NCRD’s Sterling Institute of Management Studies

Subject: Legal and Tax Aspect of Business

Cor por ate Social R esponsibili ty

Submitted By:
Satyajeet Pawar


Sr. No. 1 Introduction Topics Page No. 1





Background of CSR



Advantages of CSR


5 Rationale for CSR 6 Trends in CSR



7. 8.

Future of CSR

20 22

Potential Benefits of CSR of implementing of CSR approach

9. 10. 11

Evaluation Quantative Analysis Conclusion

28 29 40


Your business doesn't exist in isolation, simply as a way of making money. Your employees depend on your business. Customers, suppliers and the local community are all affected by you and what you do. Your products, and the way you make them, have an impact on the environment. Corporate social responsibility (CSR) takes all this into account and can help you create and maintain effective relationships with your stakeholders. It isn't about being "right on", or mounting an expensive publicity exercise. It means taking a responsible attitude, going beyond the minimum legal requirements and following straightforward principles that apply whatever the size of your business. This guide explains how you can exploit the benefits that CSR can bring to your bottom line. Definition CSR: ‘Corporate,’ ‘Social,’ and ‘Responsibility.’ In broad terms, CSR relates to responsibilities corporations have towards society within which they are based and operate, not denying the fact that the purview of CSR goes much beyond this. CSR is comprehended differently by different people. Philip Kotler and Nancy Lee (2005): “A commitment to improve community well being through discretionary business practices and contributions of corporate resources” MallenBaker: “A way companies manage the business processes to produce an overall positive impact on society.” World Business Council for Sustainable Development “Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large”. 3

The concept of CSR in India is not new, the term may be. The process though acclaimed recently, has been followed since ancient times albeit informally. Philosophers like Kautilya from India and pre-Christian era philosophers in the West preached and promoted ethical principles while doing business. The concept of helping the poor and disadvantaged was cited in much of the ancient literature. The idea was also supported by several religions where it has been intertwined with religious laws. “Zakaat”, followed by Muslims, is donation from one’s earnings which is specifically given to the poor and disadvantaged. Similarly Hindus follow the principle of “Dhramada” and Sikhs the “Daashaant”. In the global context, the recent history goes back to the seventeenth century when in 1790s, England witnessed the first large scale consumer boycott over the issue of slave harvested sugar which finally forced importer to have free-labor sourcing.In India, in the pre independence era, the businesses which pioneered industrialisation along with fighting for independence also followed the idea. They put the idea into action by setting upcharitable foundations, educational and healthcare institutions, and trusts for community development. The donations either monetary or otherwise were sporadic activities of charity or philanthropy that were taken out of personal savings which neither belonged to the shareholders nor did it constitute an integral part of business. The term CSR itself came in to common use in the early 1970s although it was seldom abbreviated. By late 1990s, the concept was fully recognised; people and institutions across all sections of society started supporting it. This can be corroborated by the fact that while in 1977 less than half of the Fortune 500 firms even mentioned CSR in their annual reports, by the end of 1990, approximately 90 percent Fortune 500 firms embraced CSR as an essential element in their organisational goals, and actively promoted their CSR activities in annual reports (Boli and Hartsuiker,2001).


The role of corporates by and large has been understood in terms of a commercial business paradigm of thinking that focuses purely on economic parameters of success. As corporates have been regarded as institutions that cater to the market demand by providing products and services, and have the onus for creating wealth and jobs, their market position has traditionally been a function of financial performance and profitability. However, over the past few years, as a consequence of rising globalisation and pressing ecological issues, the perception of the role of corporates in the broader societal context within which it operates, has been altered. Stakeholders (employees, community, suppliers and shareholders) today are redefining the role of corporates taking into account the corporates’ broader responsibility towards society and environment, beyond economic performance, and are evaluating whether they are conducting their role in an ethical and socially responsible manner. As a result of this shift (from purely economic to ‘economic with an added social dimension’), many forums, institutions and corporates are endorsing the term Corporate Social Responsibility (CSR). They use the term to define organisation’s commitment to the society and the environment within which it operates. The World Business Council on Sustainable Development’s (WBCSD) report was titled Corporate Social Responsibility: Making Good Business Sense and the OECD Guidelines for 1 Multi-National Enterprises which includes a discussion on how CSR is emerging as a global business standard. Further, there is a global effort towards reinforcing CSR programmes and initiatives through local and international schemes that try to identify best-in-class performers. Arguments for socially-responsible behaviour
• • • • • • • •

It is the ethical thing to do It improves the firm’ public image It is necessary in order to avoid excessive regulation Socially responsible actions can be profitable Improved social environment will be beneficial to the firm It will be attractive to some investors It can increase employee motivation It helps to corrects social problems caused by business 5

CSR behaviour can benefit the firm in several ways
• • • • • •

It aids the attraction and retention of staff It attracts green and ethical investment It attracts ethically conscious customers It can lead to a reduction in costs through re-cycling It differentiates the firm from its competitor and can be a source of competitive It can lead to increased profitability in the long run . Corporate Social Responsibility (CSR) is a concept whereby organizations consider the interests of society by taking responsibility for the impact of their activities on customers, employees, shareholders, communities and the environment in all aspects of their operations. This obligation is seen to extend beyond the statutory obligation to comply with legislation and sees organizations voluntarily taking further steps to improve the quality of life for employees and their families as well as for the local community and society at large. With businesses focusing on generating profits, sustainability was not a popular concern among companies up until recently. Now, in an era of globalization, multinational corporations and local businesses are no longer able to conduct destructive and unethical practices, such as polluting the environment, without attracting negative feedback from the general public. With increased media attention, pressure from non-governmental organizations, and rapid global information sharing, there is a surging demand from civil society, consumers, governments, and others for corporations to conduct sustainable business practices. In addition, in order to attract and retain employees and customers, companies are beginning to realize the importance of being ethical while running their daily operations. The corporate response has often meant an adoption of 'a new consciousness', and this has been known as Corporate Social Responsibility since the 1970’s. As stated by the department of Trade and Industry in the United Kingdom, CSR represents "the integrity with which a company governs itself, fulfills its mission, lives by its values, engages with its stakeholders, measures its impact and reports on its activities". Although most people appreciate the recent advancement of CSR, some argue that corporations are still not doing enough or are only acting in self interest. These people say that multinational corporations are acting ethically in areas that are highly regulated, such as North America, but at the same time, they are acting in an opposite manner in other parts of the world (such as using cheap or child labour). In addition, while corporations must have good CSR policies in order to 6 advantage

maintain their reputation, they are also expected to maximize profits for stakeholders such as shareholders, employees, and customers. Therefore, people argue that businesses do not put in a sufficient amount of resources to achieve what they have promised in their CSR policies. In any case, companies are now expected to perform well in non-financial areas such as human rights, business ethics, environmental policies, corporate contributions, community development, corporate governance, and workplace issues. Some examples of CSR are safe working conditions for employees, environmental stewardship, and contributions to community groups and charities. The practice of CSR is subject to much debate and criticism. Proponents argue that there is a strong business case for CSR, in that corporations benefit in multiple ways by operating with a perspective broader and longer than their own immediate, short-term profits. Critics argue that CSR distracts from the fundamental economic role of businesses; others argue that it is nothing more than superficial window-dressing; still others argue that it is an attempt to pre-empt the role of governments as a watchdog over powerful multinational corporations. What is CSR or Corporate Social Responsibility? CSR was a buzzword created in the early 1970's although it was seldom abbreviated back then. Corporate social responsibility (CSR, also called corporate citizenship, corporate responsibility, responsible business and sometimes corporate social opportunity) is a concept whereby a business organisation considers the wider social and environmental effects that it has as a trading entity outside of its direct trading environment. For example, a mining company destroys the natural landscape when mining so part of its social responsibility to the community where they are mining could be to invest in reforestation projects. Advantages of corporate social responsibility  Japanese companies often have 100 year business plans. If you are planning to be around in business for the long-run then making sure ALL your stakeholders are looked after is wise. If you mess the environment up people notice. If you mess people around people remember. If you mistreat people they never forget. And yet when you care for the environment you are awarded. When you care for people you are awarded. You are rarely forgotten when you genuinely care. A business enterprise is no different to a human people will have feelings about it and that impacts business positively or negatively. 7

 Many companies say they care and yet they may not take the actions of caring. Going beyond what is expected becomes exemplar and noted. An enterprise' actions are notes the most by its employees and staff. The business team that runs an organization knows what is going on. They know all the high and low points of a company. These exact same people interact each and every day with the businesses customers. How they feel about the company they work for impacts the bottom line of a company directly. A sales person who loves his work and the company will sell more. The receptionist who cares for her company will care for its customers making them feel better and of course they are then more likely to return.  Many businesses make a loss the very first time a customer shops with them. This is an amazing little known fact outside of the business world. It may cost thousands of dollars for some companies to gain new customers because of long lead times or expensive advertising campaigns. If they only sell to a customer once then they don't ever recover their investment in acquiring that new customer or make a profit. Customers these days are spoilt for choice. Many customers choose a business on how they feel about the company of the people in the company. Most purchasing decisions are subjective. Adding subjective and hard to measure components to a business such as solid CSR programmes add to the perceived value added benefit a customer received when they shop with the company.  2008's Good purpose™ global study of consumer thinking showed that almost seven out of 10 (68%) consumers say they would remain loyal to a brand during an economic downturn if it supports a good cause. Surprising. And logic-defying!  That same very recent study highlighted some other interesting things too. Like this: half (52%) of global consumers are more likely to tell others about a brand that supports a good cause over one that does not, with 54% saying they would help a brand promote a product if there was a good cause behind it. And going even further…Around the world, consumers have voiced a strong desire for business marketers to link their brands to social action. Forty-two percent say that if two products are identical in price and quality then the one that has the commitment to a social purpose trumps key factors like design, innovation and brand loyalty when selecting one brand over the other. Stunning isn't it?  The citizen brand emerges. And this comment from this key report just says it all: It means that putting meaning into marketing is more important than ever. One of the 8

reporters puts it this way: "These findings present brands with an opportunity to engage in 'mutual social responsibility'-brands and consumers working together to effect positive social change for mutual benefit -and to realize a 'return on involvement,' a new metric that looks at participation and involvement as true builders of brand loyalty. When a brand acts as a 'citizen brand,' contributing to community and society beyond its functional benefits, 'doing good' can translate to 'doing well' and the brand can forge a stronger emotional bond with its consumers.

The rationale for Corporate Social Responsibility in India
Gandhiji was a person who in several respects was ahead of his time. His view of the ownership of capital was one of trusteeship, motivated by the belief that essentially society was providing capitalists with an opportunity to manage resources that should really be seen as a form of trusteeship on behalf of society in general. Today, we are perhaps coming round full circle in emphasizing this concept through an articulation of the principle of social responsibility of business and industry. While the interests of shareholders and the actions of managers of any business enterprise have to be governed by the laws of economics, requiring an adequate financial return on investments made, in reality the operations of an enterprise need to be driven by a much larger set of objectives that are today being defined under the term Corporate Social Responsibility (CSR). The broad rationale for a new set of ethics for corporate decision making, which clearly constructs and upholds a company's social responsibility, arises from the fact that a business enterprise derives several benefits from society, which must, therefore, require the enterprise to provide returns to society as well. Of course, the system of taxation in most countries does ensure that basic services provided by government such as a system of law and order, provision of infrastructure that includes assets such as roads, transportation facilities, the benefits received from the apparatus of society for respecting and enforcing property rights, etc. are paid for through taxation on economic goods and services produced and consumed. But there are other aspects of services provided by society that have now become even more important than traditional relationship between government and business. These go far beyond what was the case a few decades ago. Why should companies whose major objective has been to maximize profits for the benefit of their shareholders worry at all about serving the interest of society at large? The 9

answer is simple and yet somewhat circular in nature. A business cannot succeed in a society which fails. This, therefore, clearly establishes the stake of a business organization in the good health and well being of a society of which it is a part. More importantly, in this age of widespread communication and growing emphasis on transparency, customers of any product or service are unlikely to feel satisfied in buying from a company that is seen to violate the expectations of ethical and socially responsible behaviour. We find, therefore, that to a growing degree companies that pay genuine attention to the principles of socially responsible behaviour are also favoured by the public and preferred for their goods and services. GLOBALIZATION AND CORPORATE SOCIAL RESPONSIBILITY Globalization and Corporate Social Responsibility – Anything New? The social responsibilities of business in a market society have been discussed for decades, long before globalization became a catchword (see, e.g., Baumhart 1961; Bowen 1953; Donham 1927). The capitalist system, i.e., voluntary exchange on free and open markets, is widely considered the best societal coordination measure to contribute to individual freedom and the wellbeing of society (Friedman 1962, Hayek 1996). Though the functions of the state system have always been a matter of debate (see, e.g., Block 1994), it is generally acknowledged that in capitalist societies it is the task of the state to establish the preconditions for the proper working of markets, i.e., to define legal rules such as property rights and contractual rights, to erect an enforcement body, to provide public goods, and to reduce or avoid the consequences of externalities. At the same time, private firms are entitled to own means of production and to run a business, i.e. to supply goods and services for a return in private profits, as it is the “invisible hand” of the market which directs the behavior of firm owners towards the common good. The state, it was assumed, is capable of setting the rules in such a way that the consequences of market exchange contribute to (or at least do not harm) the well-being of society. Business firms have to obey the law – this has always been a precondition and has been accepted as a minimum social responsibility of businesses, even by the harshest critics of CSR (see, e.g., Friedman 1970; Levitt 1970). However, as the system of law and the enforcement apparatus of the state are incomplete there is a likely possibility of regulation gaps and implementation deficits which have to be filled and balanced by diligent managers with prosocial behavior and an aspiration to the common good (e.g., Stone 1975). In as much as the state apparatus does not work perfectly there is a demand for social responsibilities of business, 10

i.e. corporations are asked to comply to the law when the enforcement body is weak and to even go beyond what is required by law, when the legal system is imperfect or legal rules incomplete. With globalization, it seems, the negative consequences of businesses have intensified (see, e.g. Mokhiber and Weissman 1999, Korten 2001), as has the public call for corporate responsibility (Parker 1998). Several scholarly journals have dedicated special issues to the relationship between globalization and CSR (see, e.g., Business Ethics Quarterly 2004, 2006; Journal of Business Ethics 2005). Paradoxically, today, business firms are not just considered the “bad guys”, causing environmental disasters, financial scandals, and social ills. They are at the same time considered the solution of global regulation and public goods problems (e.g., Margolis and Walsh 2003; Matten and Crane 2005) as in many instances state agencies are completely overtaxed or unwilling to administer citizenship rights or contribute to the public good. The solution of globalization problems is not just a matter of degree of engagement in CSR, i.e. of more or less investment of business firms in CSR projects (McWilliams and Siegel 2001). Rather we suggest that with globalization a paradigm shift is necessary in the debate on CSR. Current discussions in CSR are based on the assumption that responsible firms operate within a more or less properly working political framework of rules and regulations which are defined by governmental authorities. The global framework of rules is fragile and incomplete. Therefore, business firms have an additional political responsibility to contribute to the development and proper working of global governance.

Globalization: A Social and Economic Phenomenon
What is Globalization? Globalization is one of the most cited catchwords of our time and is used to describe a process of social change on the macro level of societies. Today, many social and economic phenomena such as peace, crime, migration, production, employment, technological developments, environmental risks, distribution of income and welfare, and social cohesion and identity are considered to be affected by the process of globalization (see, e.g., Brakman, Garretsen, van Marrewijk, van Witteloostuijn 2006; Cohen and Kennedy 2000; Held, McGrew, Goldblatt, and Perraton 1999; Scholte 2005). We define globalization as the process of 11

intensification of cross-area and cross-border social relations between actors from very distant locations, and of growing transnational interdependence of economic and social activities (see, e.g., Beck 2000; Giddens 1990). Giddens (1990: 64) holds that with globalization “the modes of connection between different social contexts or regions become networked across the earth’s surface as a whole.“During this process the nation state loses much of its political steering capacity (e.g., Beck 2000; Habermas 2001; Strange 1996). The state’s enforcement power is bound to its territory while the subjects of state regulation, especially the business firms, have massively expanded their activities beyond national borders. At the same time, new social and environmental challenges emerge which are transnational in scope and cannot be regulated or governed unilaterally (e.g., global warming, crime and terrorism, diseases, etc). Also, new actors and institutions, such as international organizations, transnational corporations, nongovernmental organizations, and civil society groups gain political influence. Their activities are not limited to a certain territory. Their influence stems from the political power they can exert inside and outside the traditional institutions of nation-state politics, e.g., by lobbying, public relations, campaigning, knowledge and competence, offering material or symbolic support, or threatening with disinvestments or the retreat of resources. As a result we observe new forms of governance below, above and beyond the nation state (Beck 2000; Zürn 2002).This definition of globalization emphasizes the process aspect of change and is related to other concepts that describe the status quo towards this change process develops (“globality”) and the normative claims that are related to this process. The concept of “globalism” is used to describe an ideology, i.e., a normative attitude towards the process of globalization. While globalization protesters and skeptics reject the idea that the globalization process will lead to more prosperity and social well-being in the world (“anti-globalism”) (see, e.g., Klein 2000), the adherents of globalism are convinced that an unconstrained and borderless world economy will make everybody better off (e.g., Irwin 2002; Krauss 1997; Norberg 2003). They advocate a primacy of market imperatives over political regulation via the nation state. The central idea of modernity – that nation state politics shall define the legal, social and ecological framework and the restrictions within which market transactions take place – is abandoned in favor of a dominance of economic rationality (see, critically, Beck 2000; Giddens 1990). As a consequence of cross-border trade, multinational enterprises and global supply chains, there is an increased awareness on CSR concerns related to human resource management practices, environmental protection, and health and safety, among 12

other things. Reporting on the CSR activities by corporates is therefore increasingly becoming mandatory. In an increasingly fast-paced global economy, CSR initiatives enable corporates to engage in more meaningful and regular stakeholder dialogue and thus be in a better position to anticipate and respond to regulatory, economic, social and environmental changes that may occur. There is a drive to create a sustainable global economy where markets, labour and communities are able to function well together and companies have better access to capital and new markets. Financial investors are increasingly incorporating social and environmental criteria when making decisions about where to place their money, and are looking to maximise the social impact of the investment at local or regional levels.

What are the Causes of Globalization?
One could suggest that the globalization process was started to some extent deliberately by political decisions. However, it was also caused and/or supported by technological, social, and economic developments. The intensified cross border transfer of resources, such as assets, capital, and knowledge, is in part a result of the liberalization policy of many nation state governments after WWII. The growing cross-area and cross-country social exchange was also made possible through technological inventions and achievements (e.g., telecommunications, mass media, the Internet, transportation, etc.). The exchange processes are accompanied by a growing interdependence between citizens from different communities through the emergence of global risks (e.g., nuclear weapons, global warming, global diseases, etc.) which connect the destinies of peoples with each other. In the following we will describe some dimensions of globalization.

Dimensions of Globalization
• Political Decisions and Disruptions The General Agreement on Tariffs and Trade (GATT) at the end of WWII was certainly an important factor for the liberalization of the world economy (see, e.g., Hoekman and Kostecki1995). At the end of WWII in Bretton Woods politicians from over twenty countries decided on the post-war economic order. They shared the conviction that free and open trade would lead to world-wide prosperity and would in turn reduce the possibility of war and forceful conflicts. The GATT (and later the WTO) member states decided to reduce tariffs and decrease non-tariff barriers to trade step by step. This process of liberalization in cross country trade and 13

investments was accompanied by a policy of liberalization and privatization in many of the industrial states in the Western world. Highly regulated industries with state owned or controlled firms and monopolies such as telecommunications, public transport, electricity, and water were privatized. In the 1980s, the collapse of the iron curtain of the Com6 munist countries in Eastern Europe, and in many other countries in the world, led to another breakdown of trade barriers and encouraged intensified cross-border trade and investments. • Technological Developments and Achievements The rapid technological development in the communication industry led to a significant decline in communication costs. Perraton, Goldblatt, Held, and McGrew (1998: 143) reported that the costs for a 3min phone call from New York to London dropped from 244.65 US $ in 1930 to 3.32 US $ in 1990 (measured in 1990 US $). The advances in telecommunications and in computer technology along with the invention and growth of the Internet have made it possible for people to communicate with each other between virtually all points on the earth. Along with the decrease in communication costs there has been a dramatic drop in transportation costs (Perraton et al. 1998: 143). • Socio-cultural Developments As a result of globalization, the more or less homogenous cultures of the preglobalization world were dissolved. New values and life styles have entered the static world of traditional cultures: values, attitudes and social practices that were once taken for granted have lost their certainty. This process is accompanied by the various migration processes which lead to a pluralism of cultures and values and to a growing heterogeneity of social expectations. At the same time we observe the emergence of new social movements, civil society groups, and NGOs which aggregate diverse and disparate opinions and concerns into shared interests and thus create new identities for people who lose the backing of their traditional home culture and their reliance on the capacity of official state agencies to resolve issues of public concern. These new social movements can gain political currency outside and beyond the traditional institutions of the state system (such as, e.g., political parties, parliaments etc.).


• Economic Developments
On the macro level, the liberalization of trade, investments and financial transactions has led to a huge increase both in foreign direct investments and in cross-border trade (see, e.g., Brakman et al. 2006; Held et al. 1999). Though some authors suggest that with regard to certain macroeconomic measures the situation today is not much different than it was one hundred years ago (see, e.g., Hirst and Thompson, 1996), we hold that we are confronted with a new situation without precedent in history. First, economic measures show that for several decades the growth rate in the volume of world merchandise exports has been much higher than the growth rate of world GDP and that the intra-firm trade has expanded dramatically (Held, et al. 1999). Second, the unprecedented interconnectedness of the destiny of people from different social settings and distinct locations has created new challenges. Also, on the firm level, one can observe an entirely new situation. Business firms are able to split up their value chain and to source where the production of goods and services is most efficient. By means of technology they are able to collect information about sources, qualities and prices, and to coordinate the various value chain processes inside and outside the boundaries of the firm. Today, large multinational corporations have become very powerful economic and social agents. The world’s biggest corporations have revenues that equal or even exceed the gross domestic product of some developed states (Chandler and Mazlish 2005). The power of MNCs is not just based on the enormous amount of resources they control. Their power is further enhanced by their mobility and their capacity to shift resources to locations where they can be used most profitably and to choose among suppliers applying criteria of efficiency. In effect this gives multinational firms the latitude to choose locations and the legal systems under which they will operate (Roach 2005; Scherer, Palazzo, and Baumann 2006). However, the power of the MNCs and their leaders is not unlimited. Rather, top managers more and more feel the pressure of the global financial markets when they have to respond to the profitability demands of investors and have to protect their firms from hostile takeovers. Institutional investors direct their attention and money to profitable firms and investments. Corporations that do not earn a high enough profit are sanctioned with disinvestment. Managers who do not focus on a high stock price may become the targets of takeovers. All in all the global financial market pressures business firms to stress profit and to engage only in such projects that will lead to a satisfactory return. Altruistic managers with pro-social attitudes may therefore be 15

suspect in the emerging shareholder society and may be forced to adapt their behavior to the expectations of profit seeking investors. • The Emergence of Transnational Risks The process of globalization is accompanied by the emergence of global risks (Beck 1992, 1999): Citizens from very different communities and countries realize that their destiny is bound together and depends on how economic and political actors in other countries behave, though they often have no influence to regulate or determine their behavior. Environmental disasters (Chernobyl, global warming, overfishing of oceans, loss of bio-diversity, etc.), global diseases (bird flu, mad cow disease etc.) and social problems (drugs, organized criminality, terrorism etc.) do not halt at national borders but affect the live of people who become aware that their traditional nation state institutions have become unable to protect them from harm. Changing Public Expectations of Business Globally companies are expected to do more than merely provide jobs and contribute to the economy through taxes and employment. Consumers and society in general expect more from the companies whose products hey buy. This is coherent with believing the idea that whatever profit is generated is because of society, and hence mandates contributing a part of business to the less privileged Further, separately in the light of recent corporate scandals, which reduced public trust of corporations, and reduced public confidence in the ability of regulatory bodies and organisations to control corporate excess. This has led to an increasing expectation that companies will be more open, more accountable and be prepared to report publicly on their performance in social and environmental arenas. Corporate Brand In an economy where corporates strive for a unique selling Proposition to differentiate themselves from their competitors; CSR initiatives enable corporates to build a stronger brand that resonates with key external stakeholders–customers, general public and the government.


Businesses are recognising that adopting an effective approach to CSR can open up new opportunities, and increasingly contribute to the corporates’ ability to attract passionate and committed workforces. Corporates in India are also realising that their reputation is intrinsically connected with how well they consider the effects of their activities on those with whom they interact. Wherever the corporates fail to involve parties, affected by their activities, it may put at risk their ability to create wealth for themselves and society. Therefore, in terms of business, CSR is essentially a strategic approach for firms to anticipate and address issues associated with their interactions with others and, through those interactions, to succeed in their businessendeavors. The idea that CSR is important to profitability and can prevent the loss of customers, shareholders, and even employees is gaining increasing acceptance. Further, CSR can help to boost the employee morale in the organisation and create a positive brand-centric corporate culture in the organisation. By developing and implementing CSR initiatives, corporates feel contented and proud, and this pride trickles down to their employees. The sense of fulfilling the social responsibility leaves them with a feeling of elation. Moreover it serves as a soothing diversion from the mundane workplace routine and gives one a feeling of satisfaction and a meaning to their lives. Corporate branding is the process by which you impart a personality or public image to an entire company, not just its products or services. It's different from "umbrella branding" because "umbrella" suggests that there are specific sub-brands sharing an identity. Maybe this will help: Procter & Gamble, a corporate entity, has a brand image or "corporate brand." It's often referred to as "P&G" (a friendlier version of the more formal company name). The company also has a number of brands, each with their own identities and personalities -- Tide, Crest, Pampers, etc., etc. In a few cases, it has "umbrella" brands, like Ivory -- which is a bar soap, a liquid dishwashing detergent, and a light-duty laundry product. (That's unusual for P&G, but it happened.) None of the individual brands, or the umbrella brand, use the P&G brand as part of their identity. P&G is strictly the corporate brand. Of course, sometime the corporate image is so important to the individual brands that the corporate brand is also an umbrella brand, covering many different products/services as well as 17

the corporation. It can work (think about IBM, for example), but usually it's difficult to suggest a single benefit for a diverse family of products and services, so the corporate brand is better left intact for the corporation. An excellent answer from good man, but one of the things I enjoy about branding is it’s so imprecise – so here another example of the same thing – Corporate Brand is the brand that applies to corporate (or legal) entity, the key difference is its target market is shareholders, analysts, fund managers, ie.the investment community.

Trends in Corporate Social Responsibility
‘Thinking globally’ to ‘Thinking locally” The last decade has seen a mad rush amongst multinational companies to gain first mover advantages in emerging markets by establishing operations and subsidiaries. However most of the firms have found out to their cost that local competition was not as easy to overcome as they had thought with matters made being worse by cutthroat competition amongst the multinationals themselves. Most multinationals are beginning to realise that loss making operations cannot be continued year after year under the pretext of investment for future expectation of profits. It is high time that the local subsidiaries start to deliver profits of their rather than continuing to act as sinks of the firm’s global resources. According to Dawar and Chattopadhyay (2000) “Local operations now realize that the three to five percent of consumers in emerging markets who have global preferences and purchasing power no longer suffice as the only target market. Instead, they must delve deeper into the local consumer base in order to deliver on the promise of tapping into billion-consumer markets”. Batra (1999) argues that the usual business strategy of using products that have been historically successful in developed nations will not work in emerging markets. Prahlad and Lieberthal (1998) point out that companies must make the transition in their business strategy of ‘thinking globally’ to ‘thinking locally’ as each of the merging markets represents an intriguing challenge for marketing with its vast diversities existing across nations and even within nations in culture and socio economic conditions. It is in marketing across such diverse cultures and varying conditions that the concept of corporate social responsibility becomes critical to success. In this paper, we will focus on two main paradigms of marketing in which CSR plays an important part. Graphical Representation: 18


Redesigning marketing paradigms for emerging markets
CSR refers to the obligation of an organisation which considers the interests of all their stakeholders which includes the customers, employees, shareholders, communities and ecological considerations in all aspects of their operations. Companies which aspire to be, or are, leaders in corporate social responsibility are challenged by rising public expectations, increasing innovation, continuous quality improvement and heightened social and environmental problems. They are forced to chart their CSR course within a very complex and dynamic environment. CSR trends that provide rewards for companies, communities and the world…  Return on Investment (ROI): More businesses are recognizing the benefits of CSR, from cost savings on energy and materials to direct benefits like enhanced reputation among customers and clients and indirect benefits like employee satisfaction. Most importantly, CSR programs provide rewards—and increased monetary value—through the creation of products and services that support sustainability.  Increasing Rewards for Communities and Workers: Companies are working to mitigate their impacts on community resources such as water through conservation and by promoting sustainable development that benefits communities and employees.  New Media and the Fight for Customers’ Mindshare: Through CEO blogs, YouTube videos and other new media tools, smart companies are arming customers with more information about CSR efforts.  Carbon Footprinting Reaches Supply Chains: More companies are gathering credible data about the carbon emissions in their global supply chain.  New Opportunities in Environmental Markets: Beyond reducing their climate impact through decreased carbon emissions, advanced companies are working to monetize and develop markets for environmental services like water, nutrients and biodiversity. EX: Yahoo! Launches New Business & Human Rights Initiative


THE FUTURE OF CORPORATE SOCIAL RESPONSIBILITY Companies today are increasingly sensitive about their social role. The companies not only concentrate on how they will position their product or how they will sell it but also they have a social strategy because they have started feeling that brands are built not only around good quality of the product; but also around emotions and values that people ascribe to those products In addition to be more precisely defined, the CSR movement is evolving following some trends that I intend to describe briefly:  First, there are no more a few companies, which have consecrated themselves to this new doctrine, but the majority of large enterprises have introduced it in their agenda. Philip Kotler and Nancy Lee in their book “Corporate Social Responsibility” indicate that charitable giving has risen from $9.6 b in 1999 to $12, 19 b. In spite of some opponents like the survey in The Economist last year which maintains that CSR is eroding the basis of the free enterprise system, every time more this new doctrine is catching the attention of business people.  Second, since the term “triple bottom line” (people, planet and profit) was carried in 1994, an accelerating progression from early concerns about safety, health and environment to a growing range of social concerns have been seen, among them human rights and diversity. Recently other concerns like fair trade pricing and fair wages as well as socially increasingly have increasingly made headlines. There is an increasing conviction that there is not a conflict but a positive correlation between CSR and profitability and that profit can go hand-in-hand with social and environmental responsibility.  Third, the social responsible enterprises every time more publish their activities for their shareholders and the public in general, either in their general annual report or in CSR specific reports. According to a survey of KPMG in 2002, 45% of co portions issued environmental, social or sustainability reports compared with 35% in their 1999 survey. Greater transparency is a means to improve accountability and trust.  Fourth, CSR has ceased to be a form of philanthropy so that it is no more the case to sign a check at the end of each financial year, after a positive result - and CSR enters into the 21

normal activities of the corporation before declaring its profits and becoming a all year around responsibility. It is a shift to making long-term commitments to especial social issues providing more than cash contributions, sourcing funds from business units as well as philanthropic budgets, forming strategic alliances, etc. CSR is becoming as much as anything a way of thinking about and doing business. Corporate investment decisions driven by quarterly profit earnings are short-sighted and sacrifice long-term wealth creation.  Fifth, it is no longer the owner or the CEO the one which decides to write the check, but it is the collective commitment of all the corporation from the CEO until the last employee; it is precisely the employees’ satisfaction one of the objectives of CSR. There is an increasing awareness of CSR among the workforce.  Sixth, before a social activity generally dissociated from the cooperation, the trend is that the activity be totally related with the core business of the cooperation, its products or services (for instance when an electronic corporation decides to train the students of a school on the use of computers).  Seventh, the establishment of a social norm to do good. As William Clay Ford Ford Motor Company CEO “there is a difference between a good company and a great company. A good company offers excellent products ands services. A great company also offers excellent products and services but also thrives to make the world a better place”. From the philosophy of “doing good to look good”, to the conviction of “doing well and doing good”.  Eighth, it is clear today that CSR’s success requires the decisive cooperation of the government and business in a strong symbiosis. This is particularly clear in developing countries. As the World Summit on Sustainable Development (Johannesburg 2000) recognized, partnership between business, government and civil society is the key to the progress we need on sustainable development.  Ninth, every time sectoral projects on CSR are materializing like in the mining industry, the energy industry or the apparel industry, for example, the Multi-fibre Arrangement Forum, or like the Equator Principles where a group of large financial institution decided to impose conditions particularly environmental conditions to their clients’ projects.  Ten. Up to now CSR has been something voluntary (voluntary to adopt and voluntary to comply with). Today there is a big debate where CSR should remain voluntary or should 22

become compulsory. Many believe for example that the limitation off the CO2 in the atmosphere emissions will not stop voluntary unless it becomes a legal duty. All of these trends mean that businesses need to manage their environmental and social impacts much better: corporate responsibility has to cease being a bolt-on to business operations; and instead be built-in to business purpose and strategy. This involves a clear link to business values and culture; strong leadership form the top; and the active engagement of stakeholders. Potential benefits of implementing a CSR approach Key potential benefits for firms implementing CSR include: Better anticipation and management of an ever-expanding spectrum of risk. Effectively managing social, environmental, legal, economic 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 firm's impact is one way of anticipating and managing risk. Improved reputation management. Organizations that perform well with regard to CSR can build reputation, while those that perform poorly can damage brand and company value when exposed. This is particularly important for organizations with high-value retail brands, which are often the focus of media, activist and consumer pressure. Reputation, or brand equity, is founded on values such as trust, credibility, reliability, quality and consistency. Even for companies that do not have direct retail exposure through brands, their reputation as a supply chain partner -- both good and bad -- for addressing CSR issues can make the difference between a business opportunity positively realized and an uphill climb to respectability. Enhanced ability to recruit, develop and retain staff. This can be the direct result of pride in the company's 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 become champions of a company for which they are proud to work. Improved competitiveness and market positioning. This can result from organizational, process and product differentiation and innovation. Good CSR practices can also lead to better 23

access to new markets. For example, a firm may become certified to environmental and social standards so it can become a supplier to particular retailers. Enhanced operational efficiencies and cost savings. These flow in particular from improved efficiencies identified through a systematic approach to management 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.Corporate social responsibility (CSR) promotes a vision of business accountability to a wide range of stakeholders, besides shareholders and investors. Key areas of concern are environmental protection and the wellbeing of employees, the community and civil society in general, both now and in the future. The concept of CSR is underpinned by the idea that corporations can no longer act as isolated economic entities operating in detachment from broader society. Traditional views about competitiveness, survival and profitability are being swept away.

Some of the drivers pushing business towards CSR include: 1. The shrinking role of government In the past, governments have relied on legislation and regulation to deliver social and environmental objectives in the business sector. Shrinking government resources, coupled with a distrust of regulations, has led to the exploration of voluntary and nonregulatory initiatives instead. 2. Demands for greater disclosure There is a growing demand for corporate disclosure from stakeholders, including customers, suppliers, employees, communities, investors, and activist organizations. 3. Increased customer interest There is evidence that the ethical conduct of companies exerts a growing influence on the purchasing decisions of customers. In a recent survey by Environics Internationals, more than 24

one in five consumers reported having either rewarded or punished companies based on their perceived social performance. 4. Growing investor pressure Investors are changing the way they assess companies' performance, and are making decisions based on criteria that include ethical concerns. The Social Investment Forum reports that in the US in 1999, there was more than $2 trillion worth of assets invested in portfolios that used screens linked to the environment and social responsibility. A separate survey by Envirnics Internationals revealed that more than a quarter of share-owning Americans took into account ethical considerations when buying and selling stocks. (More on socially responsible investment can be found in the 'Banking and investment' section of the site.) 5. Competitive labour markets Employees are increasingly looking beyond pay checks and benefits, and seeking out employers whose philosophies and operating practices match their own principles. In order to hire and retain skilled employees, companies are being forced to improve working conditions. 6. Supplier relations As stakeholders are becoming increasingly interested in business affairs, many companies are taking steps to ensure that their partners conduct themselves in a socially responsible manner. Some are introducing codes of conduct for their suppliers, to ensure that other companies' policies or practices do not tarnish their reputation. Some of the positive outcomes that can arise when businesses adopt a policy of social responsibility include: Company benefits: • • • • Improved financial performance; Lower operating costs; Enhanced brand image and reputation; Increased sales and customer loyalty; 25

• • • • • •

Greater productivity and quality; More ability to attract and retain employees; Reduced regulatory oversight; Access to capital; Workforce diversity; Product safety and decreased liability.

2. Benefits to the community and the general public:
• • •

Charitable contributions; Employee volunteer programmes; Corporate involvement in community education, employment and homelessness programmes; Product safety and quality.

3. Environmental benefits:
• • • •

Greater material recyclability; Better product durability and functionality; Greater use of renewable resources; Integration of environmental management tools into business plans, including life-cycle assessment and costing, environmental management standards, and eco-labelling.

Nevertheless, many companies continue to overlook CSR in the supply chain - for example by importing and retailing timber that has been illegally harvested. While governments can impose embargos and penalties on offending companies, the organizations themselves can make a commitment to sustainability by being more discerning in their choice of suppliers. The concept of corporate social responsibility is now firmly rooted on the global business agenda. But in order to move from theory to concrete action, many obstacles need to be overcome. A key challenge facing business is the need for more reliable indicators of progress in the field of CSR, along with the dissemination of CSR strategies. Transparency and dialogue can 26

help to make a business appear more trustworthy, and push up the standards of other organizations at the same time. The Global Reporting Initiatives is an international, multi-stakeholder effort to create a common framework for voluntary reporting of the economic, environmental, and social impact of organization-level activity. Its mission is to improve the comparability and credibility of sustainability reporting worldwide. There is increasing recognition of the importance of public-private partnerships in CSR. Private enterprise is beginning to reach out to other members of civil society such as nongovernmental organizations, the United Nations, and national and regional governments. An example of such a partnership is the 'Global compact'. Launched in 1999 by the United Nations, the Global Compact is a coalition of large businesses, trade unions and environmental and human rights groups, brought together to share a dialogue on corporate social responsibility.The 'Working with NGOs' section offers some insights into the way businesses and lobby groups are working together to mutual benefit. Management training plays an important role in implementation of CSR strategies, and there is a growing number of conferences and courses available on the subject. Organizations that provide such training include Global Responsibility, Business for Social Responsibility and the Corporate Social Responsibility Forum. The idea of Indian companies going beyond business imperatives to do something for society has undergone remarkable changes over the years. Time was when companies merely dispensed cash by way of charity to organisations or NGOs engaged in social work. Others promoted activities that were mutually beneficial, to villagers living around a company plant or town as well as to their own employees. For instance, villagers were encouraged to produce more vegetables or keep cattle for milk, with the company providing the start-up money, the knowledge and the marketing infrastructure that ensured the extra produce got to town. The villagers were encouraged to take the risk and try their hand at new farming activities because of the assurance of a dependable market and a steady income. That changed over time to “community outreach”: reaching out to the communities around company plants or offices, and providing amenities that were lacking. Companies supplemented facilities in schools or hospitals, helped women earn extra income through sponsorship of, say, sewing machines or community centres which, apart from generating income, promoted adult literacy and family 27

welfare activities. With the growth of environment consciousness in the 1960s, companies felt the need to redeem themselves for some of the damage done. They got involved in forestation, water conservation and similar projects. The concept of corporate social responsibility (CSR) thus evolved — from philanthropy to a more elaborate concept that encompassed the environment, employee relations, corporate governance and engaging with the community. The current understanding of CSR also attempts to deploy a company’s core competencies to help address society’s problems. Examples of this approach abound, and one standout example is TCS, which has used its expertise in information technology to help communities in different parts of India help themselves. TCS has developed a database for Child Line, which supports children in distress in 54 centres in India, all using volunteers from among its employees; it has also designed and implemented a ‘computer-based functional literacy’ project, a unique idea that enables adults to learn to read — using low-end computers and a breakthrough software solution — within 30 to 40 hours, over two-three months. Similarly, NIIT has used its IT expertise for its ‘hole in the wall’ experiment, where children from slums learn to use computers with a touch screen. Cut from the same cloth is ITC’s much-celebrated e-choupals, which help farmers check prices in Indian and global markets before going to the marketplace with their produce. An important aspect of CSR today is the encouragement given to employees to get involved in tackling social issues. Mother Teresa used to tell admirers eager to offer her money: “I don’t want your money; I want your time.” She ended up getting both. CSR is no longer a fringe activity that companies engage in to look good. Effective CSR today is that which relates directly to the giver’s core competencies and offers real value, not just philanthropy. It is no longer considered good for business, but simply good business. Because when you give back to the society you operate in, you become truly embedded in that society, rather than being perceived as seeking profits alone. Evaluation Along with innovation at conceptualisation and implementation, corporates are now undertaking greater evaluation and stricter accountability and transparency norms. Evaluating the programme essentially answers the question “what good did we do?” Evaluating programmes, based on internationally accepted formats provide feedback for correction and based on that public disclosure is done.


What is an evaluation? An evaluation tracks the overall progress of a firm's CSR approach and forms the basis for improvements and modification. With the information derived from verification and reporting, a firm is in a good position to rethink its current approaches and make adjustments. Evaluation is all about learning. Learning organizations are those whose existence is based on continuous receipt and comprehension of new information and adaptation for sustainable advantage. They do not simply attempt to achieve objectives; they are constantly on the alert to adapt to changing circumstances or to find ways for improving their approaches. An evaluation should involve stakeholder engagement, including comments and suggestions from management, CSR coordinators, managers and committees, employees and outside stakeholders. Why evaluate? An evaluation allows a firm to do the following: Determine what is working well, why and how to ensure that it continues to do so • • investigate what is not working well and why not, to explore the barriers to success and what can be changed to overcome the barriers revisit original goals and make new ones as necessary.

This base of information should allow the firm to determine whether the current CSR approach is achieving its objectives and whether the implementation approach and overall strategy are correct. How to do an evaluation Drawing on the CSR objectives and indicators, and the information obtained through the verification and reporting process, firms should consider and respond to the following questions. • • • • What worked well? In what areas did the firm meet or exceed targets? Why did it work well? Were there factors within or outside the firm that helped it meet its targets? What did not work well? In what areas did the firm not meet its targets? Why were these areas problematic? Were there factors within or outside the firm that made the process more difficult or created obstacles?


• • •

What did the firm learn from this experience? What should continue and what should be done differently? Drawing on this knowledge, and information concerning new trends, what are the CSR priorities for the firm in the coming year? Are there new CSR objectives?

Finally, it is important that firms celebrate their successes. When goals are met and progress is achieved all parties concerned need to give each other a pat on the back for a job well done. Reporting A very important aspect of CSR is the reporting practices that corporates adhere to inform their key internal and external stakeholders of social responsibility practices. In the recent past, several indicators such as the Global Reporting Initiatives guidelines and sustainability reporting have been developed. Sustainability Reporting (SR) frameworks help the companies conform to the global standards of disclosures for maintaining transparency with regard to its operations and value chain and ensuring accountability towards its internal and external stakeholders. CSR : A Quantitative Analysis The Case Study quantitative analysis represents an objective overview of the corporate social responsibility trends in India based on the desktop research and case study analysis of the corporates who have responded to the request by ASSOCHAM to share their CSR efforts and initiatives, for the compendium. 27 case studies were submitted in total and out of these 24 were used as a base to deduce some directional pointers on the status of CSR and some trends in India. The analysis does not intend or aim to pass a qualitative judgement on any corporate initiative or how good or bad it is, but rather focuses on presenting a broad overview of implementing the CSR practices. It is assumed that there is an inherent bias, as the corporates that have submitted case studies are implementing the CSR in a way or other. Moreover the source of information being they (corporates) is not an unbiased source. Thematic Areas Action in CSR in India largely spans a diverse set of thematic areas – health, education, livelihood, poverty alleviation, environment, water, housing, energy and microfinance. However 30

some other areas like women empowerment, child development and infrastructure also appeared in the case studies. Based on the comparative study of the 24 companies, it was found that while some companies chose to narrow their focus on a few thematic areas, others took a broader view and undertook a larger scope of areas to focus on. Out of 24 case studies that were analysed, it was found that there were as many as 16 corporates focusing on 3-5 thematic areas, whereas only 4 corporates catered to 1-2 thematic areas of work and remaining four stuck to six or more thematic areas. In terms of the area focus, environment garnered the maximum attention from corporates while women empowerment and poverty alleviation were neglected areas with minimal corporates focusing on the same.

Health Health has been identified as a primary objective in the community development process. As a part of the healthcare initiatives weekly clinics, counseling sessions, health camps are regularly held to promote general health and well-being in the community. The health perils in the community are numerous and in order to treat some minor ailments and casualties, community members have been identified and are being trained to treat minor ailments. Education Education too has been a primary focus area for the foundation, and a number of initiatives have been designed to promote non-formal education in the community. Akanksha, a non governmental organization that focuses on developing a strong educational foundation, deep sense of self-esteem and facilitates fun activities for underprivileged children has been identified 31

to facilitate education and awareness. PMC schools have been given computers to promote IT education in the neighboring area of Chandan Nagar. Simultaneously, IT education programs have also been deployed to spread computer literacy within Zensar's support staff. The response to all these initiatives has been overwhelming and the foundation is now taking up more initiatives to address the requirement. Environment • • Your business affects many different people - employees, customers, suppliers and the local community. It also has a wider impact on the environment. Even the simplest energy efficiency measures, like switching off lights and equipment when they aren't needed, makes a real difference. Reducing the use of water also directly cuts your costs. • Minimising waste can also make an important contribution. Simple steps like reducing the amount of paper you waste can immediately cut costs. You can save even more by thinking about waste implications when you design new products and production processes. • Caring about the environment can increase income too. Many customers prefer to buy from responsible companies. There are all sorts of ways you could think about reducing the environmental impact of your business. Livelihood A unique program to create more opportunities for less privileged youth. Pune Corporate Consortium for LABS was inaugurated on April 4, 2006. LABS, a flagship program of Dr. Reddy’s Foundation (DRF), promotes customized programs for youth and women in the age group of 18-30 years from economically weaker sections of society, and empowers them to gain access to opportunities for sustainable livelihoods and growth in the New Economy. This program is implemented in Pune with the help of organizations such as Thermax, Forbes Marshall, Confederation of Indian Industries – Young Indians (CII-YI) and Zensar Technologies in association with Pune Municipal Corporation to actively support this initiative. CII-YI is the primary coordinator of this activity that plans to train 300 young members in the coming year. This program aims to empower students who have discontinued formal education for various reasons. A total of 80 students have already enrolled for this batch which began from April 4, 2006 in Pune. 32

CSR Management It has been observed that for 37 percent corporates, the CSR initiative is being implemented through a well structured separated Foundation. Among 58 percent corporates there is a separate CSR department that takes care of the activities to be implemented.

Partnerships The importance of building strong public-private partnerships as well as working closely with NGOs as implementation partners is being increasingly realised by corporates. It has been observed that 58 percent of the corporates within the surveyed sample partnered with the government departments. The number is higher for the engagement with NGOs, where approximately 67 percent corporates have formed linkages. 21 percent corporates were working in partnership with multilateral or bilateral organisations.


Stakeholders Stakeholder engagement has become one of the important aspects of CSR practices. Though there are different sets of stakeholders that can be taken into account while implementing CSR, we decided to obtain information on the following – employees, neighboring community and general public. Neighboring community refers to the people in catchment area of corporate who have a direct effect of business on them. Out of total 24, five corporates work towards the benefit of employees, neighboring community and general public. There are 2 corporates that have set of employees and general public as their stakeholders. Five and two corporates have as their stakeholders the set of general public and neighboring community and employees and neighboring community respectively. Only one corporate has decided to concentrate on the neighboring community as the stakeholder.

Sustainability Reporting (SR) is also gaining prominence and recognition as a value added tool for displaying a corporate’s commitment towards transparency and accountability towards its stakeholders. It helps a company to report on the social, environmental and economic impact of its activities, along with a report on the internal state of its management and employee welfare system in a manner as rigorous and transparent as financial reporting. A well drafted Sustainability report provides a balanced and reasonable representation of the sustainability performance of a reporting organisation (both positive and negative). SR helps the organisations define and communicate their overall context and rationale to solve global problems through its specific business model or elicit whether its business model design is influenced by those problems. SR is also increasingly recognised as a tool for brand and image building. 34

Reporting Initiatives Public disclosure and reporting was another metric used to compare the CSR initiatives of corporates. It was observed that within the sample of 24 companies used, 25 percent are reporting as per the GRI guidelines while 21 percent were signatories of the UN Global Compact. An equal number of corporates (21 percent) come up with a separate CSR report while there are only a few (8 percent) who have a mention of their CSR activities in the annual report. Comparative numbers of reporting of CSR in the annual report at global level are much higher. For instance in 1977 the number was 50 percent, which rose to 90 percent in 1990. THE FUTURE OF CORPORATE SOCIAL RESPONSIBILITY The reasons for companies becoming interested in social responsibility are diverse. Risk protection, market positioning, recruitment, political-social relationships--each displaying an inverse relationship between immediate economic impact and degree of commitment. Corporate social responsibility (CSR) is about the acknowledging that sustainable competitive advantage requires companies to be economically viable, environmentally sound and socially responsible. CSR is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as the local community and society at large. --World Business Council for Sustainable Development (WBCSD) CSR has now been discussed in the companies across the globe for more the 15 years but a lot of people in and outside of business are very critical of CSR. Their argument is that CSR is a management fashion that will go away at one point and be replaced by something else. Corporate Social Responsibility (CSR) and its potential role as a force for change in a globalised world: CSR is a concept whereby companies and financial institutions not only consider their profitability and growth, but also the interests of society and the environment by taking responsibility for the impact of their activities on stakeholders, employees, shareholders, customers, suppliers, and civil society represented by NGOs. Companies (including banks) must take on new responsibilities that go beyond a simple policy of “paternalism” vis-à-vis their suppliers, customers and employees, such as that practised up until recent times. Companies 35

which aspire to be, or are, leaders in corporate social responsibility are challenged by rising public expectations, increasing innovation, continuous quality improvement and heightened social and environmental problems. They are forced to chart their CSR course within a very complex and dynamic environment. To assist this exercise it can be useful to reflect on the longer term trends in CSR - the future of corporate social, environmental and ethical responsibility 5 - 10 years from now, beyond the immediate operating environment. How will the social/environmental /economic dimensions of corporate sustainability evolve 5 - 10 years out? What will be the stakeholder demands on companies in the future? What forms of collaboration and partner- ship will emerge? What will be the new CSR issues confronting corporations? What will be the regulatory environment and government’s role in CSR? In effect,what will be the new CSR operating environment for companies? In the future a significant number of companies will be convinced it’s in their strategic interest to incorporate CSR substantively into their operations There will be pressure through competition for better CSR performance - this will impact on suppliers,etc. A small group of companies will be There will be differentiation between different models and levels of CSR as a result of continuous efforts.

Improvement and Quality Assurance: CSR will advance, but it will advance inconsistently across sectors, depending on a company’s economic performance, economic downturns, competitiveness of the market, etc. • Underlying structural drivers will impact large scale companies, such as the value of knowledge workers and other intangible assets, driving companies to take different issues into account. • Increasingly businesses will see CSR as resulting in increased competitiveness and profitability • The cynical corporations are dinosaurs and will be swept aside, though not in 10 years; change will be there, but it won’t be dramatic • CSR is part of a search for a new social contract between business and society. This new social contract will not necessarily be through the creation of a set of rules, but about a new set of norms arrived at through experimentation In spite of the difference in views of social impact and 36

degree of corporate commitment, the majority of the optimists and the pessimists agreed that 5 10 years from now CSR will nonetheless become increasingly main- stream within business, even if not within the public consciousness. CSR tools, resources, language - all will become more aligned with business norms and systems.CSR standards - to greater or lesser effect - will be part of business basics and not an add-on. Most of this speculation points to continued, albeit slow progress toward increasing integration of CSR values into the corporate sector with varying levels of commitment and impact within the 5 - 10 year time frame. CSR Strategic: Companies will become strategic about different aspects of CSR They will become compliant with standards and then will create niches in specific areas of CSR more strategic to their companies. They will develop business strategies within one or two aspects of CSR around which they can develop a competitive advantage Companies in certain sectors will believe their key to survival is providing products and services acceptable to broad public interests or they will go out of business CSR Integrated: Further along the continuum will be those companies that fully integrate CSR throughout their business model, not as a strategic advantage, but in the belief of the need to take social and environmental impacts and opportunities into account They will have comprehensive CSR policies covering all areas of their operations and will be operationalizing their CSR principles through rigorous performance, reward mechanisms, etc. CSR or sustainable development will inform decision-making and business strategy throughout the company Deep CSR: A group of companies will adopt or be founded on business models whose mission is to improve social or environmental conditions More Significant Roles For Stakeholders: One of the top trends around which there is consistent agreement is the increasing importance of stakeholder engagement in the future of CSR. Not only will stakeholders be engaged in increasingly significant ways, they will gain in influence, and will continue to innovate and bring forward new and challenging values. consumers, employees, shareholders, suppliers, NGOs, governments and business partners - all those that have a “stake” in a company’s operations. Employees a Growing CSR Force: 37

Most predictions point to increasing numbers of employees concerned about the social values of their employer. companies with a bad CSR track record will have difficulty recruiting compared to their more advanced CSR counterparts. Younger entrants to the work force, particularly, are expected to seek work with companies aligned to their values. More generally it is expected that employees will increasingly demand that their work and the organizations they work for be aligned with their personal values. Non-responsive employers will find their staff, particularly their most talented staff, leaving for other more compatible settings. In a mobile workforce employees won’t put up with companies that don’t reflect their values. Another expected trend 5 - 10 years from now is the increased hiring of NGO activists and social scientists within corporations. CSR Management Systems Standardize and Differentiate Improvement and Impact are Key There is widespread consensus that basic CSR systems will become more standardized and routine within 10 years. The codes of conduct debate will have been resolved. There will be convergence in codes and standards. CSR Management Systems Standardize and Differentiate - Improvement and Impact are Key: There is widespread consensus that basic CSR systems will become more standardized and routine within 10 years. The codes of conduct debate will have been resolved. There will be convergence in codes and standards. There will be more clarification of what is meant by‘real’CSR to distinguish it from ‘cosmetic’ CSR. Leading edge CSR today will be baseline 5 10 years from now and the bar will be continuously lifted. CSR will continue to evolve with the evolution of social and environmental issues. Standards and systems will continue to be affected by these developments in a very “organic” process. The future will also see not only increased adoption of these standards, but increased experimentation within companies, sectors, at the site level and in regions. The new focus will be measuring and reporting on CSR impact - the degree to which a corporation’s CSR performance has actually improved conditions in society or the Environment. Companies will be showing how they have used the data and information on which they report and how they have used stakeholder input to improve their operations. Through this they will be enhancing their accountability to stakeholders. As a result of this increased impact reporting, there will be more focus on outcome comparisons between companies. There will also be an increase in board CSR committees or sub-groups focused on CSR policy. Tools will be developed to enhance CSR corporate governance. In the future companies will stop looking at CSR as a way of responding to external pressures and will start managing it, using the systems, tools and standards available to them, to increase CSR reputation 38

and results, reduce risks and improve relationships Most expect that governments will be working to support accountability and transparency in company operations, particularly through reporting. Innovation and Learning Drive CSR: There will be in-house training programs to bring up the skills of employees across the company focused on how CSR is defined, how it is applied and how it impacts the business process. For companies going through a deeper CSR integration process there will be a focus on internal transformation beginning with personal and professional development of key personnel There will be more academic research into CSR and CSR fundamentals. There will continue to be research on the business case, which itself will continue to evolve. CSR in this environment will become a stimulant for creativity and innovation. New products and services which integrate CSR and stakeholder values will be developed and become market makers. Some companies will have discovered that by creating new environmentally and socially sustainable markets they can benefit from increased business opportunities.

Companies Expected to Achieve or Lever Greater Social Change: The big debate in CSR in 5 - 10 years is expected to be over its impact on social change Many are pinning their hopes on an emergent sector whose entire mission and agenda is sustainability, both social and ecological. Sometimes called the third sector or the civil economy, these companies have core CSR values and an ethos committed to integrated social and environmental responsibility. They include natural, clothing, building and construction, community banking, social investment, travel and educational services, Co-operatives, credit unions and non-profit enterprises are found in this sector. This sector is expected to grow and evolve over the next 5 - 10 years and will impact the. marketplace, society and the environment. They will be a competitive force in the economy, albeit in niche markets. They will be leaders in CSR innovation and will help raise the bar for CSR performance across sectors. The future of CSR lies in the hands of the public and civil society organizations and their changing expectations ,and the vision and leadership of the private sector.


Corporate Social Responsibility is not charity: The originally defined concept of CSR needs to be interpreted and dimensionalised in the broader conceptual framework of how the corporate embed their corporate values as a new strategic asset, build a basis for trust and cooperation within the wider stakeholder community. Though there have been evidences that record a paradigm shift from charity to a long-term strategy, yet the concept still is believed to be strongly linked to philanthropy. There is a need to bring about an attitudinal change in people about the concept. Several corporate today have specific departments to operationalise CSR. There are either foundations or trusts or a separate department within an organisation that looks into implementation of practices. Being treated as a separate entity, there is always a flexibility and independence to carry out the tasks. But often these entities work in isolation without creating a synergy with the other departments of the corporate. There is a need to understand that CSR is not only a pure management directive but it is something that is central to the company and has to be embedded in the core values and principles of the corporate.

Corporate Citizenship: A new way to market CSR? A new terminology that has been gaining grounds in the community today is Corporate Citizenship. So what is corporate citizenship and is this fundamentally different from corporate responsibility? Corporate citizenship is defined by the Boston College Centre for Corporate Citizenship, as the business strategy that shapes the values underpinning a company’s mission and the choices made each day by its executives, managers and employees as they engage with society. According to this definition, the four key principles that define the essence of corporate citizenship are: (i) Minimise harm (ii) Maximise benefit (iii) Be accountable and responsive to key stakeholders (iv) Support strong financial results. Thus, corporate citizenship, similar to its CSR concept, is focusing on the membership of the corporation in the political, social and cultural community, with a focus on enhancing social capital. Notwithstanding the different terminologies and nomenclature used, the focus for companies today should be to focus on delivering to the basic essence and promise of the message that embodies these key concepts – CSR and Corporate Citizenship. 40

Corporate Social Responsibility is not a fad or a passing trend, it is a business imperative that many Indian companies are either beginning to think about or are engaging with in one way or another. While some of these initiatives may be labeled as corporate citizenship by some organisations, there basic message and purpose is the same. A successfully implemented CSR strategy calls for aligning these initiatives with business objectives and corporate values thereby integrating corporate responsibility across the business functions and enhancing business reputation. The challenge for us is to apply fundamental business principles to make CSR sharper, smarter, and focused on what really matters. This can be done by: • • • • • Focusing on priorities Allocating finance for treating CSR as an investment from which returns are expected Optimising available resources by ensuring that efforts are not duplicated and existing services are strengthened and supplemented Monitoring activities and liaising closely with implementation partners such as NGOs to ensure that initiatives really deliver the desired outcomes Reporting performance in an open and transparent way so that all can celebrate progress and identify areas for further action. A long term perspective by organisations, which encom-passes their commitment to both internal and external stakeholders will be critical to the success of CSR and the ability of companies to deliver on the goals of their CSR strategy. Wealth has to be created before it can be distributed. The responsibility to create wealth is of business. And responsibilities and rights must go together. Hence, the society cannot disarm business of its rights which are essential for creating value.

Corporate Social Responsibility: The journey has begun!


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