Introduction

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Corporate Social Responsibility (CSR) is an elusive topic for companies to deal with. Today on the set of globalization and increasing competition there is an increasing importance on complying with social, economical, ethical and environmental values as a part of CSR programme. Shift in economies and blurring differences among companies has made it critical to examine CSR. According to many CSR experts, the fundamental principle of CSR is that a company is responsible for providing more benefits than just profits for shareholders and stakeholders. It has a role to play in treating its employees well, preserving the environment, developing a sound corporate governance, supporting philanthropy, fostering human rights, respecting cultural differences and helping to promote fair trade, among others. These activities are meant to have a positive impact on the communities, cultures, societies and environments in which companies operate. Thus the growing emphasis on CSR is in turn affecting the relationship between companies and their various stakeholders such as investors, customers, vendors, suppliers, employees, communities and government.

Objective of the Study: The objective of the paper is to understand what CSR is about.  Study in depth the business perspective of CSR, its importance in the business environment and examine why companies are undertaking CSR activities.  To study in detail whether in the current business environment CSR is acting as a source of competitive advantage to the company. If so, how is it offering the competitive advantage and to what extent.

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Scope of the Study:The scope of the study is limited to understanding whether CSR is a source of competitive advantage to companies. And mainly concentrate on what do we understand by CSR, importance of CSR in business and how is it offering competitive advantage to companies. Also the scope of the study is limited to secondary data.

Limitations: Most of the data in the study is collected from the secondary sources. So the reliability may be less when compared to the data collected from the primary sources.  As corporate level reach is not there, the study could not be a complete research on the CSR as a source of competitive advantage.  The subject taken for study is broad. It is not a very narrow subject concentrating a particular aspect.  Unavailability of proper contacts to conduct a primary research is a major constrain.

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Methodology

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surveys conducted and statistical data were obtained from secondary sources and is used to carry out the study. Sample design:No sample is taken as it is an exploratory and qualitative research.Methodology:Exploratory research is carried out for the study. Various research articles. 5 . Data is collected from secondary resources and is used for the purpose.

Review and Literature 6 .

ethical. The definition given by the World Bank. but not identical with. While CSR encompasses the economic. CSR is more often misunderstood as giving back to the society and considered to be synonymous with philanthropy." Corporate social responsibility is related to. CSR requires organizations to adopt a broader view of its responsibilities that includes not only stockholders. ethical. ³CSR is commitment a company makes to improve relationships with stakeholders and contribute to growth of the national economy and social groups within it. customers. all based on sound business ethics´ where as EU defines CSR as. The concept of corporate social responsibility means that organizations have moral. if not sole responsibility of the owners or stockholders. and discretionary responsibilities of organizations. local. The definition of CSR. Having become a buzzword in boardrooms and the media. as well as of the company itself. suppliers. and other special interest groups. business ethics usually focuses on the moral judgments and behavior of individuals and groups within organizations. Thus. 7 . the local community. business ethics. It advocates that CSR constitutes a series of initiatives taken by a company in its enlightened self-interest. state. ³It is an effort to integrate social and environmental causes into corporate management based on available resources to create a wider network of stakeholders´. including employees. therefore CSR is a long term investment with assured returns. but many other constituencies as well. although varies from one organization to other but has one thing in common that corporations seek sustainable growth of the society to which they belong. legal. the study of business ethics may be regarded as a component of the larger study of corporate social responsibility. and federal governments. The other school of thought is that CSR is not a philanthropic activity and a business must earn for what it invests. and philanthropic responsibilities in addition to their responsibilities to earn a fair return for investors and comply with the law. environmental groups. This collective group which is affected by the actions of an organization is called "stakeholders.Corporate Social Responsibility (CSR):There is no universally accepted definition for CSR. However. There are varied views on what CSR is and what it is not. The economic responsibilities cited in the definition refer to society's expectation that organizations will produce good and services that are needed and desired by customers and sell those goods and services at a reasonable price. A traditional view of the corporation suggests that it¶s primary.

This means that organizations are expected to do more than just comply with the law. The concept of CSR is a relatively new one²the phrase has only been in wide use since the 1960s.Organizations are expected to be efficient. and employment laws. However. By acting in a self-interested manner. environmental laws. by some definition. it is probably accurate to say that all societies at all points in time have had some degree of expectation that organizations would act responsibly. In the eighteenth century the great economist and philosopher Adam Smith expressed the traditional or classical economic model of business. even Smith recognized that the free market did not always perform perfectly and he stated that marketplace participants must act honestly and justly toward each other if the ideals of the free market are to be achieved. The viewpoint expressed by Adam Smith over 200 years ago still forms the basis for free-market economies in the twenty-first century. The ethical responsibilities concern societal expectations that go beyond the law. individuals would produce and deliver the goods and services that would earn them a profit. History:The nature and scope of corporate social responsibility has changed over time. The legal responsibilities relate to the expectation that organizations will comply with the laws set down by society to govern competition in the marketplace. this model suggested that the needs and desires of society could best be met by the unfettered interaction of individuals and organizations in the marketplace. It may also involve donating employee expertise and time to worthy causes. while the economic. including consumer and product laws. In essence. and discretionary expectations placed on organizations may differ. This may involve such things as philanthropic support of programs benefiting a community or the nation. but also make proactive efforts to anticipate and meet the norms of society even if those norms are not formally enacted in law. Finally. but also meet the needs of others. and to keep shareholder interests in mind. Organizations have thousands of legal responsibilities governing almost every aspect of their operations. 8 . the discretionary responsibilities of corporations refer to society's expectation that organizations be good citizens. legal. ethical. But. such as the expectation that organizations will conduct their affairs in a fair and just way. profitable.

An associated movement. not as representatives of their companies. especially in Europe and the United States. Laws and regulations. the companies that made them rich were practicing business methods that. The labor movement also called for greater social responsiveness on the part of business. Furthermore. were enacted to rein in the large corporations and to protect employees. the Industrial Revolution contributed to radical change. Large organizations developed and acquired great power. the community. many called for the business world to be more proactive in (1) ceasing to cause societal problems and (2) starting to participate in solving societal problems. competitive strategies and did not allow for much concern about the impact of the successful corporation on employees. Based on the general idea that those with great power have great responsibility. In the 1960s and 1970s the civil rights movement. Thus." which.In the century after Adam Smith. although many of the great tycoons of the late nineteenth century were among the greatest philanthropists of all time. sometimes called the "social gospel. Millions of people obtained jobs that paid more than they had ever made before and the standard of living greatly improved. at the same time that many of them were giving away millions of dollars of their own money. their giving was done as individuals. is the idea that the principles of natural selection and survival of the fittest are applicable to business and social policy. and their founders and owners became some of the richest and most powerful men in the world. product safety. or the larger society. Many legal mandates were placed on business related to equal employment opportunity. consumers. such as the Sherman Antitrust Act. Many of the principles espoused by Smith were borne out as the introduction of new technologies allowed for more efficient production of goods and services. In the late nineteenth century many of these individuals believed in and practiced a philosophy that came to be called "Social Darwinism. Big business was criticized as being too powerful and for practicing antisocial and anticompetitive practices. worker safety. and society at large. Around the beginning of the twentieth century a backlash against the large corporations began to gain momentum. in simple form. and environmentalism affected society's expectations of business. society began to expect business to voluntarily 9 . consumerism. were exploitative of workers. This type of philosophy justified cutthroat. and the environment. Between 1900 and 1960 the business world gradually began to accept additional responsibilities other than making a profit and obeying the law. by today's standards at least." advocated greater attention to the working class and the poor. Indeed. even brutal.

It also defines the business corporation's partnership with social action groups in providing financial and other resources to support development plans.  The establishment of trusts and foundations for tax benefits. This was based on the view that corporations should go beyond their economic and legal responsibilities and accept responsibilities related to the betterment of society. such as:  Concern for the welfare of the immediate members of the corporate body: the staff and employees. and their families. they are a) Traditional corporate philanthropy b) Corporate social responsibility. with a focus on sustainable development and attending to stakeholder priorities c) Ethical business a) Traditional corporate philanthropy dates back to the 19th century and emerged out of a variety of factors. who built up philanthropic institutions out of their individual shares.  Innovative contributions by visionary business leaders in quest of personal satisfaction. This view of corporate social responsibility is the prevailing view in much of the world today. b) Corporate social responsibility is qualitatively different from the traditional concept of corporate philanthropy. which also support socially beneficial activities.participate in solving societal problems whether they had caused the problems or not. 10 . especially among disadvantaged communities.  The desire to establish a strategic relationship with the State or society led some corporate bodies to invest in the establishment of institutions that fulfil the specific requirements of the community. as a stakeholder in corporate activity. It acknowledges the debt that the corporation owes to the community within which it operates. CSR: THE TYPOLOGY:Corporate social responsibility can be broadly classified into three areas.

regulatory bodies. employees. Some stakeholders. Lawrence. and actions. employees. customers. consumers and community) rather than on maximization of profit for shareholders.According to Post. Other stakeholders may 11 . media. It focuses on specifics:  how a business is conceptualized. c) Ethical business is the more fundamental. Planet and Profit. stakeholders are individuals and groups that are affected by an organization's policies.The emerging perspective on corporate social responsibility focuses on responsibility towards stakeholders (shareholders. According to the corporate social responsibility concept there is an increasing recognition of the triple-bottom line: People. may have specific legal rights and expectations in regard to the organization's operations. such as employees and owners. procedures. The secondary stakeholders are public or special interest groups that do not have a direct stake in the organization but are still affected by its operations like government. per Carroll and Buchholtz. In an ethical business the essential thrust is on social values and business is conducted in consonance with broader social values and the stakeholders' long-term interests. A "stake" implies that one has an interest or share in the organization and its operations. competitors and industry.  the notion of fair profit. business partners and community. management. The primary stakeholders are those whose have some direct interest or stake in the organization like shareholder. The triple-bottom line stresses the following :  The stakeholders in a business are not just the company's shareholders  Sustainable development and economic sustainability  Corporate profits to be analyzed in conjunction with social prosperity. and Weber. emerging trend on the international scene. Theories of CSR:Shareholder Concept:. There is also more stress on long-term sustainability of business and environment and the distribution of well-being.  how a business is operated.

12 . An organization's responsibilities are not limited to primary stakeholders. and value. and most companies accept that they must contend with and effectively "manage" their relationship with the media. but may believe that they have a moral right to question the firm's environmental policies and to lobby the organization to develop environmentally friendly policies. The media reports on and investigates the actions of many companies. For example. Organizations must also contend with civic and special interest groups that purport to act on behalf of a wide variety of constituencies. but are not limited to. they do play an active role in trying to ensure that organizations accept and meet their responsibilities to primary stakeholder groups. Finally. so that all competitors will have a fair chance to succeed. particularly large organizations. Employees are also primary stakeholders who have both legal and moral claims on the organization. Organizations are accountable to these secondary stakeholders. an environmental group may not have a legal right in regard to a company's use of natural resources. but may perceive that they have moral rights related to the organization's operations. The owners of a firm are among the primary stakeholders of the firm. to local communities. which can be greatly affected by the actions of resident organizations and thus have a direct stake in their operations. Many social commentators also suggest that companies have a direct responsibility to future generations and to the natural environment. even an organization's competitors can be considered secondary stakeholders. Organizations also have specific responsibilities to their customers in terms of producing and marketing goods and services that offer functionality. safety. Trade associations and industry groups are also affected by an organization's actions and its reputation. and to the other companies with whom they do business. Although governmental bodies and regulatory agencies do not usually have ownership stakes in companies in free-market economies. An organization has legal and moral obligations to its owners.not have specific rights granted by law. For example. one might argue that organizations have a social responsibility to compete in the marketplace in a manner that is consistent with the law and with the best practices of their industry. These obligations include. attempting to ensure that owners receive an adequate return on their investment. as they are obviously affected by organizational actions.

13 .According to this school of thought.  Improvement in health and longevity has been made possible by economies driven by the free market. b) Corporate social responsibility view ± the business organizations should be concerned with social issues.  ³There is one and only one social responsibility of business. a) Free market view:.  Regulation should be kept to a minimum since regulation stifles initiative and creates barrier to market entry. which is to say.  Managers are employed to generate wealth for the shareholders.to use its resources and engage in activities designed to increase its profit so long as it stays within the rules of the game.not give it away. engages in open an free competition.  But the correcting of market failure is a matter for government ± not business. American economist]  Giving money away is like a self imposed tax  Managers who have been put in charge of a business have no right to give away the money of owners.  To attract quality workers it is necessary to offer better pay and conditions and leads to rise in standards of living and wealth creation.  The role of business is to create wealth by providing goods and services. without deception or fraud´ [ Milton Friedman.  Free markets contribute to effective management of scarce resources.  It is true that at times the market fails and therefore some regulation is necessary to redress the balance.  Free markets and capitalism have been at the centre of economic and social development.There are two schools of thought on CSR: a) Free market view ± the job of the business is to create wealth with the interest of the shareholders as the guiding principle.

 It can lead to increased profitability in the long run.  Cost will be passes on to consumers  It reduces economic efficiency and profit  Directors have a legal obligation to manage the company in the interest of the shareholder and not for the other stakeholders.  CSR behavior imposes additional costs which reduce competitiveness  CSR places unwelcome responsibilities on businesses rather than on government or individuals.The free market case against CSR: The only social responsibility of business is to create shareholder wealth.  The pursuit of social goals dilutes businesses primary purpose. 14 . b) The Corporate Responsibility View:.  It differentiates the firm form its competitors and can be a source of competitive advantage.  It attracts ethically conscious customers.  The efficient use of resources will e reduced if businesses are restricted in how they can produce.  Corporate management cannot decide what is in the social interest.  It can lead to a reduction in costs through recycling.According to this school of thought  Businesses do not have unquestioned right to operate in society  Those managing business should recognize that they depend on society  Business relies on inputs from society and on socially created institutions  There is a social contract between business and society involving mutual obligations that society and business recognize that they have to each other CSR behavior can benefit the firm in several ways ±  It aids in attraction and retention of staff.  It attracts green and ethical investments.

ICICI Bank 6. evaluate and report impact of CSR in annual reports ‡ Separate department to look after the CSR ‡ Periodic training programmes and awareness camps to train personnel on CSR ‡ Linkage between CSR and financial success should be established ‡ A certain percentage of profit should be earmarked for social development that should reflect in the annual balance sheets of companies. This will definitely help in upholding human rights. the following measures may be made mandatory to ensure participation of the corporate in social development: ‡ Incorporation of a section on social actions in annual reports of companies ‡ Appointment of an independent social accounting committee to measure. companies had to ensure that their workforce had adequate housing. Reliance Industries 4. Reddy¶s Laboratories 8. HDFC 9. In this context. However. hospitals and culture institutions. Gujarat Co-operative Milk Marketing Federation 7. ITC 10. Top Ten Most Respected Companies in India.CSR Indian context:Perception and practices of CSR in India:Indian CSR has traditionally been a matter of classical paternalistic philanthropy. Wipro 5. 2003 1. far from being an add-on motivated by altruism and personal glory. Hindustan Lever 3. the philanthropic drive has been driven by business necessity. Dr. monitor. With minimal state welfare and infrastructure provision in many areas. Hero Honda 15 . It should be made compulsory for the corporate operating in India. Infosys technology 2. The CSR should not be merely a statement of intent. healthcare and education and simultaneously the country grows at a fast pace. financially supporting schools.

Tata Steel¶s Centre for Family Initiatives (CFI) was successful in influencing 59 per cent of Jamshedpur¶s eligible couples practicing family planning. blood donation drives. adult literacy. community development and social welfare. 9 child clinics and 6 community-based clinics. an effort of over three years from the field evolved into a framework of best practices. vocational training. In fact all social service departments in Tata companies have annual programmes and budgets« and all this is aligned to the MD¶s Balanced Score Card. Corporate Social Responsibility programmes at the Tata group of companies extend across a wide spectrum including rural development. There has been a long history of CSR in India and the Tatas have been the role models on this path. Tata Steel embarked on an AIDS awareness programme. compared to the national figure of 35 per cent. irrigation. programmes of TSRDS cover issues like education. Tata. Ratan N. the Birla group 16 . A commitment to the welfare of the community has long been central to the value system of companies in the Tata Group. sterilization operations and mother and child health care programmes are conducted through 9 family welfare centres. afforestation. handicrafts and rehabilitation of the handicapped persons. Routine activities like immunization programmes. which has now become an integral part of all training programmes. explains the chairman of the Tata Group. About 7000 villages around Jamshedpur and Orissa benefit from development programmes run by the Tata Steel Rural Development Society (TSRDS). We do it for the satisfaction of having really achieved something worthwhile. ³We do not do it for propaganda. mass screening of Tuberculosis patients immunization camps and drug de-addiction.´ The Tata Business Excellence Model integrates social responsibility into the framework of corporate management wherein social responsibility is encapsulated as Key Business Process. As part of the Aditya Vikram Birla Group¶s Social Reach. The Birla group of companies are also among the pioneers in the field of corporate social responsibility in India. In fact. family initiatives. tribal development and water management. January 2003 [India¶s most respected companies] The first name that comes to any Indian on the subject of CSR is that of the Tata Group. To build upon this heritage the Tata Council for Community Initiatives (TCCI) has created the Tata Guidelines on Community Development. We do not do it for publicity.Source: Businessworld. The Community Development and Social Welfare Department (CDSW) at Tata steel carries out medical and health programmes. In 1999.

000 villagers in its Carpet Weaving Center. includes Arvind Mills. Every year the Trust offers up to 30-40 interest-free loan scholarships to post-graduate students going abroad for higher studies. The Mahindra Search for Talent Scholarships is a scheme established in 34 schools in India to enthuse and reward students who have achieved excellence in their academic pursuits. over 500 cataract patients operated. C. The list. Hero Honda. Reliance. 2000 TB patients provided medical care. electronic equipment maintenance and repair and tailoring.runs as many as 15 hospitals in India. each of which has been deeply committed to their communities engaging in programmes encompassing education. Eicher. which at best can be far from complete. education.00. Ballarpur Industries. Ranbaxy. health. free of cost. More than 1. It has adopted several villages under its Village Infrastructure Development programme and has provided extensive training to over 10. Mahindra Education Trust in 1953. Similar commitment to CSR has been displayed by several corporates in India. having provided training to over 3000 women and having distributed over 1400 tool kits in a variety of areas like electrical. Mahindra for promoting education among Indians at all levels established the K. The late Mr. Kirloskar. It also provides Vocational Training. integrated rural development.000 children along with 2000 pregnant women have been immunized. K. Dabur. C. Godrej. rehabilitates Handicapped persons having touched more than 5000 physically challenged individuals. The Mahindra All India Talent Scholarships are awarded every year from all over India to over 300 students from lower income group families with good scholastic record pursuing job-oriented diploma courses in various polytechnics. Infosys. 17 . auto repair. Bajaj. Kinetic Group. Escorts. includes Adult education and schools conducting as many as 78 schools all over India.000 patients have been examined under the Group¶s medical programmes. Among corporates who have displayed deep commitment to Corporate Social responsibility over long years is Mahindra & Mahindra. Beyond the private sector. Wipro. corporate players in India¶s public sector too have been actively involved in corporate social responsibility initiatives. DCM Sriram. Over 15. Ashok Leyland. 100 leprosy-afflicted attended to.

Confederation of Indian Industry and PricewaterhouseCoopers. Of course.Most public sector units in the heavy engineering industry have not only set up a township around the plant. a leading business daily in India. covering 19 industry sectors reveals that this interest is growing as more and more companies in India are keen to project themselves as good corporate citizens. with the intense spotlight on the subject. but also established a school. Why organizations need to go for CSR activities?:The survey confirms that shareholders constitute one of the drivers behind the growing emphasis on CSR. which is one of the most important drivers of CSR identified by the respondent companies. Executives around the world chose three main factors that are causing firms to pay more attention to CSR: greater focus on CSR by shareholders. special benefits are offered in the industrial policy to companies that set up industries in backward areas and tax incentives are also offered to companies that set up water purification projects. British Council. according to the survey. It conducted a straw poll and talked to several professionals involved in the field and NGO circuit to get an idea about the leading lights. That most people tend to keep a low profile was confirmed by The Economic Times. This was the most important factor driving CSR in India. it has also been noticed that when it comes to individual CSR activities. 18 . For instance. the interest in corporate social responsibility is spreading in India as well. Private sector companies have been encouraged to undertake rural development programmes down the years through fiscal incentives by the government. the µanonymous¶ donor mentality prevails. a hospital and several other civic facilities for its employees and those that live in that area. According to the survey done by Mckinsey. recent corporate scandals and greater pressure from governments and regulators. In India. jointly conducted by the United Nations Development Programme. Good corporate citizenship and CSR initiatives are inextricably linked with improved brand reputation. The Corporate Social Responsibility Survey 2002±India. The other key drivers of Corporate Social Responsibility in India were diverse ranging from stated philosophy of founding fathers to improving relationship with local communities to enhanced shareholder value.

where almost all companies now engage in some form of CSR programme. such as those that enveloped Enron in the US and Parmalat in Italy. grassroots campaigns. The result of this mix is that consumers today are better informed and feel more empowered to put their beliefs into action. In addition. how difficult it is to build brand strength. CSR is. CSR is a means of matching corporate operations with stakeholder values and demands.executives said that the strongest drivers of the increase in importance of CSR were shareholders. it is something that you know when you see it. Globalisation: The growing influence of the media sees any µmistakes¶ by companies brought immediately to the attention of the public. 19 . the laggards come under increasing pressure to follow suit. The dangers of ignoring CSR are too dangerous when it is remembered how important brands are to overall company value. Competitive pressure: As more companies in an industry adopt CSR practices. the Internet fuels communication among like-minded groups and consumers²empowering them to spread their message. the market parameters within which companies must operate are increasingly being shaped by bottom-up. ideals and concepts that usually appeal to higher values.There are several other motives for companies to adopt CSR measures which includes. and often driving.e. such as a better brand image. following a spate of financial scandals. at a time when these values and demands are constantly evolving. this changing relationship between consumer and company. Competitive advantage: Many companies regard the intangible benefits of a CSR programme. CSR can therefore best be described as a total approach to business. recent corporate scandals and greater pressure from regulators (all 29%). CSR is particularly important within a globalizing world because of the way brands are built²on perceptions. From the corporate point of view. A typical example is the oil industry. while giving them the means to co-ordinate collective action (i. Like quality. It is something that businesses today should be genuinely and wholeheartedly committed to. in particular. NGOs and consumer activists are feeding. CSR creeps into all aspects of operations. in general. as a way of gaining the upper hand over their rivals. yet how easy it can be to lose brand dominance. also something that a company should try and get right in implementation. These three trends combine with the growing importance of brands and brand value to corporate success (particularly lifestyle brands) to produce a shift in the relationship between corporation and consumer. a product boycott). therefore. and between corporation and all stakeholder groups. Erosion of trust: Public trust in corporate management has declined.

London-based Diageo plc reported that between 1994 and 1998. Increasing affluence: This is true within developed nations.Changing social expectations: Consumers and society in general expect more from the companies whose products they buy. USA) 1. Drivers for CSR: Greater focus by shareholders on issue of corporate responsibility. A society in need of work and inward investment is less likely to enforce strict regulations and penalize organizations that might take their business and money elsewhere. human resources and innovation. This sense has increased in the light of recent corporate scandals.'Conversations with Disbelievers'. shareholder value.  Recent Corporate scandals  Greater pressure from government and regulators  Greater focus by media on issues of corporate responsibility  Evidence that it offers competitive advantage  Globalization and offshoring  Increase in customer power  Increasing NGO¶s activism  Offering sustainable growth  Longterm profitability  Main criteria for investment for investors  Reduction in cost "A recent study survey provides the evidence indicating when and how corporate social responsibility created benefits for corporations.000 for causes while increasing sales of tracked brands by 17 per cent." (John Weiser-S ZadekIn . The study also mentions some examples of benefits cited in the areas of marketing. and reduced public confidence in the ability of regulatory bodies and organizations to control corporate excess. 20 . 22 cause-related marketing projects helped it raise $600. which reduced public trust of corporations. but also in comparison to developing nations. Affluent consumers can afford to pick and choose the products they buy.

and higher productivity and promotion rates of school-to-work programme graduates. First. Programmes resulted in reduced recruitment costs.e identify a way they could involve in CSR as a part of the business process and strategy. Second. water. energy and other natural 21 . strategic positioning. Monsanto's experience in introducing genetically modified seeds dramatically illustrates the tremendous negative impact on stockholder value. the companies are unable to tap the opportunities to benefit society and thereby the company itself. One important aspect of CSR is to abide by environmental. A healthy society can be defined in term of proper education. and reputation that can be caused when a company is perceived to be behaving in ways that are socially irresponsible. constraint or a charitable deed rather it can be source of competitive advantage. Efficient utilization of land. Because the current strategies are so fragmented and disconnected from business and strategy. brand equity. it has become essential for companies to practice CSR activities. reduced turnover. reduced training and supervision costs. they pressure companies to think of CSR in generic ways instead of in the way most appropriate to each firm¶s strategy. A recent study by Interbrand concluded that a full one-quarter of the world's total financial wealth is tied up in intangible assets such as reputation. helps in retaining and acquiring a talented workforce and also reduce cost. Due the benefits that CSR is offering and as it offers sustainable growth. 4. Rather if companies analyze and use their core competencies and framework i. alliances.2. Safe product and working conditions attract customers. CSR As a Source of Competitive Advantage:Many companies have done a lot in terms of CSR activities but are unable to be able to be productive enough because of two reasons. they pit business against society when clearly the two are interdependent. brand equity. They could discover that CSR can be much more than cost. 3. The National Leadership Council (Washington DC) analysed company-sponsored schoolto-work programmes and found a positive return on investment in most of the companies studied. healthcare and equal opportunity which can produce a productive workforce. knowledge and the like. social and ethical issues which are important for developing a healthy society.

Demand ± influenced by the standard of product quality and safety. In current competitive business environment four areas drive competitive advantage for a company.social issues that are not significantly affected by a company¶s operations nor materially affect its long term competitiveness. ii. iii.  Value chain social impact:. The rules and incentives that govern competition ± such as policies that protect intellectual property. they ± i. Availability of supporting industries ± such as service providers and machinery producers or suppliers. ensure transparency. Any business that pursues its goals at the expense of the society in which it operates will find its success to be illusory and temporary. According to Michael Porter CSR activities can be classified into three categories based on impact on the competitiveness of the company. Competitive advantage through CSR can be achieved by integrating the social perspective into core framework it already uses to understand competition and guides its business strategy. iv. consumer rights fairness in government purchasing.  Social dimensions of competitive context:.resources make business more productive and reduces the fixed cost. Any or all these aspects can influence and provide competitive advantage.social issues that are significantly affected by a company¶s activities in the ordinary course of business.are factors in the external environment that significantly affect the underlying drivers of competitiveness in those places where the company operates 22 . thereby offering an advantage over competitors. The quantity and quality of available business inputs ± human resource or transportation infrastructure.  Generic social issues:. safeguard against corruption and encourage investment.

better education. and cocoa. a far cry from typical volunteer programs. coffee. The company¶s sourcing emphasizes purchases from local farmers through each 23 . while giving Nestlé direct and reliable access to the commodities it needs to maintain a profitable global business. Social issues are fundamental to what makes Whole Foods unique in food retailing and to its ability to command premium prices. representing 45% of all U. undergraduates. could be a major solution. In addition to contributing money and products. currently. volunteers and assigned staff were able to use their core professional skills to address a social need. The above initiative helped Microsoft to achieve positive results like. Microsoft¶s $50 million five year initiative was aimed at all three problems. such as milk. works directly with small farmers in developing countries to source the basic commodities. The company¶s investment in local infrastructure and its transfer of world class knowledge and technology over decades has produced enormous social benefits through improved health care. on which much of its global business depends. Nestlé. that community colleges face special challenges: IT curricula are not standardized.000 unfilled IT positions in the United States alone. The shortage of information technology workers is a significant constraint on Microsoft¶s growth. there are more than 450. enhancement of workforce productivity. Note that in this case. increased brand value and awareness and also increased motivation among the employees. Microsoft sent employee volunteers to colleges to assess needs. Microsoft recognizes. technology used in classrooms is often outdated. however. Nestlé¶s distinctive strategy is inseparable from its social impact Whole Foods Market. contribute to curriculum development. for example. and create faculty development institutes. and healthy food products to customers who are passionate about food and the environment. Community colleges. change in attitude of the community as a stakeholder towards the company. with an enrollment of 11. whose value proposition is to sell organic.S. and there are no systematic professional development programs to keep faculty up to date. natural. and economic development.The following are the examples for CSR activities providing competitive advantage to the company ± Microsoft¶s partnership with the American Association of Community Colleges (AACC) is a good example of a sharevalue opportunity arising from investments in context.6 million students.

because this success factors are not only its fuel-efficient engine (hybrid engine system. And through its philanthropy. 24 . Stores are constructed using a minimum of virgin raw materials. for example. the only Fortune 500 company to offset its electricity consumption entirely. Even the cleaning products used in its stores are environmentally friendly. Toyota Prius is good example. or about $1. This was possible by efficient use and integrating Toyota¶s core competencies to CSR practices. Whole Foods¶ vehicles are being converted to run on biofuels. Whole Foods¶ commitment to natural and environmentally friendly operating practices extends well beyond sourcing. Spoiled produce and biodegradable waste are trucked to regional centers for composting. Toyota Prius are sold very well and still now. using electric power and gas).store¶s procurement process.26 billion. and it is working as a success factor of a firm. which had a considerable impact on the economic and environmental areas of the triple bottom line. the company has created the Animal Compassion Foundation to develop more natural and humane ways of raising farm animals. some making cash donations exceeding 2% of gross income (Target) or approaching $200 million (Wal-Mart) while others donate products as well (Pfizer annually donates the equivalent of 21% of its annual income to charity. nearly every aspect of the company¶s value chain reinforces the social dimensions of its value proposition. Whole Foods¶ baked goods. Recently. according to Forbes). It is supported by many people and is still continuing selling. environment is directly connected with core competence of a firm. This success is very important to think CSR activities. not also this car stimulates the customer who has interested in environmental and/or has environmental consciousness. In short. We can see this phenomenon as a proof that many people are conscious of environmental consciousness. distinguishing Whole Foods from its competitors. the company purchased renewable wind energy credits equal to 100% of its electricity use in all of its stores and facilities. Buyers screen out foods containing any of nearly 100 common ingredients that the company considers unhealthy or environmentally damaging. The same standards apply to products made internally. That is. Nearly every major corporation in the US practices CSR through philanthropy. Toyota has built a competitive advantage from the environmental benefits of its hybrid technology. use only unbleached and unbromated flour.

featuring Kermit the frog singing ³it¶s not easy being green´ The company. is a great example of a firm that uses CSR to improve its reputation. Based on the above qualitative data we can infer that CSR practices do provide companies a source of competitive advantage. 25 . Ironically. Involved. the cost of Ford¶s donation to the construction of the environmentally-friendly Ford Field by itself might have saved the Midwest plants that will shut down this year. In fact. preserving the stock price for shareholders as well as the welfare of Ford¶s families. Sustained. Companies some times use CSR activities in directly promoting the firms profitability and security. Ford.´ could probably have saved many workers from the layoffs mentioned in the above section if it focused less attention on the green and more attention on the black. critics argue. which is in deep financial trouble.Regardless of the extent to which such practice may benefit society and thereby the company. Ford Motor Co.one cannot really classify CSR as socially responsible because managers are giving away income that belongs to shareholders. CSR as a competitive advantage is further explained using quantitative data from different surveys conducted further in the paper. touts its financial commitment to environmentalism and has launched a new marketing campaign this year promoting the Escape hybrid. whereas promoting the firms reputation indirectly. which proudly hypes itself as ³Responsible. but can sometimes become ineffective due misuse or mismanagement and can become pernicious to the company.

Analysis and Interpretations 26 .

suppliers. fostering human rights. The growing emphasis on CSR is affecting the relationship between companies and their various stakeholders such as investors. supporting philanthropy. All are meant to have a positive impact on the communities. communities and government. the following analysis is done to understand how CSR adds value to the organization and whether it offers competitive advantage to the companies following CSR activities. developing a sound corporate governance. cultures. preserving the environment. 27 . respecting cultural differences and helping to promote fair trade. Based on an online survey was conducted by Economist Intelligence Unit in corporation with Oracle Corporation on corporate executives and institutional investors and McKinsey in conjunction with Boston¶s college Centre for Corporate Responsibility.The fundamental principle of Corporate Social Responsibility (CSR) is that a company is responsible for providing more benefits than just profits for shareholders. vendors. among others. employees. It has a role to play in treating its employees well. societies and environments in which companies operate. customers.

1) Does CSR add value to company? (Source: McKinsey Global Survey Results ± Valuing Corporate Social Responsibility) Table 1:. 28 .Does CSR add value to company. Variables CFO¶s Investment Professionals CSR Professionals 7 10 27 0 9 53 Reduce value 6 No effect Don¶t know 21 22 Does CSR add value 60 50 40 30 20 10 0 CFO's Investment CSR professionals professionals Reduce value No effect Don t know Interpretation:It can be observed that two-thirds of the CFO¶s and three quarters of investment professionals agree that CSR adds value to the organization. But CSR professional are not sure whether the CSR would help in value creation.

motivating.Source of value Variables CFO's Investment professionals Maintaining a good corporate reputation and/or 79 brand equity Attracting. and retaining talented 52 employees Meeting society¶s expectations for good corporate 43 behavior Improving operational efficiency and/or decreasing 39 costs Opening new growth opportunities Improving risk management Strengthening competitive position Improving access to capital 35 24 14 3 36 24 27 2 24 18 24 9 29 42 30 39 55 61 75 CSR professionals 79 Source of value 90 80 70 60 50 40 30 20 10 0 CFO's Investment professionals CSR professionals 29 .2) Where does the value come from? (Source: McKinsey Global Survey Results ± Valuing Corporate Social Responsibility) Table 2:.

followed by attracting and retaining talented employees. investment professionals.Interpretations:CFOs. 30 . and corporate social responsibility professionals agree that maintaining a good corporate reputation or brand equity is the most important way CSR activities create value.

Impact on Stakeholders Stakeholders Customers employees investors and shareholders Board of directors institutonal investors Government and regulators Vendors Community NGO's others Impact 65 61 46 43 34 19 7 5 1 3 Figure 3:-Impact on stakeolders impact of stakeholders 70 60 50 40 30 20 10 0 impact Interpretation:The impact of CSR activities is more on the customers followed by employees and investors. 31 .3) What is the impact of CSR on different stakeholders? (Source: Economist Intelligent Unit Survey: Importance of CSR) Table 3 :.

4) Which the most preferred company for investment? (Source: Economist Intelligent Unit Survey: Importance of CSR) Table 4:.Type of company prefered Type of company Good performance no CSR Moderate performance modest CSR Lower performance good CSR Preferrence 16 63 21 Type of company preferred 70 60 50 40 30 20 10 0 Good performance Moderate Lower performance no CSR performance modest good CSR CSR Preferrence Interpretation:Most of the investors prefer a company with moderate performance and modest CSR showing that they are more inclined towards a company which has a balance between its profits and CSR activities. 32 .

Importance of CSR Importance of CSR 70 60 50 40 30 20 10 0 Response Interpretation:CSR is an important consideration for investment but not the only one variable for investment decisions.Importance of CSR Response Central consideration Important consideration A consideration Consideration on rare occasions Not a consideration 20 61 14 5 0 Figure 5:. 33 .5) How important is corporate responsibility to your investment decisions? (Source: Economist Intelligent Unit Survey: Importance of CSR) Table 5:.

Effect on bottom line Response yes no not sure 87 10 3 Figure 6 :.6) Does CSR help a company¶s bottom line? (Source: Economist Intelligent Unit Survey: Importance of CSR) Table 6:.Effect on bottom line Effect on bottom line 100 90 80 70 60 50 40 30 20 10 0 yes no not sure Response Interpretation:Eighty-four percent of executives and investors surveyed felt CSR practices could help a company¶s bottom line 34 .

35 .Drivers of CSR Drivers of CSR 60 50 40 30 20 10 0 response Interpretation:Companies are following CSR practices mainly due recent scandals and it offers competitive advantage to them.Drivers of CSR Drivers Recent corporate scandals Offers competitive advantage Greater focus by media on CSR Greater focus by shareholders on CSR Pressure from government and regulators Globalization Increasing customer power NGO's activities Others Response 49 34 32 32 22 20 15 3 5 Figure 7:.7) What are the drivers of CSR practices? (Source: Economist Intelligent Unit Survey: Importance of CSR) Table 7:.

Effect on share holder value short term 12% 22% 49% 29% yes no not sure Long term 4% yes 84% no not s re Interpretation:There is no significant contribution of CSR practices on short term share holder value whereas has a major impact on the long term shareholder value. 36   .8) What is effect of CSR on short term and long term shareholder value? (Source: McKinsey Global Survey Results ± Valuing Corporate Social Responsibility) Table 8:.Effect on Shareholder value contribution to share holder Short term value yes no not sure 29 49 22 84 12 4 Longterm Figure 8:.

Findings and Suggestions 37 .

 It can be observed that two-thirds of the CFO¶s and three quarters of investment professionals agree that CSR adds value to the organization.  But both groups also cited cost implications and unproven benefits as the two biggest obstacles to implementing CSR programs. But CSR professional are not sure whether the CSR would help in value creation.  CFOs.  49% of shareholders believe that CSR does not produce any shorter shareholder value on account of CSR practices. employees and investors. rather than companies with good performance and no CSR and low performance and good CSR.  87% percent of executives and investors surveyed felt CSR practices could help a company¶s bottom line. and corporate social responsibility professionals agree that maintaining a good corporate reputation or brand equity is the most important way CSR activities create value.Findings: The three most important aspects of CSR are ethical behavior of staff. followed by attracting and retaining talented employees.  For 61% of the investors CSR practices are important consideration during investment decision. investment professionals.  Brand enhancement and better staff morale were picked by both groups as the most important business benefits of CSR. 38 .  63% of investors prefer companies with moderate performance and modest CSR.  84% of the shareholders believe that CSR practices increases the shareholder value in long term. good corporate governance and transparency of corporate dealings.  The most important stakeholder of companies is customers.

 Also develop proper metric to measure the impact of the CSR activities on the value of the company. vision and mission strategy.Suggestions: Should follow CSR activities to obtain sustainable growth and profitability.  CSR programmes implemented by the company should be in accordance with companies core competencies.  The CSR activities implemented by a company should be such a way that it utilizes the competencies of the company. 39 .  Care should be taken that the main activities for which a business is established should not be overlooked while trying to implement CSR practices.  Integrating the companies strategy with CSR is more beneficial. Otherwise if go out of the way to perform may incur huge cost.

Conclusion 40 .

But in the currents era of globalization with increasing importance of corporate governance and transparency as a part of CSR activity has become crucial. employer and investor perspective to the company.CSR is a difficult and elusive topic for companies to deal with. It can be concluded that in the present scenario CSR activities do provide competitive advantage when viewed from customer. 41 . But there is also a notion about what standards of CSR should companies follow and how far companies should go to perform their responsibility. It is often very costly and the benefits that are obtained are hard to measure and quantify.

Bibliography 42 .

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