Chapter 9

Handmaid of Ethics:
Corporate Social Responsibility
Perspectives of Corporate Social Responsibility

There are three perspectives that prompt corporate social

responsibility. These are:
• Business perspective
• Eco-social perspective
• Rights-based perspective
 Why Social Responsibility of Business?

• Accountability to Society

• Corporations’ Debt to Society

 Definitions of CSR

It is the overall relationship of the corporate with all of its stakeholders.

 Definitions of CSR (Contd.)

The classical economic model: Adam Smith believed that public interest
was served best by individuals pursuing their own self-interests.
The socio-economic model: Business is seen as one subsystem among
many in a highly interdependent society.
• It recognizes that companies have stakeholders other than their
stockholders.
• Business has an obligation to respond to the needs of all stakeholders
while pursuing its profit.
 Today’s Corporate Social Responsibility

The corporate social responsibility of an organization today, is a set of

obligations with which it has to protect, enhance, and otherwise work to
the betterment of the society in which it functions.
The concept of corporate social performance includes a business
organization’s
• configuration of principles of social responsibility
• process of social responsiveness, and
• policies, programmes, and observable outcomes as they relate to the
firm’s societal relationships.
 Theoretical Justification
for CSR

•Trusteeship Model

•Social entity theory

•The Pluralistic
 Models for Implementation of CSR

Four Models of CSR

Model Emphasis Proponent

Ethical Voluntary commitment by Mahatma Gandhi
companies to public welfare
Statist State ownership and legal Jawaharlal Nehru
requirements determine corporate
responsibilities

Liberal Corporate responsibilities limited Milton Friedman

to private owners (shareholders)
Stakeholder Companies respond to the needs of R. Edward Freeman
stakeholders – customers, creditors,
employees, communities, etc.
Advantages of Corporate Social Responsibility

There are several advantages to corporations when they exhibit a sense of

CSR and implement it, such as:
1. Improved financial performance
2. Enhanced brand image and reputation
3. Increased sales and customer loyalty
4. Increased ability to attract and retain employees
5. Reduced regulatory oversight
6. Innovation and learning
7. Risk management
8. Easier access to capital
9. Reduced operating costs
 Scope of Corporate Social Responsibility

Three levels of social responsibility can be identified (evolution of areas of

social responsibility)
1. Market forces
2. Mandated actions
3. Voluntary actions
 Understanding Social Responsibility of Business

1) Protecting and promoting stakeholders’ interests

a) to consumers and community
b) social responsibilities of business towards employees
c) to owners and inter-business establishments
2) Promotion of common welfare programmes
3) Philanthropy
4) Good corporate governance
5) Render social service
6) Abiding by rules and regulations
7) Creation of wealth
8) Ensure ecological balance
9) Focus on the human element
10) Improve productivity
11) Sponsor social and charitable causes
12) Supplement state efforts
 Steps to Corporate Social Responsibility

The International Chamber of Commerce recommends the following nine

steps to attain Corporate Social Responsibility:
1. Confirm CEO/Board commitment to prioritize responsible business
conduct
2. State company purpose and agree on company values
3. Identify key stakeholders
4. Define business principles and policies
5. Establish implementation procedures and management systems
6. Benchmark against selected external codes and standards
7. Set up internal monitoring
8. Use language that everyone can understand
9. Set pragmatic and realistic objectives.
 External Standards on CSR

• The Caux Round Table (CRT)

• Organization for Economic Cooperation and Development (OECD)
• United Nations Global Compact
• Asian-Pacific Economic Cooperation (APEC) Business Code of Conduct
• The Global Reporting Initiative (GRI)
• AA1000 Accountability
• Social Accountability 8000
• Principles for Global Corporate Responsibility
• The Global Sullivan Principles
• The Keidanren Charter for Good Corporate Behaviour
 India on the Ethical/CSR Matrix

Wider adoption of CSR in Indian companies will be enabled by:

• Provision of tax, duties and custom benefits.
• Inclusion of CSR performance of promoters as a parameter in according
fast track clearance to projects.
• Decreased government interventions.
• Depreciation benefits where asset investments are made.
• Development guidelines on estimation of socio-economic impacts.
 Ethics and Social Responsibility of Business

• Business ethics in India today

• Why so much corruption?
• The license raj
• Black money
 Future of Indian CSR

There is a clear need for

• Transition from the present compliance centric approach to the new
paradigm
• Creation of an enabling environment and an array of support measures.
• Business schools teaching CSR to facilitate this process
• Industry associations to share experiences and reward best practice
• Need to incorporate public policies into the Indian CSR.
• International agencies to share cross-country experience.