2007-2008

Under Supervision of:

Submitted by

Dr. Mehtab Kathawala Shweta Shrimali

PACIFIC INSTITUTE OF MANAGEMENT

Pacific Hills, Airport Road, Udaipur Ph. 0294-2490604-2491440 #Fax : 0294-2491339

Presumptive Analysis of the issue Corporate Social Responsibility or CSR is gaining prominence and organizations are using CSR strategically to create for themselves an image of socially responsible organizations in the minds of their stakeholders. Talk to people in the senior management and they will tell you how deeply committed they are to some or the other social cause. The program of social benefits runs across organizations in different sectors and each is promoting a cause that aligns with the bigger picture of inclusive growth. And believe it or not, no body is talking about charity! Charity is passe. CSR today is more about involvement with the community and social cause and not just a photographic opportunity for signing up a cheque towards a charitable organization. Batstone suggests that integrity and profitability are at the forefront of CSR . He also suggest , there are 8 principles of creating and preserving integrity and profitability they are: 1. Leadership and Governance: The directors and executives of a company will align their personal interest with the fate of stakeholders and act in a responsible way to ensure the viability of enterprise. 2. Transparency and Integrity: A companys business operation will be transparent to shareholders, employees, and the public and its executives will stand by the integrity of their decisions. 3. Community: A company will think of itself as part of community as well as a market. 4.Customer care: A company will represents its products honestly to customers and honor their dignity up to and beyond a transaction.

5. Valuing the worker :The worker will be treated as a valuable team member , not just a hired hand.
Source: www.icfaiuniversitypress.org Effective Executive Sept. 2007 special issue corporate social responsibility p.g. (11-12)

Source: www.icfaiuniversitypress.org Effective Executive Sept. 2007 special issue corporate social responsibility p.g. (11-12)

Introduction
It is increasingly being acknowledged that the short-term focus of investment community may curb the development opportunities of enterprises in the long term. It is argued that the exclusive concentration on the bottom lion has caused some businesses to disconnect from their environments (Korner, 2005). Corporate social responsibility (CSR) has emerged as the human face of business activities. CSR involves changing notions of human welfare and emphasizing a concern about the social dimensions of business activity that have a direct bearing on quality of life in the society. the following paper therefore provides a way for business to concern itself with social dimensions and pay some attention it its social impacts. The paper reinstates that CSR stands for a mindset of constantly seeking for solutions that take all stakeholders perception into account leading to more sustainable solutions in an economie, environmental and societal sense. By way of demonstrating the impotance of CSR for society at large, the public policy perspections for finally the contribution to longterm economic success of business, paper concludes with suggestions for organizations on how to become more socially responsive:

Source: Environment Management Practices : An Indian Outlook, Editors Karunesh Saxena, Nitesh Bhatt.

What is CSR all about?

It is argued that the concept of corporate social responsibility develops essentially around the question of what the role of the corporation should be. CSR, in its true sense, is hard work and must be seen in conjunction with the basic functioning of the company. It must radiate outwards to the society from within the core efficiencies of the firm in order to strengthen them in a not-too-long-run. CSR, thus, selfconsciously raises the stakes for itself and doing so sets new targets and challenges that eventually impact the industry as a whole (Yamak and Suer, 2005). Researchers (papasolomou, 2005) opine that present organizations are expected to practice social responsibility or be a good corporate citizen. Therefore corporations should not only be judged on their economic success but also on non-economic criteria.

Source: Environment Management Practices : An Indian Outlook, Editors Karunesh Saxena, Nitesh Bhatt.

Conceptual Connotation 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 of the local community and society at large. According to World Bank Group Corporate Social Responsibility practice. Corporate social responsibility is the commitment of businesses to contribute to sustainable economic development by working with employees, their families the local community and society at large to improve their lives in ways that are good for business and for development. Corporate spend heavily on marketing and branding initiatives to promote their brand. CSR is one of the unique and costeffective ways to build brands. However, this type of branding does not work in isolation. The objectives of the CSR campaign may not be achieved even after the CEOs commitment to the cause and PR departments timely release of the message to media. CSR has to be used strategically. Having a CEO committed to one cause and CFO to another, will not help the organization create the desired image. Some of the points to be kept in mind while building a CSR campaign are: Do not support too many causes. Your intent and ideas might be genuine But supporting too many causes will not result in the creation of desirable image. Do not change the causes you support frequently. One year you are supporting environment and next year you abandon environment to
Source: www.icfaiuniversitypress.org Effective Executive Sept. 2007 special issue corporate social responsibility p.g. (46-47)

support aged people. Such adhoc CSR activities will not have a sound impact. Select a cause that fits with the overall core business proposition and which your audience can relate to very well. Promote the cause you select and work with organizations that support your cause. Create communication messages that reach out to all the stakeholders and not just few.

Source: www.icfaiuniversitypress.org Effective Executive Sept. 2007 special issue corporate social responsibility p.g. (47)

Importance of CSR CRS offers many advantages from the PR perspective

Help in building positive corporate image as a socially responsible

organization and can help can help in achieving different goals of the organization : the high involvement of the company in CSR develop strong commitment towards solutions of problems in the local community.
Improved employee involvement, thus contributing to improved

employee loyalty . The effective executive especially in the global arena today must consider the construct of the CSR on a daily basis. However, before one examines this, sometimes every elusive construct, one must set out to operationally define social responsibility . Help in attracting right talent Regular appearance in media (of course that would depend upon what the company does and what it is does differently ) enhance brand recall According to Prof Kesav Vithal Nori, VP, TCS Hyderabad, at an individual level, these initiatives help in leadership and character building among employees and at the company level. Social recognition, Many feel that such activities help in creating for the organization.

Source: www.icfaiuniversitypress.org Effective Executive Sept. 2007 special issue corporate social responsibility p.g. (48)

Dimensional Magnitude
A CSR Pyramid For Developing Countries Having considered the various drivers for CSR in developing countries, the question is: Are current Western conceptions and models of CSR in developing countries? If we consider the most popular model Archie Carrolls CSR Pyramid, comprising economic, legal, ethical and philanthropic, responsibilities- this is almost entirely based on research in an American context. Even so, several empirical studies suggest that culture may have an important influence on perceived CSR priorities. Hence, IO would argue that the order of the CSR layers in developing countries- if they are taken as an indicator of relative emphasis assigned to various responsibilities- differ from Carrolls classic pyramid. Hence, in developing countries, economic responsibilities still get the most emphasis. However, philanthropy is given second highest priority, followed by legal and then ethical responsibilities. Is illustrated in exhibit II. Each element will be briefly discussed in turn. Economic Responsibilities It is well known that many developing countries suffer from a shortage of FDI, as well as from high unemployment and widespread poverty. It is no surprise, therefore, that the economic contribution of companies in developing countries is highly prized, by governments and communities alike. This should not be seen in negative light, but rather as a more development oriented approach to CSR that focuses on the

enabling environment for responsible business in developing countries and that brings economic and equity aspects of sustainable development to the forefront of the agenda. Philanthropic Responsibilities Philanthropic Responsibilities in Europe tends to be rather more compulsory via the legal framework than discretionary acts of successful companies or rich capitalists like in the US. In this respect, developing countries have more in common with the American model, although philanthropy generally gets an even higher priority as a manifestation of CSR. Partly, this is a result of strong indigenous traditions of philanthropy in developing countries, as previously discussed. However, there are several other reasons as well. Legal responsibilities In developing countries, legal responsibilities generally have a lower priority than in developed countries. This does not necessarily mean that companies flaunt the law, but it is far less of a pressure for good conduct. This is because in many developing countries, the legal infrastructure is poorly developed, and often lacks independence, resources and administrative efficiency. Many developing countries are also behind he developed world in terms of incorporating human rights and other issues relevant to CSR into their legislation.

Source: www.icfaiuniversitypress.org Effective Executive Sept. 2007 special issue corporate social responsibility p.g. (61)

Prevalence Other areas of reported CSR performance examined by Baskin show that emerging markets lag the OECD significantly on reporting on business ethics and equal opportunities (with the exception of South Africa), are roughly on par for environmental reporting, and show comparable reporting variance on women on company boards (e.g. high in Norway and South Africa, low in Japan and Latin America); reporting on training and occupational health and safety also varies (e.g. high in South Africa and Western Europe, low in North America and Asia). Despite the limitations of using reporting as an indicator of CSR performance and the danger of representing regions by just a few countries ( e.g. only two of the 53 countries in Africa were included in the sample), the Baskin study does provide some insights into the level of CSR activity in developing countries, concluding that there is not a vast difference in the approach to reported corporate responsibility between leading companies in high income OECD countries and their emerging market peers. Nonetheless, corporate responsibility in emerging markets, while more extensive than commonly believed, is embedded in corporate strategies, less pervasive and less politically rooted than in most highincome OECD countries. Asia is the most covered region in the writing on CSR in developing counties. A 2005 survey of CSR reporting in Asia finds that nearly three quarters of large companies in India present themselves as having \CSR policies and practices versus only a quarter in Indonesia. Falling somewhere between these two extremes are Thailand (42%), Malaysia (32%) and the Philippines (30%). They also infer from the

research that the evolution of CSR in Asia tends to occur in three waves, with community involvement being the most established form of CSR, followed by successive second and third waves of socially responsible production process and employee relations. In another 2005 comparative survey, looking at CSR in 15 countries across Europe, North America and Asia, Richard Wellford speculates that the low response rates from countries like Hong Kong, Malaysia, Mexico and Thailand may in itself be an indicator of CSR being less prevalent in developing countries. This seems to be born out by the research findings, in which these counties fairly consistently underperforms when compared with the developed countries across 20 aspects of CSR measured by the survey. More specially, Malaysia is generally, the weakest in terms of CSR performance, with Thailand being relatively stronger on external aspects (such as child labor and ethics) and Hong Kong being generally better on internal aspects (such as non-discrimination and equal opportunities.

Source: www.wikipedia.com corporate social responsibility

Examples:

CSR Initiatives Undertaken by Dew Indian Corporate

Corporate Infosys CSR Focus and Initiatives Infosys Foundation: through creating opportunities and Foundation has made small, but effective strides in the areas of healthcare, education, social rehabilitation and the arts. Promoted by Infosys Technologies Limited, the Foundation offers the promise of a better tomorrow, through its projects across India. Focus Areas: Healthcare, Social Rehabilitation, Learning and Hero Honda Education, Art and culture. Source http://www.infosys.com/infosys_foundation_index . htm Hero Honda motors takes considerable pride in its stakeholder relationships, especially in ones developed at the grassroots. The company believes it has managed to bring an economically and socially backward region in Dharuhera, Haryana, into the national economic mainstream. Some initiatives taken include : Setting of integrated Rural development Center on Delhi Jaipur Highway

Technologies working towards a more equitable society, the Infosys

Setting up of Raman Munjal Vidya Mandir-A modern senior secondary school

Raman Munjal Memorial Hospital Vocational Training Center Adult Literacy Programs

Marriages of underprivileged girls

ONGC

Hindustan Lever Limited

Source: http://www.herohonda.com/co_csr.htm ONGC takes a proactive approach towards socioeconomic development by identifying projects at the plant level by involving the district administration, local representatives and recognized voluntary organizations. Priority is given to areas around the projects with the following themes: Education, Healthcare and Family welfare, Community Development. Source: http://ongcindia.com/community.asp HLL is very committed to social and inclusive development of the community. Some of the major projects taken by HLL include: Project Shakti; The project which aims to empower underprivileged rural women, targets small villages with population of less than 2000 people or less. It provides income-generating opportunities, health and hygiene education through the Shakti Vani program, and creating access to relevant information through the iShakti community portal. Yashodham: Rebuilding Lives- HLL has reconstructed a village in the Bhachau Taluka of Gujarats Kachch district. The village, which has been named Yashodhbam, was dedicated to its 1100 residents in December 2002. The residents belong to Nani Chirai village, which was completely wrecked by the devastating earthquake of January 2001. Soruce: http://www.hll.com/citizen_lever/csrcom.asp Nikes tagline just Do It was changed to Just Stop It by

Source: www.icfaiuniversitypress.org Effective Executive Sept. 2007 special issue protesters. corporate social responsibility

In its corporate history. Nike has often been attacked by NGOs for its sweatshops overseas. A sweatshop is a manufacturing workplace that treats its workers inhumanely, paying low wages, imposing harsh and unsafe working conditions, and demanding levels of performance that are harmful to the workers. In the 1970s most Nike shoes were made in Taiwan and South Korea. When the workers in these countries began to organize themselves for better wages and working conditions, Nike shifted to Indonesia, China and also Vietnam. It is argued that Nike preferred these countries as their protective labor laws were poorly enforced and cheap labor was abundantly available. Nike does not won any factories; it contracts the work to various factory owners across the globe. Nike claims that it is in the business of marketing shoes, not manufacturing them. In 1996, Nike was severely embarrassed on the child labor issue when a major story in the life magazine featured a photograph of a very young Pakistani boy sewing a Nike soccer ball. In response, Nike CEO Phillip knight, announced in a press conference that it will raise the minimum age of the factory workers. However, in October 200, the BBC program Panmorama revealed that Nike has been suing a factory in Cambodia which breaks their own strict code of conduct and anti-sweatshop rules. Nike then made a commitment to ensure that all underage workers will be removed from the factory and will receive their salary while they attend school till the age of 16. While this will benefit those underage workers, it raises the question did Nike have to wait for journalists to discover these underage

workers? What about its own monitoring programs? How many other children are working in other Nike contract factories undiscovered? It should also be mentioned that child labor, much worse bonded labor, is difficult to monitor. In many areas where Nike factories are located, poverty is so terrible that people present false age certificates in order to get work. In 1997, Nike was in the news when one of the companys own factory monitoring reports (conducted by Ernst and Young) leaked to the New York Times. This documented serious safety issues in one of the contract factories of Nike in Vietnam, including exposure to dangerous levels of toxic fumes from solvents like Toluene. This was up to 117 times the Vietnamese legal level. Exposure to Toluene causes central nervous system depression, damage to liver, kidneys, skin, and eye irritation. Scientific evidence also links exposure to Toluene vapors with miscarriages. Though Nike has since insisted on the contract factories meeting the US Occupational safety and Health Administrations standards, rights groups challenge Nike for a more transparent system of monitoring factory safety standards. Officials at Nike admit that they have not been as vigilant as they could have been in the past when it comes to monitoring working conditions; but now things are changing. While companies like Nike tried to avoid responsibility for factory conditions by saying they were just the buyer, the antisweatshop movement has made this excuse unacceptable and forced the retailers to take responsibility for the workers who make their products.

Advantages

Source: www.icfaiuniversitypress.org Effective Executive Sept. 2007 special issue corporate social responsibility

Within the currently emerging global society, businesses have embraced CSR not only as a value reflective of their new role in contributing to societal goals, but also as a strategy for improving their profits. Increasingly, businesses are seeking to maintain corporate identity, while at the same time upholding social and environmental standards, and confronting concerns of social elusion and community development (Okech ,2004). Author cites the Tylenol case as a classic example of CSR. In the 1980s, after reports that some Tylenol bottles were laced with cyanide, Johnson recalled 31 million bottles worth more than $100million) to protect the public and the brands reputation. Today, Tylenol remains one of the best selling brands (Cutlip et al., 1994). Today, CSR has become the vehicle through which businesses are seen to influence social cohesion, alongside other institution such as educational organizations, government entities. and religious organizations (Oketch, 2004). CSR can facilitate a better brand image too. The Body Shop has successfully managed to launch multinational operations profitably building a strong reputation on the basis of corporate social responsibility. Hence, corporate identity is reflected on corporate image, and an organizations relationships with its target audience, are by image. A positive image that people share about an organisation can yield influence on the quality of the relationships. This in turn assures that a company with a good image can more easily attract audiences that influence the success of the organization such as: investors, partners, employees, and customers. Research studies indicate that nine out of ten consumers use the reputation of an organization in order to decide which product or service they will buy from those that are similar in price and quality (Popasolomu, 2004)

If pursued proactively rather than reactively, CSR can also be utilized to segment markets and position products profitably. Brand value needs to be protected, and this is achieved more readily if company quality policy and strategy are aligned with the values of both employees and customers. The ever-increasing market power of global fast-food retailers, and their high visibility through branding, has made them a target both for government public interest campaigns and for citizens and consumer lobby groups. Inevitably, CSR initiatives have become a valuable strategy for responding to or counteracting, challenges of this nature (Schroder et al., 2005). CSR will work more effectively if the underlying philosophies have been internalized through cultural learning and change, which is not purely market focused, but also concerns itself with the nature and attitudes of employees. By building and developing brand goodwill, genuine CSR may also serve as an insurance policy for brand value if things should ever go wrong (Schroder et al. 2005) CSR provides a number of advantages to business like lowering and limiting litigation, reduction in taxes, protecting brand image, improving customer satisfaction and reducing absenteeism, employee turnover and increasing the ability to retain talented employees etc. (Sharma and Talwar, 2005). Authors suggest that a company must establish a legacy of trust by implementing community programmes (philanthropy, voluntarism, partnerships, in kind donations) that improve the quality of community life and promote the companys long-term business strategies and goals.

Conclusions:
Source: Environment Management Practices : An Indian Outlook, Editors Karunesh Saxena, Nitesh Bhatt.

CSR stands for mindset of constantly seeding for solution that take all stakeholders perception into account leading to more sustainable solutions in an economic, environmental and social sense. More and more companies are now realizing that they can no more function or be judged solely on the basis of hteir thick bottom lines and ful;filling their economic objectives only. A positive impact on employees, cuystomers and community at large has assumed an equal or greater significance in the overall success of the companies and building their brand image. This realization ahs bade them undertake socally responsive actions. There seems to be an underlying assumption of the ligiutimacy of a particular economic system and its central actors; that is, corporations are central, legitimate, and functional actors in social relations within a capatilist economic structure (Risa L. Lieberwitz, 2005). A socially responsible business is cognizant that the well being of its community affects the success of its operations. It is also critical for companies to not only develop CSR initiatives but to develop communication strageties that reaches various stakeholders viz. shareholders, customers and employees (www.timesfoundation.indiatimes.com) a well designed and implemented corporate social initiative can lead to many benefits for both the business and community. CSR is not a one directional endeavor (Oketch, 2004). Rather, it is two dimensional link between corporations and society. As business benefit from loyal customers, the loyal customers also benefit from the business.
Source: Environment Management Practices : An Indian Outlook, Editors Karunesh Saxena, Nitesh Bhatt.

Limitation
CSR is entwined in the strategic planning process of many multinational organizations. The reasons or drive behind social responsibility towards human and environmental responsibility whether driven by ulterior motives, enlightened self-interest, or interests beyond the enterprise, is subject to much debate and criticism. Some critics argue that corporations are fundamentally entities responsible for generating a product and/or service to gain profits to satisfy shareholders. Milton Friedman and others argue that there is no place for social responsibility as a business function. These critics point to the rule of corporate law that prohibits a corporation's directors from any activity that would reduce profits.

Other critics argue that the practice cherry-picks the good activities a company is involved with and ignores the others, thus 'greenwashing' their image as a socially or environmentally responsible company. Still other critics argue that it inhibits free markets or seeks to pre-empt the role of governments in controlling the socially or environmentally damaging effects of corporations' pursuit of self-interest.

Source: www.icfaiuniversitypress.org Effective Executive Sept. 2007 special issue corporate social responsibility