UNIT – 1

INTRODUCTION TO CORPORATERESPONSIBILITY

 DEFINITION
i. Corporate Social Responsibility is a self-regulation mechanism whereby an organization
actively monitors society, the environment, global trends, ethical principles, and legal
standards for compliance.
ii. CSR supports the organization’s core mission and extends its responsibility and
commitments to secondary stakeholders and other members of society.
iii. The CSR process fosters organizational actions that positively affect society as a whole:
environment, communities, and people.
iv. Organizations that adopt CSR have moral, ethical, and discretionary responsibilities in
addition to their economic and legal obligations.
v. They have a broader view of responsibilities that include not only primary stakeholder
requirements, but secondary stakeholder wants, needs, and desires.

 PYRAMID OF CSR
The pyramid below provides a visual representation of the responsibilities for an organization
that adopts CSR as part of their business mission.

i. Economic responsibility. A business must be profitable to remain economically

responsible and to remain in business. By being profitable, businesses give back to
society by providing jobs to employees and producing goods and services wanted by
consumers. The goal of the company at this level of the CSR Pyramid is to maximize
profits for shareholders and owners.
ii. A business is obligated to obey the law to achieve legal responsibility. Businesses are
required to be profitable within the defined legal structure. Government agencies and
regulators establish laws and regulations for businesses to follow. Global stakeholders
require businesses to meet country, state, and city legal responsibilities.

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 iii. A business that does what is ethically and morally right, referred to as ethical
responsibility. Business decision makers must use fairness, equality, and respect to
achieve desired organizational goals. Global stakeholders expect a company to be
morally and ethically responsible.
iv. A business gives back to society through philanthropic contributions, known as
discretionary responsibility. Discretionary responsibility is voluntary and is not
financially, legally, or ethically required. The goal of businesses at this level of the CSR
Pyramid is to improve the welfare of the community and society as a whole.

 HISTORY
i. The History of CSR dates back many years and in one instance can even be traced back 5000
years in Ancient Mesopotamia around 1700 BC, King Hammurabi introduced a code in
which builders, innkeepers or farmers were put to death if their negligence caused the deaths
of others, or major inconvenience to local citizens.
ii. With industrialisation, the impacts of business on society and the environment assumed an
entirely new dimension.
iii. The "corporate paternalists" of the late nineteenth and early twentieth centuries used some of
their wealth to support philanthropic ventures.
iv. By the 1920s discussions about the social responsibilities of business had evolved into what
we can recognise as the beginnings of the "modern CSR movement. "
v. The phrase Corporate Social Responsibility was coined in 1953 with the publication of
Bowen's Social Responsibility of Businessmen" (Corporate watch report, 2006).
vi. The evolution of CSR is as old as trade and business for any of corporation. Industrialization
and impact of businesses on the society led to a complete new vision.
vii. By 80's and 90's CSR was taken into discussion, the first company to implement CSR was
Shell in 1998. (Corporate watch report, 2006)
viii. With well informed and educated general people it has become a threat to the corporate and
CSR is the solution to it.
ix. In 1990 CSR was standard in the industry with companies like Price Waterhouse Copper and
KPMG.
x. CSR evolved beyond code of conduct and reporting, eventually it started taking initiative in
NGO's, multi stake holder, ethical trading. (Corporate watch report, 2006).

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  PHILANTHROPY TO STRATEGIC PHILANTHROPY
i. For small businesses and companies with limited resources, it’s the truly creative, out-of-the-
box solutions that succeed — from product development to advertising to employee-retention
programs.
ii. The same is true of corporate giving. Instead of scribbling a few checks each year, being
creative. Aligning charitable giving with your corporate vision to get the most out of your
philanthropic efforts.
iii. This type of giving — commonly known as strategic philanthropy — helps the community
and enhances your company’s reputation with your customers.
iv. Strategic philanthropy isn’t about disguising self-serving activities under a veil of good
intentions or adopting a cause merely to sell products. It’s about showing consumers that
your company cares about its community.
v. Consumers notice a company’s social conscience.
vi. In fact, consumers indicate that when all else is equal, they prefer to buy from a company
that’s associated with a good cause.
vii. It’s not difficult to leverage your charitable activities to benefit your community, your
employees, and your businesses.
viii. Think small. Investigate organizations in your community where smaller donations and
limited resources can have a big impact. Or support a new project or non-profit group. You’ll
generate interest in a lesser-known cause and see first-hand how your efforts make a
difference.
ix. Do what you know. Your contributions should be a logical extension of your business.
Think about how you can leverage your products, services, and areas of expertise. Then align
your company with an organization that complements your product. For example, if you sell
food products, support an anti-hunger program. If you provide personnel services, work with
a local job-training program for the poor. Helping a non-profit group develop personnel
policies or marketing materials may not sound as heroic as building houses, but if it’s what
the group needs, providing it with your services pro bono will be an enormous help.
x. Lead by example. Setting up a charitable program demonstrates to your employees that your
company doesn’t exist solely to make a buck. It shows them that you’re willing to invest in
the community where they live, which may motivate them to participate.
xi. Create a partnership. Your relationship with non-profit organizations should be a
partnership of equals. In many cases, the organization will benefit more by developing a
partnership with you than by receiving a one-time cash donation. And you’ll probably find
that it’s more rewarding to participate in social change as well as fund it.
xii. Spread the word. Most non-profits have limited publicity resources, so take the initiative to
promote your charitable activities. Devote space on your Web site for a little PR about your
partnership or call the local newspaper and pitch the story as a community-interest piece. The
people in your community should know how you and the organization are working to
improve the community.

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  GUIDELINES ON SOCIAL AND ENVIRONMENTAL RESPONSIBILITY” BY THE
MINISTRY OF CORPORATE AFFAIRS, GOVERNMENT OF INDIA – AN
INTRODUCTION
i. Principle 1: Businesses should conduct and govern themselves with Ethics , Transparency
and Accountability
ii. Principle 2: Businesses should provide goods and services that are safe and contribute to
sustainability throughout their life cycle
iii. Principle 3: Businesses should promote the well-being of all employees
iv. Principle 4: Businesses should respect the interests of, and be responsive towards all
stakeholders, especially those who are disadvantaged, vulnerable and marginalised
v. Principle 5: Businesses should respect and promote human rights.
vi. Principle 6: Business should respect, protect, and make efforts to restore the environment
vii. Principle 7: Businesses, when engaged in influencing public and regulatory policy, should do
so in a responsible manner.
viii. Principle 8: Businesses should support inclusive growth and equitable development
ix. Principle 9: Businesses should engage with and provide value to their customers and
consumers in a responsible manner

 IDENTIFICATION OF STAKEHOLDERS
i. Stakeholders : By definition, stakeholders are the individuals or groups that have an interest
in the organization and are affected by its actions.
ii. Stakeholders are customers, employees, suppliers, board of directors, owners, shareholders,
government agencies, unions, political groups, the media, and others.
iii. Within the broad spectrum of stakeholders, stakeholders can be broken into two different
groups :

a. Primary stakeholders –
i. Primary stakeholders have a vested interest in how the organization performs
and the actions it engages in to conduct business.
ii. Examples of these types of stakeholders are customers, employees, suppliers,
board of directors, owners, and shareholders.
iii. Primary stakeholders benefit from a well - run company but are also harmed
by the organization’s mishaps.
iv. Primary stakeholders directly affect the success and failure of the company.
b. Secondary stakeholders –
i. Secondary stakeholders can influence, both positively and negatively, the
actions of the organization.
ii. They indirectly affect the organization by taking actions to make it difficult
for the organization to succeed or by supporting the organization’s efforts.

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 iii. Those directly involved with or responsible for beneficiaries or targets of the effort
iv. These might include individuals and organizations that live with, are close to,
or care for the people in question, and those that offer services directly to
them
v. Examples of secondary stakeholders are government agencies, regulation
agencies, trade unions, labour unions, political groups, social groups, and the
media.
vi. One of the primary functions of a business is to serve the needs of its
stakeholders, also known as stakeholder responsibility.
vii. However, more and more businesses are taking this responsibility one step
further by seeking out ways to address global issues to ultimately make the
world a better place.
These actions are referred to as Corporate Social Responsibility (CSR).
c. KEY STAKEHOLDERS - Government officials and policy makers. These are the
people who can devise, pass, and enforce laws and regulations that may either fulfill
the goals of your effort or directly cancel them out.
i. Legislators. Federal and state or provincial representatives, senators, members
of parliament, etc. who introduce and pass laws and generally control public
budgets at the federal and state or provincial levels.
ii. Governors, mayors, city/town councilors, selectmen, etc. The executives that
carry out laws, administer budgets, and generally run the show can contribute
greatly to the success – or failure – of an effort.
iii. Local board members. Boards of health, planning, zoning, etc., through their
power to issue permits and regulations, can be crucial allies and dangerous
opponents.
iv. State/federal agencies. Government agencies often devise and issue
regulations and reporting requirements, and can sometimes make or break an
effort by how they choose to regulate and how vigorously they enforce their
regulations.
v. Policy makers. These people or groups often have no official power – they
may be “advisers” to those with real power – but their opinions and ideas are
often followed closely. If they’re on your side, that’s a big plus.
d. Internal and External Stakeholders
i. Project managers are internal stakeholders because they are directly
involved in developing the project.
ii. They have authority to manage the project by handling responsibility of work
performance, organizing and planning; effectively ensuring that all phases of
the project are done accurately and efficiently.
iii. Vendors, suppliers, and outside organizations are external stakeholders
because they supply needed elements for a project's success, they need to stay
in communication at all times on goals, milestones and deliverables.

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 e. Direct and Indirect Stakeholders
i. Direct stakeholders are concerned with the day to day activities of a project.
ii. Team members are direct stakeholders as their workloads are scheduled
around the project each workday.
iii. Indirect stakeholders are not impacted by the project.
iv. Those not affected are your customers and end users, because their concern is
with the finished project. This would be the quality of merchandise, price,
packaging, and availability.

CONCERNS OF STAKEHOLDERS

i. Economics. An employment training program might improve economic prospects for low-
income people, for example. Zoning regulations may also have economic consequences for
various groups.
ii. Social change. An effort to improve racial harmony could alter the social climate for
members of both the racial or ethnic minority and the majority.
iii. Work. Involving workers in decision-making can enhance work life and make people more
satisfied with their jobs.
iv. Time. Flexible work hours, relief programs for caregivers, parental leave, and other efforts
that provide people with time for leisure or taking care of the business of life can relieve
stress and increase productivity.
v. Environment. Protection of open space, conservation of resources, attention to climate
change, and other environmental efforts can add to everyday life. These can also be seen as
harmful to business and private ownership.
vi. Physical health. Free or sliding-scale medical facilities and other similar programs provide a
clear benefit for low-income people and can improve community health.
vii. Safety and security. Neighborhood watch or patrol programs, better policing in high-crime
neighborhoods, work safety initiatives – all of these and many other efforts can improve
safety for specific populations or for the community as a whole.
viii. Mental health. Community mental health centers and adult day care can be extremely
important not only to people with mental health issues, but also to their families and to the
community as a whole.
ix. Globalization
x. Information release
xi. Opinion canvassed

RISK AND OPPORTUNITIES FOR ADDRESSING ABOVE CONCERNS

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  CORPORATE PRACTICES TO ADDRESS STAKEHOLDER CONCERNS
i. Governance.
ii. Continuity
iii. Disclosure
iv. Ethics
v. Citizenship
vi. Managing stakeholder expectations
vii. Managing stakeholder perception
viii. Recording stakeholder activity.
ix. Solving problems and resolving conflicts
x. Planning communication and distributing
xi. Reporting Communication Performance
xii. Meeting the requirements of environmental protection agencies and legislation

 BUSINESS AS USUAL APPROACH VS ENLIGHTENED APPROACH

BUSINESS AS-USUAL (BAU)

i. A phrase which refers to the normal conduct of business regardless of current circumstances,
especially difficult events which pose a potential negative impact.
ii. The phrase can also mean maintaining the status quo.
iii. A scenario for future patterns of activity which assumes that there will be no significant
change in people's attitudes and priorities, or no major changes in technology, economics, or
policies, so that normal circumstances can be expected to continue unchanged.
iv. The normal execution of standard functional operations within an organization - forms a
possible contrast to projects or programmes which might introduce change.
v. BAU may also stand in contradistinction to external events which may have the effect of
unsettling or distracting those inside an organisation
vi. The maintenance of BAU is the primary goal of business continuity planning
vii. EXAMPLES
a. Work undertaken by a staff member on any day that is defined in their job description
OR Tasks that naturally slot into the processes run by the business on a day to day
basis (this is business operations BAU)
b. Tasks handled and managed by a team in order to comply with a Service Level
Agreement (SLA) or Operating Level Agreement (OLA) (business operations BAU)
c. Project deliverables handed over to a support team so that they fully understand how
they are to provide support on a day to day basis moving forward (business operations
BAU)
d. Work that fits within the definition of what a team, business unit, division is tasked to
perform that delivers on the overall business objectives of the organization (business
operations BAU)

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 BUSINESS ENLIGHTENED APPROACH

i. Enlightened approach states that “corporations should pursue shareholder wealth with a long-
run orientation that seeks sustainable growth and profits based on responsible attention to the
full range of relevant stakeholder interests”.
ii. Essentially, it focuses on generating shareholder value, whilst having regard to the long term
external impacts of the wealth generation.
iii. A director must act in good faith to promote the success of the company for the benefit of its
members as a whole.
iv. The director should have regard to the likely consequences of any decision in the long term;
the interest of the company’s employees; the need to foster the company’s business
relationships with suppliers, customers and others; the impact of the company’s operations
on the community and the environment; the desirability of the company maintaining a
reputation for high standards of business conduct; and the need to act fairly as between
members of the company
v. Companies should recognize and report on stakeholder matters as part of providing
comprehensive disclosures to investors.
vi. Specifically, the mandatory directors‘ report, a business review of both financial and non-
financial performance indicators, must include either information about the company‘s
environmental impact, employees, social and community issues, and essential contractual
arrangements, or a statement detailing which type of information is not being provided.
vii. These disclosures are required unless the information is not necessary for an understanding
of the company‘s business.
viii. Enlightened approach also enables greater resilience; businesses will last for longer and keep
delivering profitability.
ix. It is also increasingly obvious, that business strategies need to focus on the long-term. While
this can be a tough call for many in the current economic climate, sustainability-focused
companies significantly outperform traditional firms in terms of stock market and accounting
performance.
x. Advocates of enlightened self-interest believe that companies will increase in value if they
identify and respond to the needs of society.
xi. Enlightened self-interest increases company value by securing and maintaining market share,
attracting and retaining a skilled workforce and ensuring that natural resources and raw
materials are available for the future.
xii. Corporate Philanthropy - Enlightened self-interest can be the motivation for corporate
philanthropy. Companies known for their charitable giving gain a reputation for
responsibility in the eyes of consumers. Company donations of cash or resources are a form
of paid advertising.
xiii. Progressive Employment Conditions - Companies offer progressive employment
conditions in order to attract and retain high-performing employees. Companies offer health
benefits to improve the health and well-being of their workforce. Companies offer family-

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 friendly policies, including job-sharing, childcare support and paid time off for domestic
responsibilities, in response to the growing number of dual-income families. Family-friendly
policies improve recruitment, employee retention and productivity.
xiv. Environmental Stewardship - Enlightened self-interest encourages companies to minimize
the impact of their activities on the environment. By participating in voluntary environmental
management programs, companies minimize the potential for enforcement action by
regulators, which could be costly and damage their reputation. Consumers prefer to give their
business to companies with a positive track record of environmental management. This has
an effect throughout the supply chain. Conducting business in an environmentally sustainable
manner ensures the long-term future of the business as natural resources and raw materials
will be conserved

 TRIPLE BOTTOM LINE APPROACH

i. Triple bottom line (TBL) is a concept which seeks to broaden the focus on the financial
bottom line by businesses to include social and environmental responsibilities.
ii. TBL measures a company's degree of social responsibility, its economic value, and its
environmental impact.
iii. TBL is one of the main systems being used by businesses to assess the profits they are
making through their corporate sustainability solutions.
iv. TBL method sees beyond the traditional bottom line of business to the profits that business
makes socially, environmentally, and economically.
v. Measuring business using the TBL is one of the best markers of how sustainable your
business is, and how profitable it really is.

SOCIAL SUSTAINABILITY

i. The Social bottom line measures business profits in human capital, including position within
local society.
ii. Social bottom line is increased by having fair and beneficial labour practices and through
corporate community involvement, and can also be measured in the impact of your business
activities on the local economy.
iii. If business is not nurturing positive relationships with community, client base and employee
pool shrinks accordingly.
iv. The social bottom line questions the belief that the less a business pays its work force the
longer it can afford to operate.
v. Instead, the social bottom line measures the long-term sustainability of business human
capital, with the understanding that a business that is also a desirable workplace will always
be able to operate into the future, since there will be a work force striving to be part of the
business.
vi. Essentially, corporate interests and labour interests are seen as interdependent.

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vii. Social variables refer to social dimensions of a community or region and could include
measurements of education, equity and access to social resources, health and well-being,
quality of life, and social capital.
viii. For example, some questions you can ask yourself when measuring Corporate Social
Responsibility are:
a. Is your business a job-growth driver in your city? Do you or your employees give
back to the community?
b. Are the people you hire statistically better situated within the community in terms of
economic stability and community health?
c. Does your business support local initiatives and grow the overall sustainability of
your community/region?
d. Do you implement fair hiring standards? What are your employee demographics?

ENVIRONMENTAL SUSTAINABILITY

i. The TBL approach to sustainability takes the view that the smaller impact the business has
on the environment and the fewer natural resources it consumes, the longer and more
successful business will be.
ii. Controlling Environmental bottom line means managing, monitoring, and reporting
consumption and waste and emissions.
iii. This is typically the work of EHS department, though most sustainable business models also
make waste reduction and green policies corporate-wide values across all levels of
management.
iv. A sustainability committee is often required to communicate sustainability solution and
sustainability goals across all departments.
v. Measuring and reporting environmental bottom line is certainly possible, though depending
on the size of business, it can be a time-consuming and difficult process.
vi. Global Reporting Initiative offers a few helpful metrics for measuring and reporting
environmental triple bottom line. These include (but are not limited to):
a. Renewable energy use and energy consumption (direct and indirect)
b. Amount of material that is recycled
c. Amount of water withdrawn from local water sources
d. Total NOx, SOx, and GHG emissions

ECONOMIC SUSTAINABILITY

i. In TBL approach, economic sustainability is not simply traditional corporate capital.

Economic capital under the TBL model should be measured in terms of how much of an
impact business has on its economic environment.
ii. The business that strengthens the economy it is part of, is one that will continue to succeed
in the future, since it contributes to the overall economic health of its support networks and
community.

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 iii. Economic sustainability must focus on the long term because this is the nature of a persistent
company.
iv. A decision which creates an economic boon in the short-term (like the Ford Pinto), but
causes long-term harm, would likely reduce this bottom line to such a degree that the action
would be untenable.
v. EXAMPLES:
a. Does your business help local suppliers stay in business and innovate? Or do your
activities put the local economy at risk?
b. Do you pay employees enough to stimulate economic growth and spending? Or does
your compensation policy shrink local economy?
c. Do you choose materials that are economically a good investment? Or do you buy
cheaper products that create issues in other areas? For example, do you buy chemical
products that are low emission, or cheaper high-VOC products that put your
environmental compliance at risk?

 NEED/IMPORTANCE/ADVANTAGES OF CSR
i. To fulfill long-run self-interests
ii. To improve public image
iii. To avoid Government regulation or control
iv. To avoid misuse of national resources & economic power
v. To avoid class conflicts
vi. To convert resistance into resources
vii. To minimize environmental damage
viii. Facilitates changes consumer expectations
ix. Attracts better human resources
x. Fulfills changed public expectations of business
xi. Provides better environment for business
xii. Helps in avoiding government regulation
xiii. Maintains balance of responsibility with power
xiv. Better brand recognition
xv. Positive business reputation
xvi. Increased sales and customer loyalty
xvii. Operational costs savings
xviii. Better financial performance
xix. Greater ability to attract talent and retain staff
xx. Organisational growth
xxi. Easier access to capital
xxii. Attract positive media attention - eg when taking part in community activities
xxiii. Reduce regulatory burden - good relationships with local authorities can often make doing
business easier

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 xxiv. Identify new business opportunities - eg for development of new products or services
xxv. Assist to Government: - to solve social, economical and political problems of the country.
xxvi. Pressure of Consumer Movement: - to protect consumers against business malpractices like
adulteration, black marketing, unfair pricing, shortage in weight, measures, etc.
xxvii. Pressure of Trade Union: - relations between management and labour.
xxviii. Customers are attracted to socially responsible companies
xxix. Corporate Social Responsibility attracts investors

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