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Reading Material on CSR

CORPORATE

SOCIAL

RESPONSIBILITY

Reading material developed


for CSR subject

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Table of Contents

1. Chapter I : Development Scenario 3

2. Chapter II : Interface between business and society 8

3. Chapter III : Multi-Stakeholder Management of CSR 20

4. Chapter IV : Trends in CSR programmes 27

5. Chapter V : Operationalising CSR – some tips 35

6. Chapter VI : Measuring the impact of CSR 40

7. Appendix : Bibliography & Useful weblinks on CSR 45

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Chapter I

Development Scenario
1.0 INTRODUCTION

The dawn of a new millennium is expected to usher in an era of hope and


goodwill, where concerted global action will motivate, develop, and define a
comprehensive and integrated vision for the future. We have left behind a
century marked by unparalleled rates of population growth and near-calamitous
destruction of our natural resources and the environment. However, the
acceleration in scientific and technological advancements and the recognition
that a good quality of life is the fundamental right of citizens do indicate that all is
not lost.

Review of India’s Progress

On the positive side, India's democratic political system has endured despite
early doubts about the robustness of its basic political institutions. The political
system has weathered the challenges posed by civil violence, social unrest and
separatist social movements while preserving basic democratic freedoms. The
political environment has fostered a vocal and free press, an articulate educated
segment and a relatively free exchange of ideas. The Indian economy has
developed the capacity to produce a range of goods for domestic consumption.
Mass famines and epidemics have been prevented due to effective organization
of relief by the central and state governments. The lives of ordinary people have
improved on many counts: The average person in India lives longer, is less likely
to die in infancy or childhood, is better equipped to resist the depredations of
infectious diseases and is more likely to be literate than fifty years ago.

In spite of India's many positive accomplishments, there is a feeling in the global


community that India, as a society has not lived up to its potential, given its
considerable natural and human resources. Two problems in particular-poverty
and population growth-loom large over the horizon. In spite of an impressive
expansion of the middle class and an increase in urban living standards, poverty
continues to be an endemic problem. Over a third of the population, lives in
abject poverty -that is- below the modest poverty-line income established by the
Indian government. Although the poverty rate declined since the mid- seventies,
the total population living below the poverty line has scarcely changed and
remains at around 28.6 per cent of the total population. Further, millions of
people who are not officially poor also suffer from income and food insecurity, as
do those living in poverty. Poverty is associated with a host of secondary social
problems-high birth rates, lower life expectancy, higher child mortality, chronic
malnutrition and illness, child labour, illiteracy, and low economic productivity

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over the lifetime. See Table 4 A ‘Statistical Profile of India’ in the later part of this
chapter.

Population growth continues to be a problem in spite of recent declines in the birth


rate. India's numerous social problems have been discussed at length in academic
and official publications. Inadequacies in various areas are routinely identified in
official publications such as the Economic Survey and the Five Year Plan reports.

1.3 Tenth Five Year Plans and Millennium Development Goals

In the Tenth Five Year Plan the Planning Commission has outlined India’s human
development goals and targets for the next five to 10 years. Most of these are
related to and are more ambitious than the Millennium Development Goals1. The
following table provides you with a list of Millennium Development Goals, which
have been accepted at a global level.

1.4 SUSTAINABLE DEVELOPMENT

To achieve the goals of the tenth plan and move towards the goal of sustainable
development is the country’s vision. It is true that achieving sustainable
development both in the country and at the global level is indeed a daunting task.
The primary objective of the sustainable development is to reduce the absolute
poverty of the world's poor through providing lasting and secure livelihoods that
minimize resource depletion, environmental degradation, cultural disruption and
social instability". Sustainable development is defined as a pattern of social and
structured economic transformations (i.e. development), which optimizes the
economic and societal benefits available in the present, without jeopardizing the
likely potential for similar benefits in the future. A primary goal of sustainable
development is to achieve a reasonable and equitably distributed level of
economic well being that can be perpetuated continually for many human
generations.

We live in global community that increasingly measures development successes


in terms of the well-being of the average citizen. The Human Development Index
ranks India in the lowest tier of countries because so many people lack access to
basic goods such as education, health, housing and social services.
Governments alone cannot handle development issues. Both public and private
efforts must be expended to solve the problems identified above. A judicious mix
of government and non-government initiatives will have to be worked out to
accelerate the pace of development.

1.5 Need for Intervention of Business for Sustainable Development

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Challenges in the 21st Century cannot be tackled by yesterday’s rule of


governance. There is a need to develop new ways of thinking and new
approaches to governance at every level of society. It is an accepted fact, that,
there are crucial linkages between economic growth, human development, social
cohesion and environmental sustainability Today’s world is interdependent
where problems of poverty, unemployment, inequality, environmental
degradation and social disintegration are concerned because each of them affect
various sectors in varying degrees. The trend worldwide is for the barriers
between the various sectors to be removed in order to resolve social issues and
develop systems based on collaborative and consultative models.

If business has to be developed, the society needs to be developed, business


sector cannot flourish in any country, if the environment required by business is
not conducive. Increasing social issues impacts the entire society in general and
business in particular because to a large extent business is dependent on the
society for its growth and prosperity.

The concept of business responsibility to society was not considered when the
first factories were established partly because, prior to that time, no institution in
society had demonstrated the power necessary for independent action potentially
detrimental to society as a whole. From the beginning, industry had such power
but its effects were neither anticipated nor clearly recognized as the industrial
system grew. Only recently has the social responsibility issue towards
community has come to the forefront.

Management Tasks in the Changing Scenario

In the three decades since Drucker’s analysis of the three tasks of management,
namely managing business, managing managers and managing workers and
work (Drucker, 1963), another management task has been receiving growing
attention. Some discuss this task as managing the business environment; others
speak of managing the environmental pressures or the social responsibilities of
business. There is a shift both, in the emphasis placed on different tasks and in
the nature of the work of many managers. The result of the shift on the validity of
Drucker’s division of the jobs of management is to add a new dimension to
business that broadens all the tasks of management. Now, a good manager is
expected to include a social or environmental component in the performance of
Drucker’s three tasks. In his book on Management: Task Responsibilities and


Economic reforms and effective social policy are interlinked. Economic growth
is crucial. No country has achieved sustained improvements in living without it.
But, investing in people to create human capital – which is the main attribute that
people draw on in order to live more productive lives – is equally critical to raising
living standards. (World Bank Annual Report, 1995).

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Practices, Drucker (1963), also points out that ‘ None of our institutions exists by
itself and is an end in itself’. Everyone is an organ of our society and exists for
the sake of society. Business is exception. Free enterprises are also governed
by the legal and moral aspects of the society. Therefore, management can no
longer afford to ignore society and its demands.

Among the factors responsible for this new emphasis are the cumulative impacts
of the accelerating role of change in our industrial society and the reaction of
society to both, the advantages and disadvantages of unparalleled industrial
growth. The most fundamental impact on society is from technological and social
change. It is not surprising that the rapid rate of change in the industrial world
has created not only new cultural and social attitudes but also the need for a new
set of relationships between the business firm and the surrounding society. The
evolution of modern society and the impact of successful industrial development
have created great stress and strains. This situation has brought new
dimensions to the tasks of managers and has emphasized the need for
management to reappraise the way that a business enterprise should relate to
social demands.

IMPACT OF GLOBALIZATION

Socially responsible corporations till a few decades back were something of an


oxymoron. Social problems were the concern of the state, and businesses
argued, that they had nothing to do with it as profitability and social responsibility
could never go together. Friedman’s libertarian view of a company’s
responsibility towards society echoed this thinking and remained influential for
many years. “There is one and only social responsibility of business,” he wrote in
his book Capitalism and Freedom, “ 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”. This argument did make a lot of sense in a monopolistic, stable and
localized economy, and in a society where other stakeholders were relatively less
influential. But, then, the rules of the game changed. Markets became global;
competition intensified as multinationals swept across borders. Companies got
restructured and reengineered. Redundant employees charged re-engineered
firms with betrayal and loss of trust, while the existing ones worked under a cloud
of uncertainty. Images of gas-poisoned victims and oil-soaked birds in the
aftermath of the Bhopal gas disaster and the Exxon Valdez oil spill in Alaska
made the world sit up and take notice of the impacts that business could have on
the external world.

Stakeholders, who have long remained dormant, have stirred awake and are now
proving themselves as major forces to be reckoned with. The dent these
developments have caused in the bottom line of companies have forced many to
think anew about their responsibilities to society. Corporate Social Responsibility
(CSR) towards community has become the business issue of the 21st century!

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Conclusion

The most fundamental impact on society is from technological and social change.
Increasing social issues impacts the entire society in general and business in
particular because to a large extent business is dependent on the society for its
growth and prosperity. Governments alone cannot handle development issues.
Both public and private efforts must be expended to solve the problems identified
above. A judicious mix of government and non-government initiatives will have
to be worked out to accelerate the pace of development.

1.11 Questions for Study

 How far according to you has India progressed?


 Is there a need for joint action to change the development scenario?
Justify
 What are millennium development goals?
 What is the objective of the Tenth five-year plan?

Digital Bibliography

UNDP India: http://www.undp.org.in/

You and Aids: http://www.youandaids.org

Development Goals: http://www.developmentgoals.org

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Chapter II

Interface between Business and Society

2.0 Introduction

The business enterprise system is the mechanism selected by society to produce


and distribute goods and services. Originally, people felt that a business
enterprise had fulfilled its social responsibility by surviving and realizing the
maximum profit possible. The resources of society could be used by the business
enterprise to make profits as long as the enterprise complied with the few rules
imposed by governments to check abusive practices. The market system
provided the regulation necessary to police the system, and profits provided
incentive and insured efficiency. The work ethic and self interest were the guiding
principles of the system. By making a profit, business enterprises contributed to a
growing, healthy economic system that provided employment and adequate
incomes for all. In other words, corporate social responsibility was to operate
profitably, and the corporation could not survive without profits, much less play a
social role. The practice of business contributing for social development has
continued through the ages and as economic political and social conditions
changed, the business response to social need also underwent a change. Over
the years there has been a shift from merchant charity to corporate citizenship.
(Sundar P. 2000)

First Phase-Merchant Charity

The concept of parting with a portion of one’s surplus wealth for the good of the society
is neither modern nor a Western import to India, instead it dates back to the Vedic period.
Merchant class was nourished by a social and religious ethic, which put charitable giving
high on its list of virtues. Charity2 or daanam was an ingrained part of the merchant’s life.
Merchants provided relief in the times of natural disasters, developed supportive
infrastructures like dharamshalas (pilgrim rest houses), bathing ghats, (community
bathing areas), panjrapoles (animal refuges), and provided drinking water facilities. They
also rendered support in the areas of education, health, preservation of art, and culture.

The shift from purely ameliorative charity for religious reasons and causes during the pre
industrial era, shifted towards the more Western form of philanthropy3 along with
continuation of contribution to older forms of charity. In the period 1850-1914 the period
2
Charity, popularly used term for altruistic giving, implies giving to the poor and those in distress/need. It
is not concerned with removing the conditions, which cause distress. It is generally linked to religious
belief and teachings.
3
Philanthropy is derived from the Greek word ‘ philien’ (to love) and ‘ anthropos’ (man) means love for
mankind. It is defined as creative use of wealth for the long-term benefit of society, without any
expectation of a quid pro quo.

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saw the beginnings of industrialization in India. Like their counterparts in the West, the
rich business families began to set up trusts and endow a host of modern institutions such
as schools, colleges, hospitals, destitute homes, art galleries, and museums, and
preservation and propagation of Indian culture.

Role of Business Leaders

The credit for bringing social responsibility into business community’s consciousness
goes principally to business leaders like JRD Tata, Ramakrishna Bajaj, Arvind Mafatlal
and Kasturbhai Lalbhai. As champions of free enterprise, they feared that irresponsible
behaviour by the business community would lead the government to encroach on its
freedom more and more. Meanwhile, Gandhiji’s mantle as the moral guide of India had
fallen of Vinoba Bhave who launched the gramdan (gift of village), bhoodan (gift of
land) and sampatidan (gift of wealth) movements to put Gandhi’s ideas of trusteeship into
practice. Vinoba wanted businessmen to interest themselves in humanitarian, cultural,
educational and other beneficial social activities and inspire them to consider business as
a social mission. Vinoba Bhave’s work had the backing of the very political leaders who
had opposed the idea of Gandhiji’s trusteeship before Independence. It was clear to
Nehru and other political leaders that encouraging class struggle and raising expectations
of the depressed classes without the means to meet them would only be to invite trouble
(Rolnick 1962). The trusteeship theory therefore was seen as a safer way of bringing
social transformation without any violent social upheaval. It reinforced the traditional
concepts of charity and thereby the viability of the old social structure, while
simultaneously trying to promote the socialist ideal of classless egalitarian society. It was
therefore supported by both the capitalists and the government, though many paid lip
service to it (IMC, 1963).

2.3 Second Phase- Trusteeship

In the second phase that is 1914-1960, philanthropy was honed by the vision of free,
progressive and modern India. Many of the leading businessmen came under the spell of
Mahatma Gandhi and his theory of trusteeship4 of wealth. They contributed liberally to
his programmes for removal of untouchability, women’s emancipation and rural
reconstruction. Along with a new vision for philanthropy, business continued to support
and create physical, cultural and social institutional infrastructure. When India became
free, the independent state looked to the business community to propel the country to a
prosperous future and in the euphoria of independence, the business class, confident of its
capabilities, responded both, by creating more wealth and utilizing it for non-business
purposes.

4
M.K. Gandhi conceived Trusteeship as a non-violent process to convert private property capitalism into a
public property social institution based on social good rather than individual or collective greed. He
repeatedly returned to the realm of joint family. Gandhiji envisaged industry as a joint enterprise of labour
and capital in which both owners and workers were co-trustees for society. In his moral theory of trusteeship
was enclosed a social policy which was attuned by political expediency. His moral policies and politics were
coordinated for the realization of a harmonious social order.

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Third Phase- Declaration of Social Responsibilities of Business

The next shift came in the 1960’s, which ushered in an era of economic and political
troubles and saw the business community operating under several constraints. Jai Prakash
Narain carried Vinoba’s message forward. In 1965, he was the moving spirit behind the
seminar on social responsibilities of business, organized in Delhi by the India
International Centre and the Institute of Gandhian Studies Varanasi. One of the results of
the Conference was the declaration of Social Responsibility of Business.

The conference clearly brought out that business has responsibilities towards its
stakeholders, which consist of employees, shareholders, government, consumers and the
community. The relationship between business with its employees, consumers,
shareholders, government is legally spelt out. However there is no law, which governs the
relationship of the business enterprise with the society/community. The conference felt
that business should pay equal attention to the community and understand its importance
as a stakeholder. The concept of social responsibility towards the community was broader
than charitable giving for community affairs.

The Delhi seminar was followed by the Calcutta seminar in 1966. At its end it set
up a study group to prepare a set of business norms for adoption by the business
community; to examine the hurdles in the way of implementation of these norms;
and to recommend remedial measures. In its report, the study group examined
responsibility under five broad heads viz. responsibility of business towards
consumers, the community, employees, shareholders, other businesses and
towards the State. One immediate fallout of the conference was that JRD Tata,
Ramakrishna Bajaj and other businessmen launched the Fair Trade Practices
Association in Bombay in 1966 to codify and implement fair business practices.

The state in this period also took on many of the obligations that were traditionally the
responsibility of the community and the family, such as care of the sick, destitute, aged,
and widows. As government increased the taxes on business, coupled with mistrust of
business, business interest in philanthropy began dwindling. Though the government
expected business to support and financially contribute towards state led community
development activities, business organizations gave a poor response. Ironically the high
tax regime aided by deterioration in business morality led to a large expansion in the
establishment of charitable trusts for the purposes of tax planning.

The 70’s saw a renewed corporate interest in social concerns and a new element emerged
on the philanthropic scene that is corporate philanthropy as distinct from family business
philanthropy.

It was not only a concern with ethics which made business shift from building
institutions to becoming concerned with grassroots issues at the community
level. The shift was in keeping with global trends, which had led to the
emergence of the concept of managerial trusteeship. It became clear to business
that their survival and continued profitability depended on a more systematic

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involvement in regenerating the local communities which went beyond customer


relations and provision of welfare amenities to its own employees. It was also felt
that while massive investment in building up the country’s infrastructure there
was little attention paid to basic social amenities like drinking water, schools,
dispensaries, and agriculture. This condition activated the rise of voluntary action
in the form of NGOs. While the NGOs had the commitment to work, they lacked
financial resources. Hence, it exerted pressure on both, the government as well
as the private sector to collaborate with them to achieve the goal of social
development. This led the government to offer tax concessions to motivate
industry to involve itself in the developmental work and assist the work of
voluntary sector. In 1977, section 35CC was introduced into the Income Tax Act
to provide for 100% deduction to a company in respect of expenditure incurred
by it on approved programmes of rural development.5 It led to a variety of
community involvement activities. This induced many companies to enter the
field of rural development. Some contributed to cultural organizations, others
adopted schools; still others invested in housing and other community projects,
while some others offered job retraining or internships, all of it directed to the
whole community. Though the contexts were different, a more constructive
engagement with poor communities was undertaken as a response to the grim
social situation in India.

The post 1980 period saw an upswing in business fortunes due to economic
reforms and other factors. The tax incentives given in the seventies were later
withdrawn in 1983-84 as it was being misused. With this, those who were
involved in community development with mercenary intentions also stopped their
contributions. Even after tax incentives were withdrawn sensitive business
leaders realized that unless the business community contributed to basic
developmental needs, its survival would be threatened and it is in their own self-
interest to participate in the nation building effort (Mafatlal A, 1996). One of the
first to articulate this was JRD Tata. And as always he led by example. He
committed all Tata companies to ethical behaviour and programmes of
community development by amending the Articles of Association of Tata
Companies to include a clause that specified companies’ responsibility to all
stakeholders including the community. In order to redeem the image, JRD Tata
wanted Indian Companies to go beyond conducting themselves as honest
citizens. He advised that, “ Apart from donating for good causes we can use our
financial, managerial and human resources to provide task forces for undertaking
direct relief and reconstruction measures. This form of public community service
could be expanded by the cooperative effort among members of various
industries”(JRD Tata 1986). In his advocacy of responsibility towards community
Ramakrishna Bajaj and Arvind Mafatlal joined JRD. They felt the business
community is an essential ingredient of our democratic society and it has a duty
not only to create wealth, but also to promote ethical and social goals of the

5
Approved programmes of rural development include construction and maintenance of rural roads; drainage and sanitary systems in
rural areas; construction and maintenance of hospitals, dispensaries, and family planning centres; drinking water facilities and so on.

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community. Unless it fulfills both these functions and thereby plays its due role as
a responsible section, it will not be able to ensure its own survival.

The ethical dimension of wealth creation and the vision of a moral and just
society drove many business leaders of the time such as Arvind Mafatlal, to
efforts at improving grass roots communities. According to Arvind Mafatlal, apart
from monetary donation, contribution of management skills to the development
work is essential. Hence he gave Bhartiya Agro Industries foundation both
monetary funds and management inputs. He insisted that corporate involvement
should promote long term development work in the three ‘A’s—Anna (food),
Akshar (literacy) and Arogya (health).

Spurred partly by the realization that supporting community development is in the


interest of business, several business leaders began to advocate the importance of
community as a stakeholder in business. Of this philanthropic giving was only one
aspect, the others were more related to more ethical business practice and concern for the
physical environment in which the business operated. This period saw a swing from
charity and traditional philanthropy towards more direct engagement in the mainstream
development concerns of the society. Government of India introduced several tax
incentives for making philanthropic donations and pursuing developmental activities6

2.6 Fourth phase- Corporate Citizenship

The period from 1990 has witnessed a phenomenal growth in the corporate
sector in terms of size, complexity and sophistication. Liberalization has added a
new wave of MNCs who have set up their factories in India, either on their own or
in collaboration with Indian companies. Companies have started becoming more
and more responsible towards their stakeholders. There is a growing importance
of recognizing ‘community’/ society as a stakeholder in business. There is a
realization that if social development is neglected, businesses cannot prosper.
Government alone cannot handle social issues. If businesses have to be
expanded and be made profitable then their active participation in social
development is required.

Most of the private sector companies have community development


programmes at their home locations or in the immediate geographic
environment. For instance some of them have set up developmental
organizations themselves like Bombay-based Excel Industries have NGOs in
rural Kutch. The drought prone hinterlands of Gujarat, for example, have always
attracted corporate NGOs. While setting up their headquarters in Bombay and
in other parts of the country, Gujarati industrialists have by and large retained a
6
Organizations could claim tax relief for philanthropic activities under sections 80C of the Income Tax Act,
1961. There are specific provisions for deductions in respect of donations for rural development activities
under section 80 GGA. (2) (b), and for the National Rural Development Fund under section 80GGA (2) (d).
In addition to these incentives, way back in 1977 the Government of India introduced several tax reliefs
under section 35CC, which were later on revised in 1985.

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sense of attachment to their home state and many of them have attempted to
contribute to its development by setting up sponsored trusts, dedicated to rural
development. Bhalla Kora Mathen, the Vice-President of the Narottum Lalbhai
Rural Development Fund and the Lalbhai Group Rural Development Fund says,
`Though the Lalbhais had always contributed to charity, it was in 1985 that
Kasturbhai Lalbhai decided to get directly involved in rural development. He felt
that the group's management expertise could be a great asset in this type of
work”. Corporates like the Lalbhais, Mafatlals, Shroffs, L&T, HLL, Deepak
Fertilizers have attempted to bring in management professionals into an area that
was once the social workers’ concern. Critics of corporate sponsored trusts feel
that many corporate NGOs have been content to play a facilitating role,
implementing World Bank sponsored projects or the government’s Integrated
Rural Development Programme projects. The level of funding from their parent
corporates has often been paltry in comparison to their profits (Sundar P, 1984).
Managalore Chemicals and Fertilizers (MIF), a UB group company, has been
involved in socio-economic development work for several years now. MCF
surveyed several villages in the districts of Bellary and Raichur for
implementation of the improved agricultural programmes. Introduction of double
cropping, use of balanced fertilizers, better water management, and so on are a
few of the achievements which have increased the income of farm families from
RS. 4,000 to RS. 10,000 annually.

Further down South, SPIC's agro-service centres and rural development centres
in Tamil Nadu and Andhra Pradesh are training farmers in scientific farming and
helping them in integrated farming efforts. In fact, the ASC is part of a marketing
exercise, in that it retains its market by augmenting its core product - Urea. `No
doubt, our service activities have helped us to improve the brand image of our
products,' says a SPIC official.

Similarly new MNCs like Coca-Cola India, Motorola, and Pepsi all have initiated
community development activities in India to facilitate their acceptance with the
local community. MNCs like Procter and Gamble have initiated cause-related
marketing and reported to have increased sales through it. They claim that a
social attribute added to brand increases the product’s marketability.

According to Krishna Rao,(1997) and the IMRB survey (1993) more and more
companies are eager to adopt a credo that blends liberal idealism with the more
common management precepts to community development. Seventy per cent of
the companies surveyed by IMRB stated that they were into community
development for totally selfless reason i.e to fulfill their social responsibilities.
Fifty per cent felt concerned for a specific group, and twenty per cent cited the
benefit to the organization.

The survey on corporate social responsibility conducted by Partners in Change in 2003


highlights the following findings:

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 86% agree that corporates have a social responsibility


 Health and Education were the 2 most chosen sectors for contribution
 52% spontaneously mention employees as targets for social development;
however, 71% do mention community
 19% had a policy on community development- written or unwritten
 About 70% are involved in Social Development activities- the number goes up
amongst those having a written policy
 Donations remain the most preferred mode.
 Companies agree that involvement in social activities helps in image building.

Many business Corporations today accept that it is in their self-interest to be


more socially aware and to engage in programmes for the benefit of the
community. But the number of corporations actually undertaking social
responsibility is still very small. It is important to note that the present day
corporate involvement arises from the recognition that business can play a direct
role in maintaining a stable and healthy community environment, improve the
quality of life, effectiveness of institutions, and thereby create a favourable
business environment. The goal is to establish a dynamic relationship between
communities and business in which both complement each other.

2.7 Post Liberalization and its Impact on Social Development

Globalization has had a "worrisome impact." Globalization had increased the inequalities
between nations. Two hundred and fifty years ago, the richest countries were only five
times richer than the poorest. In 1976, Switzerland was 52 times richer than Mozambique
and in 2000, it was 508 times richer. (Vajpai A, 2000) In India we are concerned with
minimizing the negative effects of social change and development. A list of social
problems that seems to bother us would include poverty and inequality in the distribution
of wealth, unemployment, hunger, malnutrition, population growth, discrimination,
disease, squalor, crime, delinquency, violence, alienation of youth and other sections. The
nation is committed to the goal of welfare state: socialistic pattern of society raising the
living standards of all the people and the quality of life. The benefits of science and
technology are phenomenal but their distribution is unequal. This has resulted in
inequalities of wealth and power leading to stresses and strains. No democratic society
can function effectively and expect to maintain its dynamism. When the subsystems do
not coordinate for solving its problems, social problems will not be solved by
governmental action alone. Subsystems should often make compromises and the several
groups must maintain pressures and seek to work out acceptable solutions (Bhushan Y.K,
1999).

The UN Human Development Report of 2003 notes that India’s expenditure on human
priority concerns - basic, education, primary health care, child nutrition, etc. is very low.
The report notes, "India is clearly investing far too little in its human capital and it will
have to explore several avenues to find additional resources for human investment". One
such avenue clearly has to be the corporate sector (Sundar P., 1996). As we endeavour

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towards a developed India through various reforms, it is worthwhile to recall what the
distinguished economist Amartya Sen (1998), said in this regard " The central issue is to
expand the social opportunities open to people. In so far as counter-productive
regulations and bureaucratic controls compromise the opportunities, the removal of these
hindrances must be seen to be extremely important. But the creation of social
opportunities on a broad basis requires much more than the 'freeing' of markets. It calls in
particular, for expansion of educational facilities, and health care for all and public
provisions for nutritional support and security. It also demands a general political,
economic, and social programme for reducing the inequalities that blot out social
opportunities from the lives of so many hundreds of millions of Indian citizens."

The above fact also typifies the global interest in making business and industry more
socially responsible, and in forging alliances between it, the government and the non-
commercial voluntary sector. This is not surprising because, as an instrument for
development, corporate social action has several inherent strengths; it can access
financial resources but also leadership, organizational skills and a pool of trained
individuals. Not subject to the pressures of periodic elections, it can take a long-term
view of problems and promote durable solutions, though it is limited by fluctuations in
profits; and it need not spread itself thin in an effort to please everybody. Though private
business philanthropy or social action can never match or supplant the resources or
services provided by the state, its value lies in providing plurality of funding, and in the
quality of its support - innovative, flexible and of direct consequence.

2.8 Main Motive for Recognizing Community as a Stake Holder

The business world's main motive for recognizing community as an important


stakeholder and initiating community development activities is long-term educated self-
interest, not altruism. It is largely discussed at various forums that companies act
responsibly in large measure because they can do well by doing good. From this
perspective, corporate social responsibility towards community becomes a strategy for
gaining competitive advantage and a vehicle that helps business achieve its strategic
goals. There are several aspects to corporate social responsibility as a strategy for gaining
competitive advantage7. The commercial applicability of a good reputation is one.
Companies that act in accordance with principles of good corporate citizenship may reap
a reputational dividend. Ensuring that a company has a good reputation in markets where
consumers are increasingly socially aware has been proven by experience to be of
considerable economic importance.

Some seem to think that you can manage reputational risk largely with smoke and
mirrors. They talk dismissively of corporate social responsibility as cheap window
7
Fortunately, companies seem to have realized their folly in hankering after short-term financial gains and
have recognized how strategically important it is to be socially responsible. A focus group study of British
companies by the Institute of Citizenship Studies' indicated that strategic business interest, market
reputation and employee morale were considered as the main reasons for the companies to become socially
responsible.

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dressing aimed more at changing perceptions than at improving the reality. But any
substantial gap between perceptions and reality - between words and deeds - is not
sustainable for long. There is no place to hide in today's interconnected world. A good
reputation can therefore basically only be created and maintained by results. Talk is no
longer cheap. Words have consequences. Corporations must walk the talk. Otherwise
they will have to pay. Corporate social responsibility towards communities today implies
both a deeper and a wider engagement than previously with the societies in which
companies operate. Through such an engagement companies can gain new insights into
these societies and increase their understanding of the environment. This will make them
more politically and culturally sensitive.

The survival of business and its continued profitability will depend upon a more
systematic involvement in regenerating the local communities, which are beyond
customer relations (Deshmukh B.G, 1999). The concept of ‘giving’ is itself enlarged and
it includes contribution of financial, managerial, organizational and personnel resources
to the community. In sum, being a good corporate citizen means contributing back to the
same community that generated your profit.

2.9 Difference between Old and New Concept

The major difference between the older corporate social responsibility practices towards
community and the newer concept is that, the former was the result of the personal
interest of the philosophy of the founder / owner of the corporation in the latter it is the
result of a considered decision by the board and is a part of corporate policy and action. A
second difference is that it eschews the older practice of endowing institutions in favour
of programmes of direct involvement in community development.

More recently there has been a belief that business exists for more than profits
(or economic goals), with the public expecting something else from business. As
a result, the original concept of social responsibility involving the maximization of
profits has been modified. Although profits are to be made, social, as well as
economic, goals are to receive attention. Society depends on business to
achieve social as well as economic goals, that is, social responsibilities are
placed on business. While social responsibility has figured in commercial life over
the centuries, in the modern era increasing pressure has been placed on
corporations to play a more explicit role in the welfare of society. This implies that
business should have balance in maintaining stakeholder8 relationships. It should
treat all its stakeholders important.

The present day corporate involvement arises from the recognition that business can play
a direct role in maintaining a stable and healthy community environment, improve the
quality of life, effectiveness of institutions, and thereby create a favourable business

8
Business stakeholder- People who have direct and indirect influence over business. For instance, in
business, employees, shareholders, consumers, government and community are major stakeholders.

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environment. The goal is to establish a dynamic relationship between communities and


business in which both complement each other. For instance financial performance and
social investment in education or health may look mutually incompatible in the short-
term but in the long run, it provides the companies with a literate and healthy labour
market and, most important, it enhances the reputation of the company in the minds of
the consumer. Many major corporations consider such investments not only as an act of
`putting back' something to society, but also as the foundation stone for the future
benefits of the company. In India, we have the Tata’s Birla’s, Mafatlal’s Lalbhai Group
and Bajaj Group who have been engaged in extensive community development activities
from the pre-independence period. Social investment reflects the desire of companies to
ensure that they are socially responsible and beneficial. At the same time, it reflects those
companies' self-interest to ensure that society is strong and healthy. After all, business
depends on a prosperous and healthy society for its own prosperity. (Ratan Tata, 1999).
Definitions of CSR

There have been many definitions of corporate social responsibility, and rather than
giving one, listing the key elements found in various definitions may be more insightful.
Buchholz (1991, p. 19) identified five key elements found in most, if not all, definitions.

 Corporations have responsibilities that go beyond the production of goods and


services at a profit.
 These responsibilities involve helping to solve important social problems,
especially those they have helped create.
 Corporations have a broader constituency than stockholders alone.
 Corporations have impacts that go beyond simple marketplace transactions.
 Corporations serve a wider range of human values than can be captured by a sole
focus on economic values.

According to Wood (1991, p. 695), the "basic idea of corporate social responsibility is
that business and society are interwoven rather than distinct entities" and that
expectations are placed on business due to its three roles: as an institution in society, as a
particular corporation or organization in society, and as individual managers who are
moral actors within the corporation. These roles result in three levels of analysis
institutional, organizational, and individual and can be expressed in terms of three
principles of corporate social responsibility legitimacy, public responsibility, and
managerial discretion.

The principle of legitimacy refers to society's granting of legitimacy and power to


business, and business's appropriate use of that power and the possibility of losing that
power. Corporate social responsibility defines the institutional relationship between
business and society that is expected of any corporation. Society has the right to grant this
power, to impose a balance of power among its institutions, and to define their legitimate
functions. The focus is on business's obligations as a social institution, and society takes
away power or imposes some sort of sanction on business if expectations are not met.

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The principle of public responsibility means that business is responsible for outcomes
related to its areas of involvement with society. The level of application is organizational,
that is the corporation, and confines business's responsibility to those problems related to
a firm's activities and interest. This principle includes the view that firms are responsible
for solving the problems they create. The nature of social responsibility will vary from
corporation to corporation as each firm impacts society's resources in different ways or
creates different problems. The principle involves emphasizing each corporation's
relationship to its specific social, ethical and political environment.

Last, the principle of managerial discretion refers to managers as moral actors who are
obliged to exercise such discretion as is available to them to achieve socially responsible
outcomes. Discretion is involved, as the actions of managers are not totally prescribed by
corporate procedures. The level of application is the individual who has the choices,
opportunities, and personal responsibility to achieve the corporation's social
responsibility (Wood, 1991, pp. 695-700).

Although the topic of social responsibilities of business rose to prominence in the 1970s
(Carroll, 1979; Wartick and Cochran, 1985), the first publication specifically on the field
dates back to 1953, with Bowen’s “Social responsibilities of the businessman”. In this
work Bowen argues that industry has an obligation “ to pursue those policies, to make
those decisions, or to follow those lines of actions which are desirable in terms of the
objectives and values of society” (Bowen, 1953). Epstein (1987a, 1987b), however,
argues that the concept of specific business ethics can be traced further back to certain
academics and businessmen in the nineteenth century who promulgated the belief that
“private business is a public trust. Bowen (1953) sets the scene in this field by
suggesting that the concept of specifically corporate social responsibility emphasizes.

Businesses exist at the pleasure of society and that their behavior and methods
of operation must fall within the guidelines set by society; and
Businesses act as moral agents within society.

This discussion of definitions could be extensive, but the purpose is to provide an


appreciation for social responsibility. Further understanding of the concept, its origins,
and its interpretations is achieved by summarizing some of the debate over social
responsibility.

2.10 Conclusion

In conclusion the development of business and industry in general and specifically in


India has been accompanied by a clear change in the attitudes of society and the business
community itself about its obligations to the society and how they need to be expressed.
For reasons unconnected with old traditions of corporate giving, business is steadily
being drawn into a new relationship with government and voluntary organizations at
local, national and international levels. The chief reasons are the relative decline of the
nation state, the contracting role of government, the expanding role of business, and the

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emergence of an organized voluntary sector and a changing intellectual climate within


companies.

Questions for Study

Discuss how business responded to social development in the past.


Discuss what is Corporate Citizenship
Discuss the benefits a company would derive from community development
activities.
What is the difference between old and new concept of CSR?

References
Aga, Rohinton D., Changing the Mindset, Tata McGraw –Hill Publishing Co.
Ltd, New Delhi, 1994.

Galliara Meena, Sahaveeryam, Manual for Managing Sustainable


Partnerships, Business and Community Foundation, New Delhi, 2000
Iyer, Raghavan, ( 1965) Gandhian Trusteeship in Theory and Practice,
Concord Grove Press.

Juneja M. M.(1993), The Mahatma and the Millionaire, --Birla : A Biography,


Modern Publishers, Hissar,

Lala R.M (1992), Beyond the Last Blue Mountain, A Life of JRD Tata, Viking,
New Delhi, 1992.
Sundar Pushpa, (2000) Beyond Business, Tata Mcgraw Publication, New Delhi

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Chapter III

Multi-stakeholder Management of CSR

3.0 Introduction

In the last twenty years there has been a radical change in the companies with regard to
globalization and liberalization in content. CSR is recognized as the vital backbone of
the business. The following factors are taken into account for understanding the
importance of CSR: -

 Globalization and the associated growth in competition;


 Increased size and influence of companies;
 Retrenchment or repositioning of government and its roles;
 War for talent; companies competing for expertise
 Growth of global civil society activism;
 Increased importance of intangible assets.

3.1 Stakeholder Management: Stakeholder management is a generally


accepted concept in the business community. Greater media exposure,
environmental and health related incidents that have caused public anxiety and
local community conflict resulting from site management or planning decisions
have ensured that effective management of stakeholders has risen up he list of
priorities for company managers. Stakeholders have been defined as: “.. groups
and individuals who benefit from or are harmed by, and whose rights are violated
or respected by, corporate actions.” (Freeman 2001)

Investors
Governments Political
Groups

Suppliers FIRM Customers

Trade
Employee Communities
Association

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Figure 1 – The stakeholder model of the corporation (Donaldson and


Preston 1995)

Figure 1 identifies the main stakeholders a company. If business is to be responsible to


society, who in society must it be responsible to? Society today consists of a wide range
of people who have interests, expectation and demands as to what companies and
organizations ought to provide, and the ways in which they should behave. Companies
are increasingly embracing these stakeholder groups and individuals, whether by
considering or including them in decision-making. The motivation here for businesses to
become involved in CSR is to address the wide ranging and constantly changing set of
demands that stakeholders have.

The stakeholders concept has continued as a central theme in CSR. Development of the
concept has revolved around finding ways to integrate various stakeholders and their
concerns into business activity. Clarkson (1995) spearheaded the ‘Redefining the
Corporation’ project, a ten-year endeavor to set out “a process- and dialogue-based
approach to treating stakeholders with respect by consistently monitoring their interests
and status and taking those into account in corporate decision making.” Donaldson and
Preston (1995) created a well-known stakeholder theory typology to argue for
stakeholder engagement as an essential management tool.

3.2 Corporate Social Performance (CSP): Since the early 1980s a significant body
of CSR research has centered around the debate over whether there is a relationship
between good Corporate Social Performance (CSP) and strong financial performance,
and what kind of relationship there is. Lantos (2001) argues that true CSR, that is
strategic CSR, can only be carried out if a company also profits from its ‘good works’.

Today, businesses are becoming increasingly interested in the idea of the ‘Triple Bottom
Line’ (TBL). This idea focusses businesses not just on the economic value that they may
gain from acting in a certain way, but also on the value that they may accrue to the
company’s bottom line by engaging in environmentally and socially beneficial practices.
The three ‘lines’ represent the economy the environment and the society (Sustainability,
2002) and are all dependent on each other. Whether companies do (or can) actually take
each line into account is difficult to measure as the arguments surrounding whether
companies do benefit financially from being socially responsive are not clear cut.
Government agencies and organizations promoting the CSR agenda seem to be
convinced that assuming a CSR role will bring financial gain to the business world. Few
quotations are stated here to prove this point.

“…Corporate Social Responsibility (CSR) is a powerful way of making sustainable


competitive profit and achieving lasting value for the shareholder a well as for
stakeholders. CSR and the reporting thereof is a win-win opportunity, not just for
companies and for financial investors but for society at large.” (CSR Europe 2003)

“Socially responsible business practices contribute to corporate productivity and


profitability.” (Business for Social Responsibility 2002)

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Academic research has not been so concrete in its findings. Numerous studies have
shown
A positive correlation between CSP and profit (Waddock & Graves 1997, Balabanis et al.
1998, Ruf et al. 2001). Balabanis et al. (1998) analyzed the economic performance of 56
large UK companies against measures of CSR performance and disclosure developed by
the New Consumer Group. They found that economic performance is related to CSR
performance and disclosure, however relationships were weak and lacked consistency.
McWilliams & Siegel (2001) predict that there is a ‘neutral’ relationship between CSR
activity and company financial performance. In their study, they investigated this
relationship using a theory of the firm perspective, scale economies and cost-benefit
analysis. Their three main conclusions were :-
The neutral relationship exists because the company that carries out CSR activities will
have higher costs but higher revenues, whilst the company that has no CSR activities will
have lower costs but also lower revenues, thus profits are equal.
Large firms will have lower average costs for providing CSR activities than smaller
companies.
There is an optimal level of CSR that will maximise profits while satisfying the demand
for CSR from multiple stakeholders. The ideal level of CSR can be determined by cost-
benefit analysis.
Wright & Ferris (1997) predict a negative correlation between CSR activities and
companies financial performance.

Although positive relationships have been found, there are several difficulties inherent in
measuring these linkages. One of the main problems is that it is not clear whether social
responsibility leads to increased financial performance or whether better profits lead to
more funds being available to devote to CSR activities. Another is that profit is an
incomplete measure of social performance (Lantos 2001). Yet another is the difficulty of
developing a consistent set of measures that define CSR or CSP.

CSP is an important construct because it is ultimately CSP that must be measured and
compared to the financial performance of a firm in order to measure possible casual
relationships. Providing concrete evidence to managers of the financial benefits of CSR
should motivate companies to integrate CSR into their business activities. The danger
lies in the fact that the much-wanted TBL so beloved of government and business support
organizations must be proved conclusively. At present studies show diverse views.

3.3 Corporate Environmental Management (CEM): While most CSR theory


explicitly or implicitly includes responsibility to the natural environment, the past decade
has seen more literature focused specifically on corporate environmental management.
The increased focus on CEM both reflects and contributes to a growing private-sector
interest in environmentally responsible strategy. Whereas in the 1960s companies tended
to cope with environmental crises after they occurred by merely doing damage control,
and in the 1970s and 80s companies simply to minimize costs associated with rapidly
changing government environmental regulations, the 1990s witnessed companies taking a
more active interest in proactive strategies – anticipating environmental impacts of

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operations, taking measures to reduce waste, and taking advantage of business


opportunities in the environmental arena. Initiatives such as ‘Total Quality
Environmental Management’ emerged to further the notion that environmental concern
was good for business (Berry and Rondinelli, 1998).

One way of illustrating changes in business approaches toward the environment is the
’ecological footprint’, which surfaces often in popular business and environment-related
literature. For instance, the beef industry was widely criticized for systematic clear-
cutting in the Amazon, drastically altering and endangering the rainforest ecosystem; in
other words, its operations left an enormous ecological footprint. The aim of many CEM
programs is to reduce or even eliminate the company’s footprint (Hart and Milstein,
1999).

3.4 Consumers: Consumer pressure and damage to the global image of popular
brands is one reason why companies may be motivated to assume the mantle of social
responsibility. Much recent pressure has centered on the protection of the environment
e.g., campaigns to stop deforestation; other important issues include the protection of
human and animal rights, safeguarding jobs, the inclusion of minorities and the behavior
of companies operating in the developing world. A classic example is that of Shell
whose handling of the Brent Spar affair led to widespread consumer boycotts, and whose
operations in Nigeria have been widely criticised. These issues motivated the company
to issue its first Report to society in 1998.

“ The public demands from us the highest standards of ethical and environmental
responsibility. They expect us to take a long-term interest in the economic and social
well-being of the wider community, including the international community, and reflect
this in sensitive development of the world’s resources” (Shell UK Ltd. Report to Society
1998)

The Shell case also illustrates the difficulties that exist in drawing the line between what
a company may and may not be responsible for. In Nigeria, Shell was asked by the local
community and political institutions to find solutions to local political and societal
problems without having the social or political authority to do so. Consumers may often
make demands on a company to act in a responsible manner in areas outside the
company’s sphere of influence (and indeed outside the consumer’s experience) where
they do not actually sell their products. Consumer’s pressure is very strong in the
developed world and is likely to increase not decline, especially in the current of concern
about public health.

3.5 Risk Management: Risk management has tended to centre on the problems that
can be caused by consumer pressures. However, today risk management encompasses a
wider range of stakeholders, each of which must be considered if a company is to avoid a
variety of pitfalls and protect its reputation. Companies often conduct business in areas
where they could be at risk, especially if working in developing nations or with
companies with irresponsible practices. CSR activities can be used to mitigate these
risks. The increased exposure of companies to the glare of public scrutiny has

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encouraged (or forced) business to be increasingly transparent in their environmental and


social disclosures. This has led to a growing trend in environmental and social or
sustainability reporting, and a commitment to improving social performance.

The most widely recognized definition of sustainability comes from the 1987 report, ‘Our
Common Future,’ also known as the ‘Brundtland Report,’ of the UN World Commission
on Environment and Development. This report defines sustainability as “meeting the
needs of the present without compromising the ability of future generations to meet their
needs.” Sustainability is applicable at both the level of the individual firm and the global
level. Just as firms are encouraged to make their own operations more sustainable, the
business community as a whole is called upon to sustain the global environment and
stablize the global economy for the health of future generations. Over the long term this
makes good business sense once companies realize sustainability also provides
continuing resources for their own operations.

Sustainability is inextricably linked to resource usage. A sustainable company does not


deplete its raw material or human resources but takes measures to ensure that they will
remain consistently available and productive. Accordingly, implementation of the
sustainability concept can range from CEM to Human Resources Programs.

3.6 Business ethics: Business Ethics is an academic field unto itself. According to
Fieser (2001), “ the field of business ethics examines moral controversies that commonly
arise in the business world. These include the social responsibilities of capitalist business
practices, the moral status of corporate entities deceptive advertising, insider trading,
basic employee rights, job discrimination, affirmative action, whether drug testing
violates privacy, and whistle blowing.” Thus, the defining feature of business ethics is its
basis in a moral standard. However, in a global business world, moral standards become
increasingly difficult to define as varying cultural and legal standards are brought to bear
on business decisions.

In the private sector, a rich tradition of business ethics practice is already established.
Before CSR became well known, corporations were already hiring ethics officers and
appointing workplace ethics teams. Operationalization of business ethics is tied in with
many other forms of CSR, such as articulation and integration of core values, stakeholder
interactions, social audits and other forms of social-performance measurement and
reporting (Business for Social Responsibility, 2001).

3.7 Employees: Many studies have shown that investing in employees can bring
direct benefits to a company both financially and in terms of increased employee loyalty
and productivity. Such investment can include schemes like provision of childcare
facilities, flexible work hours and job sharing. Employee investment in as essential
aspect of CSR as the workplace is also the community; especially in smaller companies
where a substantial proportion of employees are likely to come from the local
community. Involving employees in CSR activities is another way of investing in them.
Good social performance also provides companies with a competitive advantage when
attracting a skilled work force. Gaining access to highly skilled, high value labour likely

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to be stimulated by, and interested in, companies with well-developed CSR approaches is
a strong motivating force. A recent study suggested that applicants are more likely to
pursue motivating force. A recent study suggested that applicants are more likely to
pursue jobs from socially responsible companies than from companies with poor social
performance reputations (Greetings and Turban 2000). The study found that applicants
might have a higher self-image when working for socially responsive companies.
Examples of companies using their CSP as a means of attracting quality employees
include IBM, Microsoft and General Motors.

3.8 Personal values: Companies (and individuals within an organisation) may be


motivated to carry out CSR for moral reasons. This approach to CSR is described in the
literature as discretionary, voluntary or philanthropic CSR. Voluntary CSR goes beyond
the usual economic confines of social responsibility in contributing to the common good
at the possible, probable or even definite expense of the business (Lantos 2001).
Voluntary CSR does more than just prevent and rectify harms that a company may cause,
it assumes the responsibility for societal problems that the company has not created.
Carroll & Buchholtz (2001) also term this behavior as ‘corporate citizenship’. This
approach has been questioned by a number of commentators, famously by Milton
Friedman who argued that “The social responsibility of business is to increase its profits"
”1970), and more recently by Lantos (2001) who argues that voluntary CSR lies outside
the scope of business responsibility. Why then would companies choose to get involved
at this level? The answer lies in the personal values and commitment to principles of
some individuals in business, who argue that it is the fundamentally ‘right thing to do’.

There are likely to be other factors motivating companies to embrace a socially


responsible approach, however, the ones discussed above are those currently concerning
researchers trying to provide a clearer understanding of why companies get involved in
CSR.

Conclusion

It must be appreciated that corporate social responsibility and a corporation's social


performance are two of many factors in an extremely complex business environment in
which the corporate manager is called upon to operate the business. Various stakeholders
are constantly seeking a different role for business in society. Society today consists of a
wide range of people who have interests, expectation and demands as to what companies
and organizations ought to provide, and the ways in which they should behave.
Companies are increasingly embracing these stakeholder groups and individuals, whether
by considering or including them in decision-making. The motivation here for businesses
to become involved in CSR is to address the wide ranging and constantly changing set of
demands that stakeholders have.

Questions for Study

 According to you what motivates companies to execute its social


 responsibilities?

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 Discuss how strategic CSR is different from Ethical CSR?


 Discuss why business ethics are important

Digital Bibliography

www.sustainability.co.uk/
www.csreurope.og/
www.bsr.org

References

1. Boston College Center for Corporate Community Relations Making the Business
Case: Determining the value of Corporate Community Involvement, 2000.
2. Heledd Jenkins and Frances Hines – The Center for business relationships,
accountability, sustainability and society working paper series No 4 –
Shouldering the burden of CSR: What makes business get committed? Brasr,
Ecrc.
3. Rachel Phillips and Lisbeth Claus, “CSR and Global HR: Balancing the Needs of
the Corporation and its Stakeholders”, International Focus, Society for HR
Management, 2002.
4. Geoffrey P. Lantos, “The Boundaries of CSR”, Journal of Consumer Marketing,
Vol. 18 No. 7 pp 59-630,2001

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Chapter IV

Trends in CSR Programmes

4.1 TRENDS IN PROGRAMME DEVELOPMENT

Just as conditions change and directions shift in the business world, CSR
programme trends also develop over time. These trends include branding, core
competency fit, partnerships, outsourcing, and integration.

First, branding and signature programmes are popular. Developing a brand name
or a signature series helps companies in positioning and advertising their values
to the public. For instance Times of India lends its name for mobilizing funds to
help NGOs.

Second, many companies are developing CSR initiatives that deliberately tie in
with their core competencies. Product, human resources and equipments are the
major competencies of any business house. Companies may volunteer to lend
these and contribute in community development activities. For instance paper
companies like Ballarpur Paper Industries will develop forestry programmes
because they need wood for their own paper production. Developing forestry is
good both for the community as well as for the industry. An educational product
company may emphasize education programs. Providing material aid to NGOs
may start a base for wider relationship. This help the company to build its own
image. See the following box for examples.

Providing material aid to NGOs may start a base for wider relationship.

Cadbury India donated old furniture, books, and stationery to the


schools run by Zilla Parishad at Talegaon and DoorStep school in
Mumbai.
Tata Consultancy, Tata Honeywell, and Thermax provided Pentium
II computers to Municipal schools for fostering computer literacy.
Tata Honeywell has also designed curriculum for computer
education for school children.

Third, many companies develop or implement CSR programs through


partnerships with external actors. These partners can include local governments
and NGOs. These cross sector partnerships are extremely beneficial to all those
who are involved. In essence “Partnership is a cross-sector alliance in which
individuals, groups or organizations agree to; work together to fulfill an obligation or
undertake a specific task; share the risks as well as the benefits and review the
relationship regularly, revising their agreement as necessary.”

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Successful partnership relies on mutual recognition of the skills and resources


that each sector can contribute and the recognition and acceptance of the fact
that cross sector partnerships are profitable ventures or are profit centers. Profit
centres mean how they could be beneficial to all the stakeholders. For
partnerships to be sustained it is essential that they provide win-win situation
to all those who are involved. To the corporates they should be able to
contribute to the financial profits and provide a positive environment for growth9.
The community tasks undertaken should increase the corporate’s value from
shareholders point of view10 and contribute to the societal value11.

To the civil society organizations it should strengthen its functioning and ability to create
an impact, and for the public sector it should aid in achieving its target in the real sense of
the term. To the government cross sector partnerships should benefit in improving its
governance by providing specific interventions in managerial and technical areas. For
instance see the example in the box below.

Local Government and Private Sector Partnership Benefits

Mumbai Municipal Corporation (MMC) had approached many


corporates and requested them to give their expertise in the area of
waste management systems. Excel Industries Limited agreed to
collaborate with MMC on this issue. Excel spotted this opportunity and
manufactured compost manure and sold it under the brand name of
‘Celrich’. This added to the profits of the company and which in turn
paid rich dividends to the shareholders. The MMC benefited by
getting the environment cleaned up and fulfilling its civic responsibility.
The local communities who faced the menace of garbage got a
cleaner environment. Community based organizations formed citizens
action groups and got training from Excel Industries to prepare
compost manure from the garbage collected and developed their
kitchen gardens.

9
Enabling environment for growth means enhance reputation and licence to operate, improve
motivation and retention of good quality employees; support strategic market positioning and
market entry; increase operational efficiency and quality; promote better risk management and
access to financing and enable a more stable society and healthy economy for a company to
operate in.
10
Share holder Value: - The financial return that a company earns in the process of producing
and delivering products of services, compared to the total cost of financial capital used, and the
company’s ability to generate long term cash flows.
11
Societal Value: - The economic social and environmental value that a company adds to its host
communities host countries and society in general, in the process of producing and delivering
products and services, compared to the societal costs it creates, and the company’s ability to
generate long-term benefit flows.

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Cash donations from business make all the difference to a struggling community
organization and can help attract further support. Increasingly companies plan
donations and activities based on certain issues, which are of concern to them.
However there is always scope for finding appropriate partner to work on
innovative schemes. Ideas and Innovation can come from all the sectors. What
is important is clarity of thought and purpose. (See examples in the box below)

Projects based on specific themes initiated by Pvt. sector companies and


NGOs.

Mahindra and Mahindra’s has a single focus. All its activities are
centered on its philosophy of encouraging education at all levels. It
has partnered with various NGOs both in urban and rural areas to
spread the message of education.

The Infosys Foundation set up by Infosys Technologies provides


grants to socially and physically handicapped children for educational
purposes and also partners with NGOs and local government in
strengthening rural development activities and infrastructure.

Cadbury India funds a street children project – for sustaining children’s


interest in education.

Ranbaxy’s social wing of Ranbaxy community health care society has


created an extensive network of social development and
communications facilities. It has collaborated with the government, and
international agencies to execute its social commitments.

Pratham is a registered Public Charitable Trust initiated in 1994.


Pratham plays a catalytic role in improving primary education in
Mumbai. This role includes developing new low-cost mass-replicable
innovative models to address existing problems, motivating teachers
and parents, and studying the current system to make it more
effective. Pratham and MCGM are active partners in the time-bound
effort to achieve universal primary education. Business partners in this
process are ICICI, IDBI, British Airways, BEST, and Mahindra’s.

The flow of resources of time and goods into voluntary and community groups
continues to expand. For example, there are schemes using surplus new goods
such as those promoted by Pfizer India Limited, SmithKline Beecham
Pharmaceuticals, Kellogs India etc.

There is widespread recycling of equipment, from furniture to computers. The


benefits are not just one way. In some instances the company is saving disposal
costs. In others, despite the increased costs associated with some planned

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disposals, the benefits that arrive in reputation make it worthwhile. Moreover, it


may be the start of a wider relationship with a community partner. The good
name of an organization is a vital asset, whichever sector it is in.

Commercial activity with an image, product or service to market can also build
relationship or partnership with a cause, or number of causes for mutual benefit,
for example a company may advertise that part of the price of the product will be
donated for a social cause. This can be part of their ‘cause related marketing
strategy’. See the following box for details. Companies adopting this stand feel
that a social attribute added to the product influences the consumers brand
behaviour and results in increased sales. There has been no official report or
research available on this aspect in India.

Cause related marketing

Procter & Gamble Hygiene and Health Care India, has launched
PROJECT DRISHTI - the first ever Sight Restoration Corporate project
undertaken in association with the National Association for the Blind
(NAB). Project Drishti will attempt to restore sight to over 250 blind girls
from across the country through corneal transplant operations. In
association with UNICEF it has announced the launch of ‘OPEN
MINDS’-- a special program targeted to support and educate working
children. These initiatives are supported by their brands. Part of the
sale of their products is contributed towards these initiatives.

The Winning Game demonstrates the growing acceptance that a business can
gain competitive advantage by responding to the social, ethical or environmental
concerns of consumers. The value for the voluntary sector partner in such an
arrangement may include the opportunity to develop awareness of its cause or
message, raise profile, enhance their image, increase membership and generate
resources. Corporate management can motivate their employees to render their
talents and skills to NGOs. This can be a very enriching and satisfying
experience to both the organizations. See the following box for examples.

Activating active citizenship and exchange of skills

ABB and Hindustan Lever Ltd. depute their management trainees to


NGOs for getting them sensitized to the rural ethos, markets and
culture. These trainees also contribute and strengthen the managerial
aspects of the NGO.
Otis Elevators motivates its employees to work with the organizations
working for the mentally challenged. Otis worldwide is working for

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organizing Special Olympics for the Mentally Challenged. This


experience has helped the employees to get sensitized to the situation
of the mentally handicapped, contribute to the development of NGO
activity. This experience has also helped them to improve their work
moral and their perceptions both at organisational and individual level.
Employees at all levels of Tata companies are encouraged to
participate in community development activities. The employee
involvements in social activities have benefited not only the
community, but also have earned good will for the company and
boosted the confidence of the employees.

The voluntary sector has valuable skills in areas such as mobilising and
motivating volunteers, networking, advocacy campaigning and generating
support from financiers and local people. For business people contact with a
voluntary or community organisation enables them to learn some of these skills
or spot an opportunity for new business activity. For example, Excel Industries
Ltd. spotted business opportunity for manufacturing compost manure while aiding
Mumbai Municipal Corporation to resolve the garbage issue.

Managers in voluntary and community organizations may have had experience in


making the most of scarce resources but would benefit from learning more about
the structured budgeting and planning models used in business. Or they could
benefit from learning about commercial marketing techniques. A mentor
relationship or access to the training that is available within a company can help
them to develop relevant skills and a broader perspective.

At the same time, voluntary sector leaders find themselves needing new skills in
a world of social enterprise and community business. While partnering with
business organizations they can benefit from the expertise in areas such as
strategic planning, marketing and so on.

4.2 PROMOTION OF CSR

If CSR is to be the fruit of a strategic and sustainable corporate commitment and


not a temporary fashion fad, the question arises as to how its contribution to
social and economic progress can be promoted, despite its limitations and
weaknesses. While a large number of proposals for the promotion of CSR could
be made, seven in particular deserve to be highlighted.

Promotion a 'CSR-friendly' social dialogue: In the field of employment and


working conditions, Foundation research suggests that successful CSR can only
exist in conjunction with a strong social dialogue. However, it has also been
shown that it is not easy for the traditional players in social dialogue to practice
CSR. Incorporation of CSR into the agenda of in-house social dialogue is still
minimal - many information/consultation or negotiating procedures ignore it, or

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deal with it only at a marginal level, while at the same time the company is
developing a significant quantity of CSR activities at management level. How can
access to information of all on CSR be promoted, so that the existing social
dialogue can expand to include these new dimensions? Furthermore, as a result
of decentralized production networks, recurrent restructuring mergers and
acquisitions, it is increasingly difficult for company boundaries to coincide with
the boundaries of social dialogue, whether the latter takes place at company or
sector level.
Social dialogue appears to face different options: first, it remains based on a
binary model with two actors and two different logics, and appears to exclude any
other parties. Second, a dialogue with other stakeholders could be developed in
parallel to the social dialogue and bridges built between these dialogues. Third, it
could be opened up to multiple logics, but then runs to risk of reducing
employees and their representatives to one stakeholder among many, while
workers see themselves as the parties most directly involved. The promotion of
an expanded dialogue without weakening the traditional social dialogue is one of
the major challenges in the development of CSR.

Rethinking the governance: 'Governance' can be best understood as design


and implementation of the rules, processes and practices. In relation to CSR,
governance can be applied either at company or at society level. To take
company level first, CSR recommends taking on board a diversity of
stakeholders and therefore a multitude of expectations. Taking them into
consideration and organizing the necessary processes would mean management
adapting the way it works and making trade-offs between the different
expectations.

However, management receives primarily its mandate from the shareholders. The
question is therefore whether executives receive a real 'social mandate' which allows
them to commit the company towards other stakeholders and under what terms? Judging
by the importance of the personal commitment of managers to CSR, questions might also
be asked about the future of these commitments. Looking at society level: because the
influence of the companies is not limited to their borders, applying CSR may also affect
the way governance is exercised in society by involving companies in the local
community in order that companies and society could benefit from a mutual enrichment.

Enabling the actors to play their role: Skills and tools are important to allow
stakeholders to play their role properly. However, today the acquisition of these
skills by most of the stakeholders and the development of these tools is not
sufficient to allow them to act efficiently. Research shows, for example, that the
civil society has difficulties in playing its role, either because the actors and their
expectations are not clearly identified or because their members do not have the
necessary skills and resources to act properly. Initiatives which already exist that
aims at helping the actors both inside and outside the company to play their role,
could be reinforced. Examples would be helping the stakeholders to be more
structured, more professional and hence more efficient, or creating appropriate

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institutional frameworks which permit stakeholders to meet and discuss CSR


matters.

Promoting the internal as well as external aspects of CSR: While


the external aspects of CSR are important and tend to get a lot of attention due
to their visibility, it is essential not to forget the internal aspects. In an economy of
decentralized production and networking companies, issues around job quality
and health and safety provisions and working conditions of the employees of
subcontracting companies play a major role in CSR policies.

Intensifying the dialogue: Active dialogue with the stakeholders is


crucial for the success of CSR. Instead of focusing only on consumers, the
research shows that companies generally have a real interest in enlarging the
focus to other stakeholders. A new way of doing business based on the
management and dialogue with the stakeholders could be promoted. Trust,
transparency, internal and external auditing can create and foster successful
dialogue and sustainable corporate governance. Local municipalities and
national governments, for example, have an important role to play in facilitating
partnerships.

Fostering CSR among SMEs: Smaller companies have little knowledge of


what CSR is. They often do not posses the human and financial resources
required, in particular when it comes to developing tools for reporting on their
CSR practices. For the most part, they regard this prospect as an additional
bureaucratic expense.

Moreover, companies employing subcontractors can have a strong influence on


their suppliers by compelling them to standardize and label their practices, for
example in the field of quality, safety and the environment, which could result in
increased dissemination.

Promoting CSR as a tool to anticipate change: The pro-active,


preventive approach to restructuring can be beneficial to all the stakeholders.
Practices positioned in advance of restructuring can anticipate the effects on
employees and prepare them for the coming changes. In this process, relevant
prior information and consultation with the parties involved are a prerequisite for
socially successful restructuring. It raises the question of how far socially
responsible companies should commit themselves to that approach and which
priorities could be used in this approach.

Conclusion

In the business climate of the early 21st century, there seems to be some
identifiable factors that make some companies more responsive to CSR
concerns than others. Most of the programmes discussed in this chapter

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pertaining to the types of corporate programs are not industry-specific; they are
activities that can be implemented by nearly any company. We are experiencing
a revolution in governance characterized by empowerment and consultative
action based on mutual respect and mutual benefit. To this end we need to
create innovative strategies and methodologies– which creates win-win situation
for all and communicate to others how consultative and collaborative model of
change is really profitable for all.

Questions for Study

(1) Discuss the types of programmes that could be developed for promoting CSR
activities.
(2) Discuss the CSR programme trends with a few examples.
(3) What is cross sector partnership?
(4) Discuss a few strategies to develop CSR.

4.3 References

1. Philippe Bronchain, “Towards a sustainable CSR”, Luxembourg office for


official publication of the European Communities (2003)

2. Rachel Phillips and Lisbeth Claus, “CSR and Global HR: Balancing the
Needs of the Corporation and its Stakeholders”, International Focus,
Society for HR Management, 2002.

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Chapter V

Operationalizing CSR - Some Tips


5.1 Introduction
The Corporate Social Responsibility (CSR) frameworks of companies, which are
front-runners, have evolved over a period of time. Their specific approaches and
strategies are based on the ethical beliefs of the founding fathers, business areas
in which the companies operate, the socio-economic environment, and the
opportunities emerging over long periods of their existence. As such, it is difficult
to provide any standard approach for operationalising CSR.
The basic objective of CSR is to maximize the company’s overall impact on the
society and stakeholders. Thus, as Business for Social Responsibility stresses,
leadership companies see CSR as more than a collection of discrete practices or
occasional gestures, or initiatives motivated by marketing, public relations or
other business benefits. Rather, it is viewed as a comprehensive set of policies,
practices and programmes that are integrated through out the business
operations and decision-making processes that are supported and rewarded by
the top management. It is also important to note the growing evidence dispelling
the notion that CSR is only a cost to the bottom line. In the context of enlightened
self-interest of business for survival in the ever-growing fierce corporate
competitive battle, CSR is seen as critical for protecting reputations, defending
attacks, improving bottom line and building business competitive edge. When
integrated in the overall business strategy, CSR could be a panacea and protect
against sudden corporate downfalls.
The above definition of CSR makes it clear that internally CSR requires
fundamentally a new approach and outlook.

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5.2 Steps to Operationalize CSR


According to India Partnership Forum12 the starting point for CSR practice must
be viewed in a holistic context and hence must begin right from the Article of
Association of the firm. The committee appointed by the India Partnership Forum
recommends the following steps to operationalise CSR.
Step 1) Mainstreaming CSR Vision in the Article of Association
Contemporary literature sees CSR as the ‘license to operate’. As such, the very
Article of Association of firms must reflect this vision and commitment based on
recognition of the interdependence of the enterprise with the well being of the
society. The Article of Association will then provide the moral foundation for CSR
and serve as the beacon guiding the mainstreaming of CSR in all policies and
practices of business enterprises.
The following clause in the Articles of Association of Tata Companies may
provide a guide:
“ The company shall have among its objectives the promotion and growth of the
national economy through increased productivity, effective utilization of material
and manpower resources and continued application of modern, scientific and
managerial techniques in keeping with the national aspirations; and the company
shall be mindful of its social and moral responsibilities to the consumers,
employees, shareholders, society and the local community.”

The company may like to further emphasize the values and principles it stands
for - to set its own ‘magnetic north’.

Step 2) Develop a Written Policy on CSR and Make it Available in the


Public Domain
This is a crucial step aimed at translating the goals enshrined in the Article of
Association into policies and principles. Towards formulation of a policy
framework, the following building blocks may be considered:
a) Assessment of the internal environment: Identification of ‘drivers’ and
‘barriers’ of change: It is important to identify the factors within the organization
that is driving the change towards a more socially responsible framework. It is
equally important to bring to the table the possible internal ‘barriers’ to change. In
all cases, the views of employees are of critical significance.
Identification/ assessment of the core competencies of the company in the
broader socio-economic context. Since one of the key potentialities of CSR
lies in harnessing the core competencies available with in the firm, such an
exercise is of prime importance. For example, IT competencies have been used
very successfully by some firms to develop highly condensed but effective
literacy pedagogies. This in turn has opened up new avenues for both the firm
and the individuals concerned.

12
The India Partnership Forum (IPF) is a joint initiative of UNDP India and the Confederation of
Indian Industry (CII), which seeks to promote multi-stakeholder dialogue on Corporate Social
Responsibility issues and a common understanding of good corporate citizenship particularly
through evolution of a common code. The Forum also seeks to promote and pilot new and
innovative initiatives in corporate partnership for development.

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b) Building in the strategic business case: While the goal of CSR is


maximization of societal returns from business enterprises and does not confine
itself to financial profits, long-term sustainability of CSR efforts would depend
upon making a strategic business case. This point is also related to CSR being
aligned to core competencies discussed above.
c) Assessment of the external environment. The following elements are of key
importance:
The legal context: The legal context which includes the laws, regulations and
standards (corporate laws, tax laws, labour laws, environmental regulations,
safety regulations, regulations protecting shareholders’ interest, fiduciary
responsibility of managers and directors) need to be analyzed in a more holistic
framework to delineate the underlying social objectives and purpose. Also, such
analysis should bring out the incentives available for undertaking more socially
responsible actions by business enterprises.
In the context of globalization, not only the national legal context, but also global
standards in business ethics and legal standards in trading partner countries
acquire paramount importance. Examples are supply chain management codes,
vendor policies etc.
b) The development context: This would include an analysis of the socio-
economic policy framework. Documents such as the Plan document, budget
speeches, national and state human development reports, state development
reports, thematic reports by NGOs/ other civil society reports etc would be
relevant for identifying the priority socio-economic needs and opportunities at the
national and sub-national levels. This will also help identify opportunities for
public-private partnerships for development.
Such an analysis could also bring out potential opportunities for business and
social entrepreneurship. The human development needs and the sections of the
population with low disposable incomes could potentially provide promising
opportunities, if business can rethink its strategies.

d) Identification and prioritization of opportunities for corporate


collaboration in CSR. The above steps in conjunction with a stakeholder
analysis help identify the set of opportunities that exist for corporate collaboration
in CSR.
The stakeholder analysis must map out the different stakeholders and the matrix
of interaction. The first category would cover the immediate stakeholders i.e. the
employees, shareholders, supply chain, consumers etc. The second category
would cover the proximate stakeholders such as the communities in and around
the area of business operations. The third category would be based on a much
broader definition of developmental needs and opportunities.

e) Putting CSR policy in the public domain: By the very logic of this subject, it
is critical to place the policy framework in the public domain. The CSR policy
should be publicized in the company’s annual report, website, newsletters and
external and internal communications

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Step 3: Translating CSR Policy into Action:


An explicit management strategy to translate CSR policy into action is critical.
The following steps are imperative:
Appointment of a senior executive responsible for CSR under the CEO. Also
managerial level officers tasked specifically with social and environmental work
should be designated.
Formulation of an annual social investment plan.
Allocation of specific resources for CSR activities. Preferably, a transparent set of
funding criteria should be defined to ensure stability of funding.

Formulation of an internal assurance system. This is critical for credible CSR


performance.
Provision of an enabling environment for employee volunteering as this is one of
the surest ways of mainstreaming CSR into the company’s core value system.
Formulation of policies to ensure equal access to employment and promotion
opportunities across gender and culture, as employees remain the first charge of
socially responsible corporate behavior.

Step 4: Reporting, Experience Sharing and Mutual Learning


For broadening the impact of individual efforts, sharing of information and
expertise are of crucial significance. Towards this, the following steps are
recommended:
Institution of monitoring systems to track implementation process and evaluating
impact and finally, integration of reporting on CSR performance in the Company’s
Annual Report.
Documenting and dissemination of learning experience. Encouragement of
exchange programmes for professionals.

Step 5: External Reporting and Certification


Some companies, which have reached an advanced level of CSR compliance,
may desire to obtain certification from external rating/certification agencies.
There are a number of national and international certification standards and
agencies.

Conclusion

The basic objective of CSR is to maximize the company’s overall impact on the
society and stakeholders. India Partnership forum recommends several steps
that companies need to undertake to operationalize CSR practice including
inserting a suitable clause on CSR in the Articles of Association. The
Government’s approach to CSR should centre around productivity and
competitiveness and on achieving transparency in the market to promote an
effective dialogue with stakeholders. The voluntary sector / NGOs have a major
role to play in contributing to the process of social and community development.

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They can advise business/industry in the area of identifying need based


developmental projects.

Questions for study

 Discuss the steps for operationalising CSR in any organisation.


 Discuss the role of government in promoting CSR.
 Discuss the role of NGOs in helping companies to attain its CSR goals.

References readings:
1. Harsh Shrivastava and Shankar Venkateswaran, The Business For
Social Responsibility - the why, what and how of corporate social
responsibility in India, Partners in Change, New Delhi, 2000
2. Ross Tennyson and Luke Wilde, ’The Guiding Hand: Brokering
Partnership for Sustainable Development, The Prince of Wales
Business Leaders Forum and the United Nations Staff College,
2000

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Chapter VI

MEASURING THE IMPACT OF CSR

Introduction

It is easier to name the many types of programmes and activities under the banner of CSR
that it is to draw quantifiable conclusions about them. Since CSR encompasses both
discrete programmes such as employee volunteer projects and more nebulous principles
like cultural sensitivity, some types are easier to measure than others. Measurement of
CSR can be broken down into three separate categories. First, measuring the order of
magnitude of CSR at the present time: how many companies are implementing some kind
of CSR, on what scale, and in what specific ways? Second, quantifying the social and
environmental impact of existing programmes - in other words, quantifying corporate
social and environmental performance (CSP). Third, identifying, measuring, and
explaining cause and effect relationships between companies' CSR activities and their
financial performance.

6.1 Measuring current order of magnitude: Since CSR can be


operationalized in so many different ways; there are no reliable aggregate
numbers available on CSR activity at the present time. The 'Global Reporting
Initiative,' a key coalition of corporations, NGOs, accountancy organisations,
business associations, and other stakeholders from around the world convened
by the United Nations Environment Programme, confirmed in 2001 "there is a
need to assess the uptake of CSR practices and aggregate and disaggregate
data from various sources" (White, 2002). More readily available are case studies
and some quantitative data on individual types of programmes, collected by
companies, governmental organisations, NGO's and coalitions. One notable
source is the United Nations Global Compact website, which provides
information on CSR measurement in more than 180 countries.

6.2 Measuring corporate social and environmental performance: The


current corporate social and environmental performance arena is crowded with a
plethora of measurement and assessment tools. Most tools are specific to a
program category or type, making comparison and aggregation difficult. While
some governments require certain types of reporting, most of the current
measurement and reporting regimes are voluntary. For example, the Caux
Round Table, which regularly brings together 250 senior business leaders from
25 countries, published its 'Principles for Business' in 1994. This document
"seeks to express a worldwide standard for ethical and responsible corporate
behavior and is offered as a foundation for dialogue and action by business and
leaders worldwide" (Caux Round Table, 1994).

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A second example of the private-sector working to develop its own standards is the
accounting profession. Accounting firms and professional accounting societies, including
the American Institute of Certified Public Accountants, the Institute of Chartered
Accountants in England and Wales, and the Society of Management Accountants of
Canada, have designed frameworks of CSP indicators that companies can voluntarily
apply. According to consulting firm KPMG, 35% of the world's 250 largest corporations
now issue environmental reports (Kolk, 2000). A final example of private-sector
innovation in the area of standards is the social investing field. Social investing firms
have constructed indexes of companies that are screened on social and environmental
standards. In particular, KLD Research and Analytics's FDI (Domini 400 Social Index)
screens for alcohol, tobacco, gambling, nuclear power, and military contracting
involvement, environmental impact, charitable contributions, women and minority
directors and managers and other issues. The company's BMSI (Broad Market Social
Index) consists of all companies within the Russell 3000 that pass similar screening
criteria.

6.3 Determining linkages between social and environmental outcomes


and financial performance: Many managers and companies are concerned
about social or environmental problems, but still wonder why it should be their
responsibility to get involved. Ultimately, most scholars and observers believe
that only a proven cause-and-effect relationship between CSR activities and
financial performance can dramatically increase CSR activity. Proving or
demonstrating this linkage is often termed 'making the business case' for
corporate social responsibility. "The search for a link between CSP and financial
performance is a quest that was begun many years ago and is not yet concluded.
During the past 25 years, dozens of studies have examined this relationship"
(Roman et al., 1999)

Academic research has employed a plethora of different methods to measure


relationships, as discussed in the earlier sections. Often, quantitative measures
such as the above-mentioned KLD index and TRI database, company voluntary
reporting, company levels of philanthropy, and manager surveys such as the
Fortune Magazine Most Admired Companies list, are compared to financial
statements.

6.4 Making the business case

a) CSR as a source of competitive advantage: Making the business case


involves not only establishing a quantifiable between CSR involvement and
financial performance, but also explaining to companies how CSR activities can
be conceived as a source of competitive advantage. In other words, what are the
specific benefits of CSR programs and activities; how do they contribute to the
financial bottom line? Benefits such as cost reduction, human capital, reduced
regulations, access to capital, consumer demand, improved business conditions,
and new market opportunities are frequently reported.

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b) Cost reduction: Costs can be cut through cleaner, more efficient


technologies, recycling, pollution prevention, and other means, Such measures
not only reduce input costs in the short-run but also compliance and liability costs
in the long run. For example, 3M's 'Pollution Prevention Pays' and Dow
Chemical's 'Waste Reduction Always Pays' programs have produced hundreds
of millions of dollars in cost savings over the past decade.

c) Human capital considerations: Studies have shown that CSR activity


increases companies 'ability to attract and retain employees, reduces employee
turnover, and increases productivity and quality of work. Greening and Turban
(2000) found that prospective job applicants are more likely to pursue jobs from
socially responsible firms than from firms with poor social performance
reputations. This is an important finding given that a talented, quality workforce
becoming an increasingly important source of competitive advantage for firms.

d) Reduced regulatory oversight: According to Business for Social


Responsibility (2001), "companies that demonstrate they are engaging in
practices that satisfy and go beyond regulatory compliance requirements are
being given less scrutiny and more free reign by both national and local
government entities. The U.S. Federal Sentencing Guidelines allow penalties and
fines against corporations to be reduced or even eliminated if a company can
show it has taken 'good corporate citizenship' actions and has an effective ethics
program in place."

e) Consumer demand: Increasingly, consumers are demanding good


behavior on the part of companies; patronizing companies they perceive to be
good corporate citizens and boycotting companies with poor reputations. The
Internet has allowed for faster and easier consumer access to company
information, and websites such as Co-op America's 'The Responsible Shopper'
are specifically tailored to assist consumers in altering their buying behavior. Just
how sensitive is consumer-buying behavior to the social environmental
performance of companies? A 1999 survey showed that two-thirds of U.S.
consumers want companies to expand their roles to embrace broader social
goals, and that half are paying attention to the social actions of companies
(Environics, 2000). A study by McWilliams (2001) confirmed the rise in consumer
sensitivity to corporate social performance, but also found that such sensitivity is
tempered by other factors such as product price, advertising, level of disposable
income, consumers' tastes and preferences, demographics, and the price of
substitute products.

Several scholars have compared consumer sensitivity to CSR across cultures.


Zalka et al. (1997) compared behavior in the U.S., the U.K., and South Africa,
and found that consumers in the U.K. were most willing "to boycott and avoid
buying from, investing in or working for irresponsible companies," followed by
South African and then U.S. consumers. The study also found that in all three
countries, women and people with left-leaning political orientations were more

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Reading Material on CSR

likely to display sensitivity to companies' social performance. Maignan (2000)


found that "consumers in France and Germany appear more willing to actively
support responsible businesses than their U.S. counterparts," and a study by
Polonsky et al. (2001) showed northern Europeans to display more sensitivity
than southern Europeans to corporate citizenship issues.

Companies can capitalize on such consumer sensitivity by using social and


environmental performance to build their reputation and brand image. One way
to do so is through cause marketing, "a strategy designed to promote the
achievement of marketing objectives (e.g. brand sales) via company support of
social causes." Annual spending on cause marketing in the U.S. alone exceeds
$ 1billion (Barone, 2000). Other methods are public relations, package labeling,
and information on the company website. A proliferation of awards programs in
recent years, by which companies are recognized and rewarded for outstanding
social and/or environmental performance, have also, helped companies to
establish their reputations. In 2003, Lupin26 has come up to the top business
world FICCI-SEDF CSR awards. Previous years winners included TISCO (1999),
TELCO (2002) and HINDALCO (2002). The other top sic companies in the year
2003 were ITC, WIPRO, Indal, Canara Bank and Gujarat Ambuja Cements.
These awards are measuring the contribution.

f) Improved conditions for doing business: Strategic community


investment, both social and environmental, can enhance the capacity of a local
environment over the long-term. Such investment builds the capacity of the local
community, yielding concrete benefits such as greater availability of its natural
resources, a better-trained workforce, and a consumer market better able to
patronize and sustain the business.

6.5 Tata Sustainability Human Development Index

In India The Tata Council for Community Initiatives (TCCI) with the help of UNDP has
undertaken pioneering work in developing a sustainable human development index to
benchmark the contributions of Tata Corporates in the spheres of social development and
environmental protection. This is indeed a significant step towards systematically
measuring the impact of Corporate Social Responsibility (CSR) initiatives of these
companies on the ground. UNDP feels privileged to have participated through its Human
Development Resource Center in the TCCI initiative, sharing its experience in human
development reporting and analysis. For more details on Tata Sustainability Index log on
to http://indiango.com/tata.pdf

6.6 Measuring CSR- Resources available


Using standards to measure CSR is not widespread, but a number of
organisations are developing benchmarks to monitor CSR.

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Reading Material on CSR

Global Reporting Initiative for reporting on CSR


http://www.globalreporting.org/index.htm

Business Impact / Winning with Integrity from Business in the


Communityhttp://www.business-impact.org/bi2/homes/winning.cfm. This is
perhaps the most accessible site around, and has some useful guides on
developing and implementing a CSR strategy. However, there is still scope for
trade unionists to improve the models in the Winning with Integrity initiative as it
fails to involve trade unions at an early stage – in fact only in the latter stages
does it advocate engaging and consulting with workers!

SIGMA (Sustainable Integrated Guidelines for Management)


http://www.projectsigma.com/SIGMAProject/Links.asp

AA1000 framework and the Global Compact http://www.accountability.org.uk/


The organisation behind AA1000 is Accountability the institute of social and
ethical accountability.

UN Global Compact (www.unglobalcompact.org) provides a number of tools for


businesses to support human rights, labour and environmental standards.
International Labour Office
(www.ilo.org,www.itcilo.it/english/actrav/telearn/global/ilo/code/main.htm) has a
code of conduct for multi-national enterprises and suggest labour standards for
its member nation states.
United Nations Environment Programme (www.uneptie.org) produces annual
reports on benchmarking the sustainability of corporations.

6.7 Conclusion

The measurement of CSR helps businesses to better align organizational responses to the
requirements of the stakeholders that they serve. The measurement of CSR will
undoubtedly be useful for the CEOs and all the employees who devote precious time and
resources in upholding their common commitment to society.

Measurement of CSR can be broken down into three separate categories. First,
measuring the order of magnitude of CSR at the present time: how many
companies are implementing some kind of CSR, on what scale, and in what
specific ways? Second, quantifying the social and environmental impact of
existing programs - in other words, quantifying corporate social and
environmental performance (CSP). Third, identifying, measuring, and explaining
cause and effect relationships between companies' CSR activities and their
financial performance.

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Reading Material on CSR

BIBLIOGRAPHY and USEFUL WEBLINKS on CSR

Books for Reference:

1. Arya P.P., Tandon B.B, ‘Corporate Governance Deep & Deep Publications, New
Delhi, 2003
2. Carroll Archie B/Buchholtz Ann K, Business and Society Ethics and Shareholder
Management, Thomson South Western, Australia, 2003
3. Kotler Philip, Lee Nancy Corporate Social Responsibility’, John Wiley & Sons,
New Jersey, 2005
4. Mary Ann Littrell and Marsha Ann Dickson, Social Responsibility in the Global
Market : Fair Trade of Cultural Products, Sage Publications, 1999
5. Marx Thomas G, Business and Society: Economic,Moral and Political
Foundations, Text and Readings, Engelwood, Prentice-Hall Publications, 2000
6. Mathias T.A. ‘Corporate Ethics’, Allied Publishers, New Delhi, 1994
7. Paul R. Niven, ‘Balanced Scorecard Step-by-step for Government and Nonprofit
Agencies’, John Wiley and Sons Inc, 2003
8. Rao P. Mohana, Corporate Social Accounting & Reporting, Deep & Deep
Publications, New Delhi, 1999
9. Sadler Philip, Building Tomorrows Company, Kogan Page Publishers, London,
2002
10. Singh Devi and Garg Subhash, Corporate Governance, Excel Books, New Delhi,
2001
11. Sundar Pushpa, Beyond Business, Tata Mcgraw Publication, New Delhi, 2000

Internet References
 www.pwblf.org (Prince of Wales Business Leaders Forum)

 www.indianngos.com (Indian NGOs)

 www.bcf.org (Business Community Foundation)

 www.picindia.org (Partners in Change, India)

 www.bsr.org (Business Social Responsibility)

 www.accountability.org (Accountability)

 www.bc.edu/centers/ccc (Center for Corporate Citizenship Boston)

 www.cof.org (Council for Foundation)

For any queries contact Prof. Vidyanand Joshi on 9819131969 or on vidyanandjoshi@gmail.com 45