ANAND ENGINEERING COLLEGE,AGRA BBA PROGRAM BE

BUSINESS ETHICS (unit-5)

CORPORATE SOCIAL RESPONSIBILITY

While there is no universal definition of corporate social responsibility, it generally refers to
transparent business practices that are based on ethical values, compliance with legal
requirements, and respect for people, communities, and the environment. Thus, beyond making
profits, companies are responsible for the totality of their impact on people and the planet.

“People” constitute the company’s stakeholders: its employees, customers, business partners,
investors, suppliers and vendors, the government, and the community. Increasingly, stakeholders
expect that companies should be more environmentally and socially responsible in conducting
their business. In the business community, CSR is alternatively referred to as “corporate
citizenship,” which essentially means that a company should be a “good neighbor” within its
host community

Corporate Social Responsibility is the continuing commitment by business to behave ethically

and contribute to economic development while improving the quality of life of the workforce and
their families as well as of the local community and society at large Operating a business in a
manner that meets or exceeds the ethical, legal, commercial and public expectations that society
has of business.

A concept whereby companies decide voluntarily to contribute to a better society and a cleaner
environment. A concept whereby companies integrate social and environmental concerns in their
business operations and in their interaction with their stakeholders on a voluntary basis.

Why do companies decide to get involved in CSR, and how do they benefit?

Today, more and more companies are realizing that in order to stay productive, competitive, and
relevant in a rapidly changing business world, they have to become socially responsible. In the
last decade, globalization has blurred national borders, and technology has accelerated time and
masked distance. Given this sea change in the corporate environment, companies want to
increase their ability to manage their profits and risks, and to protect the reputation of their
brands. Because of globalization, there is also fierce competition for skilled employees,
investors, and consumer loyalty. How a company relates with its workers, its host communities,
and the marketplace can greatly contribute to the sustainability of its business success

Examples of Corporate Social Responsibility in India

Tata Group
Tata Group in India has a range of CSR projects, most of which are community improvement
programs. For example, it is a leading provider of maternal and child health services, family
planning, and has provided 98 percent immunization in Jamshedpur. The company also endorses

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sports as a way of life. It has established a football academy, archery academy, and promotes
sports among employees. It offers healthcare services all over the country with programs like
rural health development.

Tata Group also has an organized relief program in case of natural disasters, including long-term
treatment and rebuilding efforts. It did laudable work during the Gujarat earthquakes and Orissa
floods. It also supports education, with over 500 schools, and also is a benefactor of the arts and
culture. It has done abundant work in improving the environment and local populations around
its industries.

Aptech
Aptech a leading education player with a global presence that has played a broad and continued
role in encouraging and nurturing education throughout the country since its inception. As a
global player with complete solutions-providing capabilities, Aptech has a long history of
participating in community activities. It has, in association with leading NGOs, provided
computers at schools, education to the deprived, and training and awareness-camps.

Infosys
Infosys is aggressively involved in a variety of community growth programs. In 1996, the
company created the Infosys Foundation as a not-for-profit trust to which it contributes up to 1
percent of profits after tax every year. Moreover, the Education and Research Department at
Infosys also works with employee volunteers on community development projects.

The management team at Infosys continues to set examples in the area of corporate citizenship
and has involved itself vigorously in key national bodies. They have taken initiatives to work in
the areas of research and education, community service, rural outreach programs, employment,
healthcare for the poor, education, arts and culture, and welfare activities undertaken by the
Infosys Foundation.

Mahindra & Mahindra

At Mahindra & Mahindra, The K. C. Mahindra Education Trust was established in 1953 with the
purpose of promoting education. Its vision is to renovate the lives of people in India through
education and financial assistance across age groups and across income strata. The K. C.
Mahindra Education Trust undertakes a number of education plans, which make a difference to
the lives of worthy students. The Trust has provided more than Rs. 7.5 crore in the form of
grants, scholarships and loans. It promotes education mostly by the way of scholarships. The
Nanhi Kali (children) project has over 3,300 children under it and the company aims to increase

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the number to 10,000 in the next two years by reaching out to the underprivileged children,
especially in rural areas.

Responsibility towards Different Interest Groups

 
The business generally interacts with owners, investors, employees, suppliers’ customers,
competitors, government and society. They are called as interest groups because by each, and
Livery activity of business, the interest of these groups is affected directly or indirectly.
Responsibility of Business towards Different Interest Groups

Responsibility towards owners

 Owners are the persons who own the business. They contribute capital and bear the business
risks. The primary responsibilities of business towards its owners are to:
1. Run the business efficiently.
2. Proper utilization of capital and other resources.
3. Growth and appreciation of capital.
4. Regular and fair return on capital invested.

Responsibility towards investors

 Investors are those who provide finance by way of investment debentures, bonds, deposits, etc.
Banks, financial institutions, and investing public are all included in this category. The
responsibilities of business towards its investors are:

1. Ensuring safety of their investment,

2. Regular payment of interest,
3. Timely repayment of principal amount.

Responsibility towards employees

Business needs employees or workers to work for it. These employees put their best effort for the
benefit of the busing it is the prime responsibility of every business to take care of the interest of
their employees. If the employees are satisfied and efficient, then only the business can be
successful. The responsibilities of business towards its employees include:

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1. Timely and regular payment of wages and salaries.

2. Proper working conditions and welfare amenities.
3. Opportunity for better career prospects.
4. Job security as well as social security like facilities of provident fund group insurance, pension,
retirement benefits, etc.
5. Better living conditions like housing, transport, canteen, cr6ches, etc.
6. Timely training and development.

 Responsibility towards suppliers

Suppliers are businessmen who supply raw materials and other items required by manufacturers
and traders. Certain suppliers, called distributors, supply finished products to the consumers. The
responsibilities of business towards these suppliers are:

1. Giving regular orders for purchase of goods.

2. Dealing on fair terms and conditions.
3. Availing reasonable credit period.
4. Timely payment of dues.

Responsibility towards customers

No business can survive without the support of customers. As a part of the responsibility of
business towards them the business should provide the following facilities:

1. Products and services must be able to take care of the needs of the customers.
2. Product and services are must be qualitative
3. There must be regularity in supply of goods and services.
4. Price of the goods and services should be reasonable and affordable.
5. All the advantages and disadvantages of products as well as procedure to use the products must
be informed do the customers,
6. There must be proper after-sales service.
7. Grievances of the consumers, if any, must be settled quickly.
8. Unfair means like under weighing the product, adulteration, etc. must be avoided.

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 Responsibility towards competitors 

Competitors are the other businessmen, or organizations involved in a similar type of business.
Existence of competition helps the business in becoming more dynamic and innovative so as to
make itself better than its competitors. It also sometimes encourages the business to indulge in
negative activities like resorting to unfair trade practices. The responsibilities of business
towards its competitors are

1. Not to offer exceptionally high sales commission to distributors, agents, etc.

2. Not to offer to customers heavy discounts and, /or free products in every sale.
3. Not to defame competitors through false or ambiguous advertisements.

Responsibility towards government

Business activities are governed by the rules and regulations framed by the government. The
various responsibilities of business towards-government are:

1. Setting up units as per guidelines of government

2. Payment of fees, duties and taxes regularly as well as honestly.
3. Not to indulge in monopolistic and restrictive trade practices.
4. Conforming to pollution control norms set up by government.
5. Not to indulge in corruption through bribing and other unlawful activities.

 Responsibility towards society

A society consists of individuals, groups, organizations, families, etc. They all are the members
of the society. They interact with each other and are also dependent on each other in almost all
activities. There exists a relationship among them, which may be direct or indirect. Business,
being a part of the society, also maintains its relationship with all other members of the society.
Thus, it has certain responsibilities towards society, which may be as follows:

1. to help the weaker and backward sections of the society

2. to preserve and promote social and cultural values
3. to generate employment
4. to protect the environment
5. to conserve natural resources and wildlife
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6. to promote sports and culture

7. To provide assistance in the field of developmental research on education, medical science,
technology, etc.

ARGUMENTS AGAINST SOCIAL RESPONSIBILITY OF BUSINESS

The major arguments against the assumption of social responsibilities by business are:

1) Violation of profit maximization: This is the essence of the classical viewpoint. Business is
most socially responsible when it attends strictly to its economic interests and leaves other
activities to other institutions.

2) Dilution of purpose: The pursuit of social goals dilutes business’s primary purpose:
economic productivity. Society may suffer as both economic and social goals are poorly
accomplished.

3) Costs: Many socially responsible activities do not pay their own way. Someone has to pay
these costs. Business must absorb these costs or pass them on to consumers in higher prices.

4) Too much power: Business is already one of the most powerful institutions in our society. If
it pursued social goals, it would have even more power. Society has given business enough
power.

5) Lack of skills: The outlook and abilities of business leaders are oriented primarily toward
economies. Business people are poorly qualified to cope with social issues.

6) Lack of accountability: Political representatives pursue social goals and ar6e held
accountable for their actions. Such is not the case with business leaders. There are no direct lines
of social accountability from the business sector to the public.

7) Lack of broad public support: There is no broad mandate from society for business to
become involved in social issues. The public is divided on the issue. In fact, it is a topic that
usually generates a heated debate. Actions taken under such divided support are likely to fail.

Social Audit

Introduction
Governments are facing an ever‐growing demand to be more accountable and socially
responsible and the people are becoming more assertive about their rights to be informed and to
influence governmentsʹ decision‐making processes. Faced with these vociferous demands, the

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executive and the legislature are looking for new ways to evaluate their performance. Civil
society organisations are also undertaking ʺSocial Auditsʺ to monitor and verify the social
performance claims of the organisations and institutions.

Social Audit is a tool with which government departments can plan, manage and measure non‐
financial activities and monitor both internal and external consequences of the
department/organisation’s social and commercial operations. It is an instrument of social
accountability for an organisation. In other words, Social Audit may be defined as an in‐depth
scrutiny and analysis of the working of any public utility vis‐à‐vis its social relevance. Social
Audit gained significance especially after the 73rd Amendment of the Constitution relating to
Panchayat Raj Institutions.

Purpose of the Social Audit

This tool is designed to be a handy, easy to use reference that not only answers basic questions
about Social Audit, reasons for conducting Social Audit, and most importantly gives easy‐to‐
follow steps for all those interested in using Social Audit.

The purpose of conducting Social Audit is not to find fault with the individual functionaries but
to assess the performance in terms of social, environmental and community goals of the
organisation. It is a way of measuring the extent to which an organisation lives up to the shared
values and objectives it has committed itself to. It provides an assessment of the impact of
organisationʹs non‐financial objectives through systematic and regular monitoring, based on the
views of its stakeholders.

Salient Features
The foremost principle of Social Audit is to achieve continuously improved performances in
relation to the chosen social objectives. Eight specific key principles have been identified from
Social Auditing practices around the world. They are:
1. Multi‐Perspective/Polyvocal. Aims to reflect the views (voices) of all those people
(stakeholders) involved with or affected by the organisation/department/programme.

2. Comprehensive. Aims to (eventually) report on all aspects of the organisationʹs work and
performance.

3. Participatory. Encourages participation of stakeholders and sharing of their values.

4. Multidirectional. Stakeholders share and give feedback on multiple aspects.

5. Regular. Aims to produce social accounts on a regular basis so that the concept and the
practice become embedded in the culture of the organisation covering all the activities.

6. Comparative. Provides a means, whereby, the organisation can compare its own performance
each year and against appropriate external norms or benchmarks; and provide for
comparisons with organisations doing similar work and reporting in similar fashion.
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7. Verification. Ensures that the social accounts are audited by a suitably experienced person or
agency with no vested interest in the organisation.

8. Disclosure. Ensures that the audited accounts are disclosed to stakeholders and the wider
community in the interests of accountability and transparency.

The following figure depicts the principles of Social Audit and universal values:

These are the pillars of Social Audit, where socio‐cultural, administrative, legal and democratic
settings form the foundation for operationalising Social Audit. The Social Audit process is
intended as a means for social engagement, transparency and communication of information,
leading to greater accountability of decision‐makers, representatives, managers and officials. The
underlying ideas are directly linked to concepts of democracy and participation. The application
of Social Audit at the village level holds tremendous potential for contributing to good local
governance and increased transparency and accountability of the local bodies.

Who can use the Tool?

Social Audit Toolkit can be used by government departments, private enterprises as well as the
civil society. However, the scope in terms of audit boundaries would be specific to that of a

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government department, private organisation, an NGO or a community. In case of private

organisations, the emphasis may be on balancing financial viability with its impact on the
community and environment. In case of NGOs, in addition to using them to maximise the impact
of their intervention programme, they could also be used as effective advocacy tools. Depending
on the resources available Social Audit could be comprehensive, state‐wide, and can also be
localised to the community level.
Applying the Tool
The six steps of Social Auditing are:
1. Preparatory activities
2. Defining audit boundaries and identifying stakeholders
3. Social accounting and book‐keeping
4. Preparing and using social accounts
5. Social audit and dissemination
6. Feedback and institutionalisation of social audit

The first two steps are critical when a department decides to incorporate social accounting, social
book‐keeping and social auditing. The department needs to look at its vision, goals, current
practices and activities to identify those that are amenable to social auditing purposes. Small
work groups (say, seven persons) are to be formed which would spend about two days each to
list down the social vision, core values, social objectives and map stakeholders and their
involvement. Ensure involvement of various functionaries with due representation to gender,
while forming small groups. The small groups should have access to project documents, process
documentation, department guidelines and policy notes.

The next activity would be to assign the task of matching the activities with the social objectives
and identifying gaps. This again could be carried out by a small group drawn from the
managerial cadre and execution/implementation groups at the field level. All this information
would be then looked into; to develop a plan for Social Auditing, including who would be
responsible in the department, monitoring and identifying the resources required. This
responsibility again could be given to a small group of three individuals.

Stakeholder consultation, involving department functionaries and civil society, would be the
forum for sharing the Social Audit plan. This consultation would clarify the issues important for
Social Auditing, role of stakeholders, as well as commitments from them. The outcome of the
consultation would be fed into the process of detailing out: the indicators to be monitored; which
existing records are to be used; and how additional information would be collected. The next key
step is to fix responsibilities for various activities. The activities include preparing formats for
social account‐keeping, compilation of data and reporting the same on a monthly basis (internal
use). Managers of the department/programmes can use this information for monitoring as well as
providing feedback for improving performance and overcoming bottlenecks.

Ideally, Social Audit should be conducted regularly, and the method should be developed
through a participatory relationship between the auditor and the organisations/departments. The
following figure depicts the detailed steps followed in the social audit cycle.

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In addition to using the Tool kit exercises in the right sequence, it is vital that the process is
participative and inclusive. The cycle starts with ‘deciding to do a Social Audit’ and at the end of
each year planned targets and actual achievements are to be compared.

Experiments in Social Audit from Vithura Panchayat, Kerala

The decentralisation process in Kerala is unique not only in terms of the functions and finances
transferred to the local self‐governments. It has also provided scope and space for transparency
and accountability to the people in a major way. During this process, a few Grama Panchayats
have gone far ahead of others in experimenting with various mechanisms for social audit.

Vithura was one such panchayat which tried to create a transparent local self‐governance system
with peopleʹs participation. Right from plan formulation to implementation and to the extent of
plan monitoring and evaluation was entrusted to the people. The key for success behind the
Vithura experiment was a well designed organisational setup, where peopleʹs committees were
formed and made functional. The different types of committees that were formed are:

neighbourhood groups consisting of 50 neighbouring houses, ward development committees,

panchayat level academic committees, subject groups, panchayat level womenʹs committee,
panchayat level monitoring committee, childrenʹs forum, peopleʹs committees for social audit

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etc. All these had specific roles to play in the planning and implementation stages of
developmental programmes.

The social accounts were presented to the Grama Sabhas in printed form, by the panchayats. It
was presented in the Grama Sabha in such a way that any person could understand and question
any irregularity in the activities of the panchayats. The difference with Vithura model of social
audit is that it is not an audit after the implementation. The peopleʹs committees mentioned above
were given information about the activities regularly and they were empowered and supported by
the panchayat committee to monitor the activities. Thus, these committees were active
throughout the process of planning and implementation.

The basic structure of the Vithura social audit mechanism was as follows:

1. From each Grama Sabha, three persons were elected to be a part of the panchayat level social
audit committee.
2. Each one will be a part of one of the sector group like productive, service and infrastructure
sectors.
3. These committees conduct the audit and their report is presented in the Grama Sabha.
4. All the officers of the panchayat including that of the line departments will be present in the
Grama Sabha to clear doubts with relevant documents.

Thus, a strong social audit mechanism was experimented at Vithura, a Grama Panchayat in
Trivandrum district of Kerala.

Risks Involved and Key Success Factors

The key to successful Social Auditing is in knowing which techniques to use and in what
sequence. The Social Auditor can choose different methods so as to capture both quantitative and
qualitative information from the respondent.

It is equally important to ensure the follow‐up action taken on the Social Audit report and the
receptiveness of the departments/organisations to adopt the recommendations in the Social Audit
report. The social auditors should suggest modalities for improving its performance based on the
feedback received from different stakeholders. The detailed work plan needs to be identified by
the social auditors and the same should be implemented at the earliest.

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