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Corporate Social Responsibility:


The Global Context

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

Aims and Objectives

1.1

Introduction

1.2

Globalization and its Impact


1.2.1

Economic Impacts

1.2.2

Social Impacts

1.3

Sustainable Development

1.4

Role of Business in Sustainable Development

1.5

Millennium Development Goals

1.6

India and the MDGS

1.7

Let us Sum up

1.8

Keywords

1.9

Self Assessment

1.10

Review Questions

1.11

Suggested Readings

1.0 AIMS AND OBJECTIVES


After studying this lesson, you should be able to:

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

Badly hit by globalization because of unfair rules, foreign debts,


HIV/AIDS, poverty & migration have aggravated due to poor governance
and inability to attract foreign investments to tackle the problems.

Arab & Israeli

Overshadowed by war & continuing Arab-Israeli conflict. Dominated by


oil exports & migration and the fears for the impact on cultural identity
and local traditions.

Asia

In India and China globalization resulted in poverty reduction, decrease in


unemployment, spurred economic growth and industrial productivity.
Although not for all more than one billion people (approximately) have
seen no reward. In fact globalisation has undermined their traditional
livelihoods, social security systems and resulted in increased rural-urban
intra -regional inequalities. In Philippines much of the globalization impact
was superficial. In fact, it resulted in increased conflict among
communities due to liberalization of investments and the capital flows
were badly affected by the Asian crises.

Latin America & the


Caribbean

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

In Russia, there were increased investment flows, expanded export markets


and newer opportunities for higher growth. There was thus increased need
for enforcement of labour legislations, greater employment generation,
reform f the educational system and control of migration.
Poland became a part of the European Union to reap the benefits of
globalization, but there was large unemployment due to restructuring of
industries and the farm sector.

Western Europe &


North America

In Western Europe, liberalization increased trade, capital flows and


international competition, but consequently it also increased income
disparities. Due to export of jobs to lower-cost countries and higher
international tax competition, it resulted in severe restraints on the finance
of the welfare state. It also led to the formation of the European Union as a
response to the pressures of globalization.
In North America, the impact of globalization was more or less positive,
except for new pressures on companies to be more competitive, which lead
to squeezing wages and corporate mergers, and loss of low skilled jobs to
other countries.

Source: ILO Report (n.d.)

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Corporate Social Responsibility:
The Global Context

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Corporate Social Responsibility

1.2 GLOBALIZATION AND ITS IMPACT


The ILO Report identifies economic and social impacts of globalization.

1.2.1 Economic Impacts

Liberalization and expansion of international trade has led to increase in FDI


investments which are currently concentrated2 in about ten developing countries1
and has also brought changes in the nature of financial flows by integrating the
financial markets3.

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.

Revolution in information and communications technology and declining


transportation costs have resulted in multi country based production of goods and
services, which are technically and economically feasible.

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.

1.2.2 Social Impacts

Due to globalization, small enterprises have been impacted because of their


inability to access capital, credit, information and extension services thereby
aggravating the problem of unemployment. With regard to rural and informal
economies, unskilled, illiterate and asset-less labour remain on the margins,
resulting in persistent poverty. Industrial restructuring in the face of competitive

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

ILO Report (n.d.), p. 33


Spread of internet, e-mail, low cost telephone services, mobile phones, electronic
conferencing

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.

It is difficult to assess the impact of globalization on poverty. Though people


living in poverty have decreased in China, it has increased in Sub-Saharan Africa,
Europe and Central Asia (82 million), Latin America (14 million) and the
Caribbean (8 million). Relative poverty8 has increased in majority of the countries
as an effect of globalization. Due to this, migration (both in-migration & outmigration) has increased across the globe. Migrants from all regions particularly
women are driven into an illegal economy in countries of destination leaving them
vulnerable to exploitation and trafficking. There has been an increase in illicit
cross-border activities like tax evasion, money laundering, sex and drug trades.
The fall in transportation costs and growth of mass tourism has made smuggling
of people and drugs difficult to detect and punish.

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.

1.3 SUSTAINABLE DEVELOPMENT


The challenges of globalization facing humanity are closely intertwined and tend to
complicate the solutions for attaining sustainable development. Sustainable
development being one of the greatest global challenges in this era has not escaped
worldwide notice. Political and business leaders at the international and national
levels are stressing the need for global sustainable development. The primary
objective of sustainable development is to reduce absolute poverty of the world's poor
by providing lasting and secure livelihoods that minimize resource depletion,
environmental degradation, cultural disruption and social instability (WCED, 1987).
Sustainable development is defined by the Brundtland Commission9 as Development
that meets the need of the present without compromising the ability of future
generations to meet their own needs (WCED, 1987, p. 8).
7

The UN Human Development Report 2006 estimated the Gini Index an indicator of
income inequality for India to be 32.5 in 2000.

Relative Poverty is defined in relation to the overall distribution of income or consumption in


country.
The Brundtland Commission, formally the World Commission on Environment and Development
(WCED), known by the name of its Chair, Gro Harlem Brundtland, was convened by the United
Nations in 1983. The commission was created to address growing concern "about the accelerating

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Corporate Social Responsibility

1.4 ROLE OF BUSINESS IN SUSTAINABLE DEVELOPMENT


Responsible business has always contributed for societal development. Statistics
reveals that FDI from the private sector into developing countries collectively has
exceeded the amount of financial aid granted by governments10 (World Bank Institute,
2005). Looking from this macro perspective, the private sector has already contributed
to the reduction of poverty at the global level during the past decade.
However the challenges of sustainable development in the new millennium are a new
imperative for governments, businesses, and society to collaborate and work to
strengthen each sector and create a qualitatively better world to live in. As per the
United Nations, the World Bank and other international organizations FDI
investments by private companies should enhance a process of sustainable growth that
minimizes the damaging effects on the environment. To quote Maurice Strong,
Secretary General of the World Summit, We now face the ultimate management
challenge, that of managing our own future as species (Lawrence et al., 2005, p.
212). Todays world is interdependent where problems of poverty, unemployment,
inequality, environmental degradation and social integration are causes of concern
because they have an impact on society thereby impacting businesses worldwide. If
business has to develop, society needs to be developed. Business cannot flourish in
any country if the environment required by business is not conducive. Social
upheavals impact the entire society in general and business in particular because to a
large extent business is dependent on society for its growth and prosperity.
The Government alone cannot deal with the issues of sustainable development.
Collaborative partnership amongst governments, businesses and civil societies is the
call of the day. It is therefore essential to take the agenda of developing collaborations
to address the issues of sustainable development and poverty in the new millennium.
In September 2000, world leaders belonging to the government, businesses and NGOs
in the gathering at the United Nations adopted eight specific, measurable, time-bound
targets called the Millennium Development Goals (MDGs) to address issues of
inadequate incomes, widespread hunger, gender inequality, environmental
deterioration, lack of education, healthcare and clean water( UNDP, 2006).189 United
Nations member states and at least 23 international organizations have agreed to
achieve MDGs by the year 2015. The Millennium Declaration of MDGs emphasizes
the efforts to be taken by developing countries, and the contribution that developed
countries should make through trade, development assistance, debt relief, access to
essential medicines and technology transfer.
By signing the Millennium Declaration, companies are committing to take action
through their core business in enhancing growth and help to meet the MDGs. Thus,
based on these MDGs, companies CSR policies have been framed.

1.5 MILLENNIUM DEVELOPMENT GOALS


The MDGs promote poverty reduction, education, maternal health, and gender
equality, and also aims at combating child mortality, AIDS and other diseases.
Table 1.2 provides a list of the MDGs, which have been accepted at the global level.
Table 1.2: Millennium Development Goals
Goal 1:

10

Eradicate extreme poverty and hunger

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:

Achieve universal primary education

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:

Promote gender equality and empower women

Target 4:

Eliminate gender disparity in primary and secondary education preferably by 2005


and in all levels of education no later than 2015

Goal 4:

Reduce child mortality

Target 5:

Reduce by two-thirds, between 1990 and 2015, the under-five mortality rate

Goal 5:

Improve maternal health

Target 6:

Reduce by three-quarters, between 1990 and 2015, the maternal mortality ratio

oal 6:

Combat HIV/AIDS, malaria, and other diseases

Target 7:

Have halted by 2015 and begun to reverse the spread of HIV/AIDS.

Target 8:

Have halted by 2015 and begun to reverse the incidence of malaria and other major
diseases.

Goal 7:

Ensure environmental sustainability

Target 9:

Integrate the principles of sustainable development into country policies and


program and reverse the loss of environmental resources.

Target 10:

Halve, by 2015, the proportion of people without sustainable access to safe drinking
water and basic sanitation

Target 11:

Have achieved, by 2020, a significant improvement in the lives of at least 100


million slum dwellers

Goal 8:

Develop a global partnership for development

Target 12:

Develop further an open, rule-based, predictable, non-discriminatory trading and


financial system (includes a commitment to good governance, development, and
poverty reductionboth nationally and internationally). Some of the indicators
listed below will be monitored separately for the least developed countries, Africa,
landlocked countries, and small island developing states.

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:

Deal comprehensively with the debt problems of developing countries through


national and international measures in order to make debt sustainable in the long
term.

Source: World Bank Group, ( n.d.)

1.6 INDIA AND THE MDGS


In the present context, the well-being of the average citizen is a measure of
development. The Human Development Index11 (2008) puts India12 at the bottom 50
of the 177 nations because a large part of the population lacks access to education,
11

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:
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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).

Table 1.3: Targets of the Eleventh Five Year Plan

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Corporate Social Responsibility:
The Global Context

Monitorable targets for Tenth and Eleventh Five Year Plan


Sr.
No.

Focus Areas

Tenth Five Year Plan


(2002-2007)

Eleventh Five Year Plan


(2007-2012)

1.

Poverty

Reduction of poverty ratio 5


percentage points

Reduction of poverty
percentage points

2.

Employment

Providing gainful and highquality employment at least to the


additional labour force over the
Tenth Plan period

a) Generation of 58 million new work


opportunities

ratio

by10

b) Reduction of unemployment among


the educated to less than 5%
c) 20% rise in the real wage rate of
unskilled workers

3.

Primary
Education

a) All children in school by 2003


b) All children to complete 5
years of schooling by 2007
c) Increase in literacy rates to 75
percent within the Tenth Plan
period

a) Universal enrolment of children in


the age group 614 including the
hard to reach segment by 2015
b) Dropout at primary level to be
eliminated and elementary level to
be reduced to 20%.
c) Increase literacy rates for persons
of age 7 years or more to 85% by
2012.

4.

Gender
Disparity

Reduction in gender gaps in


literacy and wage rates by at least
50 per cent

a) Reduction in gender gaps


literacy by 10 %

in

b) Sex ratio for the age group 06 to


be raised to 935 by 201112
c) Ensuring that at least 33% of the
direct and indirect beneficiaries of
all government schemes are women
and girl children.

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

a) Reduction of Infant Mortality Rate


(IMR) 28 per 1000 births by 2012
b) Reduction of Maternal Mortality
Ratio (MMR) to 1 per 1000 live
births by 2012

7.

HIV/ AIDS

a) Reduction of Infant Mortality


Rate (IMR) to 45 per 1000
live births by 2007
b) Reduction
of
Maternal
Mortality Ratio (MMR) to 2
per 1000 live births by 2007
Achieving zero level increase of
HIV /AIDS prevalence by 2007

8.

Malaria and
other diseases

a) 25% reduction in morbidity


and mortality due to malaria
by 2007
b) All villages to have sustained
access to potable drinking
water

a) Eliminate Malaria and other water


borne diseases
b) Provide clean drinking water for all
and 100% sanitation coverage

9.

Environment

a) Increase in forest and tree


cover to 25 per cent by 2007

a) To increase forest and tree cover by


5 percentage points

b) Cleaning of all major polluted


rivers by 2007

b) To attain WHO standards of air


quality in all major cities by 2012

Sustainability

Reduce new infections by 60% in high


prevalence States so as to obtain
reversal of the epidemic and by 40% in
the vulnerable States so as to stabilize
the epidemic

c) To treat all urban waste water by


2012 and to clean river waters
d) To increase energy efficiency by an
additional 20% by 201617
Source: Planning Commission of India, 2008.

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Corporate Social Responsibility

1.7 LET US SUM UP


The impact of globalization on society is largely from technological and social change.
The world faces unprecedented ecological and social challenges in the 21st century
which cannot be tackled by yesteryears rule of governance anymore. Todays world is
interdependent where problems of poverty, unemployment, inequality, environmental
degradation and social disintegration are concerned. The trend worldwide is to tackle
the problems by adopting collaborative and consultative models through a judicious
mix of government, businesses and non-government initiatives.

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

1.9 SELF ASSESSMENT


1. State whether the following statements are true or false:
(a) Globalization has led to easier access of information and labour from around
the globe.
(b) Globalization has brought the economies closer.
(c) Globalization has facilitated illegal trade practices and illegal migration.
(d) The aim of sustainable development is to reduce relative poverty.
(e) It is the government of the country who can lead sustainable development.
2. Choose the appropriate answer:
(a) Globalization integrates:
(i) People
(ii) Companies
(iii) Governments
(iv) All of the above
(b) Globalization impacts:
(i) Cultures
(ii) Environment
(iii) Political systems
(iv) All of the above

(c) Which one of these is one of the economic impacts of globalization?


(i) Increase in FDI
(ii) Expansion of production facilities
(iii) Increased global competition
(iv) Decrease in local competition
(d) Sustainable development calls for minimizing:
(i) Resource depletion
(ii) Environmental degradation
(iii) Current demands
(iv) Social instability
(e) Which of these is not a MDG?
(i) Promote education
(ii) Reduce gender inequality
(iii) Reduce child labour
(iv) Reduce infant mortality

1.10 REVIEW QUESTIONS


1. How do you think globalization has impacted trade and finance around the world?
2. What in your opinion can be done to mitigate the negative social impacts of
globalization?
3. What is sustainable development? How can business contribute towards
promoting sustainable development?
4. What are the Millennium Development Goals? How can business contribute
towards achieving these goals?

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

1.11 SUGGESTED READINGS


International Labour Organisation. (n.d.). Globalization and its Impact. Available at
www.ilo.org/public/english/wcsdg/docs/rep2.pdf
Lawrence, A., Weber, J., & Post, J. (2005). Business and Society. Singapore : McGraw-Hill.
Lee, E. & Vivarelli, M. (2006). The Social Impact of Globalization in the Developing
Countries. Institute for the Study of Labor. Available at http://ftp.iza.org/dp1925.pdf.
Planning Commission Government of India. (2008). The Planning Commission. Eleventh Five
year Plan 2007-2012, Volume I Inclusive Growth. New Delhi: Oxford University Press.
Available at http://planningcommission.nic.in/plans/planrel/fiveyr/11th/11_v1/11th_vol1.pdf.
Planning Commission Government of India. (2008). The Planning Commission. Eleventh Five
year Plan 2007-2012, Volume II Social Sector. New Delhi: Oxford University Press.
Available at http://planningcommission.nic.in/plans/planrel/fiveyr/11th/11_v2/11th_vol2.pdf.

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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.

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