International Journal of Business

Management & Research (IJBMR)

ISSN(P): 2249-6920; ISSN(E): 2249-8036
Vol. 4, Issue 4, Aug 2014, 1-10
TJPRC Pvt. Ltd.

CORPORATE SOCIAL RESPONSIBILITY: INTEGRATING CSR WITH BUSINESS VALUE

ANUJA ROY, YAGBALA KAPI & NUPUR SIDH
Institute of Technology and Science, Mohan Nagar, Ghaziabad

ABSTRACT
Globalization today has brought along with it unmatched challenges and opportunities as well. Indian businesses
turning global now need to take a leadership role in the challenges of time. In this scenario, businesses need to align
environmental and ethical responsibilities into their governance thereby ensuring long term success, competitiveness,
sustainability and value. Undoubtedly businesses are an integral part of society, and play an active role in contributing to
healthy ecosystems, improve the manner in which institutions understand and engage their communities, as well as how
they explore, view, and challenge barriers, thereby leading to good governance. During recent years many frameworks
have been developed to align business management with environmental and ethical practices- one such is Corporate Social
Responsibility (CSR).
This paper is an endeavor to associate CSR with business value.
Objectives of the Study

Broad Overview of CSR

Legal Guidelines Under Companies Bill 2012

CSR - As a marketing strategy

CSR in a nascent stage in India

Integrating CSR with business value

Conclusion and Future Strategy

Research Methodology
The present paper is divided into five sections based on SECONDARY DATA taken from newspapers, books,
reputed journals and websites. This paper is subdivided into various sections as per the objectives.

KEYWORDS: Corporate Social Responsibility, Business Value, Sustainable Development, Social Responsibility, Value
Based Management, Act of Philanthropy, Charitable Causes, Social Concern, Stakeholders Interests, Systematic
Implementation

INTRODUCTION
Broad Overview of CSR
The CSR concept came into existence in 1953 when it became an educational topic in HR Bowens Social
Responsibilities of the Business. Ever since then, there has been ongoing debate with regards to the concept and

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Anuja Roy, Yagbala Kapi & Nupur Sidh

implementation of the same. One of the most important definitions is from the World Bank Group, stating, Corporate
social responsibility is the commitment of businesses to contribute to sustainable economic development by working with
employees, their families, the local community and society at large, to improve their lives in ways that are good for
business and for development .
Every business organization should frame a CSR policy to guide its strategic planning and provide a guideline for
its CSR initiatives, which should be an essential part of overall business policy and in accordance with its business goals.
Furthermore, the policy should be framed with the involvement of various level executives and should be approved by the
Management.
Essential Fundamentals
The CSR policy should generally cover the following:
Care for All Stakeholders
The organization should regard the interests of, and show responsiveness towards shareholders, employees,
customers, suppliers, society at large etc. and create worth for everyone.
Ethical Functioning
Ethics, Transparency and Accountability should be the practice. Companies should not involve in business
practices that are abusive, unfair or by any means dishonest.
Respect for Workers' Rights and Welfare
A safe and hygienic environment should be provided to employees. Necessary trainings for enhancement of skill
development should be provided to employees. An effective grievance redressal system should be in place. Child or forced
labour should be abolished.
Respect for Human Rights
Companies should regard and respect human rights for all and should not support human rights abuses neither by
them or any other third party.
Respect for Environment
Necessary measures should be taken by organizations to check and prevent pollution; recycle and reduce waste.
Natural resources should be managed in a sustainable manner thereby ensuring maximum utilization of resources like land
and water, Efficient production methods to be adopted in order to handle the challenges of climate. Organizations should
by and large promote efficient use of energy and technologies that are eco friendly.
Activities for Social and Inclusive Development
In accordance with their core competency and business interest, companies should carry out activities for
economic and social development of communities and geographical areas - in the area of education, skill building for
livelihood of people, health, cultural and social welfare etc., particularly targeting the underprivileged sections of society.

Impact Factor (JCC): 4.9926

Index Copernicus Value (ICV): 3.0

Corporate Social Responsibility: Integrating CSR with Business Value

How CSR Policy Should be Implemented?

The CSR policy of the firm should provide for an execution strategy which should include identification of
projects/activities, setting measurable physical targets within a particular time period and monitoring. Companies may
partner with local authorities, business associations and civil society/non-government organizations. They may influence
the supply chain for CSR initiative and motivate employees for voluntary effort for social development. They may develop
a system of need and impact assessment while undertaking CSR activities in a particular area.

Companies should allocate specific amount in their budgets for CSR activities. This amount may be related to
profits after tax, cost of planned CSR activities or any other suitable parameter.

To share experiences and network with other organizations the company should engage with well established and
recognized programs/platforms which encourage responsible business practices and CSR activities. This would
help companies to improve on their CSR strategies and effectively project the image of being socially responsible.

The companies should disseminate information on CSR policy, activities and progress in a structured manner to
all their stakeholders and the public at large through their website, annual reports, and other communication
media.

Corporate Social Responsibility Voluntary Guidelines 2012

In order to assist the businesses to adopt responsible governance practices, the Ministry of Corporate
Affairs has prepared a set of voluntary guidelines which indicate some of the core elements that businesses need to
focus on while conducting their affairs. These guidelines have been prepared after taking into account the governance
challenges faced in our country as well as the expectations of the society. The valuable suggestions received from trade and
industry chambers, experts and other stakeholders along with the internationally prevalent and practiced guidelines,
norms and standards in the area of Corporate Social Responsibility have also been taken into account while
drafting these guidelines.
Provision for CSR in Companies Bill 2012
The Companies Bill, 2012 incorporates a provision of CSR under Clause 135 which states that every company
having net worth Rs. 500 crore or more, or a turnover of Rs. 1000 crore or more or a net profit of rupees five crore or more
during any financial year, shall constitute a CSR Committee of the Board consisting of three or more Directors,
including at least one Independent Director, to recommend activities for discharging corporate social responsibilities
in such a manner that the company would spend at least 2 per cent of its average net profits of the previous three years on
specified CSR activities. It is proposed to have detailed rules after passing of Companies Bill 2012 by Rajya Sabha to give
effect to this provision.
According to Schedule-VII of Companies Bill, 2012 the following activities can be included by companies in
their CSR Policies:

Eradicating extreme hunger and poverty;

Promotion of education;

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Promoting gender equality and empowering women;

Reducing child mortality and improving maternal health;

Combating human immunodeficiency virus, acquired immune deficiency syndrome, malaria and other diseases;

Ensuring environmental sustainability;

Employment enhancing vocational skills;

Social business projects;

Contribution to the Prime Ministers National Relief Fund or any other fund set by the Central Government or the
State Governments for socio-economic development

CSR As a Marketing Strategy

In todays scenario businesses to sustain in the long run must go beyond competitive benchmarking and best
practices. Professor Michael Porter (Harvard Business School) proposes, strategy is about choosing a competitive
positioningdoing things differently from competitors in a way that lowers costs or better serves a particular set of
customer needs. This approach can easily be broadened to include a companys relationship to society, as it invests in
identifying and developing innovations that have a positive social impact and at the same time strengthen the companys
competitiveness. In other words, the more closely tied a social issue is to the companys business and vision, the greater is
the chance to leverage the companys resources and capabilities to benefit society as well as itself.
Shifting from ad hoc and fragmented CSR initiatives to a strategic mind-set emphasizing selection, action, and social and
business impact will require dramatically different thinking for many corporations. There are four steps that allow
companies to take a strategic approach to CSR:

Integrated Business Modeling and Stakeholder Analysis: The business is modeled so to highlight all relevant
stakeholders, their relationships, and their possible impact on the companys operations and strategies in the short
and long terms.

Evaluation of Company Positioning with Respect to its Stakeholders: Threats and opportunities coming from
each stakeholder group are analyzed and compared with the companys capabilities.

Strategic Options Generation and Evaluation: Options for managing the companys value proposition to each
stakeholder group are generated and evaluated qualitatively and quantitatively.

Investment Monitoring Panel: The chosen strategy implementation is detailed in a set of performance indicators
to be used for tracking and following-up on investments returns, both tangible and intangible.

CSR in a Nascent Stage in India

Even though there are signs of more sophisticated and strategic approaches to CSR, many firms are at a stage
where CSR is mainly evolving around marketing, public relations or simply a corporate philanthropy. As per records,
maintained by the Center for Monitoring the Indian Economy (CMIE), 5152 companies are listed as on January 31, 2013.
However from this exhaustive list only few companies are known to undertake CSR activities. The obvious question that
Impact Factor (JCC): 4.9926

Index Copernicus Value (ICV): 3.0

Corporate Social Responsibility: Integrating CSR with Business Value

arises is the level of CSR commitment shown by other firms? The possibilities are a) some firms may be actively
undertaking CSR initiatives but are not getting adequate media mileage or else b) few profit making companies are still not
spending on CSR. In the first case, recent regulations have made it mandatory for companies to declare the CSR spending.
In the second case, the regulation forces them to think and act on the concept. It implies that firms should allot a certain
percentage of their earnings and also participate in CSR initiatives. It has been seen that in the recent past women and
children have been the key focus of such initiatives.
Integrating CSR with Business Value
In the business context, value is generated either by doing business with a particular company through sheer
economic logic (e.g., financial stability, low-cost position, technological superiority), ie, termed as hard power and by
attracting stakeholders to the company allowing the company to gain influenceeither through a seductive brand, a heroic
mission, or its willingness to be a genuine part of the community which is termed as soft power. Even though the former is
crucial in enduring success, the latter is equally important for sustainenance. For instance, consumers do not simply
purchase the technically superior or cheapest products they buy brands that offer emotional or aspirational connections as
well.
Hence, how should companies attract, convince, and influence the various stakeholders in their
businesscustomers; employees; shareholders; government officials; and broader civil society, including NGOs, unions,
and community groupsto align goals and drive business success and value? Exhibit 1, highlights four dimensions and
one common platform to achieve business value.
Technology and Innovation Leaders
For many companies, technology and innovation are at the core of their soft power. These leaders do more than
simply offer superior products; they leverage their innovation capabilities to build further strength. This can take the form
of enhanced branding, a superior ability to attract key talent, and an active role in shaping industry standards and future
research directions.
Management and Leadership Mystique
Companies such as GE, Apple, and Toyota have built their soft power in part on a management and leadership
mystique. The basis can be a distinctive management process, for example, the Toyota Way of manufacturing and GEs
application of Six Sigma methodologies. Soft power can also arise from the character of the companys leader. One good
example is Steve Jobs at Apple, whose track record and persona have successfully reinvigorated that companys internal
effectiveness and consumer appeal.
Responsible and Influential Citizen
Increasingly, companies realizing their full potential of soft power are staking out positions as good citizens in the
public arena. One example mentioned previously is the case of Toyota and its hybrid car Prius. Toyota, long a management
innovator, moved rapidly to position itself as an environmentally friendly auto company with the promotion of Prius, at a
time when U.S. manufacturers had shown little interest.

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Customer Aspiration and Inspiration

Many leading soft power companies are able to connect with and inspire customers around the world by appealing
to their self-image and dreams. The very act of owning the product becomes aspirational. For example, when Apple
launched the iPod, MP3 players had been marketed already for several years, but it was the iPod that became a must-have
iconreinvigorating the Apple brand in a way that extended beyond the iPod to the Mac computer.
Values-Based Management and Leadership
This is the common platform underscoring the four previous elements. Global attractors develop a culture and
leadership style that is effective in aligning, inspiring, and engaging employees around the world from many diverse
cultures and backgrounds with different aspirations.
Thus the key to generating business value is based on a deep understanding of what the stakeholders value and
how the company can fulfill those needs by way of a aspirational brand, a heroic mission, a distinctive talent
development approach, or a willingness to be a genuine part of the community.

Notable CSR Initiative Taken by Some Companies

Corporate social responsibility (CSR) is emerging as a new field in the management research. In India, many
firms have taken the initiatives of CSR practices which have met with varying needs of the society. During the recent
times, Indian companies have more clearly understood the inter linkage between CSR and long term business sustenance.
The following are the CSR initiatives taken by both public sector and private sector companies:
Ashok Leyland
Operates a FunBus in Chennai and New Delhi. This bus, equipped with a hydraulic lift, takes differently abled
children and those from orphanages and corporation primary schools on a days picnic. The company also runs AIDS
awareness and prevention programmes in its Hosur factories for about 3.5 lakh drivers.
Axis Bank
The Axis Bank Foundation runs Balwadis which are learning places for children living in large urban slum
clusters. It also conducts skill development programmes (PREMA and Yuva Parivartan) in motor driving, welding, mobile
repairing, tailoring etc, for the youth in backward districts.

Impact Factor (JCC): 4.9926

Index Copernicus Value (ICV): 3.0

Corporate Social Responsibility: Integrating CSR with Business Value

Bharat Petroleum Corporation

Its rain water harvesting project Boond, in association with the Oil Industries Development Board, selects
draught-stricken villages to turn them from water-scarce to water-positive. Some of BPCLs other social programmes
include adoption of villages, prevention and care for HIV/AIDS and rural health care.
Hindalco Industries
Its CSR activities are concentrated in 692 villages and 12 urban slums, where it reaches out to about 26 lakh
people. It has constructed check dams, ponds and bore wells to provide safe drinking water. In education, it awards
scholarships to students from the rural schools it support. Its other interests include womens empowerment and health
care, in which it treats patients in hospitals, runs medical camps and operates rural mobile medical van services.
Indian Oil Corporation
It runs the Indian Oil Foundation (IOF), a non-profit trust, which works for the preservation and promotion of the
countrys heritage. IOCL also offers 150 sports scholarships every year to promising youngsters. Some of its other
initiatives lie in the domains of clean drinking water, education, hospitals and health care.
Infosys
The Infosys Science Foundation, set up in 2009, gives away the annual Infosys Prize to honour outstanding
achievements in the fields of science and engineering. The company supports causes in health care, culture and rural
development. In an interesting initiative undertaken by it, 100 school teachers in Karnataka, who were suffering from
arthritis, underwent free surgery as a part of a week-long programme.
Mahindra & Mahindra
Nanhi Kali, a programme run by the KC Mahindra Education Trust, supports education of over 75,000
underprivileged girls. The trust has awarded grants and scholarships to 83,245 students so far. In vocational training, the
Mahindra Pride School provides livelihood training to youth from socially and economically disadvantaged communities.
M&M also works for causes related to environment, health care, sports and culture.
Oil & Natural Gas Corporation
It offers community-based health care services in rural areas through 30 Mobile Medicare Units (MMUs). The
ONGC-Eastern Swamp Deer Conservation Project works to protect the rare species of Easter Swamp Deer at the
Kaziranga National Park in Assam. ONGC also supports education and women empowerment.
Tata Consultancy Services
Its Computer Based Functional Literacy (CBFL) initiative for providing adult literacy has already benefitted
1.2 lakh people. The programme is available in nine Indian languages. Besides adult education, TCS also works in the
areas of skill development, health care and agriculture.

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Tata Steel
It comes out with the Human Development Index (HDI), a composite index of health, education and income
levels, to assess the impact of its work in rural areas. Health care is one of its main concerns. The Tata Steel Rural
Development Society aims to improve agricultural productivity and raise farmers standard of living.
Indias Top Companies Based on
Net Sales for the Financial Year 2012 and Their Spending on CSR

Annexure 1

CONCLUSIONS & FUTURE RESEARCH AREA

In the global arena, CSR has gained prominence. However in an emerging market like India, there is vast scope
for further implementation of the initiative or drive. The implementation part would result from two factors a) as per the
law, a compulsory 2%investment in CSR and b) increased sensitivity of firms towards CSR activities. This in turn will lead
to generating business value in the long run.
Future research work could focus on the following key areas such as:

Studies could look at customer and stakeholder perception of CSR with regard to the activities of large firms in
this domain.

Empirical work could be undertaken where the emphasis would be to understand the relationship between the
firms market value and its investment in CSR.

Studies ascertaining the role of top management and their vision for CSR involvement aligned with business
projections of the firm.
This could provide a new research avenue and several interesting management insights could be gleaned for the

CSR perspective.

Impact Factor (JCC): 4.9926

Index Copernicus Value (ICV): 3.0

Corporate Social Responsibility: Integrating CSR with Business Value

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editor@tjprc.org