Corporate Social Responsibility Reality or an Eye Wash
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Transcript of Corporate Social Responsibility Reality or an Eye Wash
1Corporate Social Responsibility
Human Resource Management
Assignment-1
Corporate Social Responsibility: Reality or an eye wash?
Submitted to: Hema Harsha Ma’am
Submitted by:
Adil Pasha
Roll No: 01
Section A
MBA 2nd Sem
2Corporate Social Responsibility
Table of contents
Index Page No.
Introduction 3
Definition 4
Concept of Social Responsibility 4
Reasons for corporate to be socially responsible 5
Responsibility towards Different Interest Groups 6
Responsible Companies in the age of globalization 10
Corporate Social Responsibility in reality 12
International Initiatives for Corporate Social Responsibility 13
Corporate Social Responsibility in India 13
Problems 15
Solutions 17
Challenges 19
Bibliography 20
3Corporate Social Responsibility
Corporate Social Responsibility
Introduction
Corporate social responsibility is basically a concept whereby companies decide
voluntarily to contribute to a better society and a cleaner environment. Corporate social
responsibility is represented by the contributions undertaken by companies to society
through its business activities and its social investment. This is also to connect the Concept
of sustainable development to the company’s level.
Over the last years an increasing number of companies worldwide started promoting their
Corporate Social Responsibility strategies because the customers, the public and the
investors expect them to act sustainable as well as responsible. In most cases CSR is a
result of a variety of social, environmental and economic pressures.
The Term Corporate Social Responsibility is imprecise and its application differs. CSR
can not only refer to the compliance of human right standards, labour and social security
arrangements, but also to the fight against climate change, sustainable management of
natural resources and consumer protection.
The concept of Corporate Social Responsibility was first mentioned 1953 in the
publication ‘Social Responsibilities of the Businessman’ by William J. Bowen. However,
the term CSR became only popular in the 1990s, when the German Betapharm, a generic
pharmaceutical company decided to implement CSR. The generic market is characterized
by an interchange ability of products. In 1997 a halt in sales growth led the company to the
realization that in the generic drugs market companies could not differentiate on price or
quality. This was the prelude for the company to adopt CSR as an expression of the
company’s values and as a part of its corporate strategies. By using strategic and social
commitment for families with chronically ill children, Betapharm took a strategic
advantage.
Today, every company invests a considerable amount of money, energy and boardroom
time on developing or strengthening its CSR strategies and initiatives. More and more
companies across the world are integrating a social perspective in their operations in
addition to what is required by law.
4Corporate Social Responsibility
Recently, the Government of India proposed in the Companies Bill 2011 that corporations
with a net worth of INR 5000 million or turnover of INR 10,000 million will be required
to constitute a ‘CSR Committee of the Board’ and allocate at least 2 per cent of their
average profits to corporate social responsibility initiatives. However, the bill which has
now been withdrawn raised several questions within the industry as well as outside it on
the feasibility and rationality of such a decision. While some argue that a government
cannot regulate CSR initiatives of a company considering CSR is still an ambiguous
concept; others believe that facilitating development in a democracy is purely the
prerogative of the government and that the corporations can only be expected to play a
collaborative role of their own free will.
Definition of 'Corporate Social Responsibility'
Corporate Social Responsibility is corporate initiative to assess and take responsibility for
the company's effects on the environment and impact on social welfare. The term
generally applies to company efforts that go beyond what may be required by regulators or
environmental protection groups.
Corporate social responsibility 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.
Concept of Social Responsibility
Profit making is not the sole function of business. It performs a number of social
functions, as it is a part of the society. It takes care of those who are instrumental in
securing its existence and survival like- the owners, investors, employees, consumers and
government in particular and the society and community in general. So, every business
must contribute in some way or the other for their benefit. For example, every business
must ensure a satisfactory rate of return to investors, provide good salary, security and
proper working condition to its employees, make available quality products at reasonable
price to its consumers, maintain the environment properly etc.
5Corporate Social Responsibility
However, while doing so two things need to be noted to view it as social responsibility of
business. First, any such activity is not charity. It means that if any business donates some
amount of money to any hospital or temple or school and college etc., it is not to be
considered as discharge of social responsibility because charity does not imply fulfilling
responsibility.
Secondly, any such activity should not be such that it is good for somebody and bad for
others. Suppose a businessman makes a lot of money by smuggling or by cheating
customers, and then runs a hospital to treat poor patients at low prices his actions cannot
be socially justified. Social responsibility implies that a businessman should not do
anything harmful to the society in course of his business activities.
Thus, the concept of social responsibility discourages businessmen from adopting unfair
means like black-marketing, hoarding, adulteration, tax evasion and cheating customers
etc. to earn profit. Instead, it encourages them to earn profit through judicious
management of the business, by providing better working and living conditions to its
employees, providing better products, after sales-service, etc. to its customers and
simultaneously to control pollution and conserve natural resources.
Reasons for corporate to be socially responsible
Social responsibility is a voluntary effort on the part of business to take various steps
to satisfy the expectation of the different interest groups. As you have already learnt, the
interest groups may be owners, investors, employees, consumers, government and society
or community. But the question arises, why the corporate should come forward and be
responsible towards these interest groups.
Let us consider the following points:
i. Public Image - The activities of business towards the welfare of the society earn
goodwill and reputation for the business. The earnings of business also depend upon the
public image of its activities. People prefer to buy products of a company that engages
itself in various social welfare programmes. Again, good public image also attracts honest
and competent employees to work with such employers.
6Corporate Social Responsibility
ii. Government Regulation - To avoid government regulations businessmen should
discharge their duties voluntarily. For example, if any business firm pollutes the
environment it will naturally come under strict government regulation, which may
ultimately force the firm to close down its business. Instead, the business firm should
engage itself in maintaining a pollution free environment.
iii. Survival and Growth -Every business is a part of the society. So for its survival and
growth, support from the society is very much essential. Business utilizes the available
resources like power, water, land, roads, etc. of the society. So it should be the
responsibility of every business to spend a part of its profit for the welfare of the society.
iv. Employee satisfaction - Besides getting good salary and working in a healthy
atmosphere, employees also expect other facilities like proper accommodation,
transportation, education and training. The employers should try to fulfil all the
expectation of the employees because employee satisfaction is directly related to
productivity and it is also required for the long-term prosperity of the organisation. For
example, if business spends money on training of the employees, it will have more
efficient people to work and thus, earn more profit.
v. Consumer Awareness - Now-a-days consumers have become very conscious about
their rights. They protest against the supply of inferior and harmful products by forming
different groups. This has made it obligatory for the business to protect the interest of the
consumers by providing quality products at the most competitive price.
Responsibility towards Different Interest Groups
After getting some idea about the concept and reasons of social responsibility of
business let us look into the various responsibilities that a business has towards different
groups with whom it interacts. The business generally interacts with owners, investors,
employees, suppliers, customers, competitors, government and society. They are called as
interest groups because by each and every activity of business, the interest of these groups
is affected directly or indirectly.
7Corporate Social Responsibility
i. 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:
a. Run the business efficiently.
b. Proper utilisation of capital and other resources.
c. Growth and appreciation of capital.
d. Regular and fair return on capital invested.
ii. Responsibility towards investors
Investors are those who provide finance by way of investment in debentures, bonds,
deposits etc. Banks, financial institutions, and investing public are all included in this
category. The responsibilities of business towards its investors are :
a. Ensuring safety of their investment,
b. Regular payment of interest,
c. Timely repayment of principal amount.
iii. Responsibility towards employees
Business needs employees or workers to work for it. These employees put their best effort
for the benefit of the business. So 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 the
only business can be successful. The responsibilities of business towards its employees
include:
a. Timely and regular payment of wages and salaries.
b. Proper working conditions and welfare amenities.
d. Opportunity for better career prospects.
e. Job security as well as social security like facilities of provident fund, group insurance,
pension, retirement benefits, etc.
f. Better living conditions like housing, transport, canteen, crèches etc.
g. Timely training and development.
iv. 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:
8Corporate Social Responsibility
a. Giving regular orders for purchase of goods.
b. Dealing on fair terms and conditions.
c. Availing reasonable credit period.
d. Timely payment of dues.
v. 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:
a. Products and services must be able to take care of the needs of the customers.
b. Products and services must be qualitative
c. There must be regularity in supply of goods and services
d. Price of the goods and services should be reasonable and affordable.
e. All the advantages and disadvantages of the product as well as procedure to use the
products must be informed do the customers.
f. There must be proper after-sales service.
g. Grievances of the consumers, if any, must be settled quickly.
h. Unfair means like under weighing the product, adulteration, etc. must be avoided.
vi. 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
i. Not to offer exceptionally high sales commission to distributers, agents etc.
ii. Not to offer to customers heavy discounts and /or free products in every sale.
iii. Not to defame competitors through false or ambiguous advertisements.
vii. Responsibility towards government
Business activities are governed by the rules and regulations framed by the government.
The various responsibilities of business towards government are:
a. Setting up units as per guidelines of government
b. Payment of fees, duties and taxes regularly as well as honestly.
9Corporate Social Responsibility
c. Not to indulge in monopolistic and restrictive trade practices.
d. Conforming to pollution control norms set up by government.
h. Not to indulge in corruption through bribing and other unlawful activities.
viii. 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:
a. to help the weaker and backward sections of the society
b. to preserve and promote social and cultural values
c. to generate employment
d. to protect the environment
e. to conserve natural resources and wildlife
f. to promote sports and culture
g. to provide assistance in the field of developmental research on education, medical
science, technology etc.
Following are the various responsibilities of business towards the different interest group
as discussed above.
i. Protection of environment.
ii. Better living conditions like housing, transport, canteen, crèches etc.
iii. Promotion of sports and culture.
iv. Opportunity for better career prospects
v. Regular supply of goods and services
vi. Proper working conditions and welfare amenities
vii. Goods and services at reasonable and affordable price.
viii. Prompt after sales services.
10Corporate Social Responsibility
Responsible Companies in the age of globalization
How a company perceives its societal responsibility depends on various factors
such as the markets in which it operates, its business line and its size.
In recent years CSR has become a fundamental business practice and has gained much
attention from the management of large international companies. They understand that a
strong CSR program is an essential element in achieving good business practices and
effective leadership. Companies have explored that their impact on the economic, social
and environmental sector directly affects their relationships with investors, employees and
customers.
Whilst so far Corporate Social Responsibility was mainly promoted by a number of large
or multinational companies, it is now also becoming important to small national
companies.
»Teflon Companies«. Shell was one of first companies which made the experience, that
early responsible acting is better than later crisis management. Shell was taken by
complete surprise when the Greenpeace campaign against sinking the former drill platform
Brent Spar achieved its goals. There was a widespread boycott of Shell service stations.
The Brent Spar affair has brought quite some change of attitude to Shell.
As companies face themselves in the context of globalization, they are increasingly aware
that Corporate Social Responsibility can be of direct economic value. Although the prime
goal of a company is to generate profits, companies can at the same time contribute to
social and environmental objectives by integrating corporate social responsibility as a
strategic investment into their business strategy.
A number of companies with good social and environmental records indicate that CSR
activities can result in a better performance and can generate more profits and growth.
Research has shown that company CSR programs influence to an extensive degree
consumer purchasing decisions, with many investors and employees also being swayed in
their choice of companies.
A major challenge for companies today is attracting and retaining skilled workers. There is
not only an image gain for the companies using CSR, but it is also important for the
11Corporate Social Responsibility
employees. Within the company, socially responsible practices primarily involve
employees and relate to issues such as investing in human capital, health and safety and
managing change.
In India there are an existent but small number of companies which practice CSR. This
engagement of the Indian economy concentrates mainly on a few old family owned
companies, and corporate giants such as the Tata and Birla group companies which have
led the way in making corporate social responsibility an intrinsic part of their business
plans. These companies have been deeply involved with social development initiatives in
the communities surrounding their facilities. Jamshedpur, one of the prominent cities in
the north-eastern state of Bihar in India, is also known as Tata Nagar and stands out at a
beacon for other companies to follow. Jamshedpur was carved out from the jungle a
century ago. TATA’s CSR activities in Jamshedpur include the provision of full health
and education expenses for all employees and the management of schools and hospitals.
In spite of having such life size successful examples, CSR in India is in a very nascent
stage.
In the informal sector of the Indian economy, which contributes to almost the half of the
GNP and where approximately 93% of the Indian workforce is employed, the application
of CSR is rare. On the contrary, the fight against poverty, the development of education, as
well as the conservation of the environment are not existent in most of the Indian
enterprises.
India has an advantage as far as labour is concerned. To some extent, business and capital
go to those places where costs are less or standards are lower like the ones in India. But
also in India, the demand for responsible and ethical goods is constantly increasing.
To guarantee the supply of responsible and ethical goods, it is especially important to
implement a nationwide system of CSR standards.
12Corporate Social Responsibility
Corporate Social Responsibility in reality
Due to the lack of international CSR guidelines, the practical application of CSR
differs and CSR Strategies within most companies still show major deficiencies. There are
still complaints about multinational companies wasting the environment and NGOs still
denouncing human rights abuses in companies. Some critics believe that CSR programs
are undertaken by especially multinational companies to distract the public from ethical
questions posed by their core operations. That meanwhile even multinational companies
such as Microsoft or Pepsi confess to their social responsibility, is discussed quite
controversial.
While companies increasingly recognize their social responsibility, many of them have yet
to adopt management practices that reflect it: company employees and managers need
training in order to acquire the necessary skills and competence. Pioneering companies can
help to implement socially responsible practices by guiding the processes.
The Copenhagen Centre and CSR Europe have recently launched a program to bring the
business and academic community together with the aim to identify and address the
training needs of the business sector on Corporate Social Responsibility.
While corporate social responsibility can only be taken on by the companies themselves,
employees, consumers and investors can also play a decisive role in areas such as working
conditions, environment or human rights, in the purchasing of products from companies
which already adopted CSR or in prompting companies to adopt socially responsible
practices.
Critics suggest that better governmental and international regulation and enforcement,
rather than voluntary measures are necessary to ensure that companies behave in a socially
responsible manner.
Corporate social responsibility should therefore not be seen as a substitute to regulation
concerning social rights or environmental standards. In countries where such regulations
do not exist, efforts should focus on putting the proper regulatory framework in place on
the basis of which socially responsible practices can be developed.
13Corporate Social Responsibility
International Initiatives for Corporate Social Responsibility
Why are governments interested in CSR?
Their task is to make sure that the process of global and economic and social change is
managed properly and fairly. Several guidelines or standards have been developed to serve
as frameworks for CSR:
The OECD Guidelines for multinational Enterprises and the ILO - International Labour
Standards form the principles for the societal responsibility of companies and will help to
implement CSR on the international level.
Corporate Social Responsibility in India
India is one of the fastest growing economies, socio-economic problems like poverty,
illiteracy, lack of healthcare etc. are still ubiquitous and the government has limited
resources to tackle these challenges. This scenario has opened up several areas for
businesses to contribute towards social development.
CSR is not a new concept in India. Corporates like the Tata Group, the Aditya Birla
Group, and Indian Oil Corporation, to name a few, have been involved in serving the
community ever since their inception. Many other organizations have been doing their part
for the society through donations and charity events.
Today, CSR in India has gone beyond merely charity and donations, and is approached in
a more organized fashion. It has become an integral part of the corporate strategy.
Companies have CSR teams that devise specific policies, strategies and goals for their
CSR programs and set aside budgets to support them.
These programs, in many cases, are based on a clearly defined social philosophy or are
closely aligned with the companies’ business expertise. Employees become the backbone
of these initiatives and volunteer their time and contribute their skills, to implement them.
CSR Programs could range from overall development of a community to supporting
specific causes like education, environment, healthcare etc.
14Corporate Social Responsibility
For example, organizations like Bharath Petroleum Corporation Limited, Maruti Suzuki
India Limited, and Hindustan Unilever Limited, adopt villages where they focus on
holistic development. They provide better medical and sanitation facilities, build schools
and houses, and help the villagers become self-reliant by teaching them vocational and
business skills.
On the other hand GlaxoSmithKline Pharmaceuticals’ CSR programs primarily focus on
health and healthy living. They work in tribal villages where they provide medical check-
up and treatment, health camps and health awareness programs. They also provide money,
medicines and equipment to non-profit organizations that work towards improving health
and education in under-served communities.
Many CSR initiatives are executed by corporates in partnership with Non-governmental
organizations (NGOs) who are well versed in working with the local communities and are
experts in tackling specific social problems.
For example, SAP India in partnership with Hope Foundation, an NGO that works for the
betterment of the poor and the needy throughout India, has been working on short and
long-term rebuilding initiatives for the tsunami victims. Together, they also started The
SAP Labs Center of HOPE in Bangalore, a home for street children, where they provide
food, clothing, shelter, medical care and education.
CSR has come a long way in India. From responsive activities to sustainable initiatives,
corporates have clearly exhibited their ability to make a significant difference in the
society and improve the overall quality of life. In the current social situation in India, it is
difficult for one single entity to bring about change, as the scale is enormous. Corporates
have the expertise, strategic thinking, manpower and money to facilitate extensive social
change. Effective partnerships between corporates, NGOs and the government will place
India’s social development on a faster track.
15Corporate Social Responsibility
Problems
The Corporate Social Responsibility Initiatives by a company is generally looked as an
'Eyewash Exercise'.
And one can frankly accept that It has been so, in the Majority of cases. Only few
Companies have shown seriousness in this regard.
The Top Management may come up with new conferences saying that they have adopted a
new Village,
They have invested in new public welfare schemes etc.
But the Questions are,
How effective are these schemes?
How Employees look at these CSR Initiatives?
The Truth is, Majority of the employees don't really care about the CSR Initiatives. And
these Schemes generally fail for some inherent reasons.
Why CSR is Important?
It improves the Economic & Social status of the Society.
It improves the Corporate Image & the Brand Value (especially when there is a Real
Progress)
To make Employees responsible for their actions, certain steps have to be taken. I believe
that linking their Salaries with the amount of Community Developmental Works that
he/she performs, is the solution.
Organizations are not isolated entities, but they are highly interconnected with the
Community. If the Community is strong, then there is a good chance that the organization
will thrive.
The following quote by the American Writer, Henry George highlights the irrefutable
Truth...
“So long as all the increased wealth which modern progress brings goes but to build up
great fortunes, to increase luxury and make sharper the contrast between the House of
Have and the House of Want, progress is not real and cannot be permanent."
The Corporate Social Responsibility Initiatives by a company is generally looked as an
'Eyewash Exercise'. And one can frankly accept that it has been so, in the majority of
cases. Only few Companies have shown seriousness in this regard. The Top Management
may come up with new conferences saying that they have adopted a new Village; they
have invested in new public welfare schemes etc.
16Corporate Social Responsibility
But the Real Questions are,
How effective are these schemes?
How Employees look at these CSR Initiatives?
The Truth is majority of the employees don't really care about the CSR Initiatives. And
these Schemes generally fail for some inherent reasons.
Why CSR is Important?
It improves the Economic & Social status of the Society.
It improves the Corporate Image & the Brand Value (especially when there is a Real
Progress).
To make Employees responsible for their actions, certain steps have to be taken. I believe
that linking their Salaries with the amount of Community Developmental Works that
he/she performs, is the solution. Organizations are not isolated entities, but they are highly
interconnected with the Community. If the Community is strong, then there is a good
chance that the organization will thrive.
The following quote by the American Writer, Henry George highlights the irrefutable
Truth...
" So long as all the increased wealth which modern progress brings goes but to build up
great fortunes, to increase luxury and make sharper the contrast between the House of
Have and the House of Want, progress is not real and cannot be permanent."
17Corporate Social Responsibility
Solutions
The Solution to the problem will be the Linking of Compensation System to the Amount
of Community
Developmental Work an Employee Performs.
I believe that this should implemented at all levels (that includes Top Management).
I would like to explain the System with some illustrations. Let us take Employee 'X',
whose monthly salary is Rs.10000. Let us assume that the Fixed Component be Rs.7000.
And the Variable component which is work performance related is Rs.3000. I would
suggest that, Out of this Rs.3000, at least half of it, that is Rs.1500 should be linked to his
Performance in Community Developmental Activities (CDA).
Let us see it in the form of an Equation.
Monthly Salary=Fixed Component (70%) + Variable Component 1 (15%) + Variable
Component 2 (15%)
Where,
Variable component 1 is related to Performance inside the Organisation
Variable Component 2 is related to the performance outside the organisation (Community
Developmental Works)
The Variable Component 2 can be measured in terms of Social Benefit Points (SBP).
There is an Upper Limit to this. The Limit is equal to 15% percent of Total Monthly
Salary. If one exceeds the Limit Continuously, he can be considered for Fast Track
Growth (Faster Promotions, Better Incentives etc.)
SBP can be measured by an Independent Agency. It can be related to Number of
Community hours one has spent, Quality of Work Performed, Number of beneficiaries etc.
How a company should go about in doing Community Developmental Works?
I would suggest 3 Ways by which this can be implemented ( according to the type of
Organisation.)
Number-1:
If it is a Service Based (Generally IT companies), Then Company can look at Adopting
Villages (or Socially- Economically Backward regions) per Project.
That is, if a company has 25 projects in its hand, then, It can adopt 25 villages. And people
working on those projects are responsible for the development of that particular Village.
18Corporate Social Responsibility
Number-2:
If it is a Product based Industry, then Allocation can be done to Regional offices.
According to the size of the regional office, certain number of villages can be allotted to it.
Number-3:
If it is purely a manufacturing Industry, then Department-wise allocation can be done. In
other words, certain number of Villages per Department. It can be based on the strength of
the department.
The CDA can be organised based on free hours available. It can be a Compulsory
Weekend Program
(Example: 2 weekends every month) or A Day can be allotted each week to the project
team / department / regional office.
I think that the company can look at adopting Villages or other Socially-Economically
Backward regions.
I believe this Solution can produce great changes that would speed-up the process of
development of the society.
19Corporate Social Responsibility
Challenges
Challenge 1:
The employees may view the system as an unproductive one. They may think that they are
being forced.
Suggestion:
An Orientation Program can be conducted to dispel all the apprehensions that the
employees may have got.
The Fact that “Sustaining the Society is the Key to the Growth of the Organisation” should
be made clear to all stakeholders. The Employees may feel that it is eating into their
personal space (time spent with family). This self-centred attitude should be changed.
Employees should open-up. For a good Corporate Citizen, There should be a shift in
thinking from ‘Materialistic life’ to ‘Meaningful Life’. Hence, This Message should be put
across, to make it a successful program.
Challenge 2:
Top management may view that the move could have an impact on the Bottom-line.
(Company have to spend some money on these projects)
Suggestion:
Long Term Profits are important. This move can make a minor dent in short term profits,
but in the long run, there will be a definite enhancement of Brand Image & thereby Profits
will increase substantially.
Challenge 3:
The Top Management may feel that they need not get involved directly.
Suggestion:
Top Management is the real face of the company. If they get involved in the project, It will
definitely be a good move. All other stakeholders (that includes employees) will get
motivated because of their direct involvement.
20Corporate Social Responsibility
Bibliography
Website:
www.wikipedia.org
Search engines: Google.
Books Referred:
Corporate social responsibility- Philip Kotler, Nancy Lee.
Corporate social responsibility- Gower publishing limited.
Business Environment- Francis Cherunilam.