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CORPORATE SOCIAL
RESPONSIBILITY1
UNIT 1
MODULE I
Dr. Meena Galliara, Chapter Extracted from Ebook on CSR, Published by NMIMS Global
Access, School for Continuing Education.
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Corporate Social Responsibility
LESSON
1*
CORPORATE SOCIAL RESPONSIBILITY: THE GLOBAL
CONTEXT
CONTENTS
1.0
1.1
Introduction
1.2
Economic Impacts
1.2.2
Social Impacts
1.3
Sustainable Development
1.4
1.5
1.6
1.7
Let us Sum up
1.8
Keywords
1.9
Self Assessment
1.10
Review Questions
1.11
Suggested Readings
Understand about globalization and its varying economic and social impacts
Know the need for integrating the goal of sustainable development into business
1.1 INTRODUCTION
Globalization has increased the volume of world trade and foreign investments. The
revolution in technological development has transformed the global economic
scenario by reducing the costs of communication, providing easier access to
information, and facilitating movement of labour and capital across the globe (ILO,
n.d.). The Carnegie Endowment for International Peace defines globalization as, A
process of interaction and integration among the people, companies, and governments
of different countries, a process driven by international trade and investment and
aided by information technology. This process affects the environment, culture,
political systems, economic development and prosperity, and physical human wellbeing in societies around the world.
In the present context, Globalization on one hand is seen as an irresistible and benign
force for delivering economic prosperity to people throughout the world and on the
other end, it is blamed as a source of all contemporary ills (ILO, n.d., p. 24). The
impact of globalization has been varied across regions of the globe (Refer Table 1.1).
Table 1.1
Perceived Impact of Globalization
Regions of the
World
Perceived Impact
Africa
Asia
Volatile global financial markets badly hit the middle class because of
inadequate government policies and poor understanding of local conditions
by the IMF and foreign banks. Legal and illegal migration also increased
to a large extent .On a positive note, it brought about public awareness on
issues such as gender inequality, human rights, sustainable development
and acceptance of other universal values and ethics.
Russia , Poland
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Corporate Social Responsibility:
The Global Context
8
Corporate Social Responsibility
Globalization has also brought a change in the governance structure of the global
financial system with an increase in influence of private actors such as banks,
hedge funds, equity funds and rating agencies4.
Production processes are unbundled and located across the globe to exploit
economic advantages arising from differences in costs, factor availabilities and
the congeniality of the investment climate (ILO, n.d., p. 27). Approximately
today there are 65,000 Multi National Corporations (MNCs) with around
8,50,000 foreign affiliates coordinating the global supply chains linking the
decentralized production system outside the formal factory system5.
The global production system is also pronounced in the service sector where
technological advancement has made it possible for services such as software
development, financial services and call centers accessible from different
countries around the globe. Technology has not only enabled economic
globalization but has also helped in increasing connectivity6 among civil societies,
governments and individuals.
The process of globalization has resulted not only in increased global competition and
efficiency but also in building convenient sources of transportation, machinery to
churn out goods faster, better communication facilities etc. The key economic
characteristics of globalization clearly indicate that though development in global
systems have got us closer together economically, the social impacts of globalization
across the globe has varied negative impacts.
China; 23.7%; Brazil: 8.3%; Mexico: 8.1%; China, Hong Kong SAR: 7.5%; Singapore: 6.0%;
Argentina: 5.6%; Malaysia: 4.0%; Bermuda: 2.7%; Chile: 2.7%; Thailand: 2.2%; Republic of Korea:
2.1%; Venezuela: 1.7%; Remaining 176 developing countries & territories: 25.3%
The integration of financial markets after the fall of Bretton Woods system lead to (i) unification of
exchange rates, (ii) removal of controls over the allocation of credit in the domestic market, (iii)
opening up of capital accounts, (iv) revolution in technology improving the speed of knowledge of
foreign markets, (v) development of new financial transactions, and (vi) emergence of new financial
instrument: derivatives. The integration of the financial markets resulted in private financial flows
and investments from North to South in emerging markets.
ibid, p. 34
4
5
6
global markets and lack of imports have displaced previously protected domestic
firms, leading to an increase in the levels of unemployment (Lee et al., 2006).
This resulted in loss of jobs as well exploitation of workers rights by various
MNCs leading to a reduction in the cost of goods, at the expense of basic access
to humane conditions of work (ILO, n.d.). Consequently, this has resulted in
widening of income gaps between the rich and the poor leading to large scale
income inequality7 within and amongst countries.
The global natural environment has also been affected by globalization because of
the following reasons: (i) increase in travel (ii) larger corporations with
centralized distribution (iii) poor pollution control mechanisms of MNCs in
foreign markets and (iv) extractive industries using natural resources nonjudiciously. The problem has further aggravated due to lack of regulations and
implementation mechanisms at the national and global levels.
Though the increased influence of private institutions has led to better financial
resource allocation, it has also led to corporate scandals, manipulations, and over
extension of credits to unstable local banks and firms resulting in financial crises
of increasing frequency and severity. Private financial institutions are exerting
power over emerging markets in designing their economic policies.
Globalization has disrupted the ecological balance, thereby creating a (i) carbonconstrained and water-constrained world. This has further created issues relating
to sustainable development and poverty, thus giving rise to unprecedented
ecological challenges to the world in the 21st century.
The UN Human Development Report 2006 estimated the Gini Index an indicator of
income inequality for India to be 32.5 in 2000.
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Corporate Social Responsibility:
The Global Context
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Corporate Social Responsibility
10
deterioration of the human environment and natural resources and the consequences of that
deterioration for economic and social development." In establishing the commission, the UN General
Assembly recognized that environmental problems were global in nature and determined that it was
in the common interest of all nations to establish policies for sustainable development.
In 2004, nation states invested 50 billion dollars; business spent more than 100 billion on building
factories, offices, shops and acquiring shares of foreign companies based in developing countries.
Target 1:
Halve, between 1990 and 2015, the proportion of people whose income is less than
$1 a day.
Target 2:
Halve, between 1990 and 2015, the proportion of people who suffer from hunger
Goal 2:
Target 3:
Ensure that, by 2015, children everywhere, boys and girls alike, will be able to
complete a full course of primary schooling
Goal 3:
Target 4:
Goal 4:
Target 5:
Reduce by two-thirds, between 1990 and 2015, the under-five mortality rate
Goal 5:
Target 6:
Reduce by three-quarters, between 1990 and 2015, the maternal mortality ratio
oal 6:
Target 7:
Target 8:
Have halted by 2015 and begun to reverse the incidence of malaria and other major
diseases.
Goal 7:
Target 9:
Target 10:
Halve, by 2015, the proportion of people without sustainable access to safe drinking
water and basic sanitation
Target 11:
Goal 8:
Target 12:
Target 13:
Address the special needs of the least developed countries (includes tariff-and quotafree access for exports enhanced program of debt relief for HIPC and cancellation of
official bilateral debt, and more generous ODA for countries committed to poverty
reduction)
Target 14:
Address the special needs of landlocked countries and small island developing states
(through the Program of Action for the Sustainable Development of Small Island
Developing States and 22nd General Assembly provisions)
Target 15:
12
The Human Development Index (HDI) takes into account three basic dimensions of human
development: the right to live a long & healthy life, to acquire knowledge, and to have a decent
standard of living.
HDI Rank of India : 128
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Corporate Social Responsibility:
The Global Context
12
Corporate Social Responsibility
health and social services. The Government of India being a member state of the
United Nations set up targets in the Tenth13 as well as the Eleventh Five Year Plan to
achieve the MDGs.
The Eleventh Five-Year Plan (2008-2012) proposes specific targets to achieve MDGs
(Refer Table 1.3). The Government has launched several large programmes with
regard to the MDGs. The areas that require redoubled efforts include literacy,
nutrition, maternal mortality and child mortality.
13
Indias Tenth Five-Year Plan (2003-2007) included targets of human development that can be
monitored, consistent with, but more ambitious than the Millennium Development Goals (MDGs).
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Corporate Social Responsibility:
The Global Context
Focus Areas
1.
Poverty
Reduction of poverty
percentage points
2.
Employment
ratio
by10
3.
Primary
Education
4.
Gender
Disparity
in
5.
Population
Reduction in the decadal rate of population growth between 2001 and 2011
to 15.9 per cent
6.
Infant and
Maternal
Mortality
Rate
7.
HIV/ AIDS
8.
Malaria and
other diseases
9.
Environment
Sustainability
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Corporate Social Responsibility
1.8 KEYWORDS
Globalization: Integration and interaction between people, companies and
governments of different countries
Sustainable Development: Balancing the present needs and future needs
Millennium Development Goals: Eight internal goals that members of UN and other
organizations have agreed to achieve till 2015
Corporate Social Responsibility: A form of self regulation integrated into business
Answers: Self-Assessment
1. (a) True
(b) True
(c) True
(d) False
(e) False
2. (a) iv
(b) iv
(c) iv
(d) iii
(e) iii
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Corporate Social Responsibility:
The Global Context
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Corporate Social Responsibility
The World Bank. (2005). World Development Report: A Better Investment Climate for
Everyone. Washington, DC: The World Bank and Oxford University Press. Available at
http://siteresources.worldbank.org/INTWDR2005/Resources/complete_report.pdf.
United Nations Development Programme. (n.d.). About the MDGs: Basics. Millennium
Development Goals. Available at http://www.undp.org/mdg/basics.shtml
United Nations Documents. (1987). Report of the World Commission on Environment and
Development: Our Common Future. Oxford: Oxford University Press. Available at
http://www.un-documents.net/wced-ocf.htm.