Concept of CSR

Deciphering the term:

Corporate : company, especially large company

Social: relating to society

Responsibility: Response to your duty/job

So, in simple terms, response of the corporates towards a social need/cause or someting of social
relevence is Corporate Social Responsibility

 Extended model of corporate governance to produce an overall positive impact on the

society
 Not just an option, it is also a legal mandate to be followed
 Focus on the good and services which can not be exhausted by one individual (eg. A glass of
water Vs river; sectors like education, sanitation, safe drinking water, housing etc.)

Why ?
  Corporate thrive at the cost of society (take raw material, release pollutants,labor etc) /
interdependence b/w corporates and society
 Not only financial accountability, publically accountable to social and environmental
records
 Social, moral and ethical responsibility of companies
 Insufficent resources for social development in the nation
 Government need support to convert policies into deliverables
 Pre-empt therole of government as the watchdog over MNCs (e.g Being human)

Models in CSR

To understand it in a better way, lets study the Carroll’s CSR pyramid...

Carroll’s four part definition of CSR: “Corporate social responsibility encompasses the economic,
legal, ethical, and discretionary (philanthropic) expectations that society has of organizations at a
given point in time” (Carroll 1979, 1991).

1. Carroll's CSR Pyramid is a simple framework that helps argue how and why organisations
should meet their social responsibilities.
o The key features of Carroll's CSR Pyramid are that:
 CSR is built on the foundation of profit – profit must come first
 Then comes the need for a business to ensure it complies with all laws &
regulations
 Before a business considers its philanthropic options, it also needs to meet
its ethical duties
The four responsibilities displayed on the pyramid are:

ECONOMIC
 This is the responsibility of business to be profitable
 Create value for customers, suppliers, employees and investors
 Only way to survive and benefit society in long-term
LEGAL
 This is the responsibility to obey laws and other regulations
 E.g. Laws pertaining to Employment, Competition, Health & Safety, human rights,
curroption and product safety
ETHICAL
 This is the responsibility to act morally and ethically
 With this responsibility, businesses should go beyond narrow requirements of the
law
 More of fundamental than legal
 Involves decision that will have impact on stakeholders rather than the bottom line
alone
 E.g. Treatment of suppliers & employees
PHILANTHROPIC
 This is the responsibility to ‘give back’ to society through philanthropic donations
 The responsibility is discretionary, not by law, but still important
  Creates a positive moral capital among the stakeholders and can generate wealth
for stakeholders
 E.g. charitable donations, staff time on projects
2. Wood’s model of Corporate social performance
 As per woods, society and business are interwoven rather than distinct entities,
therefore society place certain expectations of desirable business conduct and
outcomes
 These expectations are classified as institutional, orgazinational and individual
Priciples of Corporate Social responsibility  Instititional Principle: Legitimacy
 Organisational Principle:public
responsibility
 Individual principle: managerial discretion
Priciples of Corporate Social  Environmental assesment
responsiveness  Stakeholder management
 Issues management

Outcome of Corporate Behavior  Social Impact

 Social Programs
 Social policies

2.1 Principles of CSR:

 Principle of Legitimacy:
o implies that business institution is a part of social system and there
exists a social contract between society and business
o Society expects the business to work within bounds and norms,
hence business shall not abuse the power granted
 Principle of Responsibility:
o Applies to organisational level
o It requires the organisation to take the responsibility of the
potential impact of its acts
o It states that the business is responsible for the outcomes related to
its area of involvement with society
 Principle of Managerial Discretion:
o Implies that managers are the moral actors in the organisational
and societal environment with lots of choices
o They can choose to excercise discretion in fulfilling responsibilities
in a manner /action which are not prescribed by corporate
procedures

2.2 Principle of Corporate social responsiveness:

o It is the 2nd phase of conceptual development in which the emphasis
is on how the theory of CSR is put into practice
 o Refers to the capacity of an institution to respond to the social and
environmental pressure
o Includes 3 interlocked process:
 Environmental assesment: How a business
responds to environmental conditions and adapt
itself
 Stakeholder management: How an organisation
manages its relationship with different stakeholders
(community relation, activist pressure, international
stakeholders and business-governmet relation)
 Issue Management: Issue identification, issue
management and issue response. Involves
developing and monitoring internal and external
process for managing company’s response to social
issues

2.3 Outcomes of Corporate behavior: Refers to the result of the firm’s interaction with
the society , which manifests in the form of impact of corporate behavior, the
program companies use to implement responsibility and the policies employed by
companies to handle social issues and stakeholders interest.

Based on above, we can sum up that there are 3 basic approaches to CSR:
 Perceived Merits and Demerits of CSR:
Merits
 Balance corporates power with
responsibilities
 Discourage the creation and
imposition of government
regulation
 Focus on social problems
Types /Models of CSR:
Demerits
 Cost implication borne by stakeholders
(employees, shareholders, consumers)- effect on
operating efficiency and competetive positioning
 Extra power to the corporate as they already
excercise considerable power over society
 Lack of management exposure to social issues

Corporate may engage in CSR for ethical or strategic purpose.

 Ethical CSR:
o legal and ethical requirements that a business must fulfil
o working conditions for employees, and environmental laws regarding sourcing
materials, emissions and so forth
o ‘cover your back’ aspect of CSR- failure to address can result in a loss of reputation,
or even worse, legal prosecution
o to avoid harm and social injuries ( ISO 26000 is the recognized international
standard for CSR)

 Altruistic /Humanatarian CSR:

o For the common good at the possible expense of the business for altruistic or
philanthropic cause
o May not directly benefit the company , but may give a knock-on effect on business
Eg: a fund raising event for a local charity, sponser marathon for blind people/
fitness awareness in sync with NGOs
 Strategic CSR:
o a carefully planned act of CSR that has a direct and expected impact on the business
o firm’s social welfare responsibilities that benefits both the corporation and
stakeholders
o Done to accomplish strategic business goals and reap long term profits
o E.g : recycling resources (water, paper etc.) for business use, green building, Nursing
college within private hospitals, sponsership for education with ensured placements

Suggested Read:

 Strategy and Society: The Link Between Competitive Advantage and Corporate Social
Responsibility (HBR review December 2006)
 https://link.springer.com/article/10.1186/s40991-016-0004-6
Theories of CSR:

 Neo Classical CSR Theory:

o Corporates are meant to make profits and legitimized by law
o Only responsibility of business is to use its resources and engage in the activities
reaping profits while working within the framework of society
o Managers are the agents of the stakeholders and are responsible to spend
stakeholders money wisely to maximize the value and not on social activities
o Social concern shall be left to the care of government

 Stakeholders Theory of CSR:

o Freeman chose the word Stakeholder on the basis of the traditional term -
stockholder which takes only a look at the economic point of view. Where the
stakeholders are defined as “any group of individual who is affected by or can
affect the achievement of an organization’s objectives” (Freeman 1984).
 Stakeholder theory is based on the assumption that businesses can only be
considered successful when they deliver value to the majority of their stakeholders.
 That means that profit alone cannot be considered the only measure of business
success
 The idea of stakeholders, or stakeholder management, or a stakeholder approach to
strategic management, suggests that managers must formulate and implement
processes which satisfy all and only those groups who have a stake in the business
 The main task in stakeholder management process is to manage and integrate the
relationships and interests of shareholders, employees, customers,
suppliers,communities and other groups in a way that guarantees the long-term
success of the firm
 A stakeholder approach is very much concerned about active management of the
business environment, relationships and the promotion of shared interests in order
to develop business strategies.

o Refers to the individuals or groups that have interest in the organisation and are
affected by its actions
 Primary Stakeholders: Customers, employees, suppliers and
shareholders
 Secondary stakeholders: Government, regulatory agencies, competitors,
trade unions, NGOs and Political activist
o The way businesses involve the shareholders, employees, customers, suppliers,
governments, non-governmental organizations, international organizations, and
other stakeholders is usually a key feature of the Corporate Social Responsibility
(CSR) concept
o It states that business shall acts in consistent with the moral and legal rights of
the stakeholders. This princple is regarded as the principle of business
responsibility
o Companies are dependent on stakeholders to obtain the necessary resources
for their survival and for their development
o The legitimacy of the company to use these resources depends on the
correspondence of its behavior to rules and values recognized by the society; it
will obtain a “license to operate” on the condition of not being considered as a
predator of the natural and social environment. It is about a utilitarian
legitimacy
o The employees, when they have the choice, will prefer to work in a socially
responsible company. The consumers tell, in inquiries, to prefer goods produced
in the respect for the fundamental rights of the work. Besides the financial
performances, the investors integrate, in their choices of portfolios, the risk of
loss of " reputation capital ", which can also be translated by a loss of financial
capital
o Dr. Freeman’s books describe how a healthy company never loses sight of
everyone involved in its success. Stakeholder theory says that if it treats its
employees badly, a company will eventually fail. If it forces its projects on
communities to detrimental effects, the same would likely happen. “A
company can’t ignore any of its stakeholders and truly succeed,” Dr. Freeman
said in an interview. “There might be short-term profits, but as stakeholders
become dissatisfied, and feel let down, the company cannot survive.”
o Organisation must work to achieve its economic motives while simultaneously
satisfying effective legitimate claims of the shareholders
o Business which do not act in interest of stakeholders faces either legal penalties
or disadvantages such as :
 Deterioration of relationship
  Damage to reputation
 Declining productivity,creativity, loyalty
 Ineffective flow of information throughtout organisation
 Absenteesism

Example: Let’s consider a hypothetical company that builds condos in an American city. That company
has gone public, so its shareholders are eager to see a rise in the value of their stock. Under stakeholder
theory, however, those shareholders could be joined by several other types of stakeholders, each with
its own interests relative to the company. Here are a few possible stakeholders with interest in this
company and its projects:

Employees: The employees want to be treated and compensated fairly,

and work reasonable hours. If the company underpays the employees,
or gives them lengthy and difficult work shifts, the employee attitude
and buy-in in the company is going to erode. There will be turnover, bad
word-of-mouth among the potential workforce in the area, and a
weakened company.

Suppliers: Suppliers for this condo project also want to be treated and
compensated fairly, or similar results as those with employees could be
seen. However, under stakeholder theory, suppliers should also be
operating their own businesses ethically, fairly, and equitably. If the
condo company truly wants long-term success, stakeholder theory
holds, it should treat suppliers and vendors well, but also do due
diligence on how the supplier companies themselves do business.
Manufacturers: In a global economy, sometimes parts or even whole
products are manufactured in other countries, far away from the main
marketplace or the location of the project. But for this condo company
to do well, it must think of its manufacturers - and their employees - as
stakeholders too. So, working conditions and wages must be fair and
equitable for them as well.
Environmentalists: People who live in the city and neighborhood where
the housing development is being constructed want to be assured that
the environment, water system, power sources, and other things
potentially affected by the project, are protected in as transparent a
way as possible. These people who care about the local ecology would,
under stakeholder theory, be considered stakeholders in the project,
and should be kept apprised of plans and developments so they can
have a chance to review them and weigh in with their thoughts.
Housing activists: As more and more housing projects are built in
increasingly dense cities, many local activists have a political voice and
 stake in how new developments are handled. Will there be enough
parking for every resident? What kind of services will the residents need
and have these been taken into account? Does the project displace
long-time residents of the area, and, if so, would they be considered as
tenants in the new structure? If the construction company is truly
subscribing to stakeholder theory, it will want to get buy-in from these
activists. It’s good public relations, but more than that, it’s truly
satisfying real stakeholders.
Governmental bodies: The city, county, and state likely have density,
environmental, and other concerns. Even with governmental approval,
a construction project needs regular check-ins with governmental
bodies, regulated agencies like gas and electric companies, and more.
For instance, there may be design restrictions in a historic part of town,
or height restrictions in a mostly single-family-home area. All of the
aforementioned are valid concerns to these stakeholders.
Neighbors: These stakeholders are going to be stakeholders for a long
time, living alongside the new condo development. If the construction
company wants to please these stakeholders, it should consider parking,
greenspace and parks, and perhaps create a space that can be used and
shared by all the neighbors (not just the condo residents). Neighbors
should feel as though their quality of life is being maintained or
enhanced - but not reduced because of the project.

This is by no means a complete list, but as you start to think of your

company and its projects in terms of the full ecosystem of potential
stakeholders, you can see how far-reaching your impact can be. Some
will have a financial interest in your project. Some will have an
emotional interest. Many may have both. And stakeholder theory holds
that all these stakeholders, as well as their interests, are critical to your
project’s success.

Rw
Relationship between business Functions and Impact on stakeholders
Fucntion Stakeholder Impact on stakeholder
1 Making Profits Communities,  Displacements due to acquisition of lands or due to
labor, operations impacting livelihoods and means of
 environment, survival
investors,  Pollution of water, land and air impacting on the
consumers, resource of production
competitors,  Work and wage conditions of contract, casual and
regulators, daily labor
business  Investors and consumers insensitive to the poor,
partners pressurizing the business for maximizing their
returns which impact poor-who are unorganised
and posses low bargaining power
 Dole-out to buy peace with local communities
reinforce the traditional power structures on the
one hand and build pressure-cooker situation for
the business as well.
2 Distributing Communities Improrperly strategised and targeted philanthropy
profits (both impacted does not reach the neediest
and un
impacted)
3 Institutionalizing All stakeholders In the absence of such a process, the impacts would
responsible continue to be felt by the poor as the influence even of
behavior within a well intentioned leader would be limited
business
4 Engaging with All stakeholders Such lobbying without considerations to minimize
state to lobby impact can result in impacting the stakeholders,
for business generally the poorer sections like for instance, an
gains inadequate state articulation of R & R or alienating
the poor from utilities and means of livelihoods.

BENEFITS OF USING STAKEHOLDER THEORY

 Higher productivity through employee satisfaction

 Improved retention / referrals from happy customers
 Increased investment from happy financiers
 Improved talent acquisition from a positive image in the community
 When you can use the opinions and influence of all your stakeholders to help shape your
project, you and the project will be much better positioned for success.
 The benefits can shape the perception of your project and your company, not only with all
of your extended stakeholders, but with the rest of the world.

Benefits of CSR

 Increased reputation and Brand

 Increased employee loyalty and retention
 Increasd quality of product and service
  Increased customer loyalty and retention
 Increased reputation and brand image
 Greater productivity and quality
 Reduced regulatory oversight
 Access to capital and market

Added Value drivers of CSR:

Green Strategies for CSR:

 Green Building concept

 Green manufacturing to control green house gas emission
 Hybrid and Electric Vehicles
 Biodegradable plastic
 Mobile recycling (Fonebank.com)

Entrepreneurs social calling to natural and man-made disaters

Examples:
o Henri Dunant’s Red Cross
o Fazle Abad’s BRAC in Bangaladesh
o Joe Madinath’s Gram Vikas
Sustainable Development:

“We Do Not Inherit the Earth from Our Ancestors;

We Borrow It from Our Children”
“Earth provides enough to satisfy every man's need, but not every
man's greed” - Mahatma Gandhi

 Some key factors have influenced the emergence of sustainable development as an area of
great importance. One major precursor occurred in 1962, when Rachel Carson’s book, Silent
Spring was published
 Sustainable development was a term first coined in 1980, when the intent of the concept
was merely basic. It was in the World Conservation Strategy, a union between three
prominent environmental non-governmental organizations International Union for
Conservation of Nature (IUCN), World Wide Fund WWF, and The United Nations
Environment Programme (UNEP), where sustainable development took on the meaning of
‘conserving the earth’s natural resources
 In the 1980s the UN set up the Commission on Environment and Development, also known
as the Brundtland Commission, named after its Chair Gro Harlem Brundtland.
 Sustainable development formed the basis of ‘United Nation Conference on Environment
and Development held in Rio de Janeiro’ in 1992. It was presented as a solution to the
problems of environment degradation based on Brundtland Commission in the 1987 (it
explained that the economy, society, and the environment were key to sustainable
development)
 Living within our environmental limits is one of the central principles of sustainable
development. Our implication of not doing so is the climate change.
 Sustainable development is about finding the ways of doing things, both for future and
present
 Sustainable development calls for the concerted efforts towrds building an inclusive,
sustainable and resilient future for the people and planet
 The issue of sustainability is essentially one of the resource scarcity or damage; either at
present or at some projected timeline in the future
 For sustainable development to be achieved, it is crucial to harmonize three core elements:
economic growth, environmental protection and social inclusion
 According to World Commission on Economic Development (WCED 1987), sustainable
development is defined as “the development that meets the need of present without
compromising the ability of future generations to meet their own needs”
 Sustainable Development is an idea of using our resources towards our continued progress
in a way that will not impede upon the basic needs of those who are yet to come, a concept
of putting people first by placing the necessary value on the environment
 The principle of sustainability can be widely applied to many aspects of our societal
functions, most of which can be arguably categorized under one of these three defined
areas
 The economic element pertains to the sustainability of economic growth and profitability,
the social element deals with socially equitable development and the environmental aspect
focuses on issues of natural resource use and preservation
 Every day we make decisions about the environment, often times without even being
aware. Every purchase is either leading closer or farther away from sustainability and it is
not always easy to tell which direction. The purchasing choices made by us as consumers in
products such as vehicles, appliances, food, clothing, electronics etc all have implications
beyond the immediate environment.
 Consider the ecological footprint, which provides a tool for estimating a population’s use of
resources in consumption and waste integration (Wackernagel and Rees, 1996). The
accounting tool tracks land and water area needed to support the current levels of
consumption and these measurement allow for comparisons to be made of human
functional demands in relation to the earth’s biosphere and carrying capacity
 It also considers the volume of resources that are imported from outside areas and assesses
the future ability of the natural environment to support growing population sizes at current
rates of consumption (Wackernagel and Rees, 1996). Each person has an ecological
footprint and this highlights the significance of creating individual awareness so personal
choices can be tailored to reduce resource consumption to an overall level compatible with
nature’s ability to renew itself
Strategic Imperitives for Sustainable Development (based on Brundtland Report)

1. Reviving Growth
2. Changing the quality of growth
3. Meeting essential needs for jobs , food, energy , water and sanitation
4. Ensuring a sustainable level of population
5. Conserving and enhancing the resource base
6. Reorienting technology and managing risks
7. Merging environment and economics in decision making

1. Reviving Growth:
 Sustainable development has to address the problem of the large number of people living in
absolute poverty- who are not able to satisfy their needs
 A necessary but not a sufficient condition for the elimination of absolute poverty is a relatively
rapid rise in per capita incomes in the Third World
 It is therefore essential that the stagnant or declining growth trends of this decade be reversed
 Growth must be revived in developing countries because that is where the links between
economic growth, the alleviation of poverty, and environmental conditions operate most
directly
 Yet developing countries are part of an interdependent world economy; their prospects also
depend on the levels and patterns of growth in industrialized nations. However, if developing
nations focus their efforts upon eliminating poverty and satisfying essential human needs, then
domestic demand will increase for both agricultural products and manufactured goods and
some services
 Hence the very logic of sustainable development implies an internal stimulus to Third World
growth

2. Changing the Quality of Growth:

 Sustainable development requires change in the content of growth, to make it less material and
energy intensive and more equitable in its impact
 Change in the quality of growth require changing our approach to development efforts taken
into account
 In all countries, rich or poor, economic development must take full account in its measurements
of growth of the improvement or deterioration in the stock of natural resources
 It must be based upon the realities of the stock of capital that sustains it, which is rarely done in
developing and developed countries
 For example, income from forestry operations is conventionally measured in terms of the value
of timber and other products extracted, minus the costs of extraction. The costs of regenerating
the forest are not taken into account, unless money is actually spent on such work. Thus
figuring profits from logging rarely takes full account of the losses in future revenue incurred
through degradation of the forest
 Similar incomplete accounting occurs in the exploitation of other natural resources, especially in
the case of resources that are not capitalized in enterprise or national accounts: air, water, and
soil.
 For instance, a hydropower project should not be seen merely as a way of producing more
electricity; its effects upon the local environment and the livelihood of the local community
must be included in any balance sheets. Thus the abandonment of a hydro project because it
will disturb a rare ecological system could be a measure of progress, not a setback to
development.

3. Meeting Essential Human Needs:

 Meeting essential human need is the core objective of production activity. Due to poverty a
large number of people are not able to meet even the basic needs for survival, even if goods
and services are available.
 While simultaneously, the demands of rich may have major environmental consequence on the
environment
 With the rising world population, it is important to create enough sustainable employment
oppurtunities that would enable poor households to meet their basic needs
 The other basic need to be taken care of, especially in the developing economies are: Food,
energy, water supply, sanitation, healthcare. In these countries, failure to meet these key
needs is one of the major cause of the communicable disease like malaria, typhoid, cholera etc.
 Planners have to find out the ways of relying more on supporting community initiatives, self
help efforts, and use of low cost technologies

4. Ensuring a sustainable level of population

 The sustainability of development is largely linked to the dynamics of population
 Not only population, but place of birth also matters. A child born in a country with high
consumption of material and energy will have a greater burden on earth’s resource compared
to a child born in a poor country.
 For sustainable develpoment, population size has be stabilized at a level consistent with the
productive capacity of the ecosystem
 Developing countries have a higher population growth rate compared to developed countries
 Rising incomes, urbanization and changing role if women in society leads to decline in birth rate
shall be supported in developing countries
 Direct measure to reduce fertility and access to familiy planning measures shall be recognized
and encouraged
 With the rising incomes levels , urbanization and migration is causing high population pressure
being built in the cities creating disbalance in the resource allocation. A growing proportion of
slum dewllers and shanty dewllers in cities have a higher exposure to air, water, noise pollution
and industrila hazards
 There is need to develop smaller urban centres or counter magnet cities to reduce pressure on
the cities and promote sustainable development

5. Conserving and Enhancing the resource base

 In order to meet the growing needs of the population on a sustainable basis, natural resources
must be conserved and enhanced. To do so, major shift in the government policies shall be
made to cope with the worlds’s growing levels of consumptions
 The use of natural resources shall be based upon scientific methods and calculations
 This can also be supported by increased use of renewable resources, however keeping in mind
the extent of use and availability
 Policies, widening the earning capacity and options for the people, especially poor and needy
people in resource poor households and in areas under ecological stress
 Enforcing stringent regulations like energy emission standards, waste disposal policies etc.
 For Example, in a hilly area , economic self-interest and ecology can be combined by helping
farmers shift from grain to tree crops by providing them with advice, equipment, and
marketing assistance. Programmes to protect the incomes of farmers, fishermen, and foresters
against short-term price declines may decrease their need to overexploit resources.
 Conservation of agriculture , fisheries, and forestry resources is an ugent task as they have
been exploited for long and not replenished

6. Reorienting Technology and Managing Risk

 To fulfill the above tasks, reoirintation of technology is the key link between humans and
nature
 Capacity and orientation of the technology needs to be greatly enhanced in the developing
countries to enable them to respond and pay greater attention to the suatainable development
 Rather than just focussing on the technology to enhance production capacity, efforts shall be
made to develop technologies for ‘social goods’ , such as to improve air quality , waste
utilisation etc.
 It is also important to consider the vulnerability of technologies and risk associated (nuclear
reactors, electric and other utility network distributions , communications systems etc.)
 National and international institutional mechanisms are needed to assess potential impacts of
new technologies before they are widely used, in order to ensure that their production, use,
and disposal do not overstress environmental resources
 Similar arrangements are required for major interventions in natural systems, such as river
diversion or forest clearance
 In addition, liability for damages from unintended consequences must be strengthened and
enforce

7. Merging Environment and Economics in Decision making

 The common theme of sustainable development is merging environment and economies
  Economic and ecological considerations are not always in opposition. For example, policies
that conserve the quality of agricultural land and protect forests improve the long-term
prospects for agricultural development. An increase in the efficiency of energy and material use
serves ecological purposes but can also reduce costs. (Use of CFL etc)
 Sustainability requires the enforcement of wider responsibilities for the impacts of decisions.
This requires changes in the legal and institutional frameworks that will enforce the common
interest. Some necessary changes in the legal framework start from the proposition that an
environment adequate for health and well-being is essential for all human beings including
future generations

Millenium Development Goals: 2000-2015

The Sustainable Development Goals (2015-2030): are the blueprint to achieve a better and
more sustainable future for all
“At the institutional level, the interdependent goals of economic growth, social development
and environmental protection are managed today by institutions that tend to be independent
and fragmented, and that respond to narrow man -dates with closed decision-making
bodies. Sustainable development stresses the importance of institutions that are willing to
integrate economic, social and environmental objectives at each level of policy development
and decision-making With this in mind,it can be argued that in terms of reach, scope,
significance or consequence, corporate practices have even greater responsibilities when it
comes to their responsibility to sustainable development and the social environment at
large”

Models of Sustainable Development:

1. Triple bottom line concept of CSR: given by John Elkington in 1998

TOMS
 Shoe company started in 2006
 Founder Blake Mycoskie
witnessed the hardships faced
by children growing up without
shoes
 Wanting to help, he created
TOMS Shoes, a company that
would match every pair of
shoes purchased with a new
pair of shoes for a child in need.
One for One®
https://www.toms.com/corporate
-responsibility/
Tesla
 Tesla produces electric vehicles,
energy storage systems and
solar panels
 Addresses some of the major
interests of the stakeholders of
the automotive and energy
solutions business
 According to Tesla, as of August
2018 more than 3,64 millions of
tons of CO2 have been saved by
Tesla vehicles
 Electric vehicles batteries
developed by Tesla are not
patented and the vehicle
designs are open source as well

 In congruence with CSR and SD, The Triple Bottom Line (TBL) argues for businesses to measure
their success according to three perspectives: people, planet and profits. (Elkington, 1998).
 It is an accounting framework aimed at moving beyond the traditional profit measures or
reporting corporate performance to incorporate social and environmental measures
 Economic responsibility (profits)
o Profit generation , assest creation, economic growth
o Monetory support to political parties
o IPR, Patents
o Tax incentives
o Antitrust and Competition
  Social responsibility (People)
o Labor rights: Slave, forced labor, child labor, non- discrimination, equal
oppurtunities, minimum wages, Health and safety
o Right to work: Protection against unjustifies dismissal, vocational trainings
o Right to hold opinions: Freedom of expression, thought, religion
o Right to privacy: Drug testing, personal information, Survellince
o Cultural Rights: Right to take part in political life
o Right to family life
 Environmental responsibilities (Planet)
o UN Convention on biodiversity : use of genetic material
o Green house gas emission and global warming
o Soil and Water contamination
o Treatment and reduction of water waste
o Recycling and reuse of material
o Protection of forest resources
 The major challenge is that while economic performance is easily measured in currencies
(Dollor, INR etc.), environmental and social performance are not easily quantifiable
 The TBL has potential to demonstrate to corporates that social and financial responsibilities are
relevent factors
 Their performence in each category represents their percieved commitment to the stakeholders
 A balance of 3 must be achieved to maximize the benefit without compromising on other
 By using innovative and energy efficient technology, company can create a competitive, increase
profitability without compromising on environment while enhancing their brand, customer
loyalty and respect in society
 Challenge with TBL is that environmental and social profits/ impact can not be quantified in
income statement
 The company’s economic sustainability would be dependent on its ability to simultaneously
incorporate these values into its practices in order to yield higher overall profitability

Benefits of Measuring the Triple Bottom Line

The potential benefits of measuring a broader scope of business performance based on Profit,
Planet & People include:
 Encourages businesses to think beyond narrow measure of performance (profit)
 Encourages CSR reporting
 Supports measurement of environmental impact & extent of sustainability

Criticisms of The Triple Bottom Line

Amongst the criticisms that have been made of Elkington’s model are:

 Not very useful as an overall measure of business performance

  Hard to reliably and consistently measure People & Planet bottom-lines
 No legal requirement to report it – so take-up has been poor

For reporting their efforts companies may demonstrate their commitment to corporate social
responsibility (CSR) through the following:

 Top-level involvement (CEO, Board of Directors)

 Policy Investments
 Programs
 Signatories to voluntary standards
 Principles (UN Global Compact-Ceres Principles)
 Reporting (Global Reporting Initiative)

The concept of TBL demands that a company's responsibility lies with stakeholders rather than
shareholders. In this case, "stakeholders" refers to anyone who is influenced, either directly or
indirectly, by the actions of the firm.

Following the initial publication of the triple bottom line concept, students and practitioners have
sought greater detail in how the pillars can be evaluated.

 The people concept for example can be viewed in three dimensions – organisational needs,
individual needs, and community issues
 Equally, profit is a function of both a healthy sales stream, which needs a high focus on
customer service, coupled with the adoption of a strategy to develop new customers to replace
those that die away
 And planet can be divided into a multitude of subdivisions, although reduce, reuse and recycle is
a succinct way of steering through this division

Elkington describes 7 types of revolutions to achieve this scenario

o The first revolution refers to the transformation from compliance with existing market
conditions to more competition through markets. Businesses become the agents of
change as shifting market mechanisms demand the increased environment and social
targets
 o The second revolution focuses on the shift of values from “‘hard’ commercial values to
‘softer’ triple bottom line values” (Elkington, 1998, p. 5) as businesses conform to the
globalized shift in societal values. These values are characterized by unwillingness to
complacently allow environmental or social compromises once tolerated. (Elkington,
1998)
o Globalization and information technologies are two propellers of the transparency
revolution. Increased demands are being made on corporations to provide information
on their current operations and future plans. These actions and plans are scrutinized by
stakeholders and competitors and used to make decisions in comparisons. Companies
find it more difficult to keep secrets and hide abuses of public trust and instead are
encouraged to embrace openness and disclosure in their interactions with all
stakeholders.
o Driven by the increased transparency, the fourth revolution is focused on life-cycle
technology. Companies are being held accountable at all levels of their supply chain as
well as their product life cycle. Not only must they take responsibility for their products
from “cradle to grave” but further from “cradle to cradle” to include product disposal
and recycling. Products are more susceptible to assessments which include the social
and environmental elements critical to the triple bottom line. (Elkington, 1998)
o Increased rates of partnerships represent the fifth revolution as corporations embrace
the benefits of strategic relationship in achieving their sustainability goals in order to
thrive in the triple bottom line environment. By doing so they are able to reap the
advantages of core capabilities and efficiencies of other companies and groups not
previously available or deemed necessary to them. (Elkington, 1998)
o The sixth Revolution is centred on time. Technological advances have made information
more accessible at faster rates. Speed is now an important commodity. Many processes
are taking place more quickly and businesses are responding at a faster pace. The focus
is also in 19 perception from broader to longer term thinking and planning and
managing. This includes the excessive rates of resource exploitation and environmental
degradation usually associated with short-sighted visions. (Elkington, 1998)
o The seventh revolution relates to corporate governance, as it must become inclusive of
environmental and social factors. The more corporations and their boards embrace their
responsibility for the triple bottom line standards in their organization, the more the
likelihood of surviving its transition into a sustainable future. (Elkington, 1998)

Tools to access the impact on society and environment:

 To propel the CSR and TBL, Standardization is a tool used in an organisation. (e.g ISO,
Green Building etc.)
 Global Reporting Initiative and Sustainability Reporting: The Global Reporting Initiative
(GRI) is a framework for standardizing sustainability reporting. Sustainability reporting
refers to a company’s reporting on its environmental and social performance and
governance. The GRI standards are voluntary and adaptable to all types of
organizations. They are based on multi-stakeholder involvement and each year an
 increasing number of companies adopting the guidelines to improve their reporting. The
guidelines serve to provide many benefits such as the ability to mitigate environmental
and social impacts, and to facilitate stakeholder understanding of intangible
performance and intercompany performance comparisons. Further benefits include
improved understanding of opportunities and associated risks, improving long-term
strategies and highlighting the connections between financial and non-financial
performance
Companies to track for TBL:
 Novo Nordisk
 Unilever
 Covestro
2. Prism model (sometimes called the four pillars model)
This model was developed by the German Wuppertal Institute and defines SD with the help of
four components - economy, environment, society and institution.
This Model stipulates four dimensions:
• economic dimension (man-made capital)
• environmental dimension (natural capital), and
• social dimension (human capital) as the base for
• institutional dimension (social capital)
In this model the inter-linkages such as care, access, democracy and eco-efficiency need to be
looked at closely as they show the relation between the dimensions which could translate and
influence policy
In each dimension of the prism, there are imperatives (as norms for action).
Indicators are used to measure how far one has actually come in comparison to the overall
vision of SD
Similarly to the three pillars model, the prism model proposes a set of interlinked components

The prism model of sustainability suffers from much the same criticisms as the three-pillar
model in that these models assume that the different components/pillars are independent and
that there is no time dimension built into the model, which is an essential component
3. Nested circles of sustainability (also egg of wellbeing model or concentric circles)
As a partial response to the three-pillar model and the prism model of sustainability,
the “egg of wellbeing model” represents the relationships between the different dimensions
as concentric ovals with one oval (e.g. the ecosystem) entirely encapsulating the other oval
(e.g. people).

This model is drawn from the IUCN (1991) definition of sustainable development and uses the
metaphor of an egg (Guijt et al., 2001), where the white of the egg (ecosystem) supports and
surrounds the yellow yolk (people).
This implies that people are within the ecosystem, and that ultimately one is entirely dependent
upon the other
Social and economical development can only take place if the environment offers the necessary
resources: raw materials, space for new production sites and jobs, constitutional qualities
(recreation, health etc.).

Ecosystem is therefore to be regarded as a super coordinated system to the other dimensions

of the triangle or prism models: social, economical, and institutional
The wellbeing of the egg is only considered complete when the wellbeing of each individual
subsystem is achieved.
Thus according to this model:
sustainable development = human wellbeing + ecosystem wellbeing

The various versions of the egg model are essentially the same as the three-pillar or fourpillar
model in content except that the human subsystem is considered as a single
 subsystem with multiple components (i.e. health and population wellbeing, wealth,
knowledge and culture, community, and equity) and is entirely dependent on a healthy
ecosystem.
4. Atkisson’s Pyramid Model
The Atkisson Pyramid process supports and accelerates the progress from identifying the vision
of sustainability, through analysis and brainstorming and agreements on a credible plan of
action.
The Structure of the Pyramid guides through the process of first building a firm base of
understanding, searching for and collecting relevant information and ideas, and then focusing
and narrowing down to what is important, effective, doable, and something that everyone can
agree in.
• The five steps or levels of Atkisson’s Pyramid include:
• Level 1: Indicators- Measuring the trend
• Level 2: Systems- Making the connections
• Level 3: Innovations- Ideas that Make a Difference
• Level 4: Strategies: From Idea to Reality
• Level 5: Agreements: From Workshop to Real World

This model is designed to help groups of 20-40 people move quickly up the sustainability
learning curve, from basic principles and frameworks, to systems analysis, to innovative
strategies for action.

Along the way, groups practice cross-sectoral teamwork, make linkages, generate dozens of new
ideas, and work toward an “Agreement” which is a set of actions they agree to follow through
within the real world.
Examples of Corporate Irresponsibilities:

 Nike factory employing young children in extermly poor working conditions

 Bhopal Gas tragedy : Union Carbide explosion

4 dimensions of CSR:

Dimension Purpose
Discretionary responsibility Philanthropy
Ethical responsibility License to Operate
Legal Responsibility Attain profits within the confines of the law
Economic responsibility Produce goods and services to earn profits

https://www.slideshare.net/RobbySahoo/corporate-social-responsibility-13975540

https://jcsr.springeropen.com/articles/10.1186/s40991-016-0004-6

https://www.tutor2u.net/business/reference/carrolls-csr-pyramid

Corporate Social Dharma

The word 'Dharma' has its root 'dhr'" meaning 'to

uphold', 'to support', and 'to sustain'

 Dharma sustains and upholds the social, moral, political and economic order
 Therefore, that which ensures the welfare of living beings is Dharma
 Dharma is not just responsibility, but also includes duty, towards community and
stakeholders

*Loksangraha means ‘maintainance of the world’

“In human life, the life of an individual is always interwoven with the
society. None can take a selfish or independent stand. What is good
and necessary for the society should alone follow from the individual.
If because of my inward sufficiency, I prefer to be inactive, that would
be detrimental to the society’s welfare .
  There are 4 fundamental forces that influences the society /nations and corporations
 These forces bears Co-Responsibility/Shared responsibility towards each other It implies
that society members have a shared responsibility towars issues facing the society

The FOUR FORCES MODEL:

As per Four Forces model,

Force Responsibility
1. Force of Market  Responsible towards state as good
/Corporates corporate citizens and towards
community through CSR
 Also have ‘ethico-spritual’, Moral
and eco-spritual responsibility All forces have social
2. Force of  Umpire role towards and spritual
State/Government market/corporations, spritual responsibilities
responsibility towards community towards each other
3. Force of People  Responsibility towards state and
corporation
4. Forceof  Social responsibility towards state
self/individual and spritual responsibility towards
society/community

Hence, Corporate SOCIAL Responsibility + Corporate SPRITUAL Responsibility = CSD

There are 3 Rs which better defines the evolution of human society :

 Rights
 Responsibility
 Realization
Organisations have the rights and responsibilities and so do individuals. For smooth functioning of
society .

The above diagram represents equilibrium .

 Demand –Supply Diagram represents equilibrium in market

 Balance represent equilibrium in society
 Circle represent equiibrium in within one self

As per expereince, efforts to achieve equilibrium in one part of the system may lead to
disequilibrium in another. Hence, a holistic approach is need to achieve equilibrium on all.

Corporate Varna (Hierchy) Dharma

Board Every one shall pay due attention to their roles
Top Management/ Senior Management and responsibilities , keeping in view over arching
Middle Management purpose CSR towards society represented by the
Workers loksangraha* from Gita

 As per CSD, organization’s G/T ratio shall be always greater than 1.

GITA Model: Giving Taking (GiTa)-G/T ratio:

Gita suggest idea of Loksanghrah: the focus of one action is for benefit of society/larger good
Hence, giving should be more than taking

There are 3 types of expressions of self:

Expression Give and Take Typology of Self Expression in Reference in

ratio Human Society 3 G model
(Gita Theory
of Gunas)
Only take from G<T Rights oriented Self intrest Greed
society but do not
give back
Give more than G>T Duties and Enlightened self Goodness
take responsibility and collective
oriented intrest
Balance Giving and G=T Realization self Co responsibility/ Godness
Taking oriented Enlightned
collective intrest

To achieve this shift in consiousness, co –realization of 3 Cs

 Dharma encompasses 3 Cs:

o Culture
o Consiousness
o Conscience

 The Trident model form the basic foundation of Dharma as it focus on ethicotarian
and moral responsibility and duties towards society and stakeholders
 When applied at individual level, this concept is known as My Social Dharma (MSD)

When society is driven by Trident Model,it achieve the Co-realization leading to a balance of 3 Rs
Section 135 of the Companies Act, 2013:
 In India, the concept of CSR is governed by clause 135 of the Companies Act, 2013, which
was passed by both Houses of the Parliament, and had received the assent of the President
of India on 29 August 2013
 The new rules, are applicable from the fiscal year 2014-15 onwards,
 Section 135 (1) : The CSR provisions within the Act is applicable to companies with an annual
turnover of Rs 1,000 crore and more, or a net worth of Rs 500 crore and more, or a net
profit of Rs 5 crore and more. ( 1 crore is 10 million)
 The Act encourages companies to spend at least 2% of their average net profit in the
previous three years on CSR activities (The ministry’s rules, define net profit as the profit
before tax as per the books of accounts, excluding profits arising from branches outside
India.)
 It require companies to set-up a CSR committee consisting of their board members,
including at least one independent director
 The company can implement its CSR activities through the following methods:
o Directly on its own
o Through its own non-profit foundation set- up so as to facilitate this initiative
o Through independently registered non-profit organisations that have a record of at
least three years in similar
such related activities
o Collaborating or pooling their resources with other companies
o Only CSR activities undertaken in India will be taken into consideration
o Activities meant exclusively for employees and their families will not qualify
o A format for the board report on CSR has been provided which includes amongst
others, activity-wise , reasons for spends under 2% of the average net profits of the
previous three years and a responsibility statement that the CSR policy,
implementation and monitoring process is in compliance with the CSR objectives, in
letter and in spirit. This has to be signed by either the CEO, or the MD or a director
of the company.
Role of Board:
 Form a CSR commiittee
 Approve the CSR policy
 Ensure implementation of the activties under CSR
 Ensure 2% spend
 Disclose reasons for not spending the amount (if applicable)

Role of CSR Committee:

 Three or more directors with at least one independent director

 Formulate and recommend a CSR policy to the board
 Recommend activities and the amount of expenditure to be incurred
 Monitor the CSR policy from time to time

Reporting

 The new Act requires that the board of the company shall, after taking into
account the recommendations made by the CSR committee, approve the
CSR policy for the company and disclose its contents in their report and also
publish the details on the company’s official website, if any, in such manner
as may be prescribed
 If the company fails to spend the prescribed amount, the board, in its
report, shall specify the reasons

CSR processes:

 Developing a CSR strategy and policy

 Identify a partner agency and due diligence of the implementation partner
 Project development, approval & start the project
  Monitoring the project (Its a continuous process)
 Evaluation of the project (Every financial year)
 Impact measurement
 Report communication within the company, to shareholders, to other
stakeholders like government, NGOs, media, consultants, supply chain,
organisation which serve semilar communities, companies in the industry,
companies and other stakeholders in other countries

Section 135 of the proposed Companies Bill 2011 indicates that every company having net worth of Rs
500 crore ($92.35 mn) or more, or turnover of Rs 1000 crore ($184.7 mn) or more or a net profit of Rs 5
crore ($0.92 mn) or more during any financial year shall constitute a CSR Committee of the Borad
consisting of three or more directors, out of which at least one director shall be an independent
director. The Board of every such company, shall make every endeavour to ensure that the company
spends, in every financial year, at least 2% of the average net profits of the company made during the
three immediately preceding financial years, in pursuance of its CSR Policy: Provided that if the company
fails to spend such amount, the Board shall, in its report made under clause (o) of sub-section (3) of
section 134, specify the reasons for not spending the amount.

Which issues will be considered as part of CSR

SCHEDULE VII:

Activities relating to:—

(i) eradicating extreme hunger and poverty;
(ii) promotion of education;
(iii) promoting gender equality and empowering women;
(iv) reducing child mortlity and improving maternal health;
(v) combating human immunodeficiency virus, acquired immune deficiency
syndrome, malaria and other diseases;
(vi) ensuring environmental sustainability;
(vii) employment enhancing vocational skills;
(viii) social business projects;
(ix) contribution to the Prime Minister's National Relief Fund or any other fund set up by the Central
Government or the State Governments for socioeconomic development and relief and funds for the
welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women;
and
(x) such other matters as may be prescribed.

Here is what you need to understand:

 The Companies Bill 2012 is passed by the Lok Sabha and Rajya Sabha
 The 2% formula is a recommendation and not mandatory. If the company is not able to invest
the 2% amount in CSR for whatever reasons, the Board shall, in its report made under clause (o)
of sub-section (3) of section 134, specify the reasons for not spending the amout
 While many sceptics feel that companies will find it easy to justify why they have not spent the
money, it may be otherwise because of several reasons. First and foremost, the IICA is going to
keep a close watch. And then, multiple stakeholder groups including competition,
Environmental Groups, Social Groups and NGOs, Investors, Media and others will ensure that
exceptional justification is justifiable
 While legally it is applicable to company's having net worth of Rs 500 crores ($92.35 mn) or
more, or turnover of Rs 1,000 crore ($184.7 mn) or more or a net profit of Rs 5 crore ($0.92 mn)
or more during any financial year, it must be noted that pressure from multiple stakeholders will
mean that every company will sooner than later have to think in this direction.
 The formula is to aggregate the total new profit of the companies for the last three years, take
an average and then make 2% of the average
 Each company should constitute a CSR Committee of the Borad consisting of three or more
directors, out of which at least one director should be an independent director. This is no
ordinary committee. The members have great responsibility not only to ensure transparency
and accountability, but action on the ground.