CORPORATE SOCIAL RESPONSIBILITY

What is CSR?

Itis how the organizations

manage the business processes
to produce an overall positive
impact on the society
 RESPONSIBILITIES OF A BUSINESS FIRM
1. Friedman’s Traditional
View of Business Responsibility
 Urging a return to a laissez-faire worldwide economy with
a minimum of government regulation, Milton Friedman
argues against the concept of social responsibility.
 That a business-person who acts “responsibly” by cutting
the price of the firm’s product to prevent inflation, or by
making expenditures to reduce pollution, according to
Friedman, is spending the shareholder’s money for a
general social interest.
 Thateven if the businessperson has shareholder permission
or encouragement to do so, he or she is still acting from
motives other than economic and may, in the long run, harm
the very society the firm is trying to help.
 By taking on the burden of these social costs, the business
becomes less efficient— either prices go up to pay for the
increased costs or investment in new activities and research
is postponed. These results negatively affect—perhaps
fatally—the long-term efficiency of a business.
 Friedman’s summary

 There is one and only one social responsibility of

business—to use its resources and engage in activities
designed to increase its profits so long as it stays
within the rules of the game, which is to say, engages
in open and free competition without deception or
fraud.
 Carroll’s Four Responsibilities of
Business
Archie Carroll proposes that the managers of business
organizations have four responsibilities: Economic,
Legal, Ethical, and Discretionary
 1.Economic responsibilities of a business
organization’s management are to produce goods and
services of value to society so that the firm may repay
its creditors and shareholders.
 2.Legal responsibilities are defined by governments
in laws that management is expected to obey.
 3. Ethical responsibilities of an organization’s management are to follow
the generally held beliefs about behavior in a society. The affected people
can get very upset if an organization’s management fails to act according
to generally prevailing ethical values.
 4.Discretionary responsibilities are the purely voluntary obligations a
corporation assumes. Examples are philanthropic contributions, training
the hard-core unemployed, and providing day-care centers. The difference
between ethical and discretionary responsibilities is that few people expect
an organization to fulfill discretionary responsibilities, whereas many
expect an organization to fulfill ethical ones
 Types of CSR

 Environmental focused CSR- Aims to reduce the harmful

effects of the corporations operations on the environment
 Community based CSR- Ensures welfare of a local
community by joining hands with other organizations
 Human Resource based CSR- Organizations focus on the
well being of their own staff and improve their living
condition
 Charitybased CSR- Organizations donate to certain
organizations or individuals for their general welfare
 Dimensions of corporate
responsibility
 Business ethics, values and principles
 Accountability and transparency (legal compliance)
 Commitments to Socio-economic developments
 Environmental concerns
 Human Rights
 Workers rights and welfare
 Market relations
 Sustainability
 Corporate Governance
 Benefits of CSR

 Providesa company with social capital, the goodwill of key

stakeholders, that can be used for competitive advantage.
 Being socially responsible does provide a firm a more positive
overall reputation
 Theirenvironmental concerns may enable them to charge
premium prices and gain brand loyalty
 Their trustworthiness may help them generate enduring
relationships with suppliers and distributors without requiring
them to spend a lot of time and money policing contracts.
 Theycan attract outstanding employees who prefer working for a
responsible firm.
 They are more likely to be welcomed into a foreign country
 They can utilize the goodwill of public officials for support in
difficult times.
 They are more likely to attract capital infusions from investors
who view reputable companies as desirable long-term
investments.
A way to advertise your brand
 Access to debt and equity capital
 Operational efficiency
 Innovation
 Risk management
 License to operate
 Driving forces behind
CSR
 Globalization
 Power and influence of business corporations
 Growing access to education and information
 Growing access to environmental issues
 Spread of corporate scandal and public distrust
 Disadvantages of CSR

A shift from profit making objective

Company reputation can take a hit- more scrutiny
Increase in cost of production
Resistance from shareholders
 Which group’s
interests should
have
 The priority?
question calls for a Stakeholder Analysis process.
 Stakeholder analysis is the identification and evaluation of
corporate stakeholders. This can be done in a three-step process.
 The first step in stakeholder analysis is to identify primary
stakeholders, those who have a direct connection with the
corporation and who have enough bargaining power to directly
affect corporate activities. Primary stakeholders are directly
affected by the corporation and usually include customers,
employees, suppliers, shareholders, and creditors.
 The second step in stakeholder analysis is to identify the
secondary stakeholders—those who have only an indirect stake in
the corporation but who are also affected by corporate activities.
 These usually include nongovernmental organizations (NGOs,
such as Greenpeace), activists, local communities, trade
associations, competitors, and governments.
 The third step in stakeholder analysis is to estimate the effect
on each stakeholder group from any strategic decision. Because
the primary decision criteria are typically economic, this is the
point where secondary stakeholders may be ignored or
discounted as unimportant.
 For a firm to fulfill its ethical or discretionary responsibilities, it
must seriously consider the needs and wants of its secondary
stakeholders in any strategic decision. For example, how much
will specific stakeholder groups lose or gain? What other
alternatives do they have to replace what may be lost?
Thank you!!!