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A pirate throwing doubloons to a better may claim to be a philanthropist, but that hardly makes him a responsible businessman.
Rio Tinto
Literature Review
lthough the subject Corporate Social Responsibility in its present form and
content
has gained popular attention only in recent years, its origin can be traced back to the evolution of the concept of a welfare state. As the pace of industrialization quickened employers became more and more concerned with the loss of productivity efficiency due to avoidable sickness or accidents or stoppage of work due to bad personal relationships. This gave rise to the idea of a welfare state, which was further strengthened by the growth of democracy and of respect to human dignity during the last 150 years. The frame work of a welfare state and with it the concept of social responsibility have thus come to stay in many countries of the world.
I firmly believe as do many others, that voluntary business initiatives in the form of corporate social responsibility can play a key role in contributing to sustainable development, while enhancing a countrys innovative potential and competitiveness
European Commission Vice President Gunten Verheugen, November 2006
The changing image of business in the recent years has lent further support to the idea of social responsibility. Some public opinion have left businessman disenchanted. It was revealed that the businessman is viewed as an individual who does not cares for others, who ignored social problems, who prey upon the population, who exploits labor, and who is a selfish money grabber.
On the other hand, until these opinions were unveiled, the businessman believed that others viewed him as he viewed himself, as a practical, down-to-earth, hardworking, broadminded, progressive, interesting and a competitive free enterpriser. He believed that the society looked up at him as a self sacrificing community leader, pillar of society, generous to a fault, great supporter of education, patron of the arts, in short, the salt of the earth. Indeed, the businessman in the early days thought of himself as a happy mix of Plato, Gandhi, and Churchill.
What is CSR?
SR is a concept that
approaches such as corporate sustainability, corporate sustainable development, corporate responsibility, and corporate citizenship. While CSR does not have a universal definition, many see it as the private sector's way of integrating the economic, social, and environmental imperatives of their activities. As such, CSR closely resembles the business pursuit of sustainable development and the triple bottom line. In addition to integration into corporate structures and processes, CSR also frequently involves creating innovative and proactive solutions to societal and environmental challenges, as well as collaborating with both internal and external stakeholders to improve CSR performance.
CSR is not solely about promulgating the values and principles of your company. It is about your company understanding and taking account of the values and principles of everyone who has a stake in its operation
Definition
According to the guidelines on Corporate Social Responsibility (CSR) designed by the National Empowerment Foundation (NEF), Corporate Social Responsibility (CSR) is the concept whereby companies act to balance their own economic growth with the sustainable social and environmental development of their areas of operation. A company performing highly in CSR is one that goes beyond compliance with the legal framework to actively pursue positive impacts on local communities and its environmental footprint.
The Government of INDIA has established a policy with the overall objective of mandating registered companies to pay 2% of their book profit towards programmes that contribute to the social and environmental development of the country. Specific objectives of this fund are to: Encourage companies to manage their own programmes, impacting the intersection of economic with social and environmental development
Facilitate the contribution of companies to support existing Approved National
Promote a functional community on NGOs with complementary workplans that are relevant to the national development programme The Government of Mauritius has also given the CSR a legal framework,
stipulating that any company making profit is required as per Section 50K and 50L of Income Tax Act to contribute 2% of their book profit after income tax, in compliance with prevailing legislation, to set up a CSR Fund to finance CSR activities, excluding companies holding a Global Business Licence Category 1 under the Financial Services Act, secondly Incomes of banks derived from transactions with non-residents and corporation holding a Global Business Licence, IRS Company and non-resident societe, a trust or a trustee of a unit trust scheme.
Thus, corporate social responsibility is necessarily an evolving term that does not have a standard definition or a fully recognized set of specific criteria. With the understanding that businesses play a key role on job and wealth creation in society, CSR is generally understood to be the way a company achieves a balance or integration of economic, environmental, and social imperatives while at the same time addressing shareholder and stakeholder expectations. CSR is generally accepted as applying to firms wherever they operate in the domestic and global economy. The way businesses engage or involve the shareholders, employees, customers, suppliers, governments, non-governmental organizations, international organizations, and other stakeholders is usually a key feature of
and regulations on social, environmental and economic objectives set the official level of CSR performance, CSR is often understood as involving the private sector commitments and activities that extend beyond this foundation of compliance with laws.
Power cannot be separated from responsibility. For markets to expand in a sustainable way, we must provide those currently excluded with better and more opportunities to improve their livelihoods
From a progressive business perspective, CSR usually involves focusing on new opportunities as a way to respond to interrelated economic, societal and environmental demands in the marketplace. Many firms believe that this focus provides a clear competitive advantage and stimulates corporate innovation.
"More and more companies are accepting corporate citizenship as a new strategic and managerial purpose requiring their attention. Once seen as a purely charitable activitya source of general goodwill, with no bottom-line consequence-citizenship is moving from the margins of concern to the center at leading companies."
CSR is about taking personal responsibility for your actions and the impacts that you have on society. Companies and employees must undergo a personal transformation, reexamine their roles, their responsibilities and increase their level of accountability.
Today, there are many references to corporate social responsibility (CSR), sometimes referred to as corporate citizenship, in our workplaces, in the media, in the government, in our communities. While there is no agreed-upon definition, the World Business Council for Sustainable Development defines CSR as the business commitment and contribution to the quality of life of employees, their families and the local community and society overall to support sustainable economic development. Simply put, the business case for CSR-establishing a positive company reputation and brand in the public eye through good work that yields a competitive edge while at the same time contributing to others--demands that organizations shift from solely focusing on making a profit to including financial, environmental and social responsibility in their core business strategies. Despite
what the phrase corporate social responsibility suggests, the concept is not restricted to corporations but rather is intended for most types of organizations, such as associations, labor unions, organizations that serve the community for scientific, educational, artistic, public health or charitable purposes, and governmental agencies. CSR is generally seen as the business contribution to sustainable development which has been defined as "development that meets the needs of the present without compromising the ability of future generations to meet their own needs", and is generally understood as focusing on how to achieve the integration of economic, environmental, and social imperatives. CSR also overlaps and often is synonymous with many features of other related concepts such as corporate sustainability, corporate accountability, corporate responsibility, corporate citizenship, corporate stewardship, etc.
CSR commitments and activities typically address aspects of a firm's behaviour (including its policies and practices) with respect to such key elements as; health and safety, environmental protection, human rights, human resource management practices, corporate governance, community development, and consumer protection, labour protection, supplier relations, business ethics, and stakeholder rights.
Economic Responsibilities
Historically, business organizations were created as economic entities designed to provide goods and services to societal members. The profit motive was established as the primary incentive for entrepreneurship. Before it was anything else, business organization was the basic economic unit in our society. As such, its principal role was to produce goods and services that consumers needed and wanted and to make an acceptable profit in the process. At some point the idea of the profit motive got transformed into a notion of maximum profits, and this has been an enduring value ever since. All other business responsibilities are predicated upon the economic responsibility of the firm, because without it the others become moot considerations.
Legal Responsibilities
Society has not only sanctioned business to operate according to the profit motive; at the same time business is expected to comply with the laws and regulations promulgated by governments as the ground rules under which business must operate. As a partial fulfillment of the "social contract" between business and society firms are expected to pursue their economic missions within the framework of the law. Legal responsibilities reflect a view of "codified ethics" in the sense that they embody basic notions of fair operations as established by our lawmakers. They are depicted as the next layer on the pyramid to portray their historical development, but they are appropriately seen as coexisting with economic responsibilities as fundamental precepts of the free enterprise system.
Ethical Responsibilities
Although economic and legal responsibilities embody ethical norms about fairness and justice, ethical responsibilities embrace those activities and practices that are expected or prohibited by societal members even though they are not codified into law. Ethical responsibilities embody those standards, norms, or expectations that reflect a concern for what consumers, employees, shareholders, and the community regard as fair, just, or in keeping with the respect or protection of stakeholders' moral rights.
Philanthropic Responsibilities
Philanthropy encompasses those corporate actions that are in response to societys expectation that businesses be good corporate citizens. This includes actively engaging in acts or programs to promote human welfare or goodwill. Examples of philanthropy include business contributions to financial resources or executive time, such as contributions to the arts, education, or the community. A loaned-executive program that provides leadership for a communitys United Way campaign is one illustration of philanthropy.
The pyramid of corporate social responsibility is depicted below. It portrays the four components of CSR, beginning with the basic building block notion that economic performance undergirds all else. At the same time, business is expected to obey the law because the law is society's codification of acceptable and unacceptable behavior. Next is business's responsibility to be ethical. At its most fundamental level, this is the obligation to do what is right, just, and fair, and to avoid or minimize harm to stakeholders (employees, consumers, the environment, and others). Finally, business is expected to be a good corporate citizen. This is captured in the philanthropic responsibility, wherein business is expected to contribute financial and human resources to the community and to improve the quality of life.
In summary, the total corporate social responsibility of business entails the simultaneous fulfillment of the firm's economic, legal, ethical, and philanthropic responsibilities. Stated in more pragmatic and managerial terms, the CSR firm should strive to make a profit, obey the law, be ethical, and be a good corporate citizen.
History of CSR
he CSR concept evolution started with the concerns related to the damage created business operation. Businesses are expected to clean up the mess they have
by
business on environment and society at large by way of activities linked to their generated to the environment. Until the 1980s CSR was considered same as corporate philanthropy. The current CSR concept started formulating in early 80s. In 1980s and 1990s events like Shell spoiling the environment and violating the human rights in Nigeria, started a new wave of criticism which triggered a completely different thinking on CSR and hence many CSR definitions emerged during this period. Customer expectations and demand for clean and green companies have led to a number of benchmarks and guidelines, such as the Sullivan Principles, the UN Global Compact etc. Hence, CSR has continued to evolve rapidly over the last thirty years and companies now all over the world are expected to engage in CSR activities to be recognized as a socially responsible company that not only looks after the interests of itself but also after the interests of the society.
Shareholders:
The first responsibility of the management is to protect the interest of shareholders. The interests of majority of shareholders and large minority of shareholders are generally well protected through either direct participation in the management actions or they have real power to intervene, if necessary. They should be informed about the functioning of the organization adequately and timely.
Therefore, management has a responsibility to provide proper safeguard to the money invested by shareholders.
Workers:
Workers have direct interest in an organization because by working there, they satisfy their needs. Thus, it is the managements responsibility to protect the interest of workers in the organization. This can be done by the management in the
following ways: -
Customers:
Management owes a primary obligation to give a fair deal to the customers. This can be done in the following ways: Customers should be charged a fair and reasonable price. The supply of goods and services should be of uniform Management should not indulge in profiteering, hoarding, or Management should not mislead the customers by false, standard and of reasonable quality. creating artificial scarcity. misleading and exaggerated advertisements.
Management should provide accurate and relevant information to creditors and suppliers. - Payments of price of materials, interest on borrowings, other charges should be prompt.
Government:
It is very closely related with the business system of the country. It provides various facilities for the development of business. Government, no doubt, exercises
control over business, but these controls are meant for overall development of
Management should be a law-abiding citizen Management should pay taxes and other dues fully, timely &
Society:
Organizations exist within a social system and get facilities from the system.
Therefore, they owe obligations to the society as a whole. This can be done by:
Management should maintain fair business policies and practices.
The needs of todays consumers have changed, resulting in a change in their expectations of businesses. Since businesses owe their profits to society, they have to therefore respond to the needs of society. Business is a part of society
Society and business are benefited when there is a symbiotic relationship between the two. Society gains through economic development and the provision of employment opportunities; and business benefits through the workforce and consumers provided by society.
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By being socially responsible, organizations attract less attention from regulatory agencies. This gives them greater freedom and flexibility in their operations. Balance responsibility power of and
Businesses have considerable power and authority. The exercise of this power should be accompanied by a corresponding amount of responsibility. Impact of internal activities of the organization on the external environment
Most firms are open systems, i.e., they interact with the external environment. The internal activities of such firms have an impact on the external environment. To avoid a negative impact
By being socially involved, a company can improve its image and thus protect its shareholders interests. New avenues to create profits
Social responsibility involves the conservation of natural resources. Conservation can be beneficial for firms. Items that had been considered waste earlier (for example, empty soft drink cans) can be recycled and profitably used again. Favorable image public
Through social involvement, a firm can create a favorable public image for itself and endear itself to society. By so doing, a firm can attract customers, employees, and investors.
Businesses have a history of coming up with innovative ideas. Therefore, they are likely to come up with solutions for social problems, which other institutions were unable to tackle.
of a
business
Businesses should make optimum use of the skills and talent of its managerial personnel as well as its capital produce resources good to quality
products and services. By so doing, the business will be able to fulfill their
It is in the interests of business organizations to prevent social problems. Instead of allowing large-scale unemployment to lead to social unrest (which will harm business interests), businesses can be sources of employment for eligible youth.
The main motive of a business is profit maximization. Social involvement may not be economically viable for a business. Excessive costs
When a business incurs excessive costs for social involvement, it passes the cost on to its customers in the form of higher prices. Society, therefore, has to bear the burden of the social involvement of business by paying higher prices for its products and services.
A weakened international balance of payments situation may be created by the social involvement of organizations. Since the cost of social initiatives would be added to the price of the products, the multinational companies selling in international markets would be at a disadvantage when competing with domestic companies which may not be involved in social activities. Increase in the firms power and influence
Businesses are inherently equipped with a certain amount of power. Their involvement in social activities can lead to an increase in their power and influence. Such influence and power may corrupt them. Lack of necessary skills among businesspeople
Businesspeople do not possess the necessary skills to handle the problems of society. Their expertise and knowledge may not be relevant to deal with social problems.
Until a proper mechanism to establish the accountability of businesses is developed, they should not get involved in social activities. Lack of consensus on social involvement
There is no agreement regarding the type of socially responsible actions that a business should undertake.
Conclu sion
Taking into view the recent happenings at Reliance Industries, it can be said that the focus on topics like Ethics And Corporate Social Responsibility is increasing. Nowadays the companies have to keep in view the social benefits of all projects undertaken, they have to keep in mind the well being of the Stakeholders as also issues like the safeguarding of the Environment. These activities are constantly under the microscope of the society.
When a corporate undertakes a new project it has to keep in mind how does it portray its image in the market. Any wrongdoings can be potential pitfalls for the corporates; they have to
be right all the time, any mistake or shortcoming can immediately result in a loss of market share as also reputation. Thus the companies have to continuously Re Evaluate its goals and Objectives and align them with the Corporate Strategy. They can take this opportunity to inculcate proper Business Ethics & Corporate Values in their employees.
Along with the CSR comes the opportunity to convert these social initiatives into tangible results, namely profits. A company should look what amount of value the project can give back to the company. A Social Cost Benefit Analysis can give the company a fair idea about what kind of rewards the initiative can generate for the company. Thus a company can decide on the initiatives taking into consideration these various factors.