
Sustainable Development)
“The continuing commitment by business to
behave ethically and contribute to
sustainable economic development while
improving the quality of life of the workforce
and their families as well as of the local
community and society.”

10. Definitions: Concept
Philip Kotler & Nancy Lee (2005)
“a commitment to improve community
well-being through discretionary business
practices and contributions of corporate
resources”.

11. Corporate Social Responsibility (CSR)
CSR in Equation Form Is the
Sum of:
Economic Responsibilities (Make a profit)
Legal Responsibilities (Obey the law)
Ethical Responsibilities (Be ethical)
Philanthropic Responsibilities (Good
corporate citizen)
CSR

12. Historical Perspective
From the 1950’s to the present the
concept of CSR has gained considerable
acceptance and the meaning has been
broadened to include additional
components

13. Corporate Social Responsibility (CSR)
Evolving Viewpoints
CSR considers the impact of the
company’s actions on society (Bauer)
CSR requires decision makers to take
actions that protect and improve the
welfare of society as a whole along with
their own interests (Davis and Blomstrom

14. Phases of Corporate Social Responsibility
Frederick provides expanded framework for
understanding the evolution of CSR concept
Divided into 4 phases:
Corporate social stewardship, 1950s –
1960s
Corporate social responsiveness, 1960s –
1970s
Corporate/business ethics, 1980s –1990s
Corporate/global citizenship, 1990s –
2000s

15. Drivers of CSR
The shrinking role of government
Demands for greater disclosure
Growing investor pressure
Competitive markets

16. Benefits of CSR…
Strengthened brand positioning.
Enhanced corporate image.
Increased ability to attract, motivate, and retain
employees.
Increased sales and market share.
Increased appeal to investors and financial
analysts.

17. CSR also known as
Sustainable Development
Corporate Citizenship
Triple Bottom Line
Business Ethics
Sustainable Business Practices

18. 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

19. 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 .

20. 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

21. Private Sector Perspective
“Corporate Social Responsibility is not a
cosmetic; it must be rooted in our values.
It must make a difference to the way we
do our business.”

22. CSR –A New Paradigm
To think comprehensively and systematically about
The role of business in development
The manner in which the business is conducted
Corporate Governance
Poverty alleviation
Corporate contribution to peace and war against
terror
Business, government and civil society
partnership-common ground and collective
action

23. CSR and the law of economics
Aseverybodyknows,thegoalofabusinessistomakeprofitandincrease
it,evenmaximizeit,giventheactualrestraints.(cannotobeythelaw)
Thefactisthat,inacertaincontext,thelawsarenotwellelaborated?If
theywere,corporateaction&socialactionwouldbesubjectto
convergence.Sincewehaveagreedonthefactthatahierarchyof
imperativesmustexist,onecouldeasilyfindawaytoreconcilethe2
imperatives,theeconomic&thelegalones.
Profitisnotaimedatforashortperiod,butonthelongrun.Thus,the
pointistosetupalawthatallowstheexistenceofasustainable
profitability,withoutignoringthesocialneeds.
ThisiswhereCSRcomesintoaction,sinceCRisnotaboutgainingprofit
nomatterwhat,butgainingprofitthatis,atthesametime,asocialgain.
Corporateactionshouldrelyonrespectingthelaw,sincethissustainsa
socialandsustainableprofit.
Thus,theinfluencecorporationshaveongovernanceshouldbeoriented
towardssettinguplawsthatguaranteethistypeofprofit.
Onecansee,now,howaimingtowardsthelegalimperativeofjusticeis
sustainingprofit.

24. CSR and the law of economics
Aimingtowardsgoodisprofitableonthelongrun.Corporate
actionisaimedtowardsagoodthathasasocialrelevanceandisa
bitdifferentfromwhatmanypeopletakeasgood.
Inshort,theideaisnottohelpthepoor,buttomakethemhelp
themselves.Corporateactioncannotbereducedtothemereactof
beingkindtoapoorperson.
ThisiswhyCSRisanewtypeofmorality,asocialinsertedone.
Furthermore,beinggooddoesnotmeangivingupcompetition.
Beingfairtocompetitorsdoesnotruleoutprofit.
Thepointisthatwhatstirscorporateactionisthedesireto
improveownactivity,nottoweakentheactivityofthe
competitors.
Besides,oneshouldneverforgetthatbeingfaircontributesto
settingupafriendlybusinessenvironment
And,lastbutnotleast,bothsocietyandotherbusinessesbenefit
fromanactofgoodnessofsomebusiness.Thisishowmoral
imperativesustainsprofit

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26. CSR and Social Legitimacy
"The socialresponsibilityof business
encompasses theeconomic,legal,ethicaland
discretionaryexpectationsthatasocietyhasof
organizationsatagivenpointintime.“
“Aconceptwherebycompaniesintegratesocial
andenvironmentalconcernsintheirbusiness
operationsandintheirinteractionwiththeir
stakeholdersonavoluntarybasis".
Legitimacyfocusesonwhetherthevaluesystem
ofanorganisationisconsistentwiththevalue
systemofsociety,andwhethertheobjectiveof
organisationsistomeetsocialexpectations

27. CSR and social legitimacy
Legitimacytheory,providesasightthatthe
interrelationshipbetweenanorganisation&
relatedsocialexpectationsisjustarealityof
sociallife.
Acctothistheory,thecontinuedexistenceofan
organisationisestbbothbymarketstrength&
socialexpectations,&henceanunderstanding
ofthebroaderconcernsofthepublicarticulated
incommunityexpectationsbecomesaessential
prerequisiteforanorganisation’ssurvival.
Thetheoryfocusesonthesuppositionthatan
organisationmustkeepitssocialpositionby
respondingtosociety’srequirements&giving
societywhatitwants.

28. The evolving role of stakeholders
•Shareholder-the purpose of the corporation is to
promote shareholder value
•Stakeholder-the purpose of the corporation is to serve a
wider range of interests
Goodcorporategovernancehelps...toensurethat
corporationstakeintoaccounttheintereststhatofawide
rangeofconstituencies,aswellasofthecommunities
withinwhichtheyoperate,andthattheirboardsare
accountabletothecompanyandtheshareholders.This,in
turn,helpstoassurethatcorporationsoperateforthe
benefitofsocietyasawhole.

29. Employees: There is widespread agreement that they are a prime
stakeholder
Shareholders: Some would say that shareholders are the first
stakeholder
Management : Controversial, but some believe that managers are
stakeholders
Creditors: Creditors rights are often protected under contract and
backed by collateral so they are seldom treated as “owners” as the
shareholders are.
Trade unions: Some argue that this group is redundant with the
employee group
Customers: Most stakeholder models include customers
Suppliers: Often considered a stakeholder
The local community : Broader definitions of stakeholders widen
the concept to include responsibilities to local communities and,
more generally, civil society
Future generations: Sustainable development --those who will
one day be reliant upon the physical environment--as a
stakeholder group

30. Stakeholders and shareholders agree that
effective corporate governance requires the
following principles:
Transparency: Full disclosure of financial and
non-financial information
Accountability: Ensuring that magt is
effectively overseen (and, where necessary,
replaced) by appointing an independent &
competent governing body
Fairness: Equitable treatment of investors
Responsibility: Ensuring the corporation
fulfills its proper role in society
The evolving role of stakeholders

31. Employee participation in corporate governance systems can be
found in many countries and corporations throughout the world.
Examples include:
Right to consultation -where employees must be consulted on
certain mgt decisions. This right increases transparency of mgt
decisions & allows employee opinion to reorganize the
asymmetry of information between management & the market
Duties of board members to consider stakeholder
interests. This right reinforces accountability by protecting
stakeholders
Right to nominate/vote for supervisory board members .
In many cases employee participation on the board is mandated.
This right creates a check & balance system between
management & the supervisory board, which in turn creates the
perception of greater fairness
Compensation/privatization programs that make employees
shareholders, thereby empowering employees to elect the
supervisory board, which, in turn holds management responsible

32. Dynamics of reform: what is needed?
Champions: The reform process needs champions-a stakeholder group
that is deeply interested in the long term health of the company and has
an undeniable right to speak out to management on improving the
corporation. Employee shareholders are ideally positioned because:
•they have additional knowledge of the corporation
•they rely upon the corporation for their own prosperity through
employment
Incentives: The reform process needs to provide incentives for change.
Improvements in corporate governance standards could benefit employee
shareholders:
•improving long term prospective health of company, safeguarding jobs
•they stand to gain as shareholders if the corporation increases in value
Rules: The reform process must also be governed by clear rules. But this
is not all. Rules must be enforced.
Enforcement-Institutions which can enforce corporate governance rules
must also be supported in the reform process

33. The Iron Law
TheLawofLong-RunSelf-Interest,orthe
IronLawofSocialResponsibility:
“Inthelongrun,thosewhodonotuse
powerinamannerthatsocietyconsiders
responsiblewilltendtoloseit.”
Social responsibilityshould involve
considerationfortheenvironmentandother
issuesofpublicwelfareasapplicableto
specificcorporateactivities.
Therulewasintroducedinresponseto
Davis'sobservationthatpeopleinbusiness
tendtobemoreconcernedwithprofit&
immediateeconomicintereststhantheyare
withanythingelse.Heclaimedthatthey
shouldseektoresolveanyissuescausedby
theirpracticesaswell.
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34. The Principle of Public
Responsibility
The firm is said to have three levels of involvement:
Primary involvement : Doing the firm’s basic tasks or
missions.
Secondary involvement : Fixing the unintended by products
of the primary level, such as cleaning up pollution.
Tertiary involvement: Everything else, such as making
speeches at business school graduations.
interaction with the local community;
level of support for community projects;
level of support for developing countries;
health and safety record;
training, employment and education programs; and
environmental performance.
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35. Moral & Economic Arguments for CSR
Arguments in favour of CSR:
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.

36. 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. 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.

37. 5. 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.
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.