Corporate Social

Responsibility
{ meaning, advantages of CSR, Section 135 of the Companies Act;
Stakeholders model of social responsibility, CSR initiatives
undertaken by different organisations.
  Corporate Social Responsibility (CSR) refers to
operating a business in a manner that accounts
for the social and environmental impact created
by the business
 CSR means a commitment to developing
policies that integrate responsible practices into
daily business operations
 CSR is generally understood as being the way
through which a company achieves a balance
of economic, environmental and social
imperatives (“Triple-Bottom-Line- Approach”

What is CSR?
 Corporate means any group of people that work
together in a company or organisation, whether for
profit or non-profit
 Social means the social system and includes finance,
economy, environment and social issues
 Responsibility is about taking issues that affect the
corporate body seriously and about acting within -
and even beyond - societal norms
 Identifying points of intersection between your
company and society. For instance, does the company
provide safe working conditions and reasonable
wages?
The Ecomagination initiative General
Electric launched in early 2005 benefits
society through environmentally
beneficial products (such as compact
fluorescent light bulbs) while
benefiting the company's bottom line.
The initiative boosted revenue on such
products from $6.2 billion in 2004,
before the initiative began, to $10.1
billion in 2005, over halfway to the
goal of $20 billion by 2010.
  The term was coined by John Elkington in 1994.
 Triple bottom line (abbreviated as TBL or 3BL) is an
accounting framework with three parts: social,
environmental (or ecological) and financial.
 These three divisions are also called the three Ps: people,
planet and profit, or the "three pillars of sustainability".
 In traditional business accounting and common usage, the
"bottom line" refers to either the "profit" or "loss", which is
usually recorded at the very bottom line on a statement of
revenue and expenses.

The Triple Bottom Line approach

 For example, if a corporation shows a monetary profit, but
their asbestos mine causes thousands of deaths from
asbestosis, and their copper mine pollutes a river, and the
government ends up spending taxpayer money on health
care and river clean-up.
 The triple bottom line adds two more "bottom lines”: social
and environmental (ecological) concerns.
The Bottom Lines
 People pertains to fair and beneficial business practices
toward labour and the community and region in which a
corporation conducts its business.
 Planet (natural capital) refers to sustainable
environmental practices. A TBL endeavour reduces its
ecological footprint by, among other things, carefully
managing its consumption of energy and non-
renewables and reducing manufacturing waste as well
as rendering waste less toxic before disposing of it in a
safe and legal manner
 Profit this aspect needs to be seen as the real economic
benefit enjoyed by the host society. It is the real
economic impact the organization has on its economic
environment, not to be confused with simply the
internal company profit

People, Planet and Profit

 Environment: One primary focus of corporate social
responsibility is the environment. Businesses, both large and
small, have a large carbon footprint. Any steps they can take to
reduce those footprints are considered both good for the
company and society as a whole.
 Philanthropy: Businesses also practice social responsibility by
donating to national and local charities. Whether it involves
giving money or time, businesses have a lot of resources that
can benefit charities and local community programs.
 Ethical labour practices: By treating employees fairly and
ethically, companies can also demonstrate their corporate social
responsibility. This is especially true of businesses that operate
in international locations with labor laws that differ from those
in the home country.

Types of CSR
 1. Satisfied employees.
Employees want to feel proud of the organization they work
for. An employee with a positive attitude towards the
company, is less likely to look for a job elsewhere. It is also
likely that you will receive more job applications because
people want to work for you.

 2. Satisfied customers
Research shows that a strong record of CSR improves
customers’ attitude towards the company. If a customer likes
the company, he or she will buy more products or services
and will be less willing to change to another brand.

Advantages of CSR
 3. Positive image
CSR provides the opportunity to share positive stories online
and through traditional media. Companies no longer have to
waste money on expensive advertising campaigns. Instead
they generate free publicity and benefit from worth of mouth
marketing.

 4. Costs reductions
A CSR program doesn’t have to cost money. On the contrary. If
conducted properly a company can reduce costs through CSR.
Companies reduce costs by:
 More efficient staff hire and retention

 Implementing energy savings programs

 Managing potential risks and liabilities more effectively

 Less investment in traditional advertising

 5. More business opportunities
A CSR program requires an open, outside oriented
approach. The business must be in a constant
dialogue with customers, suppliers and other parties
that affect the organization. Because of continuous
interaction with other parties, your business will be
the first to know about new business opportunities.

6. Long term future for your business

CSR is not something for the short term. It’s all about
achieving long term results and business continuity.
  This section deals with the CSR responsibilities
and regulations that companies need to follow
in India

Section 135 of the

Companies Act
 Applicability: Section 135 of the Companies Act
provides the threshold limit for applicability of the CSR to
a Company i.e. (a) net worth of the company to be Rs 500
crore or more; (b) turnover of the company to be Rs 1000
crore or more; (c) net profit of the company to be Rs 5
crore or more. Further as per the CSR Rules, the provisions
of CSR are not only applicable to Indian companies, but
also applicable to branch and project offices of a foreign
company in India.
 CSR Committee and Policy: Every qualifying
company requires spending of at least 2% of its
average net profit for the immediately preceding 3
financial years on CSR activities. Further, the
qualifying company will be required to constitute a
committee (CSR Committee) of the Board of
Directors (Board) consisting of 3 or more directors.
 Activities under CSR: The activities that can be done by
the company to achieve its CSR obligations include
eradicating extreme hunger and poverty, promotion of
education, promoting gender equality and empowering
women, reducing child mortality and improving
maternal health, combating human immunodeficiency
virus, acquired immune deficiency syndrome, malaria
and other diseases, etc.
 Local Area: Under the Companies Act, preference should be
given to local areas and the areas where the company
operates. Company may also choose to associate with 2 or
more companies for fulfilling the CSR activities provided
that they are able to report individually. The CSR Committee
shall also prepare the CSR Policy in which it includes the
projects and programmes which is to be undertaken, prepare
a list of projects and programmes which a company plans to
undertake during the implementation year and also focus on
integrating business models with social and environmental
priorities and process in order to create share value.
The Stakeholder Model
of Social Responsibility
 Shareholder: Those who have financially invested in the
company, the owners/stockholders

 Stakeholders: People directly involved with the company,

such as
• workers
• consumers
• suppliers
• creditors
• Competitors
etc.

The “Traditional/Classical” View: Only SHAREholders

should have a say in how a company runs

Defining the important

terms
 Proponents of the Stakeholder Model argue
that the company should be driven by the
interests of their stakeholders, rather than
the interests of the stockholders alone (as
argued in the Classical Model).

The Basic Idea…

The Classical Model argues that the ethical responsibility of a
corporation is to earn a profit and to obey the law, the
Stakeholder Model has a more complex approach. In addition
to earning a profit, this model includes consideration of the
impact upon major stakeholders when making a decision.

The model effectively says that the company must not only be
committed to profit, but must behave in a “Socially
Responsible” way.

So what are these responsibilities?

 Economic responsibilities:
The first criterion of social responsibility is economic
responsibility. The business institution is, above all, the
basic economic unit of society. Its responsibility is to
produce goods and services that a society wants and to
maximise profit for its owners and shareholders.
Economic responsibilities, carried to the extreme, is
called profit-maximizing view.
The profit-maximizing view is no longer considered an
adequate means of judging performance.
 Legal responsibilities
All modern societies lay down ground rules, laws and
regulations that businesses are expected to follow. Legal
responsibility defines what society deems as important with
respect to appropriate corporate behaviour. Businesses are
expected to fulfil their economic goals within the legal
framework. Legal requirements are imposed by local
councils, state and federal governments and their regulating
agencies.
 Volkswagen, the world's biggest automaker, is in crisis
over its rigging of diesel engine emissions tests
 The company was found to have falsified U.S. pollution
tests on 500,000 diesel engine vehicles, by installing
software ("defeat devices") to make them appear cleaner
than they were when being tested. Once on the road, the
cars would pump out as much as 40 times the allowed
level of nitrogen oxides.
 They are likely to face almost 15 BILLION DOLLARS (or
even more!) in losses (fines, lawsuits, compensation etc)

The Volkswagen Scam

 Ethical responsibilities
Ethical responsibility include behaviour that is not
necessarily codified into law and may not serve the
organization’s direct economic interests. To be ethical,
organization’s decision makers should act with equity,
fairness and impartiality, respect the rights of individuals, and
provide different treatments of individual only when
differences between them are relevant to the organization’s
goals and tasks. Unethical behavior occurs when decisions
enable an individual or organization to gain expense of
society.
 Discretionary responsibilities
Discretionary responsibility is purely voluntary and guided by an
organization’s desire to make social contributions not mandated by
economics, laws or ethics. Discretionary activities include generous
philanthropic contributions that offer no payback to the
organization and are not expected such as donating to NGOs.
Discretionary responsibility is the highest criterion of social
responsibility, because it goes beyond societal expectations to
contribute to the community’s welfare.
Examples of strong
CSR initiatives
 LinkedIn. One Friday each month
LinkedIn’s employees participate “InDay.”
InDay’s purpose is to give back to the
community through employee volunteerism
and resources. Each InDay has a different
theme allowing diverse departments to come
together for a common cause. InDay activities
range from guest speakers discussing global
justice, to initiating global learning programs,
and volunteering in local communities.
 Dell supports over 4,615 charities around the
world. Dell YouthConnect provides technology
and educational facilities in 11 countries. The
Dell Social Innovation Challenge provides
funding and mentorship to college students to
further projects that help solve social problems.
Dell’s disaster relief program provides holistic
assistance to communities affected by natural
disaster around the world. Dell’s employees
are a social good force to be reckoned with.
 IBM believes in Corporate Citizenship.
Their social good projects extend across
societal issues. Employees volunteer in
environmental efforts, community economic
development, education, health, literacy,
language and culture. Their year long
volunteer initiative, “Celebration of Service,”
logged over 3,00,000 hours of service. IBM
has also established, “On Demand
Community,” enabling employees and
retirees to find volunteer opportunities,
through trainings and placement.