CENTRE FOR SUSTAINABILITY MANAGEMENT AND SOCIAL ENTERPRENEURSHIP

STUDY MATERIAL IN

CORPORATE SOCIAL RESPONSIBILITY (CSR)

Dr. MEENA A. GALLIARA

Shri Vile Parle Kelvani Mandals

Narsee Monjee Institute Of Management Studies

Corporate Social Responsibility INDEX

CHAPTER

DESCRIPTION

PAGE NO.

1. 2. 3. 4. 5. 6

Development Scenario Interface between Business and Society Generations of Corporate Social Responsibility Drivers and Responsibility Models of Corporate Social

Typology of Corporate Programmes to promote Corporate Social Responsibility Measuring the Responsibility Impact of Corporate Social

7.

Operationalising Corporate Social Responsibility Some Tips

UNIT 1

MODULE I

LESSON

1*
CORPORATE SOCIAL RESPONSIBILITY: THE GLOBAL CONTEXT
CONTENTS 1.0 1.1 1.2 Aims and Objectives Introduction Globalization and its Impact 1.2.1 1.2.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 1.10 1.11 Economic Impacts Social Impacts

Sustainable Development Role of Business in Sustainable Development Millennium Development Goals India and the MDGS Let us Sum up Keywords Self Assessment Review Questions Suggested Readings

1.0 AIMS AND OBJECTIVES

After studying this lesson, you should be able to: Understand about globalization and its varying economic and social impacts Know the need for integrating the goal of sustainable development into business

1.1

INTRODUCTION

Globalization has increased the volume of world trade and foreign investments. The revolution in technological development has transformed the global economic scenario by reducing the costs of communication, providing easier access to information, and facilitating movement of labour and capital across the globe (ILO, n.d.). The Carnegie Endowment for International Peace defines globalization as, A process of interaction and integration among the people, companies, and governments of different countries, a process driven by international trade and investment and aided by information technology. This process affects the environment, culture, political systems,

economic development and prosperity, and physical human well-being in societies around the world. In the present context, Globalization on one hand is seen as an irresistible and benign force for delivering economic prosperity to people throughout the world and on the other end, it is blamed as a source of all contemporary ills (ILO, n.d., p. 24). The impact of globalization has been varied across regions of the globe (Refer Table 1.1).
Table 1.1 Perceived Impact of Globalization
Regions of the World Africa Perceived Impact Badly hit by globalization because of unfair rules, foreign debts, HIV/AIDS, poverty & migration have aggravated due to poor governance and inability to attract foreign investments to tackle the problems. Overshadowed by war & continuing Arab-Israeli conflict. Dominated by oil exports & migration and the fears for the impact on cultural identity and local traditions. In India and China globalization resulted in poverty reduction, decrease in unemployment, spurred economic growth and industrial productivity. Although not for all more than one billion people (approximately) have seen no reward. In fact globalisation has undermined their traditional livelihoods, social security systems and resulted in increased rural-urban intra -regional inequalities. In Philippines much of the globalization impact was superficial. In fact, it resulted in increased conflict among communities due to liberalization of investments and the capital flows were badly affected by the Asian crises. Volatile global financial markets badly hit the middle class because of inadequate government policies and poor understanding of local conditions by the IMF and foreign banks. Legal and illegal migration also increased to a large extent .On a positive note, it brought about public awareness on issues such as gender inequality, human rights, sustainable development and acceptance of other universal values and ethics. In Russia, there were increased investment flows, expanded export markets and newer opportunities for higher growth. There was thus increased need for enforcement of labour legislations, greater employment generation, reform f the educational system and control of migration. Poland became a part of the European Union to reap the benefits of globalization, but there was large unemployment due to restructuring of industries and the farm sector. Western Europe & North America In Western Europe, liberalization increased trade, capital flows and international competition, but consequently it also increased income disparities. Due to export of jobs to lower-cost countries and higher international tax competition, it resulted in severe restraints on the finance of the welfare state. It also led to the formation of the European Union as a response to the pressures of globalization. In North America, the impact of globalization was more or less positive, except for new pressures on companies to be more competitive, which lead to squeezing wages and corporate mergers, and loss of low skilled jobs to other countries.
Source: ILO Report (n.d.)

Arab & Israeli

Asia

Latin America & the Caribbean

Russia , Poland

1.2 GLOBALIZATION AND ITS IMPACT

The ILO Report identifies economic and social impacts of globalization.

1.2.1 Economic Impacts

Liberalization and expansion of international trade has led to increase in FDI investments which are currently concentrated1 in about ten developing countries1 and has also brought changes in the nature of financial flows by integrating the financial markets2. Globalization has also brought a change in the governance structure of the global financial system with an increase in influence of private actors such as banks, hedge funds, equity funds and rating agencies3. Revolution in information and communications technology and declining transportation costs have resulted in multi country based production of goods and services, which are technically and economically feasible. Production processes are unbundled and located across the globe to exploit economic advantages arising from differences in costs, factor availabilities and the congeniality of the investment climate (ILO, n.d., p. 27). Approximately today there are 65,000 Multi National Corporations (MNCs) with around 8,50,000 foreign affiliates coordinating the global supply chains linking the decentralized production system outside the formal factory system4. The global production system is also pronounced in the service sector where technological advancement has made it possible for services such as software development, financial services and call centers accessible from different countries around the globe. Technology has not only enabled economic globalization but has also helped in increasing connectivity5 among civil societies, governments and individuals. The process of globalization has resulted not only in increased global competition and efficiency but also in building convenient sources of transportation, machinery to churn out goods faster, better communication facilities etc. The key economic characteristics of globalization clearly indicate that though development in global systems have got us closer together economically, the social impacts of globalization across the globe has varied negative impacts.

1.2.2 Social Impacts

Due to globalization, small enterprises have been impacted because of their inability to access capital, credit, information and extension services thereby aggravating the problem of unemployment. With regard to rural and informal economies, unskilled, illiterate and assetless labour remain on the margins, resulting in persistent poverty. Industrial restructuring in the face of competitive global markets and lack of imports have displaced previously protected domestic firms, leading to an increase in the levels of unemployment (Lee et al., 2006). This resulted in loss of jobs as well exploitation of workers rights by various MNCs leading to a reduction in the cost of goods, at the expense of basic access to humane conditions of work (ILO, n.d.). Consequently, this has resulted in widening of income gaps

3 4 5

China; 23.7%; Brazil: 8.3%; Mexico: 8.1%; China, Hong Kong SAR: 7.5%; Singapore: 6.0%; Argentina: 5.6%; Malaysia: 4.0%; Bermuda: 2.7%; Chile: 2.7%; Thailand: 2.2%; Republic of Korea: 2.1%; Venezuela: 1.7%; Remaining 176 developing countries & territories: 25.3% The integration of financial markets after the fall of Bretton Woods system lead to (i) unification of exchange rates, (ii) removal of controls over the allocation of credit in the domestic market, (iii) opening up of capital accounts, (iv) revolution in technology improving the speed of knowledge of foreign markets, (v) development of new financial transactions, and (vi) emergence of new financial instrument: derivatives. The integration of the financial markets resulted in private financial flows and investments from North to South in emerging markets. ibid, p. 34

ILO Report (n.d.), p. 33 Spread of internet, e-mail, low cost telephone services, mobile phones, electronic conferencing

between the rich and the poor leading to large scale income inequality6 within and amongst countries. It is difficult to assess the impact of globalization on poverty. Though people living in poverty have decreased in China, it has increased in Sub-Saharan Africa, Europe and Central Asia (82 million), Latin America (14 million) and the Caribbean (8 million). Relative poverty7 has increased in majority of the countries as an effect of globalization. Due to this, migration (both in-migration & out-migration) has increased across the globe. Migrants from all regions particularly women are driven into an illegal economy in countries of destination leaving them vulnerable to exploitation and trafficking. There has been an increase in illicit cross-border activities like tax evasion, money laundering, sex and drug trades. The fall in transportation costs and growth of mass tourism has made smuggling of people and drugs difficult to detect and punish. The global natural environment has also been affected by globalization because of the following reasons: (i) increase in travel (ii) larger corporations with centralized distribution (iii) poor pollution control mechanisms of MNCs in foreign markets and (iv) extractive industries using natural resources non-judiciously. The problem has further aggravated due to lack of regulations and implementation mechanisms at the national and global levels. Though the increased influence of private institutions has led to better financial resource allocation, it has also led to corporate scandals, manipulations, and over extension of credits to unstable local banks and firms resulting in financial crises of increasing frequency and severity. Private financial institutions are exerting power over emerging markets in designing their economic policies. Globalization has disrupted the ecological balance, thereby creating a (i) carbon-constrained and water-constrained world. This has further created issues relating to sustainable development and poverty, thus giving rise to unprecedented ecological challenges to the world in the 21st century.

1.3 SUSTAINABLE DEVELOPMENT

The challenges of globalization facing humanity are closely intertwined and tend to complicate the solutions for attaining sustainable development. Sustainable development being one of the greatest global challenges in this era has not escaped worldwide notice. Political and business leaders at the international and national levels are stressing the need for global sustainable development. The primary objective of sustainable development is to reduce absolute poverty of the world's poor by providing lasting and secure livelihoods that minimize resource depletion, environmental degradation, cultural disruption and social instability (WCED, 1987). Sustainable development is defined by the Brundtland Commission8 as Development that meets the need of the present without compromising the ability of future generations to meet their own needs (WCED, 1987, p. 8).

1.4 ROLE OF BUSINESS IN SUSTAINABLE DEVELOPMENT

6
7 8

The UN Human Development Report 2006 estimated the Gini Index an indicator of income inequality
for India to be 32.5 in 2000. Relative Poverty is defined in relation to the overall distribution of income or consumption in country. The Brundtland Commission, formally the World Commission on Environment and Development (WCED), known by the name of its Chair, Gro Harlem Brundtland, was convened by the United Nations in 1983. The commission was created to address growing concern "about the accelerating deterioration of the human environment and natural resources and the consequences of that deterioration for economic and social development." In establishing the commission, the UN General Assembly recognized that environmental problems were global in nature and determined that it was in the common interest of all nations to establish policies for sustainable development.

Responsible business has always contributed for societal development. Statistics reveals that FDI from the private sector into developing countries collectively has exceeded the amount of financial aid granted by governments9 (World Bank Institute, 2005). Looking from this macro perspective, the private sector has already contributed to the reduction of poverty at the global level during the past decade. However the challenges of sustainable development in the new millennium are a new imperative for governments, businesses, and society to collaborate and work to strengthen each sector and create a qualitatively better world to live in. As per the United Nations, the World Bank and other international organizations FDI investments by private companies should enhance a process of sustainable growth that minimizes the damaging effects on the environment. To quote Maurice Strong, Secretary General of the World Summit, We now face the ultimate management challenge, that of managing our own future as species (Lawrence et al., 2005, p. 212). Todays world is interdependent where problems of poverty, unemployment, inequality, environmental degradation and social integration are causes of concern because they have an impact on society thereby impacting businesses worldwide. If business has to develop, society needs to be developed. Business cannot flourish in any country if the environment required by business is not conducive. Social upheavals impact the entire society in general and business in particular because to a large extent business is dependent on society for its growth and prosperity. The Government alone cannot deal with the issues of sustainable development. Collaborative partnership amongst governments, businesses and civil societies is the call of the day. It is therefore essential to take the agenda of developing collaborations to address the issues of sustainable development and poverty in the new millennium. In September 2000, world leaders belonging to the government, businesses and NGOs in the gathering at the United Nations adopted eight specific, measurable, time-bound targets called the Millennium Development Goals (MDGs) to address issues of inadequate incomes, widespread hunger, gender inequality, environmental deterioration, lack of education, healthcare and clean water( UNDP, 2006).189 United Nations member states and at least 23 international organizations have agreed to achieve MDGs by the year 2015. The Millennium Declaration of MDGs emphasizes the efforts to be taken by developing countries, and the contribution that developed countries should make through trade, development assistance, debt relief, access to essential medicines and technology transfer. By signing the Millennium Declaration, companies are committing to take action through their core business in enhancing growth and help to meet the MDGs. Thus, based on these MDGs, companies CSR policies have been framed.

1.5 MILLENNIUM DEVELOPMENT GOALS

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

In 2004, nation states invested 50 billion dollars; business spent more than 100 billion on building factories, offices, shops and acquiring shares of foreign companies based in developing countries.

Table 1.2: Millennium Development Goals

Goal 1: Target 1: Target 2: Goal 2: Target 3: Goal 3: Target 4: Goal 4: Target 5: Goal 5: Target 6: oal 6: Target 7: Target 8: Goal 7: Target 9: Target 10: Target 11: Goal 8: Target 12: Eradicate extreme poverty and hunger Halve, between 1990 and 2015, the proportion of people whose income is less than $1 a day. Halve, between 1990 and 2015, the proportion of people who suffer from hunger Achieve universal primary education Ensure that, by 2015, children everywhere, boys and girls alike, will be able to complete a full course of primary schooling Promote gender equality and empower women Eliminate gender disparity in primary and secondary education preferably by 2005 and in all levels of education no later than 2015 Reduce child mortality Reduce by two-thirds, between 1990 and 2015, the under-five mortality rate Improve maternal health Reduce by three-quarters, between 1990 and 2015, the maternal mortality ratio Combat HIV/AIDS, malaria, and other diseases Have halted by 2015 and begun to reverse the spread of HIV/AIDS. Have halted by 2015 and begun to reverse the incidence of malaria and other major diseases. Ensure environmental sustainability Integrate the principles of sustainable development into country policies and program and reverse the loss of environmental resources. Halve, by 2015, the proportion of people without sustainable access to safe drinking water and basic sanitation Have achieved, by 2020, a significant improvement in the lives of at least 100 million slum dwellers Develop a global partnership for development Develop further an open, rule-based, predictable, non-discriminatory trading and financial system (includes a commitment to good governance, development, and poverty reductionboth nationally and internationally). Some of the indicators listed below will be monitored separately for the least developed countries, Africa, landlocked countries, and small island developing states. Address the special needs of the least developed countries (includes tariff-and quotafree access for exports enhanced program of debt relief for HIPC and cancellation of official bilateral debt, and more generous ODA for countries committed to poverty reduction) Address the special needs of landlocked countries and small island developing states (through the Program of Action for the Sustainable Development of Small Island Developing States and 22nd General Assembly provisions) Deal comprehensively with the debt problems of developing countries through national and international measures in order to make debt sustainable in the long term.

Target 13:

Target 14:

Target 15:

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

1.6 INDIA AND THE MDGS

With impressive gains in improving primary education enrollment rate, promoting gender equality and increasing forest cover, the country's lackluster performance in reducing overall poverty and health indicators has dragged down the performance of the overall South Asian region. (See Box 1.1 & Table 1.2 below) Box 1.1

Source: Asia - Pacific Regional MDG report 2011-12

Table 1.2 Indias progress on the MDGs for 2015

Target No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. Target Description Halve, between 1990 and 2015, proportion of population below national poverty line Halve, between 1990 and 2015, proportion of people who suffer from hunger Ensure that by 2015 children everywhere, boys and girls alike, will be able to complete a full course of primary education Eliminate gender disparity in primary and secondary education, preferably by 2005, and in all levels of education no later than 2015 Reduce by two-thirds, between 1990 and 2015, the under-five mortality rate Reduce by three quarters, between 1990 and 2015, the maternal mortality ratio Have halted by 2015 and begun to reverse the spread of HIV/AIDS Have halted by 2015 and begun to reverse the incidence of malaria and other major diseases Integrate the principles of sustainable development into country policies and programmes and reverse the loss of environmental resources Halve, by 2015, the proportion of people without sustainable access to safe drinking water and basic sanitation By 2020, to have achieved, a significant improvement in the lives of at least 100 million slum dwellers In cooperation with the private sector, make available the benefits of new technologies, especially information and communication Progress Signs

Source: UNDP in India

 : Moderately/almost nearly on track considering all indicators : Slow/almost off-track considering all indicators : On-track or fast considering all indicators

Poverty

India, compared to most nations in the Asia Pacific, has made very slow progress in eradicating poverty over the period of 10 years, according to the Asia - Pacific Regional MDG report 2011-12. Malnourishment is also an indicator of food insecurity. In 1990, when the MDGs were formulated 53.5 percent of all Indian children were malnourished. Since then, progress has been slow. In India, the proportion of underweight children below three years has declined by only one percent between 1998-99 and 2005-06 to 46 percent. It is estimated that malnourishment could decline to 40 percent by 2015. This would still be below the target of reducing malnourishment to 28.6 percent. In the present context, the well-being of the average citizen is a measure of development. According to the Human Development Report 2011, the human development index (HDI) positions India at 134 out of 187 countries and territories. Bangladesh and Pakistan are ranked at 146 and 145, respectively. On the Multidimensional Poverty Index (deprivations such as in health, education and living standards) 53.7 per cent Indians have been placed in the bracket of multidimensionally poor (612 million), the largest concentration of such poor persons in the world. Education

India is on-track and ahead of targets that relate to universalizing primary education in India. Gross Enrolment Rates for both girls and boys in 2006-07 crossed 100 percent. Empowerment of Women

Government of India MDG Report 2009 notes, participation of women in employment and decision-making remains far less than that of men, and the disparity is not likely to be eliminated by 2015. The labour market openness to women in industry and services has only marginally increased from 13-18 percent between 1990-91 and 2004-05. Infant Mortality

Indias Under Five Mortality (U5MR) declined from 125 per 1,000 live births in 1990 to 74.6 per 1,000 live births in 2005-06. U5MR is expected to further decline to 70 per 1,000 live births by 2015. This means India would still fall short of the target of 42 per 1,000 live births by 2015. In view of these statistics, child survival in India needs sharper focus. This includes better managing neonatal and childhood illnesses and improving child survival, particularly among vulnerable communities.

Maternal Mortality

From a Maternal Mortality Rate (MMR) of 437 per 100,000 live births in 1990-91, India is required to reduce MMR to 109 per 100,000 live births by 2015. Between 1990 and 2006, there has been some improvement in the Maternal Mortality Rate (MMR) which has declined to 254 per 100,000 live births as compared to 327 in 1990. However, despite this progress, India is expected to fall short of the 2015 target by 26 points. Safe motherhood depends on the delivery by trained personnel, particularly through institutional facilities. However, delivery in institutional facilities has risen slowly from 26 percent in 1992-93 to 47 percent in 2007-08. Consequently, deliveries by skilled personnel have increased at the same pace, from 33 percent to 52 percent in the same period. By 2015, it is expected that India will be able to ensure only 62 percent of births in institutional facilities with trained personnel. Thus, universal coverage remains to be achieved. HIV- AIDS

India has made significant strides in reducing the prevalence of HIV and AIDS across different types of high risk categories. Eighty-six percent of transmissions of HIV and AIDS in India are caused by sexual activity. Much of this decline can be attributed to greater awareness and increasing condom use. Adult prevalence has come down from 0.34 percent in 2007 to 0.45 percent in 2002. Malaria

Malaria, both in terms of prevalence and death has declined. Malaria diagnosis has declined from 1.745 percent in 2005 to 1.52 percent in 2009. Further, malaria prone states such as the north- eastern states, Gujarat, Karnataka, Madhya Pradesh, Maharashtra, Orissa, Rajasthan and West Bengal have recorded fewer malaria deaths since 2006. Tuberculosis

India accounts for one-fifth of the global incidence of tuberculosis (TB), but India has made progress in halting its prevalence. Treatment success rates have remained steady at 86-87 percent over the last five years and prevalence of TB has steadily declined. Environmental Sustainability

India has made some progress towards the Seventh Millennium Development Goal of ensuring environmental sustainability. Forest cover has increased to 21.02 percent and protected areas cover to about 4.83 percent of the countrys total land area. Reducing the energy intensity of GDP growth through higher energy efficiency will be the key to achieving energy security.

India is on-track in achieving the MDG target for sustainable access to safe drinking water. The overall proportion of households having access to improved water sources increased from 68.2 percent in 1992-93 to 84.4 percent in 2007-08. However India, which is one of the most densely populated countries in the world, has not recorded similar progress in improving sanitation facilities over the last decade. The proportion of households without toilet facilities declined from 70 percent in 1992-93 to about 51 percent in 2007-08. At current progress, the country is unlikely to achieve the target of reducing the proportion of households having no access to sanitation to 38 percent by 2015. The rural urban gap in access and use of sanitation facility continues to be very high. Sixty-six percent of rural households do not have toilet facilities as against 19 percent of urban households in 2007-08. Goal 8 of the MDGs is unique in the sense that it essentially focuses on donor government commitments and achievements, towards developing the global partnership for development. Most of the objectives and targets under the goal are set for developed countries to achieve a global partnership for development by supporting fair trade, debt relief for developing nations, increasing aid and access to affordable essential medicines, and encouraging technology transfer. The Twelfth Five-Year Plan (2012-2017) proposes specific targets to achieve MDGs. The Government has launched several large programmes with regard to the MDGs. The areas that require redoubled efforts include literacy, nutrition, maternal mortality and child mortality. In India, the work of the UN entities on the Millennium Development Goals takes place within the framework of the: 1. UN Development Assistance Framework the overarching policy document for UN country assistance to India. The UNDAF is implemented under a five-year cycle, in harmonization with the Government of Indias Five Year Plans the overarching policy document for development planning in the country. 2. National Development Goals articulated in the Government of Indias Five Year Plans (Refer Table 1.3) The new UNDAF (2013-2017) cycle and 12th Five Year Plan (2012-2017) implementation overlap fully with the remaining period left to achieve the MDGs.

1.7 LET US SUM UP

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

1.8 KEYWORDS
Globalization: Integration and interaction between people, companies and governments of different countries Sustainable Development: Balancing the present needs and future needs Millennium Development Goals: Eight internal goals that members of UN and other organizations have agreed to achieve till 2015 Corporate Social Responsibility: A form of self regulation integrated into business

1.9 SELF ASSESSMENT

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

Globalization impacts: (i) (ii) (iii) (iv) Cultures Environment Political systems All of the above

(c)

Which one of these is one of the economic impacts of globalization? (i) (ii) (iii) (iv) Increase in FDI Expansion of production facilities Increased global competition Decrease in local competition

(d)

Sustainable development calls for minimizing: (i) (ii) (iii) (iv) Resource depletion Environmental degradation Current demands Social instability

(e)

Which of these is not a MDG? (i) Promote education (ii) Reduce gender inequality (iii) (iv) Reduce child labour Reduce infant mortality

1.10 REVIEW QUESTIONS

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

Answers: Self-Assessment
1. 2. (a) True (a) iv (b) True (b) iv (c) True (c) iv (d) False (d) iii (e) False (e) iii

1.11 SUGGESTED READINGS

International Labour Organisation. (n.d.). www.ilo.org/public/english/wcsdg/docs/rep2.pdf Globalization and its Impact. Available at

Lawrence, A., Weber, J., & Post, J. (2005). Business and Society. Singapore : McGraw-Hill. Lee, E. & Vivarelli, M. (2006). The Social Impact of Globalization in the Developing Countries. Institute for the Study of Labor. Available at http://ftp.iza.org/dp1925.pdf. Planning Commission Government of India. (2008). The Planning Commission. Eleventh Five year Plan 2007-2012, Volume I Inclusive Growth. New Delhi: Oxford University Press. Available at http://planningcommission.nic.in/plans/planrel/fiveyr/11th/11_v1/11th_vol1.pdf. Planning Commission Government of India. (2008). The Planning Commission. Eleventh Five year Plan 2007-2012, Volume II Social Sector. New Delhi: Oxford University Press. Available at http://planningcommission.nic.in/plans/planrel/fiveyr/11th/11_v2/11th_vol2.pdf. The World Bank. (2005). World Development Report: A Better Investment Climate for Everyone. Washington, DC: The World Bank and Oxford University Press. Available at http://siteresources.worldbank.org/INTWDR2005/Resources/complete_report.pdf. United Nations Development Programme. (n.d.). About the MDGs: Basics. Millennium Development Goals. Available at http://www.undp.org/mdg/basics.shtml

United Nations Documents. (1987). Report of the World Commission on Environment and Development: Our Common Future. Oxford: Oxford University Press. Available at http://www.un-documents.net/wcedocf.htm.
UNDP. (n.d.). The Millennium Development Goals 2015. Retrieved from http://www.in.undp.org/content/india/en/home/mdgoverview.html

Chapter II Interface between Business and Society

Objectives

a) To review the process of contribution of business in the field by social development. b) To examine the difference between the old and new concept of corporate social responsibility (CSR). Chapter Outline

Merchant Charity to Corporate Citizenship. Social Responsibilities of Business. Post Liberalization and its impact on Social Development. Main Motive for Recognizing Community as Stakeholder.

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)

2.1

First Phase-Merchant Charity

The concept of parting with a portion of ones 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. Charity10 or daanam was an ingrained part of the merchants 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 philanthropy11 along with continuation of contribution to older forms of charity. In the period 1850-1914 the period 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. 2.2 Role of Business Leaders

The credit for bringing social responsibility into business communitys 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, Gandhijis 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 Gandhis 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 Bhaves work had the backing of the very political leaders who had opposed the idea of Gandhijis 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
10

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. 11 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.

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 trusteeship12 of wealth. They contributed liberally to his programmes for removal of untouchability, womens 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 nonbusiness purposes. 2.4 Third Phase- Declaration of Social Responsibilities of Business

The next shift came in the 1960s, which ushered in an era of economic and political troubles and saw the business community operating under several constraints. Jai Prakash Narain carried Vinobas 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.

12

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.

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. 2.5 Fourth Phase- Managerial Trusteeship

The 70s 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 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 countrys 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.13 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 selfinterest 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 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 AsAnna (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
13

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.

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 activities14 2.6 Fifth 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 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 governments Integrated Rural Development Programme projects. The level of funding from their parent

14
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.

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 products 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: 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 Development in the West

In Western usage, charity is specifically directed towards the poor and meeting their immediate needs. The philanthropic impulse is as old as recorded history. In many ancient societies, including those of Greece and Rome, the breakup of self-supporting kinship groups caused by urbanization led to the institution of state-sanctioned measures to aid the infirm, the poor, and the disadvantaged. During the Middle Ages in Europe, an elaborate network of almshouses, hospitals, and orphanages was supported by donations from the rich and by church collections. Charity is deeply rooted in American culture. Philanthropy on the other hand includes a wide range of private giving for public purposes which increases the well being of a community, and which are not necessarily directed at the poor (Ostrower F,1995). The credit for initiating new development in business philanthropy in the West goes to Andrew Carnegie who made millions from steel and coal. In an article Wealth published in the North American review in 1889, which came to be known as the Gospel of Wealth, Carnegie argued, that no system could maintain complete equality between the drones and the bees. Private wealth was necessary for achieving the best in literature, arts and other refinements of civilization, and that differential reward was necessary for progress. He further stated that it was true that capitalists reaped far more than they had sown and therefore owed it to society to return the surplus wealth, which was not there due. Carnegie believed that businessmen should act as mere trustees and agents for their poor brothers, bringing to their service their superior wisdom, experience and administrative ability, doing for them better than they could do for themselves (Masani, 1956). Several others shared Carnegies views, among them was Frederick Harrison, the famous essayist and philosopher of 19th century. Inspired by them the new generation of wealthy elite thus began to explore new modes of charitable action, which went beyond palliative action. John D. Rockfeller, gave away a tenth of his income even when he was a clerk in Cleveland and transformed Standard Oil from the greatest wealth creating machine in the world into the greatest charity dispensing machine in history (Economist 1998). The instrument through which the new intentions were translated into practice was the endowment or charitable foundation. Mrs. Russell Sage, Carnegie and Rockefeller pioneered the concept of arms length philanthropy. Professionals other than the owners of wealth administered this. Till late 19th century British and American individuals interpreted the obligations of the wealthy to include donation of both time and money. But with the institutionalization of philanthropy in to foundation, the obligation of personal

involvement was transformed into monetized and bureaucratic philanthropy. Altruism became organized, professionalized and programmed (Nielson, 1985). By 1940 twelve of the thirteen families in control of 200 of the nations largest non-financial corporations had their own foundations. Pure altruism was not the only motive for philanthropy by the early capitalists, or robber barons as they were contemptuously called. There were other more selfish reasons: to save their property from expropriation and taxes and to burnish their reputations. But, in the process, they contributed much to American society, and even to humanity worldwide. It is today acknowledged that no institution in the US private sector has had a greater impact on society, especially on research and development, than the foundations (OConnell, 1987). With the growth of corporate enterprise the relationship between business and society entered a new phase. Philanthropy of corporations was born from the concept of social responsibility of business. As Morrel Heald (1970) has observed, The spirit of charity and service did not die with the rise of business Corporation although institutionalization and talk of return on investment may have obscured the fact. 2.8 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 Indias 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 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. 2.9 New Relationship

Globalization entails a new kind of relationship - a new balance - between business, government, and society. World-class business now accepts its responsibility both to mitigate these and other impacts, which are negative and proactive, and turns them to business and social advantage wherever possible. In order to translate this mandate the Prince of Wales in February 1990 initiated a business leader forum (PWBLF). The PWBLF is an international network of business leaders who recognize the long-term benefits of good corporate citizenship and sustainable development. The PWBLF is supported by international business from Europe, North and South America and Asia and is registered in the U.K. as an international educational charity. Similarly Forum for the Future is a sustainable development charity with a mission to promote best practice for sustainability and accelerate policy implementation towards sustainable development. The forum works in close partnership with major U.K. and international businesses to generate a strategic understanding of the business opportunities and threats, implicit in the now universally accepted imperative to make development sustainable, in other words to embed environmental sustainability and social development in processes of wealth creation. In India too we have organizations like Centre for Corporate

Philantrophy in Mumbai, Business Community Foundation, Action Aid, Center for Advancement of Philanthropy in New Delhi, who are working in close partnership with the corporates to make them more socially responsible. 2.10 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 advantage15. 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 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.

15
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.

2.11

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 stakeholder16 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 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 Tatas Birlas, Mafatlals 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).

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

16

2.12

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 emergence of an organized voluntary sector and a changing intellectual climate within companies. 2.13 Key Terms

1) Trusteeship 2) Charity 3) Philanthropy. 2.14 Select appropriate answer

(1) The Trusteeship idea was propagated by a) b) c) d) M.K.Gandhi Vinobha Bhave Jawaharlal Nehru Sonia Gandhi.

(2) The stakeholders in business are a) b) c) d) Government and Communies Employees and Consumers. Shareholders All of the above.

(3) Corporate Citizenship means a) b) c) d) Philanthropy Charity Trusteeship None of the above.

(4) Globalization entails a new kind of relationship between a) b) c) d) State and Center One Country with another Business government and society None of the above. Questions for Study

2.15

(1) Discuss how business responded to social development in the past. (2) Discuss what is Corporate Citizenship (3) Discuss the benefits a company would derive from community development activities. (4) What is the difference between old and new concept of CSR? 2.16 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

Chapter III GENERATIONS OF CSR

Objective 1) To study the growth of CSR over the generations. 2) To study the different perspectives of CSR.

Chapter Outline Generations of CSR Definitions of CSR Social Responsibility Debate Social Responsibility Theories Related economic and social responsibility concepts

3.0

INTRODUCTION

Thus contrary to popular belief CSR is not a product of 1990s mismanagement and guilt, but has studied as far back to 1950s. CSR was borne out of re-examination of the nature of the relationship between business, society and governments. Whilst the primary role of business is to produce goods and services that society needs, there is also interdependence between business and society in the need for a stable environment. Increasingly, up to 1970 the understanding of CSR largely concentrated on companies obligation to work for social betterment. However, at the start of the 1970s there was distinct change towards social responsiveness-in other words the capacity of organizations to respond to social pressures. This movement in effect characterized a change from a more philosophical approach to one that clearly focuses on managerial action. With the change in the managerial approach CSR has now developed and become more mainstream and leadership companies have become more focus and at each stage there are restrictions and contradictions imposed by a limited approach to CSR which had led them to become more ambitious in tackling issues in a more strategic and integrated way.

Simon Zadek (2001) describes the development of CSR broadly in terms of three generations. 3.1 The first generation of CSR showed companies can be responsible in ways that do not detract from, and may contribute to commercial success. It is the most traditional and widespread form of CSR and is most often manifested as corporate philanthropy. It rose to heights in 1990s when huge amount of money being by individuals such as Ted Turner and Bill Gates. It is not part of the main business of the company but may add commercial value through reputation enhancement. Corporate philanthropy is the practice of companies of all sizes and sectors making charitable contributions to address a variety of social, economic and other issues as part of their overall corporate citizenship strategy. Historically, many businesses have played a significant role in their local communities by providing financial support to a variety of nonprofit organizations and charitable causes. In recent years, several events and trends have contributed to companies changing the way they approach their philanthropy. The most prominent changes include: Adoption of a strategic approach to philanthropy, in which companies align charitable giving with the companys core business interests; Expansion of the geographic focus of corporate giving to reflect the needs and expectations of a global workforce and customer base; Development of measurement tools for evaluating the impact of charitable contribution; Innovation in the ways companies incorporate greater stakeholder participation in philanthropic activities, create long-term relationships with nonprofit organizations, and organize their philanthropic programs.

3.2 The Second Generation is now developing where companies, and whole industries, see CSR as an integral part of long-term business strategy. Now, a days lots of companies are taking CSR seriously for good of business. Leadership by pioneering companies and business leaders, or as Elkington has termed them Citizen CEOs has been crucial in moving companies towards second generation CSR. The business level of strategy and goal setting addresses the issue of how should a firm compete in a given business? The business level pertains to how the organization should tactically behave in order to survive and prosper in the market that it has chosen to enter. The natural hierarchy of goals and strategies becomes obvious. An organization does not set goals and strategies in isolation, but through a process of careful planning and integration of the organization into the larger environment and interactions among its subdivision. Proper management requires optimal coordination and integration.

3.3 A Third Generation of CSR is needed in order to make a significant contribution to addressing poverty, exclusion and environmental degradation. This will go beyond voluntary approaches by individual companies and will involve leadership companies and organisations influencing the market in which they operate and how it is regulated to remould whole markets toward sustainability. This will need to involve both partnerships with civil society and changes in public policy, which both reward CSR and penalize poor performance. This could include changes to the corporate tax regime, mandatory social and environmental reporting and support for consumer education. However, all of the above issues raise many contentious and unanswered questions regarding the parameters of responsibility of a company. Where should lines be drawn between corporate, public, and civil society actors in terms of their responsibility to deliver the public good? Whether the market is able to shift in line with leading CSR companies, or whether these leading lights will be priced out of a market. In essence, what is required is an understanding of the pathway towards Third Generation CSR that achieves societal as well as business development. To achieve mutual strategic development, a clearer understanding is required of the conditions upon which newly emerging partnerships, as that between the business, are based and that they face up to the challenges brought by critics of CSR. However, it must be concluded that at present third generation CSR is mostly a vision.

3.4

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. 1) 2) 3) 4) 5) 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. 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 Bowens 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. 3.5 The Social Responsibility Debate

The discussion of the appropriateness and meaning of social responsibility continues. This debate is treated in two ways in this chapter: through a listing of the arguments for and against social responsibility, and through a summary of the theories used to represent the variety of views toward social responsibility. 3.6 The Case For Involvement

There are many arguments in support of business involvement in society, that is, in support of the social responsibility or social responsiveness of business. These arguments are summarized below. (1) Business should operate in such a way as to fulfil the public needs, or expectations. It should do so for a very pragmatic reason: it is believed in some quarters that business functions by the consent of society and therefore must be sure to satisfy the needs of society. In other words, the existence of the business enterprise system depends on its acceptance by society. If business is to prevent criticisms or mutinous behaviour, it must be receptive to what is happening in society and respond in some way. (2) A social responsibility role should be undertaken in order to prevent some public criticism and discourage further government involvement or regulation. This is a defensive approach designed to offset possible government action against those in the business system who uses their power irresponsibly. The threat of nationalization of business enterprises is sufficient to motivate some businesses to become involved in social responsibility endeavours.

(3) Business must realize that society is a "system" of which corporations is a part, and that the system is interdependent. Therefore, if business institutions interact with others in society, there is a need for social participate in the complex system that exists in society. There are many

involvement along with increasing interdependence comes the need to mutual involvements among individuals, groups, and organizations in society, or among subsectors of society. Business is vulnerable to the actions or events that occur in other subsectors. (4) Social responsibility is in the stockholder's interest that is, being socially responsible will simply be profitable especially in the long term. A poor social responsibility role on the part of the corporation means poor management to some investors. They view failure to perform in society's interest in much the same way as they view the corporation's failure to perform in financial matters. Business must realize that social problems can become opportunities, or can lead to profits. Expenditures on pollution abatement may result in the retrieval of materials that were formerly disposed of as waste, or may allow for equipment to operate more efficiently, therefore generating more profits on future operations. With regard to social responsibility matters, business should take a long run as opposed to a short run view. Profits may increase in the long run as a result of actions taken at the present time. Judging the benefits of social responsibility becomes a simple matter of ascertaining whether or not it is in the corporation's longest term self interest to be conscious of social responsibility matters. Business enterprises must be concerned with the public image and the good will generated by responsible social actions. Business should be given an opportunity to solve some social problems. The logic behind this argument is that business can solve problems as well as government can and that it certainly cannot do any worse than government has in the past: business possesses the expertise, in its managers and executives, to develop plans to overcome social problems.

(5)

(6)

(7)

(8)

(9)

(10) Preventing is better than curing. It is better to take a proactive stance than a reactive one. (11) Businesspeople are also concerned citizens and humans who are interested in social matters. It is not appropriate for them to ignore social matters.

3.7

The Counterargument

Friedman (1970) argued that the successful functioning of our society depends on the role specialization of its institutions (or systems). According to him the corporation is an economic institution and thus should specialize in the economic sphere; socially responsible behaviour will be rectified by the market through profits. In Friedmans (1970) view business has only one social responsibility and that is to maximise the profits of its owners (to protect their property rights). Organisations are seen purely as legal entities incapable of value decisions. A manager who uses a firms resources for non-profit social purposes is thought to be diverting economic efficiency and levying an illegal tax on the organisation. Although there are several arguments for social involvement by business corporations, there are many arguments against business social involvement, including the following. (1) Profit maximization is the primary purpose of business and to have any other purpose is not socially responsible. To have other than a profit maximizing goal is to sabotage the market mechanism and distort the allocation of resources. Generally then, it is contrary to the basic function of business to become involved in social matters. It should not be forgotten that business is an economic institution, not a social one, and its only responsibility is to manage efficiently within the law. The company would be irresponsible if it did not pursue profits and operate in the efficient market. (2) Business corporations are responsible to the shareholders and, in effect, have no authority to operate in the social area. When a corporation becomes involved in social matters, there is a question of legitimacy. Even if corporations are sufficiently competent and powerful to bring about social changes in matters considered beyond the range of their immediate involvement, there is a real question as to whether such endeavours are appropriate. (3) Social policy is the jurisdiction of governments, not business. (4) Business lacks training in social issues, and lacks social skills necessary to carry out social programs. In other words, business is not competent to undertake social responsibility tasks. (5) Social responsibility is viewed by some as another excuse to let big business increase its power. The increase in power comes as a result of business becoming involved in social as well as economic matters. Imposing business values on social issues may lead to inappropriate domination: Business already has sufficient power, and it would be inappropriate to extend that power to other matters.

(6) Business involvement in social matters increases costs not only costs to the organization but possibly even social costs instead of decreasing them. This in turn may lead to business failures. (7) There is no acknowledged source of reliable guidance or policy for business in social responsibility questions, and it is not easy to make the choice between responsible and selfish action in social issues. Social responsibility is an elusive concept for which few standards are available to evaluate and control the actions of corporations. (8) As institutions in society, business corporations cannot be held accountable for their actions in a way sufficient to satisfy demands for social involvement. Institutions involved in social matters should be accountable to society for that involvement. At the present time, there are few mechanisms available to ensure business corporations are accountable for their social actions. (9) There is divided support in the business community for social involvement and as a result there is unlikely to be a very satisfactory treatment of social issues by business. These listings summarize the reasons for and against corporations assuming social responsibility for their activities. The following section also addresses this debate but from a different perspective, summarizing the different corporate social responsibility theories that exist. 3.8 Social Responsibility Theories

Klonoski (1991, p. 16) sets out to address a fundamental question: "Does business and the corporation have a social nature, or not?" The answer given by any stakeholder can be associated with a theory of corporate social responsibility, and these theories fall into three categories: amoral, personal, and social. Table1 on the next page lists the categories and briefly describes the theories in each . The Amoral View This category represents a traditional view of business and the role of the corporation, that is, the corporation is seen as "highly individualized rights bearing economic entity designed for profit making and legitimatized by the laws governing incorporated businesses" (Klonoski, 1991, p. 16). Free market defenders and legal recognition theorists are among those holding this view

including some who believe there is no such thing as corporate social responsibility. The "amoral" view should be carefully defined and not confused with an "immoral" view. Amoral refers to an activity without a moral quality, that is, something that is neither moral nor immoral: moral standards, restraints, or principles do not exist. This is quite different from immoral, which denotes activities that are not moral and do not conform to usually accepted or established patterns of conduct. Amoral means lacking in morals, good or bad, while immoral connotes evil or licentious behaviour. Although in some contexts being amoral is considered as reprehensible as being immoral, that is not the position taken by most advocates of the theories listed in this category. 3.9 The Personal View

This view discusses the nature of the corporation in ascertaining whether or not it can be held accountable. The question involved is whether corporations are "moral agents" or "full fledged" moral persons. This question has been extensively discussed in the literature and Klonoski (1991) provides a brief summary. Those arguing that corporations are persons claim that corporations are responsible for their actions in a way comparable to the actions taken by natural persons or individuals. Therefore, the corporation can be morally blamed in a way identical or very similar to natural persons. Goodpaster and Matthew (1982) pose the question "Can a corporation have a conscience?" in a Harvard Business Review article, and conclude that conscience can reside in the organization. Others supporting the view that corporations should be considered as persons and be held morally responsible include French (1979), DeGeorge (1990), Hoffman and Frederick (1986), and Donaldson (1985).

Table 1 Summary of the Corporate Social Responsibility Debate Alternate View of the Corporation AMORAL Fundamentalism LEGAL RECOGNITION Functionalism The corporation has no or very little social responsibility The corporation is an autonomous entity and not the creation of society Groups in society should not encroach on each other's provinces of behaviour. Corporations can be socially responsible, but only within the limits of a prior contractual agreement with stockholders. Beyond individual agreements, corporations are not ethically required to be socially responsible; they are responsible only to monies and to maximize profits. The role of the corporation determines its responsibilities Corporations are collectives that act as individuals; they exist as legal persons and can be held responsible for their actions. An implicit social agreement exists between business and society that determines the social nature of the corporation, identifies its duties and rights, and is considered to be an evolving document. Theory Description

Individual Agreement

Traditional Stockholders Model

Role-Based Approach PERSONAL Moral Person/Moral Agents

SOCIAL

Social Contract

Ideological/Histo rical

Society evolves and history gives rise to new social needs, societal demands, and changes in social values to which business is expected to contribute. There is a social responsibility function of the interrelationships developed by the corporation with groups that have a stake. Also referred to as "constituency theory." The corporation is a creature of law, existing only in contemplation of law, and is thus made by society for the common good of society. A similar view is referred to as "legal framework." Society can legitimately demand that the corporation do certain kinds of activities and if the corporation is harming the public good, can restrict or eliminate its activities. With the charter, corporation becomes a legal entity with standing as a citizen similar to that of the individual and has duties as well as rights and privileges. Corporations legitimize themselves as common property with responsibilities expected to extend to the common good. The corporation as a privately held good should be used in a socially responsible way because it is also public or common property. Business has the power to change society and must consider social responsibilities. Business is so intertwined with society that it cannot avoid social responsibilities.

Stakeholder

Legal Creator

Social Permission

Corporate Citizenship

Property-Based

Social Impact

Interpenetration

Moral Gratitude/ ReciprocityBased

As business operates within a social system, it should be socially responsible out of "gratitude" or have a moral responsibility to "reciprocate." Corporations benefit from and thus owe society. It is to the benefit of society or for the greatest good for the greatest number of people that corporations are socially responsible; social responsibility is in business's best interest. This view focuses on the development of good or morally virtuous people instead of principles or contracts. A morally responsible business is one in which good people make decisions based on generally developed moral character, self discipline, moderation, hard work, courage, creativity, good humour, and intelligence.

Utilitarian

Virtue-Based

SOURCE: Summarized from Richard J. Klonoski. (1991, July/August). Foundational considerations in the corporate social responsibility debate. Business Horizons, pp. 916.

A strong counterargument in the literature claims that corporations are not persons (Gibson, 1986; Danley, 1990; Velasquez, 1990). Supporters of this view argue that it is not possible to impose moral sanctions or punishments on corporations as corporations. It is possible to blame or punish the people who work for or manage the corporation but not the corporation itself. The debate over whether or not the corporation can be seen as a moral person does not provide an answer as to whether or not the corporation is a social institution. Those claiming that the corporation is a person believe that it is socially responsible for its impact on society, and that it can be held morally accountable for its actions in the social sphere. Those who do not consider the corporation to be a person say that claims against the corporation by society need a different basis than that provided by the moral person or agency theory. To complicate the discussion there is a position between these two: the "personal" view fits between the amoral and social views. For an example of this type of view, Ewin (1991) claims that corporations are moral persons in that they have rights and duties, but their moral personality is severely limited. The following quotation summarizes Ewin's position: Because they are artificial people and not "natural" people, corporations lack the emotional makeup necessary to the possession of virtues and vices. Their moral personality is exhausted by their legal personality. Corporations can have rights and duties; they can exercise the rights through their agents, and they can in the same way fulfil their duties. If necessary, they can be forced to fulfil their duties. The moral personality of a corporation would be one restricted to issues of requirement, rights, and duties. It could not be the richer moral life of virtues and vices that is lived by the shareholders, the executives, the shop floor workers, the unemployed, and natural people in general. (Ewin, 1991, p. 755) The personal view leaves the debate unresolved. However, the arguments favouring the treatment of corporations as persons lead to the next theoretical view of corporate social responsibility: the social view. 3.10 The "Social" View

This view holds that the activities of corporations occur within an interpersonal and, most likely, social context. The corporation is considered a social institution in society, with social responsibilities. But, the social nature of business can rest in many different theories, as outlined in Table 5-1. The extent of corporate social responsibility depends on the theoretical foundation used to support the view (Klonoski, 1991, pp. 11-12).

It is argued that the corporation should be considered a social institution as it exists because individuals come together to achieve some objective related to the provision of goods and services. Today, corporations exist because society implicitly sanctions them to operate in that form. Many in society believe that corporations now operate within the "social" view of corporate social responsibility despite the continuing claims of those who argue the "amoral" view, with its incomplete vision of the corporation operating as a private institution with a solely economic purpose. Many theories and frameworks have been presented to describe corporate social responsibility. Some of them overlap and some parallel the arguments for and against corporate social involvement. The existence of numerous theories supporting corporate social responsibility makes it difficult to find a comprehensive and definitive definition, as mentioned in the Defining Social Responsibility section. The literature contains numerous models of social responsibility, and one has been selected for presentation. Carroll's (1991) pyramid of corporate social responsibility is a practical framework for managers: it incorporates economic, legal, social, and ethical responsibilities. 3.11 The Pyramid of Corporate Social Responsibility

One way to view corporate social responsibility is through Carroll's Pyramid (1991), which he claims presents the concept such that social responsibility will be accepted by a conscientious businessperson. There are four kinds of social responsibility: economic, legal, ethical, and philanthropic that can be depicted in a pyramid, as presented in Figure1. Carroll contends that all of these responsibilities have always existed to some degree, but ethical and philanthropic responsibilities have only become significant in recent years. Economic responsibilities relate to Business's provision of goods and services in society. Profits result from this activity and are necessary for any other responsibilities to be carried out. It is assumed that corporations will be as profitable as possible, maintain a strong competitive position, and maintain a high level of operating efficiency. Society expects business to conform to laws and regulations, formulated by governments that act as the ground rules under which business must operate. Corporations are expected to pursue profits within the framework of the law, which establishes what are considered fair operations. Society expects that all goods and services and relationships with stakeholders will meet at least minimal legal requirements.

Ethical responsibilities include those activities that are not expected or prohibited by society as economic or legal responsibilities. Standards, norms, or expectations that reflect concern for select stakeholder input is fair, just, or in keeping with their moral rights. Ethics or values may be reflected in laws or regulations, but ethical responsibilities are seen as embracing the emerging values and norms that society expects of business even if not required by law presently. These responsibilities are more difficult for business to deal with as they are often ill defined or continually under public debate. Ethical responsibilities also involve the fundamental ethical principles of moral philosophy, such as justice, human rights, and utilitarianism. The changing or emerging ethical responsibilities are constantly pushing legal responsibilities to broaden or expand, while at the same time expecting Business's ethical behaviour to go beyond mere compliance with laws and regulations. Philanthropic responsibilities involve being a good corporate citizen and include active participation in acts or programs to promote human welfare or goodwill. Examples are contributions to the arts, charities, and education. Such responsibilities are not expected in an ethical or moral sense, making philanthropy more discretionary or voluntary on the part of business even though society may have some such expectations of business. Carroll views the pyramid as a basic building block structure with economic performance as a foundation. At the same time, business is expected to obey the law, behave ethically, and be a good corporate citizen. Although the responsibilities are portrayed as separate elements, in practice they are not mutually exclusive; however, the separation aids managers to appreciate the different obligations that are in a constant but dynamic tension with one another. For example, there are particular tensions between economic and ethical responsibilities. In summary, Carroll views the total social responsibility of business as involving the simultaneous fulfillment of the four responsibilities, which stated in pragmatic terms means that the corporation should strive to make a profit, obey the law, be ethical, and be a good corporate citizen (1991, pp. 39 43).

Figure 1 Carrolls Pyramid of Corporate Social Responsibility

LEGAL
Obey the Law

PHILANTHROPIC Responsibilities Be a good corporate citizen

ETHICAL Responsibilities Be ethical, Be Profitable

(SOURCE: Archie Carroll. The pyramid of corporate social responsibility: toward the moral management of organizational stakeholders. Reprinted from Business Horizons, July/August 1991, p. 42. Copyright 1991 by the Foundation for the School of Business at Indiana University)

3.12

An Alternative Approach

The concept of corporate social responsibility has been challenged recently, by Freeman and Liedtka (1991, p. 92), as one that has failed to help create a good society. They claim that conversations about corporations and the good life have been hampered by the concept, and a new form of conversation is necessary. They propose the following propositions to emphasize the fact that the corporate social responsibility concept is still evolving.

Three Propositions for New Conversations PROPOSITION 1: Corporations are connected networks of stakeholder interests. This proposition expands the conversation to include suppliers, employees, and customers, among others, making them legitimate partners in the dialogue. PROPOSITION 2: Corporations are places in which both individual human beings and human communities engage in caring activities that are aimed at mutual support and unparalleled human achievement. This proposition pushes us beyond the language of rights and responsibilities to a focus on the ethic of care, which recognizes needs and affirms the self and its linkage with others. PROPOSITION 3: Corporations are mere means through which human beings are able to create and recreate, describe and redescribe, their visions for self and community. This proposition urges us to see the projects of "self creation" and "community creation" as two sides of the same coin, and see in institutions many possibilities for different ways of living together to pursue the joint ends of individual and collective good. (SOURCE: R. Edward Freeman and Jeanne Liedtka. Corporate social responsibility: a critical approach. Reprinted from Business Horizons, July/August 1991, p. 96. Copyright 1991 by the Foundation for the School of Business at Indiana University.)

3.13

Related Economic and Social Responsibility Concepts

Corporate social responsibility is the terminology most widely used to represent business social responsibilities. However, other terms have appeared that incorporate the consideration of economic responsibilities as well, including: corporate citizenship, corporate sustainability, reputation management, social impact management, and triple e bottom line. Businesspersons and managers should be familiar with these terms, as they will appear elsewhere in the course, and every day in the media. Note that all the terms include the economic and social responsibilities of the corporation.

3.14

Corporate Citizenship

The corporation is viewed as a citizen because of the economic and social influences or forces it has on society. Various stakeholders demand that corporations take an active role in social, environmental, and community concerns as well as carrying out its economic responsibilities. Corporate citizenship is the process of serving a variety of stakeholders with a focus on both economic and social responsibilities. It is based on the nature and quality of various stakeholder inputs and the practices corporations use to develop relationships with stakeholders. Aspects of the multidisciplinary nature of corporate citizenship include: The basic values, policies and practices of the corporation, for example, the development of values statements and codes of ethics, sustainability strategies, and governance practices. The management of social, ethical and environmental issues within the corporations value chain. The voluntary contributions made for the economic and social development of the community. The understanding of stakeholder relationships through social and environmental reporting, social auditing, and stakeholder consultation.

3.15

Corporate Sustainability

Corporate Sustainability is a business approach that creates long-term shareholder value by embracing opportunities and managing risks deriving from economic, environmental and social developments. Corporate sustainability leaders achieve long-term shareholder value creation by gearing their strategies and management to harness the market's potential for sustainability products and services while at the same time successfully reducing and avoiding sustainability costs and risks. The quality of a company's strategy and management and its performance in dealing with opportunities and risks deriving from economic, environmental

and social developments can be quantified and used to identify and select leading companies for investment purposes. Leading sustainability companies lead their industries and set industry-wide best practices in the following areas: strategy, innovation, governance, shareholders, employees and other stakeholders. 3.16 Triple E Bottom Line (TBL)

The triple e (economic, ethical and environmental) bottom line evaluates a corporations performance according to a summary of the economic, social and environmental value the corporation adds, or destroys. The narrowest meaning of the term is a framework for measuring and reporting corporate performance against economic, social and environmental indicators. Recently a boarder meaning as been attributed to the term in that the concept is used to capture a whole set of values, issues and processes that corporations must address in order to minimize any harm resulting from their value adding or destroying activities. This includes clarifying the corporations purpose and taking into consideration all stakeholders. 3.17 Conclusion

Corporate social responsibility is a reflection of the fact that business and society are interwoven and can be expressed in terms of three principles: legitimacy, public responsibility, and managerial discretion. The debate as to whether or not social responsibility is an appropriate concept is summarized in arguments for and against corporate social involvement. These arguments are reflected in Klonoski's summary of social responsibility theories, categorized according to three alternative views of the corporation as amoral, personal, and social. The arguments and theories are not presented to provide a definitive answer to the question of corporate social responsibility but to review the background to the debate. In fact, the debate has not been resolved to date! In recent years, the ethical and philanthropic responsibilities have received more attention. Social responsibility has evolved and today there is other terminology being used to describe the concept. This terminology includes: corporate citizenship, corporate sustainability and triple e bottom line. 3.18 Key Terms:

(1) Generations of CSR (2) Corporate philanthropy (3) Citizen CEOs (4) CSR (5) Triple E Bottom Line

3.19

Select the appropriate answer:

1. Historically many businesses have played a significant role in developing communities by providing a) Food, Shelter b) Scholarships c) Financial aid for charitable causes d) None of the above. 2. a) b) c) 3. a) b) c) d) The second Generation of CSR companies view CSR as : Charitable activity Philanthropy Integral part of business strategy. The 3rd generation of CSR goes beyond Voluntary approaches to community development Corporate Citizenship Corporate Philanthropy All the above.

4. Who made this statement No success or achievement in material terms is worthwhile unless it serves the needs or interests of the country and its people. a) Mr. J.R.D. Tata b) Mr. Arvind Mafatlal c) Mrs. Sonia Gandhi d) None of the above. 3.20 Questions for Study

a) Discuss the differences between three generations of CSR. b) What did Friedman think about social responsibilities of corporates? Do you agree with his views? c) Is business a social or a economic institution? Justify your answer. d) Discuss any two definitions of CSR and give your own views on the same. 3.21 References:

Buchholz, Rogene A. (1991, July/August). Corporate responsibility and the good society: from economics to ecology. Business Horizons, pp. 19-31.

Carroll, Archie. (1991, July/August). The pyramid of corporate social responsibility: toward the moral management of organizational stakeholders. Business Horizons, pp. 39-48. Danley, John R. (1990). Corporation moral agency: the case for anthropological bigotry. In W. Michael Hoffman and Jennifer Mills Moore (Eds.), Business Ethics: Readings and Cases in Corporate Morality (pp. 202-208). New York: McGraw Hill Publishing Co. DeGeorge, Richard. (1990). Business Ethics (3rd ed.). New York: MacMillan Publishing Co. Donaldson, Thomas. (1985). Fact, fiction and the social contract: a reply to Kultgen. Business and Professional Ethics Journal, 5, pp. 40-46. Freeman, R. Edward and Jeanne Liedtka. (1991, July/August). Corporate social responsibility: a critical approach. Business Horizons, pp. 92-98. Goodpaster, Kenneth E. and John B. Matthews, Jr. (1982, January February). Can a corporation have a conscience? Harvard Business Review, pp. 132-141. Klonoski, Richard J. (1991, July/August). Foundational considerations in the corporate social responsibility debate. Business Horizons, pp. 9-18. Wood, Donna J. (1991). Corporate social performance revisited. The Academy of Management Review, pp. 16, pp. 691- 718

Chapter IV Drivers and Models of CSR

Objectives 1. To examine the motivating factors that influence CSR activities in any organization 2. To study the models that have emerged from CSR practice. Chapter Outline Main drivers and factors for CSR Models of CSR

4.0

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.

What drives companies to undertake CSR may depend upon various factors. Zadek S., Puran, P and Evans R., (1997) considers the main drivers of CSR are values, strategy and public pressure. a) Values: A value shift has taken place within businesses where they not only feel responsibility for wealth creation but also for social and environmental goods.

b) Strategy: Being more socially and environmentally responsible is important for the strategic development of a company. c) Public Pressure: Pressure groups, consumers, media, the state and other public bodies are pressing companies to become more socially responsible.

But this is the traditional (limited) view of the drivers of CSR. In the present context, there are several factors that may motivate companies to carry out social responsibility. They are stakeholder management, Corporate Social Performance, Corporate Environment Management, consumer pressure, risk management and sustainability, business ethics, attracting employees and personal values. 4.1 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 Associations

Employee

Communities

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 decisionmaking. 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. 4.2 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 companys 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) Academic research has not been so concrete in its findings. Numerous studies have shown (1) 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.

(2) 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. (3) 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. 4.3 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 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 companys footprint (Hart and Milstein, 1999). 4.4 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 worlds 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 companys sphere of influence (and indeed outside the consumers experience) where they do not actually sell their products. Consumers pressure is very strong in the developed world and is likely to increase not decline, especially in the current of concern about public health. 4.5 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 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. 4.6 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). 4.7 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 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. 4.8 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. 4.9 MODELS OF CSR

To decide on the parameters and legitimacy of CSR for an enterprise, we need to draw distinctions between three different types of CSR a business can practice. They are ethical CSR, altruistic CSR, and strategic CSR. a) Ethical CSR involves fulfilling the firm's ethical duties. This is "social responsibility" in the sense that a corporation is morally responsible to any individuals or groups where it might inflict actual or potential injury (physical, mental, economic, spiritual and emotional) from a particular course of action. Even when the two parties to a transaction are not harmed others parties (stakeholders) might be. Any organization not adhering to its ethical responsibilities would be acting as a morally irresponsible agent. Although harms cannot always be avoided, they should be minimized where feasible. For example, when a company decides to close or relocate a plant because the product is no longer selling or the source of raw materials has changed,

this would seem sound. While the shift might cause temporary difficulties for some employees and their community, it makes more efficient use of resources and therefore, benefits society as a whole, i.e. it is the socially responsible thing to do so as long as injuries to workers are minimized as much as reasonably possible via means such as advance notification and severance pay. Ethical edicts must be adhered to even at the firm's expanse it terms of possible foregone profits since by definition, ethics deals with moral standards that override self-interest. Sometimes actions need to be taken because they are right, not because they are profitable (Chewning et al., 1990; Goodpaster, 1996; Miller and Ahrens, 1993). Managers of a corporation do not have an obligation to maximize profits for shareholders without regards to the means used. As in all social responsibility decisions, there are tradeoffs, and with ethical CSR it is often between short-run profitability and moral actions. For instance, money spent on product safety or pollution control might reduce shareholder profits, but the alternative is to threaten unethically the welfare of others in society (Boatright, 1999). Experience, anecdotal evidence and empirical evidence reveal that in the long run "good ethics is good business". First, moral behavior builds trust and enhances the firm's reputation, which attracts customers, employees, suppliers and distributors, not to mention earning the public's goodwill. Second, ethical actions minimize the cost of fines and litigation, not to mention the bad publicity that unethical actions often attract, especially with today's instantaneous, global communications and media. For instance, we all know that several well-known firms came under fire for running or letting their suppliers manage "sweatshops" in manufacturing facilities in order to cut costs. Clearly, the boundaries of ethical CSR are not clear; otherwise we would not have so many interesting ethics discussions in boardrooms and college classrooms. b) Altruistic CSR: The terms altruistic or humanitarian CSR is coined to suggest genuine optional caring even at possible personal or organizational sacrifice. Humanitarian CSR is Carroll's "fourth face" of CSR philanthropic responsibilities: to be a "good corporate citizen" by "giving back" to society, furthering some social good, regardless of whether the firm will financially reap what it has spiritually sown. It demands that corporations help alleviate "public welfare deficiencies" (Brenkert, 1996), such as urban blight, drug and alcohol problems, poverty, crime, illiteracy, lack of sufficient funding for educational institutions, chronic unemployment and other social ills within a community or society. The business has no "moral obligations", only alleged "social obligations" (DeGeorge, 1990). Humanitarian CSR is based on capability responsibility the company has the resources to be able to do social good. Humanitarian CSR includes all philosophies, policies procedures and

actions intended to enhance society's welfare and improve the quality of life, and it involves linking core corporate competencies to societal and community needs. Altruistic CSR, then, goes beyond ethics to somehow making the world a better place by helping to solve social problems. In the past decade or two, we increasingly have seen such activities as charitable contributions, community service programs, employee voluntarism, environmentally friendly policies, executive loan programs and various quality-of-life efforts. Regarding charitable giving, companies increasingly strive to align charitable giving with the hearts of workers and customers Quality-of-life issues include rebuilding inner cities, providing job training for the hardcore unemployed, helping renovate parks, sponsoring cleanup programs, providing primary education, providing primary health care facilities. There are a number of arguments for altruistic CSR, all of which contain some truth but none of which, individually or collectively, builds a strong care for the practice. The most basic justification for humanitarian CSR is the social contract argument. "Business is a major social institution that should bear the same kinds of citizenship costs for society that an individual citizen bears" (Davis, 1983). Each one of us have an obligation to take into consideration all of the parties that we directly and significantly affect, so too are businesses required to take into consideration all parties that they will affect. In the moral realm this is true. This is an argument for ethical CSR - avoiding harms or social injuries viewed as affirmative duties might be seen by others as correction of social injury (Simon et al., 1983). For instance, affirmative action programs might be seen as same as altruistic CSR to promote diversity in the workplace and, hence, the general welfare, while others might view them as ethical CSR to right past social injustice in treatment of minority groups. Whether the issue is altruistic or strategic CSR, companies would be wise to avoid controversial causes, walking a fine line between conservative and liberal critics of philanthropic giving, as it is becoming increasingly difficult to avoid offending at least one important constituency (Carroll, 2001). People also fear that corporate CSR will result in the redivision of power and consider good works are just a publicity stunt or a public relations ploy. There is no doubt that companies practicing social responsibility often, and probably usually, have ulterior motives. Friedman (1996) believed that CSR activities are indicative of an agency problem arising from separation of ownership and control, i.e. a conflict between the interests of managers and shareholders where managers use CSR as a means to further their own personal agendas at the expense of shareholders (McWilliams and Siegel, 2001). c) Strategic CSR: Strategic CSR or "strategic philanthropy" (Carroll, 2001) is done to accomplish strategic business goals - good deeds are believed to be good for business as well as for society. With strategic CSR, corporations "giveback" to their constituencies because they believe it to be in their best financial interests to do so. This is "philanthropy aligned with profit motives" (Quester and Thompson, 2001) - social goals might be profitable in the long run since market forces provide financial incentives for perceived socially

responsible behavior. Stakeholders outside the stockholder group are viewed as means to the ends of maximizing shareholders wealth (Goodpaster, 1996). Such strategic philanthropy grew popular beginning around the mid1980sones (1997) and Carroll, (2001) expects it to grow in the years ahead. The idea is that while being socially responsible (and ethical, too) often entails short-run sacrifice and even pain, it usually ultimately results in long-long gain. Expenditures on strategic CSR activities should properly be viewed as investments in a "Goodwill bank" (Vaughn, 1999,p. 199) which yields financial returns (McWilliams and Siegel, 2001). For instance, Ford spent millions of dollars on an advertising campaign to convince parents that most four to eight-year-old children should ride in booster seats, which raise children in auto seats so that adult seat belts fit better, and Ford gave away one million such seats. "Corporate social responsibility is viewed as an asset and continues to nurture and grow. It's a critical part of how we do business and balances the needs of all our constituents. In the long-term, it will benefit our company and its shareholders" (Business Ethics, 2001) Thus, we might find a corporation practicing strategic CSR by providing charitable good deeds such as providing shelter for the destitute, building a museum, or renovating the local park if, as a result, those helped will feel grateful and indebted to that organization, and will reciprocate in various ways by giving it their business, recommending it to others, asking government regulators to stay at bay, and so on. And, some of those not directly helped will still look more favorably on the firm and thereby turn their loyalties toward it (Brenkert, 1996). Cynics complain that strategic CSR is self-serving and somehow impoverishes the notion of citizenship (Brenkert, 1996). Novak (1996) makes a strong case for his seven "responsibility outside business", suggesting that all are ultimately necessary for the survival of business as an institution. While he views these as moral responsibilities, all but the obligation to respect the law seem to be optional altruism that nonetheless can potentially profit the firm. Three of Novak's (1996) extra-legal social responsibilities would appear to benefit a business directly. These are:-

Communicate frequently and fully with investors, shareholders, customers, employees, and other constituencies in order to gain their support;

Establish within the firm a sense of community and respect for the dignity of persons, which should foster motivation, teamwork, fulfillment, and hence productivity; and

Protect the "moral ecology" by accepting some responsibility for the television programs in which they advertise avoiding shows laced with sex, violence and denigration of either business or religion.

There are certain unsolved issues, which lies in strategic CSR. One unsettled difficulty lies in ethically and strategically balancing the tradeoffs among stakeholder groups. Another issue is that the empirical evidence on the effectiveness of strategic CSR as a good investment is equivocal - it is not clear whether socially responsible corporations outperform or under perform other companies (McWilliams and Siegel, 2001; Trevino and Nelson, 1999). Some research shows that companies that practice social responsibility prosper in the long run, although these studies are neither conclusive nor exhaustive. (Business Ethics, 2001). 4.10 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. 4.11 (1) (2) (3) (4) (5) (6) (7) Key Terms

Stakeholder Management Corporate Social Performance Corporate Environmental Management Risk Management Ethical CSR Altruistic CSR Strategic CSR.

4.12

Select the appropriate answer

(1) The central theme of CSR is a) b) c) d) Make Profits Stakeholders Management Develop Nation None of the above.

(2) Triple bottom line means a) b) c) d) Profits, Markets and Products Develop economic, environment and social value. Development of human resources, markets and products None of the above.

(3) Sustainability is inextricably linked to a) b) c) d) Resource usage Longetivity Profits None of the above

(4) The field of business ethics examines a) Moral Controversies that arise in the business world. b) How profits are made c) Behavior of businessmen d) None of the above. 4.13 Questions for Study

(1) According to you what motivates companies to execute its social responsibilities? (2) Discuss how strategic CSR is different from Ethical CSR? (3) Discuss why business ethics are important

4.14

Digital Bibliography

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

4.15

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

Chapter VI MEASURING THE IMPACT OF CSR

Objectives
1) To study the type of measurement techniques used by companies to measure CSR. 2) To examine the relevance of measurement of CSR for business. Chapter Outline Measuring CSR Current Strategies Making the Business Case for measuring CSR. Tata Sustainability Human Development Index.

6.0

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). 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. 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 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. 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 http://www.projectsigma.com/SIGMAProject/Links.asp for Management)

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. 6.8 a) b) 6.9 1) a) b) c) d) 2) a) b) c) d) 3) a) b) c) d) Key Terms Measurement of CSR. Business Case for CSR. Select the appropriate answer Proving the linkages between CSR and financial performance is termed as Making the business case Making profits Increasing market shares None of the above. The Global Reporting Initiative is a coalition of Businesses NGOs Accountancy organisations and other stakeholders. All of the above. Most of the current CSR measurement and reporting regimes are Voluntary Mandatory Flexible None of the above.

4) a) b) c) d) 6.10 (1) (2) (3) 6.11

In order to improve the brand image and reputation companies can Capitalize on consumer sensitivity by using social and environmental performance. Capitalize on their profit performance Capitalize on their advertisements Capitalize on their rules. Questions for study Discuss why measurement and reporting of CSR is important. According to you how can the impact of CSR be measured? What is the business case for CSR? References Why it should?;

CSR Awards, CSR Cover Story Does Business Care? Business World, 29th December 2003 pp 44 - 54

J. Nelson, Business as Partners in Development: Creating Wealth for Countries, Companies and Communities - The Prince of Wales Business Leaders Forum in collaboration with the World Bank and UNDP, 1996

Chapter VII Operationalising CSR - Some Tips

Objectives
1) To study the steps involved in operationalise CSR. 2) To examine the role of government and NGOs to activate CSR. Chapter Outline Steps to operationalise CSR Role of Government

7.0

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 companys 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 throughout 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.

7.1

Steps to Operationalise CSR According to India Partnership Forum17 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.

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.
17

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.

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

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. 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. 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.

a)

b)

c)

a)

b)

The development context: This would include an analysis of the socioeconomic 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.

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.

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 companys annual report, website, newsletters and external and internal communications

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 companys 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 Companys Annual Report. Documenting and dissemination of learning experience. of exchange programmes for professionals. Encouragement

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. The website addresses of these organisations are listed in Chapter VI (section 6.6 Measuring CSR Resources) 7.2 ROLE OF GOVERNMENT IN CSR

The governments approach to promoting CSR should seek to mainstream CSR within community policies, engage the public and private sectors and promote greater transparency in the marketplace. The Governments approach to CSR should centre around productivity and competitiveness and on achieving transparency in the market to promote an effective dialogue with stakeholders. Public authorities may pursue policy objectives at different levels by using different tools. They may introduce regulations to set minimum standards in areas, for example, where risks of harm or abuse are greatest. They can also help drive forward the policy agenda on CSR. Thus, they may help establish codes of practice and specific programmes to promote good practice and to encourage communities of interest to share information and advice about CSR. Many of these activities are more effective if developed in partnership with the public, private and voluntary sectors.

CSR exists within the above framework, but is primarily about what organizations do of their own volition. Many business leaders wish to have a beneficial impact on the societies in which they operate, and offer some accountability to their stakeholders. Businessmen have the need to stay ahead of competitors, satisfy the aspirations of customers, employees and other interested parties, manage risk and develop reputation. Therefore, whilst government can provide leadership on CSR by helping to raise awareness of the business case and helping to build consensus on priorities for action, they should work in partnership with the public and private sector on CSR, recognizing the need to avoid duplicating or displaying the contribution that the public and private sector is already making in this area. Policy debate should not focus only on the balance of arguments between a voluntary or regulatory approach. The issues are more complex and a greater degree of subtlety will be needed to maximize the benefits of CSR. Intervention may be helpful to support productivity and competitiveness, to ensure that the market mechanisms that drive CSRs development work effectively, or to register key policy concerns. But public authorities should recognize the power of the independence of this voluntary approach. Public and private sectors initiative can go further and faster in setting standards and encouraging innovation than is possible for Governments, given the ongoing development of this area. CSR can contribute to social, development or environmental objectives at the local, national or international level, but Governments need to recognize that the prime mover lies within each organization in the context of its unique market position. CSR should not be about Government offloading onto the public and private sector social responsibilities that are appropriate for the State. Government needs to work with the grain of the market and in partnership with the public and private sector and other stakeholders including unions, NGOs, consumers and investors. Partnerships between business, other stakeholders and Government can be effective in meeting mutually advantageous objectives, with the Government acting as broker or providing funding to reflect the public policy interest e.g. in economic regeneration. For the market to operate and especially to ensure transparency and clarity of communication a degree of standardization may be required. In many cases, private sector led initiatives have succeeded in agreeing widely acceptable approaches. But in a dynamic market greater standardization does not imply that a single approach is required. Government also has a role as a key stakeholder, representative of the public interest, or as representative in relevant international bodies. Government can therefore have a role in helping to inform the consumer and developing guidelines or standards, in partnership with others, as well as in determining those areas where it chooses to set standards using a regulatory approach. Government can also have a role in promoting increased awareness of the business case for CSR, recognizing achievements and progress to date, celebrating innovations and ensuring that its own initiatives provide a consistent

framework within which the CSR agenda can be driven forward. Given the breadth of Government activity to engage the private sector it is often particularly important to ensure that public policies are consistent and make business sense. CSR takes place at the level of the individual company, which has to take decisions on priorities, purpose and values, strategy and engagement with its stakeholders. Multinational enterprises need to find an appropriate response to social and environmental challenges in each of the communities in which they operate. At the local and regional levels joint action may be helpful in addressing local community needs, such as in regeneration, employment or partnership with education. The public sector may provide some appropriate funding or provide assistance in brokering business partnerships. At national level action may be appropriate in developing partnerships for sharing good practice (e.g., on business action in developing countries), agreeing and monitoring standards or setting the overall market framework. Some issues are best dealt with at the global level especially those dealing with conduct of multinational enterprises or affecting international investment. 7.3 ROLE OF NGO IN CSR

These days, apart from government and corporate world various nongovernmental organizations are involved in forwarding the agenda of corporate social responsibility. A non-government organisation (NGO) can be defined as an organization formally independent of the state and private sector. It has its own constitutional identity that doesnt seek profit for individuals and shareholders. NGOs are able to understand the intricacies of various policies and determine the consequences on the general public. They can generate a public mandate and there by influence the course of actions. NGOs have also been responsible for initiating actions against companies who are not adhering to their responsibility and accountability towards society. NGO are using following strategies and tactics for promoting CSR Research and Reporting media exposure; Social Responsibility dialogue with MNCs; Social Accountability standards and audits; Shareholder Activism shareholder resolutions; Economic Pressure boycotts; Sanctions/Divestment selective purchasing; Government Regulations supporting legislation; Litigation bringing law suits; and Norm Creation development of international law

The voluntary sector / NGOs have a major role to play in contributing to the process of social and community development. By working at grassroot levels and implementing projects and programmes in the community, NGOs are uniquely positioned for identifying community needs, seeking and implementing a

matching response to achieve the development goals. NGOs that work with corporates realize the great benefits that corporate skills, time and resources can bring through synergistic partnerships of corporates in enabling social development. At the same time, companies require specific social needs matching, credible, reputed and effective NGOs, which can deliver meaningful results by associating with them for corporate contributions in the community. The partnership between government, business and NGOs will accelerate the pace of social development. 7.4 Conclusion

The basic objective of CSR is to maximize the companys overall impact on the society and stakeholders. India Partnership forum recommends several steps that companies need to undertake to operationalise CSR practice including inserting a suitable clause on CSR in the Articles of Association. The Governments 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. They can advise business/industry in the area of identifying need based developmental projects. 7.5 a) b) 7.6 1) a) b) c) d) 2) a) b) c) d) Key Terms India Partnership Forum NGOs. Select the appropriate answer The starting for CSR practice must be viewed in a holistic context and hence must begin right from Board room Union Articles of Association Human Resource Department In order to develop CSR any company should have CSR Policy CSR department CSR Staff All of the above.

3) a) b) c) d) 4) a) b) c) d) 5) a) b) c) d) 7.7 (1) (2) (3) 7.8

In the context of CSR Multinational companies need to find appropriate responses for Political challenges Social & environmental challenges Infrastructure challenges Legal challenges. Organisations which can generate a public mandate and thereby influence the course of action are NGO Business Organisations Religious Organisations Public sector undertakings. Long term sustainability of CSR efforts would depend upon Making a business case Political will Profits made None of the above. 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: 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 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 Digital Bibliography http://www.indiapartnershipforum.org/csr_how_more.htm

7.9