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BUSINESS ETHICS AND CORPORATE GOVERNANCE (4TH SEM)

UNIT-5 CORPORATE SOCIAL RESPONSIBILITY

 Corporate social responsibility, often abbreviated "CSR," is a corporation's initiatives

to assess and take responsibility for the company's effects on environmental and
social wellbeing.
 The term generally applies to efforts that go beyond what may be required by
regulators or environmental protection groups.
 CSR may also be referred to as "corporate citizenship" and can involve incurring
short-term costs that do not provide an immediate financial benefit to the company,
but instead promote positive social and environmental change.
 The practice of CSR or Corporate Social Responsibility as a paradigm for firms and
businesses to follow has evolved from its early days as a slogan that was considered
trendy by some firms following it to the present day realities of the 21st century
where it is no longer just fashionable but a business requirement to be socially
responsible.
 This evolution has been necessitated both due to the myriad problems that we as a
race face which has changed the environment under which firms operate as well as a
realization among business leaders that profits as the sole reason for existence can
no longer hold good.
 The reason why companies must look beyond profits is also due to the peculiar
situation that humanity finds itself in the second decade of the 21st century.
 Given the political, economic, social and environmental crises that humans as a race
are confronting, corporations have a role to play since they contribute the most to
the economic well being of humanity and in turn influence the political situation.
 Corporate Social Responsibility or CSR makes for eminent business sense as well
when one considers the knock-on effect that social and environmental responsibility
brings to the businesses.
 The evolution of CSR as a concept dates back to the 1950’s when the first stirrings of
social conscience among management practitioners and theorists were felt.
 Corporate social responsibility, though a heavy terminology, is self-explanatory
when broken down into individual terms. Corporate refers to the corporations, a
legal entity created with the objective of profit. Social refers to the community of
people among whom and for whom the corporations runs its business and depends
on for its monetary returns. Responsibility is the trait of being answerable .
FACTORS INFLUENCING CORPORATE SOCIAL RESPONSIBILITY :
1) Increased stakeholder activism : Corporate accounting scandals have focused
attention more than ever on companies’ commitment to ethical and socially
responsible behaviour.

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2) Increased stakeholder engagement : Engaging stakeholders in decision making

process has evolved from “whether to engage shareholders” to “how to engage
shareholders”.

3) Proliferation of code , standards and guidelines : New voluntary Corporate Social

Responsibility standards and performance measurement tools are added by various
companies as part of their annual reports. There is a growing consensus to evolve a
standard in CSR reporting and dissemination of information.

4) Emphasis on concept of Value chain: CSR agenda is characterized by the expansion of

boundaries of corporate responsibility . Stakeholders increasingly hold companies
accountable for the practices of their business partners throughout the entire value
chain with special focus on supplier environment, labour and human rights practices.

5) Transparent disclosures and reporting : Public demand greater transparency and

better disclosure of the economic and social performance of the corporate sector.

6) Growing pressure from investors and markets : CSR is now part of the mainstream
investment . Mainstream investors are now treating CSR as a strategic issue. Socially
responsible investors are putting pressure on companies to disclose their workplace
policies environmental responsibility, human rights practices , corporate governance
and community involvement

7) Innovative Information technology : Changes brought about but IT in the areas of

data storage and management , the processing of information, and information
dissemination impact on the roles of directors, auditors and regulators in their
respective CSR functions.

8) Globalization : With its focus on cross- burden trade, multinational enterprise and
global supply chains economic globalization in increasingly raising CSR concerns
related to HRM practices.

9) Need to quantify CSR “ROI”: Companies , employees, customers , NGOs and public
institution want to know return on CSR.

COMMAN INDICATORS FOR MEASURING BUSINESS SOCIAL PERFORMANCE :

A) FINANCIAL METRICS
1) Profit: This goes without saying, but it is still important to note, as this is one of the
most important performance indicators out there. Don’t forget to analyze both gross

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and net profit margin to better understand how successful your organization is at
generating a high return.
2) Cost: Measure cost effectiveness and find the best ways to reduce and manage your
costs.
3) LOB Revenue Vs. Target: This is a comparison between your actual revenue and your
projected revenue. Charting and analyzing the discrepancies between these two
numbers will help you identify how your department is performing.
4) Cost Of Goods Sold: By tallying all production costs for the product your company is
selling, you can get a better idea of both what your product markup should look like
and your actual profit margin. This information is key in determining how to outsell
your competition.
5) Day Sales Outstanding (DSO): Take your accounts receivable and divide them by the
number of total credit sales. Take that number and multiply it by the number of days
in the time frame you are examining. The lower the number, the better your
organization is doing at collecting accounts receivable. Run this formula every
month, quarter, or year to see how you are improving.
6) Sales By Region: Through analyzing which regions are meeting sales objectives, you
can provide better feedback for underperforming regions.
7) LOB Expenses Vs. Budget: Compare your actual overhead with your forecasted
budget. Understanding where you deviated from your plan can help you create a
more effective departmental budget in the future.

B) CUSTOMER METRICS
8) Customer Lifetime Value (CLV): Minimizing cost isn’t the only (or the best) way to
optimize your customer acquisition. CLV helps you look at the value your
organization is getting from a long-term customer relationship. Use this performance
indicator to narrow down which channel helps you gain the best customers for the
best price.
9) Customer Acquisition Cost (CAC): Divide your total acquisition costs by the number
of new customers in the time frame you’re examining. Voila! You have found your
CAC. This is considered one of the most important metrics in e-commerce because it
can help you evaluate the cost effectiveness of your marketing campaigns.
10) Customer Satisfaction & Retention: On the surface, this is simple: Make the
customer happy and they will continue to be your customer. Many firms argue,
however, that this is more for shareholder value than it is for the customers
themselves. You can use multiple performance indicators to measure CSR, including
customer satisfaction scores and percentage of customers repeating a purchase.
11) Net Promoter Score (NPS): Finding out your NPS is one of the best ways to indicate
long-term company growth. To determine your NPS score, send out quarterly
surveys to your customers to see how likely it is that they’ll recommend your
organization to someone they know. Establish a baseline with your first survey and
put measures in place that will help those numbers grow quarter to quarter.

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12) Number Of Customers: Similar to profit, this performance indicator is fairly

straightforward. By determining the number of customers you’ve gained and lost,
you can further understand whether or not you are meeting your customers’ needs.
13) Customer Support Tickets: Analysis of the number of new tickets, the number of
resolved tickets, and resolution time will help you create the best customer service
department in your industry.
14) Percentage Of Product Defects: Take the number of defective units and divide it by
the total number of units produced in the time frame you’re examining. This will give
you the percentage of defective products. Clearly, the lower you can get this
number, the better.
15) Efficiency Measure: Efficiency can be measured differently in every industry. Let’s
use the manufacturing industry as an example. You can measure your organization’s
efficiency by analyzing how many units you have produced every hour, and what
percentage of time your plant was up and running.

C) PEOPLE METRICS

16) Employee Turnover Rate (ETR): To determine your ETR, take the number of
employees who have departed the company and divide it by the average number of
employees. If you have a high ETR, spend some time examining your workplace
culture, employment packages, and work environment.
17) Percentage Of Response To Open Positions: When you have a high percentage of
qualified applicants apply for your open job positions, you know you are doing a
good job maximizing exposure to the right job seekers. This will lead to an increase in
interviewees, as well.
18) Employee Satisfaction: Happy employees are going to work harder—it’s as simple as
that. Measuring your employee satisfaction through surveys and other metrics is
vital to your departmental and organizational health.

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