What is CSR?

Social responsibility (is the) responsibility of an organisation for the impacts of its decisions and activities on
society and the environment through transparent and ethical behaviour that is consistent with sus- tainable
development and the welfare of society; takes into account the expectations of stakeholders; is in compliance
with applicable law and consistent with international norms of behaviour; and is integrated throughout the
organisation.
Corporate Social Responsibility is a management concept whereby companies integrate social and environmental concerns
in their business operations and interactions with their stakeholders. CSR is generally understood as being the way through
which a company achieves a balance of economic, environmental and social imperatives (Triple-Bottom-Line- Approach),
while at the same time addressing the expectations of shareholders and stakeholders. In this sense it is important to draw a
distinction between CSR, which can be a strategic business management concept, and charity, sponsorships or philanthropy.
Even though the latter can also make a valuable contribution to poverty reduction, will directly enhance the reputation of a
company and strengthen its brand, the concept of CSR clearly goes beyond that.
Promoting the uptake of CSR amongst SMEs requires approaches that fit the respective needs and capacities of these
businesses, and do not adversely affect their economic viability. UNIDO based its CSR programme on the Triple Bottom Line
(TBL) Approach, which has proven to be a successful tool for SMEs in the developing countries to assist them in meeting
social and environmental standards without compromising their competitiveness. The TBL approach is used as a framework
for measuring and reporting corporate performance against economic, social and environmental performance. It is an attempt
to align private enterprises to the goal of sustainable global development by providing them with a more comprehensive set of
working objectives than just profit alone. The perspective taken is that for an organization to be sustainable, it must be
financially secure, minimize (or ideally eliminate) its negative environmental impacts and act in conformity with societal
expectations.
Key CSR issues: environmental management, eco-efficiency, responsible sourcing, stakeholder engagement, labour
standards and working conditions, employee and community relations, social equity, gender balance, human rights, good
governance, and anti-corruption measures.
A properly implemented CSR concept can bring along a variety of competitive advantages, such as enhanced access to
capital and markets, increased sales and profits, operational cost savings, improved productivity and quality, efficient human
resource base, improved brand image and reputation, enhanced customer loyalty, better decision making and risk
management processes.

Corporate initiative to assess and take responsibility for the company's effects on the
environment and impact on social welfare. The term generally applies to company
efforts that go beyond what may be required by regulators or environmental
protection groups.

Corporate social responsibility may also be referred to as "corporate citizenship" and
can involve incurring short-term costs that do not provide an immediate financial
benefit to the company, but instead promote positive social and environmental
change.

n recent years, the mantra of social responsibility has been taken up by small businesses, non-
profits, and corporations alike. Some notable examples of corporate efforts at social
responsibility include:


Ben & Jerry's, which started the Ben & Jerry's Foundation and donates 7.5% of profits to
charitable causes
Kenneth Cole, which has supported AIDS awareness and research
Pedigree, which distributes grants and food to animal shelters.

Each of these companies has recognized that success in business alone falls short of
contributing to the societies they share in, and have taken the extra step to address their
ethical obligations.


What ARE included in CSR?

The World Business Council for Sustainable Development has described CSR as the
business contribution to sustainable economic development. Building on a base of com-
pliance with legislation and regulations, CSR typically includes beyond law commit-
ments and activities pertaining to:

corporate governance and ethics;

health and safety;

environmental stewardship;

human rights (including core labour rights);

sustainable development;

conditions of work (including safety and health, hours of work, wages);

industrial relations;

community involvement, development and investment;

involvement of and respect for diverse cultures and disadvantaged peoples;

corporate philanthropy and employee volunteering;

customer satisfaction and adherence to principles of fair competition;

anti-bribery and anti-corruption measures;

accountability, transparency and performance reporting; and

supplier relations, for both domestic and international supply chains.


Why CSR?
Why do we need CSR?
Consumers increasingly don't accept unethical business practices or organisations who act irresponsibly.
Advances in social media (giving everyone a voice) mean that negative or destructive practices quickly fuel
conversations online. Organisations are accountable for their actions like never before.
Many factors and influences have led to increasing attention being devoted to the role of
companies and CSR. These include:

Sustainable development: United Nations (UN) studies and many others
have underlined the fact that humankind is using natural resources at a faster
rate than they are being replaced. If this continues, future generations will not
have the resources they need for their development. In this sense, much of
current development is unsustainableit cant be continued for both practi-
cal and moral reasons. Related issues include the need for greater attention
to poverty alleviation and respect for human rights. CSR is an entry point for
understanding sustainable development issues and responding to them in a
firms business strategy.

Globalization: With its attendant focus on cross-border trade, multinational
enterprises and global supply chainseconomic globalization is increas-
ingly raising CSR concerns related to human resource management prac-
tices, environmental protection, and health and safety, among other things.
CSR can play a vital role in detecting how business impacts labour condi-
tions, local communities and economies, and what steps can be taken to
ensure business helps to maintain and build the public good. This can be
especially important for export-oriented firms in emerging economies.

Governance: Governments and intergovernmental bodies, such as the UN,
the Organisation for Economic Co-operation and Development (OECD) and
the International Labour Organization (ILO) have developed various com-
pacts, declarations, guidelines, principles and other instruments that outline
norms for what they consider to be acceptable business conduct. CSR
instruments often reflect internationally-agreed goals and laws regarding
human rights, the environment and anti-corruption.

Corporate sector impact: The sheer size and number of corporations, and
their potential to impact political, social and environmental systems relative
to governments and civil society, raise questions about influence and
accountability. Even small and medium size enterprises (SMEs), which col-
lectively represent the largest single employer, have a significant impact.
Companies are global ambassadors of change and values. How they
behave is becoming a matter of increasing interest and importance (see box
below).

Communications: Advances in communications technology, such as the
Internet and mobile phones, are making it easier to track and discuss cor-
porate activities. Internally, this can facilitate management, reporting and
change. Externally, NGOs, the media and others can quickly assess and
profile business practices they view as either problematic or exemplary. In
the CSR context, modern communications technology offers opportunities to
improve dialogue and partnerships.

Finance: Consumers and investors are showing increasing interest in sup-
porting responsible business practices and are demanding more information
on how companies are addressing risks and opportunities related to social
and environmental issues. A sound CSR approach can help build share
value, lower the cost of capital, and ensure better responsiveness to mar-
kets.

Ethics: A number of serious and high-profile breaches of corporate ethics
resulting in damage to employees, shareholders, communities or the envi-

ronmentas well as share pricehave contributed to elevated public mis-
trust of corporations. A CSR approach can help improve corporate gover-
nance, transparency, accountability and ethical standards (see matrix
below).

Consistency and Community: Citizens in many countries are making it clear
that corporations should meet the same high standards of social and envi-
ronmental care, no matter where they operate. In the CSR context, firms can
help build a sense of community and shared approach to common prob-
lems.

Leadership: At the same time, there is increasing awareness of the limits of
government legislative and regulatory initiatives to effectively capture all the
issues that CSR address. CSR can offer the flexibility and incentive for firms to
act in advance of regulations, or in areas where regulations seem unlikely.

Business Tool: Businesses are recognizing that adopting an effective
approach to CSR can reduce the risk of business disruptions, open up new
opportunities, drive innovation, enhance brand and company reputation and
even improve efficiency.

What are the benefits of CSR?

Better anticipation and management of an ever-expanding spectrum of
risk. Effectively managing governance, legal, social, environmental, eco-
nomic and other risks in an increasingly complex market environment, with
greater oversight and stakeholder scrutiny of corporate activities, can
improve the security of supply and overall market stability.
Considering the interests of parties concerned about a firms
impact is one way of better anticipating and managing risk.




Improved reputation management. Organizations that perform
well with regard to CSR can build their reputation, while those
that perform poorly can damage brand and company value
when exposed. Reputation, or brand equity, is founded on
values such as trust, credibility, reliability, quality and consistency.
Even for firms that do not have direct retail exposure through
brands, their reputation for addressing CSR issues as a supply
chain part- nerboth good and badcan be crucial
commercially.

Enhanced ability to recruit, develop and retain staff. This can be
the direct result of pride in the companys products and practices,
or of introducing improved human resources practices, such as
family-friendly policies. It can also be the indirect result of
programs and activities that improve employee morale and
loyalty. Employees are not only front-line sources of ideas for
improved performance, but are champions of a company for
which they are proud to work.

Improved innovation, competitiveness and market positioning.
CSR is as much about seizing opportunity as avoiding risk.
Drawing feedback from diverse stakeholders can be a rich
source of ideas for new products, processes and markets,
resulting in competitive advantages. For example, a firm may
become certified to environmental and social standards so it can
become a supplier to particular retailers. The history of good
business has always been one of being alert to trends,
innovation, and responding to mar- kets. Increasingly,
mainstream advertising features the environmental or social
benefits of products (e.g., hybrid cars, unleaded petrol,
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ethically- produced coffee, wind turbines, etc.).

Enhanced operational efficiencies and cost savings. These flow
in particular from improved efficiencies identified through a
systematic approach to man- agement that includes continuous
improvement. For example, assessing the environmental and
energy aspects of an operation can reveal opportunities for turning
waste streams into revenue streams (wood chips into particle board,
for example) and for system-wide reductions in energy use, and
costs.

Improved ability to attract and build effective and efficient
supply chain relationships. A firm is vulnerable to the weakest
link in its supply chain. Like-minded companies can form
profitable long-term business relationships by improving
standards, and thereby reducing risks. Larger firms can stimu-
late smaller firms with whom they do business to implement a CSR
approach. For example, some large apparel retailers require
their suppliers to comply with worker codes and standards.

Enhanced ability to address change. A company with its ear to
the ground through regular stakeholder dialogue is in a better
position to anticipate and respond to regulatory, economic,
social and environmental changes that may occur. Increasingly,
firms use CSR as a radar to detect evolving trends in the
market.

More robust social licence to operate in the community.
Improved citizen and stakeholder understanding of the firm and
its objectives and activities translates into improved stakeholder
relations. This, in turn, may evolve into more robust and enduring
public, private and civil society alliances (all of which relate
closely to CSR reputation, discussed above). CSR can help
build social capital.




Access to capital. Financial institutions are increasingly
incorporating social and environmental criteria into their
assessment of projects. When making decisions about where to
place their money, investors are looking for indica- tors of
effective CSR management. A business plan incorporating a
good CSR approach is often seen as a proxy for good
management.

Improved relations with regulators. In a number of
jurisdictions, govern- ments have expedited approval processes
for firms that have undertaken social and environmental activities
beyond those required by regulation. In some countries,
governments use (or are considering using) CSR indicators in
deciding on procurement or export assistance contracts. This is
being done because governments recognize that without an
increase in business sector engagement, government
sustainability goals cannot be reached (see box below).

A catalyst for responsible consumption. Changing
unsustainable patterns of consumption is widely seen as an
important driver to achieving sustain- able development.
Companies have a key role to play in facilitating sustain- able
consumption patterns and lifestyles through the goods and
services they provide and the way they provide them.
Responsible consumerism is not exclusively about changing
consumer preferences. It is also about what goods are supplied
in the marketplace, their relationship to consumer rights and
sustainability issues, and how regulatory authorities mediate the
rela- tionship between producers and consumers.

Benefits of CSR
Corporate Social Responsibility has many benefits that can be applied to any business, in any region, and at a
minimal cost.
Improved financial performance: A recent longitudinal Harvard University study has found that stakeholder balanced
companies showed four times the growth rate and eight times employment growth when compared to companies that focused
only on shareholders and profit maximization.

Enhanced brand image & reputation: A company considered socially responsible can benefit -both by its enhanced
reputation with the public, as well as its reputation within the business community, increasing a companys ability to attract
capital and trading partners. For example, a 1997 study by two Boston College management professors found that excellent
employee, customer and community relations are more important than strong shareholder returns in earning corporations a
place an Fortune magazines annual Most Admired Companies list.

Increased sales and customer loyalty:A number of studies have suggested a large and growing market for the products and
services of companies perceived to be socially responsible. While businesses must first satisfy customers key buying criteria
such as price, quality, appearance, taste, availability, safety and convenience. Studies also show a growing desire to buy based
on other value-based criteria, such as sweatshop-free and child labor-free clothing, products with smaller environmental
impact, and absence of genetically modified materials or ingredients.
Increased ability to attract and retain employees: Companies perceived to have strong CSR commitments often find it
easier to recruit employees, particularly in tight labor markets. Retention levels may be higher too, resulting in a reduction in
turnover and associated recruitment and training costs. Tight labor markets as well the trend toward multiple jobs for shorter
periods of time are challenging companies to develop ways to generate a return on the consideration resources invested in
recruiting, hiring, and training.

Reduced regulatory oversight: Companies that demonstrate that they are engaging in practices that satisfy and go beyond
regulatory compliance requirements are being given less scrutiny and freer reign by both national and local government
entities. In many cases, such companies are subject to fewer inspections and paperwork, and may be given preference or fast-
track treatment when applying for operating permits, zoning variances or other forms of governmental permission.

Easier access to capital: The Social Investment Forum reports that, in the U.S. in 1999, there is more than $2 trillion in assets
under management in portfolios that use screens linked to ethics, the environment, and corporate social responsibility. It is
clear that companies addressing ethical, social, and environmental responsibilities have rapidly growing access to capital that
might not otherwise have been available.
Based on a two-year study, the World Business Council for
Sustainable Development has drawn several conclusions
about the benefits of CSR to companies


A coherent CSR strategy, based on integrity, sound values
and a long- term approach, offers clear business benefits to
companies and helps a firm make a positive contribution to
society;


A CSR strategy provides businesses with the opportunity to
show their human face;


Such a strategy requires engagement in open dialogue
and con- structive partnerships with governments at
various levels, intergovern- mental organizations, non-
governmental organizations, other ele- ments of civil
society and, in particular, local communities;


When implementing a CSR strategy, companies should
recognize and respect local and cultural differences, while
maintaining high and con- sistent global standards and
policies; and


Being responsive to local differences means taking specific initiatives.

4. Difference between CSR and LAW