1

A RESEARCH REPORT

ON

Study of Corporate Social Responsibility in Banking Sectors

IN PARTIAL FULFILMENT FOR MASTER IN BUSINESS ADMINISTRATION

Academic session: 2012-13

Gr. Noida

UNDER THE GUIDANCE OF SUBMITTED BY

Garima Madan Ujjwal Kumar

FACULTY MBA133

MIMT 1115270133

SECTION – B

]

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DECLARATION

I hereby declare that the thesis entitled Study of Corporate Social Responsibility in

Banking Sectors for the degree of M.B.A in FINANCE is the original record of work carried

out by me during the period of my perusal of the course.

Place: GreteNoida

Date: Signature of the Candidate

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TABLE OF CONTENT

1. Declaration

2. Acknowledgement

3. Executive Summary

4. Chapter-1: Introduction

5. Chapter-2: Literature Review

6. Chapter-3: Research Methodology

7. Chapter-4: Analysis

8. Chapter-5: Findings and Suggestions

9. Chapter-6: Conclusions and Recommendations

10. Bibliography

11. Annexure and Appendices

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ACKNOWLEDGEMENT

Pursuit of knowledge when the subject is as vast and dynamic as Corporate Social

Responsibility (CSR) is an enriching experience by itself. The project was very challenging to

me and initially it seemed quite elaborate to tackle and make the appropriate analysis. But

the pursuit was facilitated by a host of people whom I found too willing to help. I derived a lot

of assistance from my place of work, study and home. Any emotion of thanks and gratitude

would be too little for me to make any justification of the help I received.

My very special thanks and regards are owed to Garima Madam, who agreed to be my guide

throughout this endeavor. Despite of his very busy schedule, he kept a regular check on my

progress, along with his helping attitude and constant encouragement towards my project.

I owe my heartfelt thanks and regards to Dr. A.K. Singhal, who was always ready to answer

the queries at any time and was a major guiding force for the timely completion of the

research.

UJJWAL KUMAR

1115270 133

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RESEARCH OBJECTIVES

The objectives of the study are:

To study the various CSR practices followed by different banks.

The project focuses on banks with direct activities. Several criteria were relevant for

the selection of sector:

A variety of CSR issues that are expected to be relevant for the bank in question (in

order to get deeper insight into the CSR aspects relevant for the Indian banking

context).

The importance of the bank in Indian market.

The perception of the CSR behavior of the company in general.

To identify the perceptions of the stakeholders to CSR in its process of achieving

sustainable development.

Analyze to what extent banks with direct activities, a supply chain or investments

have developed a policy on Corporate Social Responsibility (CSR),

To identify good practices and potential bottlenecks in the implementation of such

policy and to support banks in finding practical solutions.

The roles that different actors could play in the implementation of a CSR policy.

The project focuses on positive examples and on (potential) bottlenecks and dilemmas which

banks (may) encounter when they implement CSR principles in their business. The project

aims to make the CSR operational by looking at the practical implications

This can give insight to what extent banks can implement the standards of the CSR and where

other actors such as governments and NGOs can or should play a role. As benchmarking is

not an objective of this research, the findings on the particular banks have been kept

anonymous.

This research intends to identify practical solutions, e.g. by means of good practices. This

approach is chosen to shed light on the Indian perspective on CSR in terms of practices of

selected banks which have provided insight into such practices.

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EXECUTIVE SUMMARY

Considering the pace with which the changes occur in the world today, it is important for the

banks to integrate with the rest of the sectors through flexibility, adaptability and quickness.

Business leaders throughout the world are under increasing pressure to make socially responsible

decisions even as they comply with legal requirements and generate sufficient profits.

Corporate social responsibility (CSR) decisions demand new skills: managers must understand

not only the responsibilities demanded of all firms, but also the opportunities they introduce.

While the marketplace does not reward all good deeds, thoughtful strategies can increase the

likelihood that firms increase their value while creating positive outcomes for society.

In this essay, we review the complexity of the issue, the opportunities CSR presents, and one

approach to identifying CSR opportunities.

In recent times, the issue of corporate social responsibility (CSR) has been given a lot of attention

by various stakeholders. CSR is not about charity, but that it belongs to the core business of a

company and therefore should be an integral part of doing business. Banks are under increasing

pressure from society to take their social responsibility. This is especially so if it concerns banks

with a business relation in a developing country, since these banks are more confronted with CSR

issues.

CSR is a container concept which encompasses many different ecological, social and economic

issues.

Corporate Social Responsibility in Banking and Financial Institutions

The world we live in today is more connected than ever before. The global village that has

emerged as a result of the Information and Communication Technology revolution has redefined

the way we interact and communicate with each other. The government, businesses and society

are much more interactive than in the past. Corporations are more aware of their role towards the

society. They are responsible bodies that feel a sense of duty towards commonwealth and the

environment. This has come with a growing realization that they, as an integral part of the

society, can contribute towards the empowerment and upliftment of the society. Also consumers

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and citizens are increasingly playing an important role by their interaction with governments and

businesses. This is the foundation thought behind the tripartite golden handshake between—

businesses, civil society and governments.

As business has become increasingly global, the values and principles that guide managers are no

longer local. Social activists, investors, accountants, workers, politicians, environmentalists,

regulators, and customers in each and every location work to influence management‘s decisions.

Normal business practices in one location can be objectionable to customers and investors in

other areas, while labor and environmental principles in one region appear to be protectionist to

businesses in other regions.1 Companies would like to do the right thing but seldom have reliable

means to choose a direction or level of investment.

For most companies, CSR presents complex problems and great opportunities. CSR allows

companies to engage in sophisticated non market strategies that can influence customers,

regulators, and employees. It also can reveal firm weaknesses. There are no global laws. There is

no single right way. Firms must distinguish the legitimate demands of multiple governments,

assess the claims of diverse groups, and identify the significant problems they can best resolve.

What Counts?

Many researchers have looked for the elusive factor that will turn a firm‘s good deeds into profits.

The right answer to the question ―Does doing result in doing well?‖ is ―It depends.‖ Firms that

select a specific type of social or environmental opportunity consistent with their identity and

strategy will reap rewards. Firms which make choices based on the most recent request for help or

on a particular manager‘s enthusiasm will likely not.

The most critical factors in the success of any firm‘s CSR strategy are not about CSR. A

successful CSR strategy builds on basics.

First, a firm must be viable in order to create an effective, valuable approach to society and the

environment. It is unlikely that a good CSR strategy will reverse bad business decisions.

Second, firms must meet their legal and regulatory commitments. Compliance is essential.

Enron‘s ethics policies were widely admired, but the company was nevertheless in violation of

the law.

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Third, firms must meet basic expectations of their industry and the communities in which they

operate. A company known for spilling toxic effluent is unlikely to make gains from sponsoring a

children‘s sports team.

Different organizations recommend that firms ask their employees, suppliers, and customers what

kind of CSR strategy would be optimal. Engagement with these groups helps managers identify

their best strategies in many settings. This is consistent with recent economic theory that makes

the case for strategic approaches not only to financial gains, but also to social output.

Meeting the demands of disparate social agents disperses the energy and creativity of the firm.

Deliberate, strategic choices maximize social effectiveness and firm opportunities.

Financial institutions can choose to play another, powerful role: increasingly often, they

determine whether new initiatives carry more social and environmental risks than

potential economic benefits. Good analysts will be able to see the ways in which future growth

prospects are enhanced or reduced by the social and environmental characteristics of the firms

and projects they finance.

Financial analysts and investors now recognize that a firm‘s ability to work with indigenous

people and their property rights is critical to the success of new mineral extraction

projects. Corporate finance professionals in banks like HSBC know that their sustainability

principles must be factored into their investment decisions and growth forecasts.The special role

of the financial industry is apparent in the appearance of two CSR codes focused solely on

finance. The Equator Principles and Principles for Responsible Investment both offer guidance to

finance professionals who are faced with projects of great potential value and risk. Financial

professionals who identify a broader set of risks and rewards will be more effective.

The best business opportunities lie in the area where a firm‘s unique resources and skills match

social and environmental gaps or needs. Competitive advantage does not emerge from

compliance with the law, from tackling systemic issues single-handedly, or from meeting the

demands of civil society. Each of those must be addressed as distinct ways of doing well.

Compliance issues are the most straightforward: Noncompliance is too risky for most

businesses.

Choice issues are more complex. What are the social norms? Are there any rankings or

indices that give firms information about their competitive position with regard to the

issues? What kind of identity does the firm wish to project? What can it afford?

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Structural issues demand the alignment of firms, governments, industries, and/or civil

groupings. Each structural problem identified demands the formation of a working group

or coalition. A firm can then ask if the potential benefit to a resolution warrants

participation in such a group.

Finally, strategic opportunities can be evaluated for their potential benefit to the

reputation, position, or profits of a firm. Their implementation can be assessed through the

same processes as are used for other business strategies.

For our research purpose, Corporate Social Responsibility (CSR) can be defined as the

"economic, legal, ethical, and discretionary expectations that society has of organizations at a

given point in time". The concept of corporate social responsibility means that organizations

have moral, ethical, and philanthropic responsibilities in addition to their responsibilities to

earn a fair return for investors and comply with the law. A traditional view of the corporation

suggests that its primary, if not sole, responsibility is to its owners, or stockholders. However,

CSR requires organizations to adopt a broader view of its responsibilities that includes not

only stockholders, but many other constituencies as well, including employees, suppliers,

customers, the local community, state, and federal governments, environmental groups, and

other special interest groups.

The aim of this research is to study the various CSR practices followed by different Indian

banks and to identify the perceptions of the stakeholders to CSR in its process of achieving

sustainable development.

Based on the literature review on the topic Corporate Social Responsibility in general, the

various CSR practices followed by different Indian banks were studied, which comprise the

first part of the thesis. A positive approach was chosen and self-administered questionnaire

has been developed. These questionnaires were given to the employees in different Indian

banks. The detailed discussion of the research method can be found in the third chapter.

Publicly available secondary data from books, articles and journals, websites and primary data

is used for the research. Because the data obtained this way, in both the cases are based on

official company disclosures, for which company are held legally liable, it is assumed that the

data point obtained from this way is just as accurate as from having received it as part of the

filled –questionnaire.

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The latter part of the thesis covers up the summary of findings and discussions of the data

analyzed.

The last part of the thesis includes conclusions, suggestions and study implications along with

the suitable articles put as appendices.

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CHAPTER 1

INTRODUCTION

1.1 CORPORATE SOCIAL RESPONSIBILITY

CSR can be described as an approach by which a company does the following:

Recognizes that its activities have a wider impact on the society in which it operates, and

that developments in society in turn impact on its ability to pursue its business

sustainable.

Actively manages the economic, social, environmental and human rights impact of its

activities both locally and across the world, basing these on principles which reflect both

international values and the organization‘s own values (ethics), reaping benefits for both

its own operations and reputation as well as the communities in which it operates.

Seeks to achieve these benefits by working closely with other groups and organizations –

local communities, civil society groups, other businesses and home and host

governments.

CSR is generally seen as the business contribution to sustainable development which has been

defined as "development that meets the needs of the present without compromising the ability

of future generations to meet their own needs", and is generally understood as focusing on

how the Corporate Social Responsibility is the concept according to which the corporation

has to undertake the responsibility of their activities affecting the society at large. The

economic globalization resulted in a demand for corporations to play a central role in efforts

to eliminate poverty, achieve equitable and accountable systems of governance and ensure

environmental security. There was a need to make business a part of society and to maximize

positive benefits that business endeavor can bring to human and environmental well being and

to minimize the harmful effects of irresponsible business. The scheme which was developed

from this concern is known as the ―Corporate Social Responsibility‖.

In India, concept of three bottom lines has been introduced in this regard.

The growth in public expectations and the commitment to its stakeholders in its

business operations makes the banks compulsory to implement CSR.

The concept of corporate social responsibility, linked with the sustainability of these

operations is recognized not only as a necessity but also for developing systems to

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manage implementation and systematically assess and report on progress relative to

those commitments.

Socially responsible investing is required to be practiced by the banks, which is about

combining the urge to make money with social and ethical objectives. Thus, socially

responsible investors aim to make banks more accountable not only to shareholders

and employees but also to all those affected by its operations, including future

generations.

The degradation of environment and the environmental hazards like global warming, increase

in the pollution due to various acts of the banks due to industrial and factory

Work increasing day by day. There is a need to introduce methods to keep a check on these

activities of the banks.

Apart from environmental concern, various other activities can be taken down for the benefit

of the society.

This check and support mechanism can also be initiated by the financial sector which plays

indispensable role in promotion and working of the corporate sector.

Apart from various banks, the financial institutions should also carry the social responsibility.

The need for sustainable developmental efforts by financial institutions in India assumes

urgency and banks, in particular, can help contribute to this effort by playing a meaningful

role. The financial institutions have realized their responsibility and they are practicing it also.

Initiatives are taken in international level; the best example can be the introduction of Equator

principle by FCI.

Various banks like HDFC, SBI, ICICI are showing concern in child welfare, poor welfare and

employee benefit schemes.

Banks like HDFC, SBI, ICICI, Standard Chartered Bank are now active in a host of areas

including primary education, women empowerment, rehabilitation of poor, and aged

1.2 NEED OF CORPORATE SOCIAL RESPONSIBILITY

The concept of corporate social responsibility (CSR) is not new to Indian banks. However,

what is new is the way it has caught on with banks in India and the direct involvement of

employees in implementation of these projects. Dedicated departments in most banks are

looking into much more than just funding or getting involved in one-time projects.

CSR activities have their advantages. The benefits are in terms of building a positive image,

encouraging social involvement of employees, which in turn develops a sense of loyalty for

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the organization. CSR activities help bond employees as a team and with the organization,

which, in turn, helps in creating a dedicated workforce that is proud of its employer.

1.3 RELEVANCE OF THE TOPIC STUDIED

Corporate social responsibility (CSR) is a concept that suggests that commercial corporations

have a duty of care to all of their stakeholders in all aspects of their business operations.

CSR is closely linked with the principles of Sustainable Development which argue that

enterprises should be obliged to make decisions based not only on financial/economic factors

(e.g. Profits, Return on Investment, dividend payments etc.) but also on the social,

environmental and other consequences of their activities.

The benefits of CSR to businesses vary depending on the nature of the enterprise, and are

difficult to quantify, though there is a large body of literature exhorting business to adopt

measures beyond financial ones (e.g., Deming's Fourteen Points, balanced scorecards).

Orlizty, Schmidt, and Rynes found a correlation between social/environmental performance

and financial performance. However, businesses may not be looking at short-run financial

returns when developing their CSR strategy.

The definition of CSR used within business can vary from the strict "stakeholder impacts"

definition and will often include charitable efforts and volunteering. CSR may be based

within the human resources, business development or PR departments of a company, or may

be given a separate unit reporting to the CEO or in some cases directly to the board.

Progressive banks do not have a CSR department or function at all -- the concept is so

ingrained in the company itself that employees implement the company's values directly.

Role of Corporate Social Responsibility in

Human Resource Management

Corporate Social Responsibility can be an important aid to recruitment and retention,

particularly within the competitive graduate student market. Potential recruits are increasingly

likely to ask about a firm's CSR policy during an interview and having a comprehensive

policy can give an advantage. CSR can also help to build a "feel good" atmosphere among

existing staff, particularly when they can become involved through payroll giving, fundraising

activities or community volunteering.

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Risk management

Managing risk is a central part of many corporate strategies. Reputations that take decades to

build up can be ruined in hours through incidents such as corruption scandals or

environmental accidents. These events can also draw unwanted attention from regulators,

courts, governments and media. Building a genuine culture of 'doing the right thing' within a

corporation can offset these risks.

Brand differentiation

In crowded marketplaces banks strive for 'X Factors' which can separate them from the

competition in the minds of consumers. Several major banks, such as The Co-operative Group

and The Body Shop are built on ethical values. Banks being the major service organizations

can benefit a lot from building a reputation for integrity and best practice.

License to operate

Banks and other corporations are keen to avoid interference in their business through taxation

or regulations. By taking substantive voluntary steps they can persuade governments and the

wider public that they are taking current issues like health and safety, diversity or the

environment seriously and so avoid intervention. This also applies to firms seeking to justify

eye-catching profits and high levels of boardroom pay. Those operating away from their home

country can make sure they stay welcome by being good corporate citizens with respect to

labor standards and impacts on the environment.

Critics of CSR will attribute other business motives, which the banks would dispute. For

example, some believe that CSR programmes are often undertaken in an effort to distract the

public from the ethical questions posed by their core operations. Some that have been accused

of this motivation include British American Tobacco (BAT) which produces major CSR

reports and the petroleum giant BP which is well known for its high profile advertising

campaigns on environmental aspects of their operations.

The significance of CSR is a matter of debate today. The critical issues in the debate

on CSR centers around the definition of the boundaries or the extent of the activities, the

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scope for evaluation or setting standards, as well as the scope and limitations of voluntary

action, through a management initiative.

The CSR is implemented for the benefit of the stakeholders. But the benefits that are being

arisen from the CSR cannot be implemented without neglecting it disadvantages.

CONS of CSR

Shareholders put their risk capital in a Joint Stock Company (or business) and therefore,

banks should be managed in the interest of the owners or the shareholders.

This primacy of treatment given to the shareholders is being justified on the grounds of

ownership and shareholding. It is felt that maximization of profits or the bottom line should

be the ultimate objective of the management.

Developing corporations argue that practicing and following CSR is matter of concern for

banks having big business with lot of resources at their disposal. It is argued that CSR is the

responsibility of the politicians. It‘s not business role to get involved. Business has

traditionally been beyond morality and public policy.

1.4:INDIAN FINANCIAL SETUP AND THE CONCEPT OF CSR

Financial sector is considered to be a very indispensable part of our country. Financial

institutions act as a medium for the transfer of resources from net savers to net borrowers. It is

a major source of long- term funds of the economy. The Government of India, in order to

provide adequate supply of credit to various sectors of the economy, has evolved a well

developed structure of financial institutions in the country. At the national level, they provide

long and medium term loans at reasonable rates of interest. They subscribe to the debenture

issues of banks, underwrite public issue of shares, guarantee loans and deferred payments, etc.

1.5:IMPLEMENTATION OF CSR BY INDIAN FINANCIAL INSTITUTIONS

In the Indian context, very little systematic documentation of CSR initiatives is available so

far. One such study was done by Business Community Foundation for TERI (The Energy and

Resources Institute).

Some of the findings of the study are as follows:–

(1) Serious and committed approach to CSR is increasing its reach, but there is vast

ground yet to be covered.

(2) Collaboration work between banks & NGOs is increasing.

(3) Corporate are realizing that ―Good for business is good business‖.

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(4) Most interventions so far philanthropic in nature, rather than strategic.

Some guidelines as plan of action are proposed by the Reserve Bank of India in this aspect.

The substantial financing is said to be increased. Sustainable finance is financing that places

importance on the environmental and social consequences of projects and financial products,

rather than just the economic impact. The financial institutions have to see the environmental

and social sustainability of the projects of the company, coming for financing. Social

Responsibility of the banks and firms should be acknowledged.

In the financial sector too there is a visible trend to promote environmentally and socially

responsible lending and investment in emerging markets. Banks are beginning to recognize

that they have a social responsibility to fulfill as they emerge from the shadow of traditional

banking. Responsible banking is the new approach born out of the new market realities.

Banks need to examine the effects of their lending and investment decisions. Banking and

finances immediate environmental and social impacts are relatively low because most of those

impacts are delivered through the activities of other businesses that rely on financial

institutions – the businesses in a loan or investment portfolio. However, despite the relatively

indirect nature of their environmental and social impacts, banks need to examine the effects of

their lending and investment decisions. Incorporating environmental and social criteria into

business decision-making can reduce the impacts of operating activities. Therefore, financial

institutions that implement strategies incorporating environmental and social issues in lending

and investment should be able to better assess, mitigate, document and monitor risks

associated with financing and investment. Such strategies can be implemented by financial

institutions by adopting the approach of sustainable development. Banks should make sure

that the banks for which they are financing or investing incur the risks that the impacts due to

their anti-environmental acts create can be legal, financial, and reputational, and banks

themselves are increasingly accountable for the effects their portfolios have on the

environment and society. The costs that can be incurred by a business operating without

regard to environmental and social issues include:

• Pollution clean up costs

• Fines

• increased waste handling costs

• Costs from damaged assets with reduced value

• Legal claims

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• Regulatory delays

• reduced public regard, and reduced sales

The risks that often get transferred to financial institutions include:

• increased loan defaults

• decreased value of investment and loss of collateral due to decreased asset values

• Liability for damages arising from negligent investment advice

• Loss of reputation and standing as a result of association with polluting businesses

As an important player in the Indian economy, the Banks realize that its role should extend

beyond the commercial sector to include the social sector as well.

It, therefore, aims to participate in the all round development of the country by focusing on

some of its fundamental needs. The Bank seeks to perform this role primarily as a funding

agency, through a dedicated not-for-profit group, the Social Initiatives Group (SIG).

ICICI Bank has joined hands with NGOs to reach out to children in ten states helping them

have better access to education;

As a large participant in the financial system, it lies in the longer-term interests of the Bank to

actively contribute in bringing the above to fruition.

The financial sector seeks in this regard, to improve the poorer section of the country so as to

participate in socioeconomic processes.

The group seeks to achieve its mission by supporting initiatives that are -

(1) Cost effective;

(2) Measurable;

(3) Capable of large-scale replication and

(4) Have the potential for both near and long-term impact.

In pursuit of its goals, the SIG seeks to work actively with research agencies, Non-

Governmental Organizations (NGOs), corporate, government departments, local stakeholders

and international organizations. It should also be noted that the group believes modern

technologies; particularly Information and Communication Technologies (ICT) can prove to

be important facilitators if used appropriately. Community Services Banking is one of the

instruments through which, the bank plays, the role of a responsible and responsive corporate

citizen.

The Bank was among the first to accept, as part of its corporate philosophy, that human and

financial resources at their command should be mobilized in discharging the social role. The

two dimensions of their social role are:

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A) The Bank as a corporate citizen, with resources at its command and the benefits it derives

from operating in the society in general, owes a solemn duty to the less fortunate and under-

privileged members of the same society.

B) Another dimension is the contribution the staff members are expected to make by

understanding the urges and aspirations of the public around them.

The concept of ―Community Service Banking‖ (earlier known as Innovative Banking) is

Australia's first and specialist banking service exclusively for not-for-profit organisations,

their staff and community sector enterprises; refer http://www.csbanking.com.au/. But now

this has been widely used by Indian banks also.

PROBLEMS IN IMPLEMENTATION OF CSR BY FINANCIAL

INSTITUTIONS

Main problems or disadvantages of corporate social responsibility with regard to corporations

are same with that of banks or financial institutions as well. Many-a-times CSR is practiced

by the banks only to make their reputation good and so that more and more people chose them

to invest their money.

There can also be problem with regard to the follow up of the Equator principles. These

principles require the mutual compliance of the host country laws with the IFC or World

Bank standards.

In India the environmental aspects of project finance deals are governed primarily by

environmental legislation of the Ministry of Environment and Forestry (MoEF) and the

Central Pollution Control Board (CPCB).A project developer is required by regulation to

undertake an Environment Impact Assessment (EIA) in order to obtain Environmental

Clearance, which is the major prerequisite for starting projects and thus is demanded by banks

in all project finance deals in India. For the project approval, the National Environmental

Policy and a set of Acts, Rules and Notifications, related to water pollution, air pollution,

hazardous substances management, eco-sensitive zones and environment protection are to be

followed. The project is to approved only when it passes various clearance requirements.

The standards are set by the Central Pollution Control Board of India. The regulatory

authorities (Ministry of Environment & Forest and State Level Impact Assessment Authority)

are responsible for monitoring the compliance of the project activities. Indian regulations are

very specific and provide detailed accounts of the activities to be carried out, the procedures.

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There are detailed and unambiguous laws to be complied with, but the problem is these laws

are not complied with by the authorities in a responsible way. The main problem is the

corruption and money-mindedness of the people. Although the process appears sound, there

are loopholes in implementation.

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CHAPTER-2

LITERATURE REVIEW

2.1 INTRODUCTION

Responsible Business (what some call Corporate Social Responsibility, CSR, Sustainability or

good Corporate Citizenship) is increasingly seen as just commonsense good business, for

larger banks around the world. Some refer to a commitment to a ―triple bottom line‖ which

measures results in terms of People, Profit and Planet; or being a good Corporate Citizen. In

essence, we are talking about a business which is seeking to minimize its negative

environmental and social impacts and to maximize its positive impacts. Negative impacts

might include: a poor work environment (bullying, favoritism, high accident rates etc) or

undertaking hazardous activities near a residential area. Positive impacts could include:

incorporating energy efficiency into the design of new products and buildings; reducing

excess packaging; ensuring that people of any faith or background are comfortable working in

the business.

It is just as relevant for smaller firms too. Nowadays, for businesses large and small, the issue

is less ―why do it?‖ and much more about ―How?‖ How to integrate responsible business

practice, so that, it is built-in to purpose and strategy rather than, being a bolt-on to business

operations.

2.2WHAT IS CORPORATE SOCIAL RESPONSIBILITY?

CSR is the acknowledgement by banks that they should be accountable not only for their

financial performance, but for the impact of their activities on society and/or the environment.

Discussions surrounding the concept are still at an evolutionary stage, although the principles

of CSR have long been part of business strategy.

Business is already accountable for its activities over the diverse strands that now come under

the 'CSR' umbrella, such as human resources and environmental issues, sustainable

development, waste management, health and safety practices, through a wide range of

existing guidelines at the national, EU and global levels. But it is important to distinguish

between these base-line standards and CSR activity, which is voluntary, business-driven and

often goes well beyond what is required by legislation.

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Your business doesn‘t exist in isolation, simply as a way of making money. Your employees

depend on your business. Customers, supplies and the local community are all affected by you

and what you do. Your products, and the way you make them, have an impact on the

environment.

Corporate Social Responsibility takes all this into account. It isn‘t about being ‗right on‘ or

mounting an expensive publicity exercise. It simply means taking a responsible attitude, and

following simple principles that apply whatever the size of a business.

Every business should be interested in CSR. It‘s a win-win situation, society benefits and so

does the business. For example, reducing waste, helps the environment, cuts the material costs

and makes the products and services attractive to ‗green‘ or ethically driven consumers.

Treating customers fairly makes them want to do business with the organization.

Corporate social responsibility (CSR) is also often referred to as business responsibility and

an organization‘s action on environmental, ethical, social and economic issues.

CSR can be described as an approach by which a company does the following:

Recognizes that its activities have a wider impact on the society in which it operates, and

that developments in society in turn impact on its ability to pursue its business

sustainable.

Actively manages the economic, social, environmental and human rights impact of its

activities both locally and across the world, basing these on principles which reflect both

international values and the organizations own values (ethics), reaping benefits for both

its own operations and reputation as well as the communities in which it operates.

Seeks to achieve these benefits by working closely with other groups and organizations –

local communities, civil society groups, other businesses and home and host

governments.

Corporate social responsibility is necessarily an evolving term that does not have a standard

definition or a fully recognized set of specific criteria. With the understanding that businesses

play a key role on job and wealth creation in society, CSR is generally understood to be the

way a company achieves a balance or integration of economic, environmental, and social

imperatives while at the same time addressing shareholder and stakeholder expectations. CSR

is generally accepted as applying to firms wherever they operate in the domestic and global

economy. The way businesses engage/involve the shareholders, employees, customers,

suppliers, governments, non-governmental organizations, international organizations, and

other stakeholders is usually a key feature of the concept. While business compliance with

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laws and regulations on social, environmental and economic objectives set the official level of

CSR performance, CSR is often understood as involving the private sector commitments and

activities that extend beyond this foundation of compliance with laws.

From a progressive business perspective, CSR usually involves focusing on new opportunities

as a way to respond to interrelated economic, societal and environmental demands in the

marketplace. Many firms believe that this focus provides a clear competitive advantage and

stimulates corporate innovation.

CSR is generally seen as the business contribution to sustainable development which has been

defined as "development that meets the needs of the present without compromising the ability

of future generations to meet their own needs", and is generally understood as focusing on

how to achieve the integration of economic, environmental, and social imperatives. CSR also

overlaps and often is synonymous with many features of other related concepts such as

corporate sustainability, corporate accountability, corporate responsibility, corporate

citizenship, corporate stewardship, etc.

CSR commitments and activities typically address aspects of a firm's behavior (including its

policies and practices) with respect to such key elements as; health and safety, environmental

protection, human rights, human resource management practices, corporate governance,

community development, and consumer protection, labor protection, supplier relations,

business ethics, and stakeholder rights.

Corporations are motivated to involve stakeholders in their decision-making and to address

societal challenges because today's stakeholders are increasingly aware of the importance and

impact of corporate decisions upon society and the environment. The stakeholders can reward

or punish corporations. Corporations can be motivated to change their corporate behavior in

response to the business case which a CSR approach potentially promises.

This includes:

1. stronger financial performance and profitability (e.g. through eco-efficiency),

2. improved accountability to and assessments from the investment community,

3. enhanced employee commitment,

23

2.3. Operational CSR aspects

Definition

The term ‗operational aspects‘ is included in the CSR. It refers to the following principles

which a company should adhere to in order to fulfill its social responsibility and to give

account about its practice:

• Development of CSR policy

• Supply chain responsibility

• Stakeholder involvement

• Transparency and reporting

• Independent verification

CSR is not a common term. One large company prefers sustainable development or

sustainable business. Several Indian banks talked about responsible business or Triple P

(People, Planet, and Profit).

According to SBI:

―Sustainable development implies optimizing financial position while not depleting social and

environmental aspects and CSR implies supporting issues related to children, women and

environment‖.

This company refers in its definition of CSR to community development. In the Western

context community development is often seen as charity. In the Indian context it is seen as a

large responsibility of a company, not only by stakeholders but also by the local Indian

management. The background of this is that stakeholders see the large western banks as

capitalist islands in a developing country. This position gives them a certain responsibility

towards the community.

2.5. Development of CSR policy

The operational CSR mentions several aspects which play a role in the development of a CSR

policy.

Assess CSR risks

This seems to be the first logical step to develop a CSR policy: banks should assess which

CSR risks are at stake with respect to the it‘s activities, its supply chain, the country and the

24

region where it operates. CSR assessment should also relate to the impact of the marketing of

the product on the local market.

Activities

It is not clear to what extent banks perform CSR impact assessments of their production

processes and their products, because not so much information is obtained on this issue. It

seems that banks that have not formulated a CSR policy have, among others, refrained from

doing so because they are not aware of, or possibly ignore, the CSR risks at stake. For banks

that do have a CSR policy the development is a continuous process, many times initiated by

public pressure or requirements of clients.

Several examples of good practice were found:

• One large MNC makes use of environmental, social, health impact assessments of the World

Bank. On the basis of these assessments recommendations are made on whether or not and

how to take part in a project.

• After negative publicity with respect to one of its financing activities a bank decided to

involve NGOs on CSR aspects because it needed external expertise. One could argue that it

should have involved these NGOs beforehand but this incident gave rise to develop a CSR

policy on other investment areas as well.

Environmental CSR

Environmental CSR aspects are categorized as follows:

General environmental principles, referring to

• Principle of preventive action

• Precautionary principle

• Rectify environmental damage at source

• Polluter pays principle

• Greater environmental responsibility

• Environmental friendly technologies

• Biodiversity

• Energy, material and water use

• Emissions, effluents and waste

.

2.6. Preservation of biodiversity

Within the context of this project preservation of biodiversity is defined as policy aiming at

the decrease of the direct and local caused impact on specific (geographic) defined

25

ecosystems. By means of this definition biodiversity is distinguished from so-called ―grey‖

environmental issues, such as litter or the greenhouse effect, even though there is an indirect

relationship between the green and grey issues. Furthermore, biodiversity affects the activities

of all banks in one way or another.

Biodiversity can be influenced both negatively and positively through the activities of banks.

Land conversion

One of the most important causes of loss of biodiversity is the conversion of natural areas into

production areas, e.g. conversion of forests into agriculture. Negative conversion should

therefore be an important issue in the CSR scans or risk/impact assessments of banks. Starting

point is the extent to which an area is influenced by human being, which can vary from a

pristine ecosystem to systems in which the presence of human beings is very dominant. When

a company analyses the impact on land conversion it should also look at the history of the

production area in order to prevent future conversion or to stimulate compensation for

negative land conversion. In that way positive conversion is also possible.

Land use

Another important issue is the amount of land or water which is necessary in order to produce

a certain amount of product (productivity/acre). The higher the productivity the less space is

required, which is better from the perspective of biodiversity. However, land use might

frustrate other biodiversity aspects; for example, biological production methods have a

positive impact on biodiversity from most perspectives, but usually require higher land use

than intensive agriculture, because the productivity per acre is lower. In the long run,

however, productivity of biological production methods might be higher, because soil does

not get degraded so fast. In order to optimize the overall performance in the field of

biodiversity a company needs to seek a balance between land use and habitat degradation.

Some banks give money to the banks involved with agriculture (food, seeds and tea)

make use of intensive systems, which may in the short term be positive from the

perspective of land use.

Industrial banks use land as well. There is a tendency to convert land from agricultural

land to industrial areas. The Indian government also promotes location of

Multinational banks in backward areas by means of all kinds of concessions.

26

Disturbance of flora and fauna

Plants and animals can be disturbed in their natural environment by noise, light, odor, hunting

or by human presence. This can result in disturbance of the eco-system. Banks can also

contribute to conservation of natural elements in production areas.

Over-exploitation

This is an issue when more animals and plants are harvested from the wild than can be

supplemented by means of reproduction.

While food processing and seed producing banks say they instruct farmers on the need to

rotate their crop, a research institute observed a negative impact on biodiversity, such as

decline of soil fertility and the fact that soil becomes prone to pest and diseases. Apparently

not enough measures are taken to countervail the negative influence on biodiversity.

Other issues

Banks might perform activities which are essential for the preservation of biodiversity. They

can also offer compensation if it is not possible to completely reduce the biodiversity impact

of its activities. Another more indirect contribution is possible by means of active

dissemination of knowledge on best practices.

2.7. Legislative framework

Also within the Indian legislation the focus is more on the use and exploitation of biological

resources rather than on their conservation.

According to a stakeholder there is a great need for a comprehensive biodiversity strategy and

action plan in order to assess the current state of India‘s biodiversity and develop

mechanisms, guidelines and concrete steps to implement this strategy.

2.3HOW AND WHY IS CSR RELEVANT?

As CSR is all about values and accountability then it is also about the behavior of your people

and the behavior of your suppliers. In this sense virtually everything that is found within the

HR remit - from training, recruitment, staff retention, policies, procedures and strategy -

involves CSR.

Traditionally HR and CSR have been led by the need for compliance and keeping up with

new laws on employment as well as environmental, ethical and social issues. Increasingly HR

27

managers are crucial to the delivery of training to deal with these issues in terms of

organizational objectives and strategy.

Equally important is the importance CSR has to recruitment: 75% of UK professionals take

social or ethical considerations into ac\count while changing employment. Whilst over half of

graduates will not work for banks they believe to be unethical.

Corporate governance is a board level hot topic - you only have to look at how much publicity

the Higgs report on the role of non-executive directors received – and it will continue to

develop, as there is increased recognition that how an organization is run is the key. This can

cover many areas such as financial integrity, transparency and accountability, leadership from

the board and being employer of choice.

Excellent responsibility management is central to the implementation of policies and

programmes. Having good corporate governance means, that, these areas are embedded in the

organization and deliver to the business and to stakeholder objectives, and are not just nice-to-

have. The HR manager has become central to this role in helping deliver culturally open and

transparent organizations where dialogue is celebrated not feared.

For a business being CSR compliant is also an exercise in future-proofing its business as risks

and opportunities are identified. Quite often changes lead to performance improvements such

as increased staff retention and customer satisfaction. Adding this value is one of the main

reasons why CSR is of increasing relevance to the HR manager.

CSR is a crosscutting topic under which numerous issues can be grouped including training

and education, capacity building, leadership, health and safety, working conditions, human

rights, stakeholder engagement and corporate governance. Large multi-national banks were

the first to identify CSR as a potential tool to improve performance and now through their

supply chain they are asking suppliers to comply with their standards.

Corporate social responsibility activities in most organizations are much more than a brand-

building effort.

CSR activities have their advantages. The benefits are in terms of building a positive image,

encouraging social involvement of employees, which in turn develops a sense of loyalty for

28

the organization. CSR activities help employees bond as a team, and with the organization,

which, in turn, helps in creating a dedicated workforce that is proud of its employer.

The trend is especially strong in Banks and IT banks with a young workforce that increasingly

feels that they would like to contribute to the cause of creating a better society. Most of these

banks are working on issues related to children and education. Voluntarism to them means

taking technology to the grassroots levels and to bridge the digital divide. Whether it is TCS‘s

Web-based solution for their adult literacy programmes or Kale Consultant‘s (an airlines and

banking verticals software maker) effort in creating a centralized data system on children for

adoption, CSR has proved its relevance.

With serious money and human resources involved how does it benefit the organization? It is

not uncommon to hear of rumors that in many cases no actual work was done and projects

were shown on paper to gain tax exemptions. Most organizations, however, vehemently deny

such allegations as funds are strictly dedicated to such projects and monitored by company

boards. CSR is increasingly becoming the part of corporate governance.

Yet another allegation is that CSR is just a brand-building exercise. Getting associated with a

cause might create an apparent impact, but that does not generate any tangible profits for the

organization. While it does help develop their brand and convey to the public that it is a

socially conscientious company, it is a natural fall out and not a deliberate attempt.

Canara Bank believes that organizations today cannot have a ‗how I can benefit attitude‘ as

employees are sensitive on such issues.

However, one of the biggest advantages of such activities is the creation of an internal brand

among employees. ―Employees feel a sense of pride when they are involved in such activities

which, in turn, help in retaining them.

Similarly, such activities also in a small way contribute towards image building,‖ says Ms.

Anchan Khanna, HR manager Kotak Bank. Besides, with hectic work schedules, these

activities help in de-stressing employees and create a much involved and a conscious person.

As Ms. Anchan Khanna, Senior HR Manager, Kotak Mahindra Bank says, ―Getting involved

in CSR is like an investment for us. There is no direct benefit out of it. But it shows the way

29

an organization is growing.‖ She does believe that such activities create a feeling of

credibility.

According to Punjab National Bank- at an individual level these initiatives help in leadership

and character building among employees and at the company level, social recognition. Many

feel that such activities help in creating a value system for the organization.

2.8 REPORTING AND VERIFICATION

Most enterprises engaging in CSR activities communicate to stakeholders and others in a

variety of ways, many of which have proved successful and beneficial. Reporting enhances

transparency and can be the basis for constructive dialogue with other parties. Some banks use

global reporting frameworks and a more limited number also use internal or external

verification to evaluate the implementation of their CSR policies. Verification and reporting

can be useful management tools, but they are not essential to CSR and the absence of such

procedures does not indicate the absence of good practice. Especially in the case of smaller

banks, verification and reporting can be burdensome, and the value they add has to be

balanced against their cost.

Attempts to harmonize reporting standards are likely to have limited impact because of the

diversity of enterprises and their CSR activities and the fact that banks have different target

audiences. Since each company is communicating with a unique audience, it is reasonable to

expect that CSR reports will reflect that diversity and contain different types of information

2.9 NATURE OF CSR CHALLENGES AND OPPORTUNITIES

There is increasing focus on both the private and public sectors to be proactive in the area of

CSR. Various challenges are emanating from consumers, shareholders, non-governmental

organizations, international organizations, and other stakeholders. These challenges are

increasingly recognized in public policy debates as well as in the marketplace by banks and

industry sector associations and they are frequently recognized as opportunities.

Stakeholders challenge corporations to play social responsibility roles - at both the domestic

and international levels. Challenges usually focus on one or more elements of CSR such as

environmental protection, health and safety, corporate governance, human resource

management practices, human rights, community development and consumer protection. In

30

many cases, the challenges are framed in an incremental way and on other occasions the

challenges are spelled out in a more comprehensive and overarching manner. The challenges

often call for voluntary actions by businesses to demonstrate responsible behavior and

effective responses to social and environmental problems - both in the domestic and

international contexts. The demands also call upon the public sector to reinforce corporate

leadership and to use other policy tools such as economic and regulatory instruments to

encourage CSR.

The challenges for action can differ considerably from one stakeholder group to another. For

example, the demands can range from a call for more disclosure of information to demands

for improved stakeholder involvement to requests for changes in management practices to

proposals for altering the relationships between company directors, business managers,

auditors, shareholders, debt holders, employees, suppliers, customers, community members,

and other stakeholders. Some of the challenges are oriented to the ways that businesses

manage their internal operations such as human resources management while others are

directed at the ways that a business interacts with the rest of the community and society (e.g.

human rights, consumers, and supplier relationships).

2.10 CSR TOOLS

Banks interested in advancing corporate social responsibility and in improving their social

and environmental performance as part of their business have a wide range of tools available

for application. Tools can vary widely in terms of objectives, scope, costs, and level of

formality, partnerships, extent of stakeholder involvement, and many other characteristics.

Tools can be applied to one or more of the planning, implementation, checking, and

improvement facets of corporate operations.

Businesses have options in how they can use the tools. For example, banks can use the tools

that have been developed by others or they can develop their own tools - either independently

or in partnership with other stakeholders.

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2.11 NEED FOR CSR

Business and CSR

Enterprises are an integral part of society, producing the goods, services and employment that

people need, thus stimulating economic prosperity and enhanced quality of life. Their primary

objective is to achieve an adequate return on the investment made in them, without which

they cannot survive and create new jobs.

Corporate social responsibility is a means by which enterprises affirm their principles and

values for themselves and for external organizations. Many aspects of CSR have been part of

business activity for a long time, well before the current debate began. In undertaking CSR,

enterprises add value to their business by, for example, responding to consumer expectations

and societal needs, attracting and retaining employees, while enhancing their brand and

reputation in the eyes of their customers and other stakeholders. CSR is thus closely linked to

competitive advantage. It involves the integration of the principles and values of the

enterprise in its internal methods and processes, as well as in its interaction with stakeholders

and others. The wide variety of ways in which banks implement CSR policies and initiatives

reflects the many different characteristics of the enterprises involved. Some enterprises go

even beyond their responsibilities and engage in such activities as new product development,

innovative pricing strategies, or philanthropic activities in order to provide vital support to

people in need.

The role of government

It sometimes appears that CSR is treated as a means to get enterprises to address a wide range

of issues in society that are the responsibility of other social actors, principally governments.

CSR can never replace the government‘s role in implementing and enforcing legislation. It is

vitally important that governments be effective in enforcing national legislation all through

their territories, creating a framework through which CSR can flourish. CSR should never be

considered as an alternative to good governance. Governments should continue to respect the

voluntary nature of CSR.

CSR is voluntary, flexible, and respects diversity

Enterprises, as corporate citizens, need to conduct themselves ethically. Like other citizens,

they have an obligation to respect the laws of the land. CSR has to remain a voluntary means

at the disposal of enterprises to go beyond compliance with national law to make a positive

32

contribution consistent with their role in society. In order for enterprises to engage in it in a

meaningful way, it is important

that they be allowed to fit CSR into their own particular culture, operational styles and needs.

Also, the extent to which individual enterprises engage in CSR will depend on their own

particular circumstances and the same expectations cannot be placed on every enterprise. CSR

should therefore remain voluntary and flexible. Issues of compliance should refer to respect

for national laws and regulations, and not to CSR.

The role of banks

Respect by enterprises for national laws and regulations is an obligation; CSR is no substitute

for it and cannot be incompatible with it. There is a wide range of CSR activities which banks

successfully engage in, and it would be of value to others, to share experiences in

implementing and reporting. Some banks define their CSR strategies in dialogue with external

partners, while others do not; in either case, the responsibility for those strategies remains

with the enterprise. In their relations with stakeholders such as workers‘ organizations and

NGOs, they should help their dialogue partners to understand the limitations of CSR and to

manage their expectations in that regard.

The role of national employers’ organizations

Employers‘ organizations are in a privileged position to affirm the content and the limits of

CSR to reflect the diversity of enterprise circumstances, and to lead business participation in

the CSR debate. They can also provide a forum for the debate on the part of enterprises and a

platform to exchange experience and good practice between enterprises. They are also in a

good position to communicate the positive aspects of CSR from a broad perspective to other

participants in the dialogue. This is important especially to those whose CSR focus is about

finding fault with enterprises. It may also be useful in certain circumstances for employers‘

organizations to assess, on behalf of their members, the representative ness of others who

engage in the debate and the legitimacy of their demands, and to communicate more actively

with the public in general, in order to achieve a better understanding of the role of the

business enterprise in society and the nature of CSR.

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2.12Social CSR aspects

Introduction

Within the context of this project we define social CSR aspects as follows:

• Human rights

• Labor

• Consumer protection

• Respect for national sovereignty and local communities

Human rights

The issue of human rights forms a dilemma for banks. Those banks with a code of conduct

have incorporated respect for human rights in it. They see their responsibility in this field

however limited by the legitimate role of business, meaning that banks should not interfere

with the politics of the (host) country.

Expectations of stakeholders

An Indian human rights organization attributes the a-political position of banks to their

economic interests. Banks are afraid that if they stand up against the government their

business operations will be negatively affected. According to this organization it is however

in the economic interest of these banks to speak out: security and productivity of the company

are affected by a continuation of social unrest in Gujarat, exports get affected, and an explicit

position can have a positive rub-off on public perceptions.

―Therefore banks should maximize profits without compromising on issues like peace and

justice.‖ (NGO)

Role for governments

Banks presume a large role for governments and international institutions. This was

demonstrated by a bank which indicated that it cannot define in advance what country or

region cannot be financed.

34

Sector specific findings

Human rights seem to be mainly a concern for the banking sector and banks which activities

have a large impact on local communities, like mining activities. Well-known large

Multinational banks are more confronted with human rights issues than smaller banks.

Labour

General

All banks pay attention to CSR aspects related to labor, but often selectively. Large

Multinational banks have incorporated specific aspects into their code of conduct. The Indian

banks follow to a large extent the policy of the mother company, with the exception that local

standards are used.

Right to organize

Although all banks acknowledge the right of their employees to organize, they seem less

eager in the Indian context. Several Indian stakeholders mentioned that trade unions in India

are not fully independent and are closely affiliated to political parties.

Consumer protection Safety

In general, banks pay a lot of attention to product safety and quality in order to fulfil

requirements of their buyers. Product safety is ensured through the supply chain, by means of

audits and training.

Right to information

Information towards consumers seems to be mainly focused on product information and to a

much lesser extent on processes.

Only one code of conduct explicitly mentioned transparency to customers and society on

products and processes.

The impact of corporate Social Responsibility o the cost of Bank Loans

How do financial markets view socially responsible companies? Among financial economists,

the accepted view of the firm has managers working to maximize the utility of the

shareholders. To the extent that the interests of other stakeholders are considered, the goal

must be shareholder wealth maximization. Classical finance theorists remain steadfast in their

35

belief that if corporate social responsibility (hereafter CSR) initiatives do not maximize firm

value, they represent a costly diversion of scarce firm resources. The traditional shareholder

view recognizes that the unfettered pursuit of profit may result in negative externalities for

other constituents, but holds that the burden of dealing with these social issues is best left to

governments, who have both the means and the jurisdiction to deal with them.

However, the sovereignty of the shareholder view has come under attack from management

and strategy researchers who argue that the firm has multiple stakeholders, including

employees, suppliers, and the larger community in which it operates and that the proper goal

of management must be to meet the objectives of all stakeholder groups simultaneously.

According to advocates of the stakeholder view, corporate social responsibility goes beyond

simply staying within the rules of the game, and has been defined as ―actions that appear to

further some social good, beyond the interest of the firm and that which is required by law‖

(McWilliams and Segal (2001)). A recent survey by the Center for Corporate Citizenship at

Boston College finds the majority of U.S. business executives sharing this view. They

describe the role of management as balancing the goals of investors, employees, consumers,

communities and the environment. Recent work by Faleye et. al. (2006) documents the impact

of an additional stakeholder on corporate behaviour in the United States. They find labor

controlled firms deviate from strict shareholder wealth maximization, investing less in long

term assets and taking less risk. Support for the stakeholder view is even stronger outside of

the United States, with employees being the stakeholder group most often given explicit

consideration. In an attempt to reconcile CSR with the shareholder view of the firm,

stakeholder theorists suggest that pursuing multiple objectives need not be detrimental to

shareholder interests. In fact, they argue that satisfying multiple constituencies may actually

increase financial performance (e.g., Clarkson (1995); Waddock and Graves (1997)). This

argument posits that companies paying attention to issues of sustainability and social

responsibility are more likely to perform well in all dimensions, including financial

performance. If the company strives to satisfy all stakeholders, the stakeholders will

reciprocate by supporting the firm. Employees will be more loyal. Outside stakeholders will

be more supportive. Ultimately (although perhaps not immediately) this is manifest in

superior performance (Bansal (2005)). A related argument is that socially responsible

companies will be less prone to extreme negative events. By including environmental, social

and governance considerations into business plans, firms reduce the risk of financial fallout

that may accompany lapses (Buysse and Verbeke (2003)).The debate between the shareholder

36

and stakeholder views revolves around whether investments in CSR are value enhancing, or

whether they are examples of agency conflicts between managers and shareholders (Jensen

and Meckling (1976)). Barnea and Rubin (2005) suggest that CSR investments are motivated

by the desire of managers to burnish their reputations as responsible stewards of industry at

the expense of shareholders. This represents an agency cost of equity similar to the purchase

of unnecessary corporate jets (Yermack (2006)) or other excessive perquisite consumption.

First, we examine the role of CSR in a channel of the debt market. Second, our focus

exploits the unique role of banks as ―quasi-insiders‖ of the firm, to explore whether banks

discriminate between firms with low levels of CSR and those with higher levels. The banking

literature has long established that banks are fundamentally different from other stakeholders.

In their roles as delegated monitors (Diamond (1984); Fama (1985)), banks are given access

to information about the firm that may not be available to outsiders. They use this information

to make initial decisions about the ability of the firm to honor its loan obligations and, after

the loan agreement is struck, to monitor the firm to ensure repayment2

. Among the options

available to banks to mitigate risk are demands for security, shortened maturity, adding

covenants or increasing the spread charged on the loan to reflect the risk3

. Because bank

lenders are able to engage in more detailed monitoring as well as to tailor loan terms, they

may be more finely tuned to any impact of CSR than are public lenders. Of interest here is

whether loan contract terms, and in particular, loan spreads are influenced by the social

performance of the firm. Consistent with the loan pricing literature, our dependent variable is

the loan spread over LIBOR on private bank debt. There is some support for the monitoring

role of banks in the context of environmental issues. Aintablian et. al. (2004) find higher

positive abnormal returns when new bank loans are announced for firms with higher potential

for spills compared to those with more benign environmental profiles. While results are not

presented in that paper, one suspects that banks compensated for the risk inherent in lending

to companies with questionable environmental practices by charging higher yields.

The link between financial performance and social performance has been examined in both

the management and the finance literatures. The bulk of the finance literature views the

question through the lens of socially responsible investing (SRI). Often used interchangeably,

SRI and CSR are related but subtly different concepts. CSR researchers look for links

between social performance and financial performance at the firm level. SRI research focuses

on the returns to investing in portfolios of companies that are identified as socially responsible.

37

Following these international principles involves assessing the social and environmental

impact of large-scale project finance before granting the financing

BBVA announced that it was signing up to the ―Equator Principles‖, a set of social and

environmental guidelines promoted by the International Finance Corporation, a World Bank

organization, which governs how adopting banks must act in granting large-scale project finance,

with particular attention to emerging countries. BBVA is thus moving forward with its

comprehensive Corporate Social Responsibility strategy and the progressive expansion of its

business, with an innovative, global vision.

―Adoption of the Equator Principles is a very important step in BBVA's commitment to

harmoniously reconciling the economic, social and environmental aspects of its business, thus

advancing towards a sustainable model of development‖, according to Francisco González,

chairman of BBVA.

The Equator Principles, which are adopted voluntarily, have so far been accepted by 22 major

international financial institutions, which BBVA has now joined.

These institutions are as follows: ABN AMRO, Bank of America, Barclays, CIBC, Citigroup,

Credit Lyonnais, Credit Suisse, Dexia, Dresdner, EKF, HSBC, HVB, ING, KBC, MCC, Mizuho,

Rabbobank, Royal Bank of Canada, Standard Charter, Royal Bank of Scotland, West LB and

Westpac.

By adopting these principles, BBVA undertakes not to directly finance projects worth more than

$50 million that do not fulfill the social and environmental standards established by the

International Finance Corporation.

In order to do this, it must put all these kinds of projects through an environmental and social

assessment process before granting any financing. Once financing has been granted, BBVA

undertakes to monitor compliance with those standards.

BBVA is one of the most important international players in financing these kinds of projects. In

2003, it came third worldwide in Dealogic's classification of leading project finance banks, with

$2,124.14 million of financing and a 3.36% share of the world market.

BBVA: commitment to sustainable development

The social and environmental standards that must be taken into account are:

Categorizing the risk of a project in accordance with social and environmental impact

criteria in three categories: ―A‖ High Risk, ―B‖ Medium Risk and ―C‖ Low Risk.

38

Social and environmental assessment of projects classified as ―A‖ or ―B‖. The study must

deal with the social and environmental aspects of the project to the bank's satisfaction.

Drawing up an Environmental Management Plan for all Class A projects and those Class

B projects for which the bank deems it advisable. The Plan must take into account the

conclusions of the socio-environmental assessment and propose migration plans,

monitoring and management of social and environmental risks.

A plan to monitor social and environmental aspects. Financing contracts must include

clauses regarding compliance with social and environmental standards and the

Environmental Management Plan.

The socio-environmental assessment necessary in each project includes questions such as the

following:

Sustainable development and use of renewable natural resources.

Protection of health, cultural diversity and biodiversity, including endangered species and

sensitive ecosystems.

Particularly important risks.

Health and safety systems.

Systems to prevent fires and safety risks.

Socioeconomic impacts.

Land acquisition and usage systems.

Involuntary population resettlement.

Impact on indigenous communities and people.

Cumulative impact on previous and future projects.

Participation of affected sectors in designing and implementing the project.

Weighing up alternatives that are preferable in social and environmental terms.

Efficiency in production, transport and consumption of energy.

Prevention and control of pollution and optimizing waste management.

By adopting the Equator Principles, BBVA is reaffirming its commitment to being at the

forefront internationally in the financial sector concerning Corporate Social Responsibility, in

line with its firm desire to align itself with the needs of all of its targets – customers,

shareholders, employees and suppliers - and the societies in which it carries out its business.

39

The role that banks could and should play in addressing financial exclusion on the basis

of their corporate social responsibilities:

While some banks are undertaking voluntary initiatives in this regard, those initiatives are

unlikely to be enough to have any real impact on the problem, and some regulatory

intervention will be required to achieve both longevity and scale with respect to such

initiatives.

Financial exclusion

The term ‗financial exclusion‘ has been in use in the United Kingdom since at least the mid-

1990s, defined broadly as:

Those processes that prevent poor and disadvantaged social groups from gaining access to the

financial system. (Leyshon & Thrift 1995, p.312)

Financial exclusion subsequently came to be viewed in the U.K. as a lack of access to the

mainstream financial system, which includes banks, building societies and credit unions.

According to research undertaken in the U.K. in 1999, 7% of British households had no

access to mainstream financial products at all, and 29% of British households were found to

have lacked access to mainstream credit, although it was unclear how many of those

households sought or desired access to credit. Those who lacked access to credit fell into two

main groups: those with poor credit histories and those living on low incomes. It was found

that those living on low incomes were likely to turn to alternative or ‗fringe‘ credit providers

to meet their credit needs. (Kempson et al. 2000)

The lack of access by certain consumers to appropriate low cost, fair and safe financial

products and services from mainstream providers. (2004, p.58) This definition is interesting

for its emphasis on the cost and safety of available products, which largely distinguishes

between mainstream credit products and some alternative credit products such as payday

loans. Chant Link & Associates confirm the implications of financial exclusion in relation to

low-income people. Financial exclusion becomes of more concern in the community when it

applies to lower income consumers and/or those in financial hardship.

Why should banks have a role in addressing financial exclusion?

It is argued that banks, together with government and the community sector, have a key role

to play in addressing the lack of access to small amount, short-term credit for low income

40

people. Imposing such a role on banking corporations can be justified on the basis that banks,

as well as other corporations, have a responsibility beyond that owed to shareholders,

extending to a broader stakeholder group including members of the communities in which

they operate. This broader responsibility has been recognized by banks themselves, many of

whom publish annual corporate social responsibility reports, noting the importance of

corporate social responsibility (‗CSR‘) to their businesses.

Corporate Social Responsibility (CSR) includes the way we make business decisions, the

products and services we offer, our efforts to achieve an open and honest culture, the way we

manage the social, environmental and economic impacts of our business and our relationships

with our employees, customers and other key stakeholders.

CSR means conducting its business so that it meets its financial, social and environmental

responsibilities in an aligned way. At its core, it is simply about having a set of values and

behaviors that underpin its everyday activities, its transparency, its desire for fair dealings, its

treatment of people, behavior that involves voluntarily sacrificing profits, either by incurring

additional costs in the course of the company‘s production processes, or by making transfers

to non-shareholder groups out of the surplus thereby generated, in the belief that such

behavior will have consequences superior to those flowing from a policy of pure profit

maximization. (1993, p.261)

This goes beyond a concept of profit-maximization constrained only by law and regulatory

compliance, which was very much the limited approach to CSR taken by the Corporations

and Markets Advisory Committee which defined CSR in the following terms:

A company will be seen to be socially responsible if it operates in an open and accountable

manner, uses its resources for productive ends, complies with relevant regulatory

requirements and acknowledges and takes responsibility for the consequences of its actions.

(2006, p.iv)

This view of CSR contemplates companies giving consideration to social and public welfare

questions in making decisions, even where some profit-sacrifice is involved.

The ‗superior consequences‘ referred to may include strategic benefits to a corporation, for

example in terms of its public image and reputation, and in that sense may result in profit

41

return in the long-term, notwithstanding short-term profit sacrifice. Alternatively, those

superior outcomes may be more philanthropic, being socially beneficial but not necessarily of

strategic benefit to the corporation- although even then, reputational benefits to the

corporation might be shown.

On the face of it, banks seem to be the perfect vehicle for addressing this aspect of financial

exclusion given their clear financial intermediary role in society. This will often amount to a

strategic exercise of CSR, given the possible reputational benefitsof such activities. It may

therefore be profit- sacrificing in the short-term, but with long-term profit-making

possibilities.

Parkinson refers to the concept of ‗relational responsibility‘, whereby: companies should

sometimes forgo profits in order to reduce the harmful impact of their activities, to treat

beneficently groups with whom they deal, or to bring their resources to bear in helping solve

problems, [as having a certain] intuitive appeal. (1993, p.304)

Beyond intuitive appeal, however, this view of CSR can be justified under the banner of

‗stakeholder theory‘, as well as under a general argument that power and resources should

bring with them a corresponding social responsibility.

Whereas the shareholder theory of the corporation encourages a focus on profit making to

benefit corporate owners, stakeholder theory requires companies to make decisions having

regard to the effects of those decisions on those with a stake in the company, such as

suppliers, customers, employees, management and the local community (Post 2003). A key

justification given for shareholder theory is that of‘ economic efficiency‘, that is, that the

pursuit of profits for the benefit of shareholders is efficient in the sense of being financially

beneficial to society .

This argument cannot always be maintained, given that the pursuit of profit by one corporate

entity may in some circumstances be of little or no benefit to society at large, due to factors

such as externalities where the costs of a company‘s activities are borne by society and not the

company. Conversely, where a corporate entity acts specifically to benefit social welfare, for

example by providing just and adequate services to low income consumers, then financial

benefits such as a decreased reliance on social welfare, fewer bankruptcies and so forth, may

well follow. Another argument in favor of the shareholder theory of the corporation is that

shareholders are in a unique position requiring special protections, given that they are

42

property owners without management control over their property. It should be noted,

however, that the law often constrains the exercise of property rights and the uses to which

property can be put where that exercise of rights adversely affects others. There seems no

justification for shareholders to enjoy an unbridled right to have profits pursued for them at

cost to others in society. As Parkinson notes:

There is little to commend the view that shareholders should receive rewards that do not fully

reflect the social cost of the activities from which they are derived. Similarly, investors should

not be regarded as entitled to the proceeds of conduct that conflicts with generally accepted

non consequentiality social or moral values. (1993, pp.334-335)

This is not to say that the pursuit of profits and return to shareholders must be abandoned, but

rather that there needs to be a greater balance between the pursuit of profits and the use of

power and resources to achieve the ‗superior consequences‘ referred to above, for example

through contributing to a solution to a social or economic problem. This leads to argument

that such a contribution to the ‗social good‘ should be made by banking corporations on the

basis of their considerable power and resources. This argument is concerned with the

legitimacy of the exercise of private as opposed to democratically elected, or at least

constitutionally valid, state power. Within a free market, banks have the ability to determine

who will be the beneficiaries of access to certain financial services and products. This has

resulted in a lack of competition in the market for low income consumers, and consequently

inadequate services for those consumers (Connolly & Hajaj 2001). To the extent that this

results in those who can least afford it paying higher fees, such as bank default fees, and

higher costs for credit due to lack of access to mainstream credit sources, we have private

regulatory actors in the form of banks performing a redistributive role motivated by the

pursuit of profit.

The ‗power and responsibility‘ argument also relies upon an understanding that corporations

are only able or allowed to exist by concession of the state, usually through legislation, and

that historically the recognition of corporations depended upon a demonstrated public interest

or benefit being served by the corporation‘s existence.

It is argued that banking corporations should be required to exercise relational corporate

social responsibility, by providing access to safe and affordable small amount short-term

credit for low income consumers (either directly or by providing assistance to other entities

and organizations to undertake this work).

43

WORLD BANK

The World Bank is an international financial institute. With an aim of reducing poverty,

World Bank provides leveraged loans to poorer countries for capital programs. The World

Bank includes only two institutes and is different from the World Bank Group. The two

groups of the World Bank include International Bank for Reconstruction and Development

(IBRD) and International Development Association (IDA).

Nowadays, World Bank is focusing on the achievement of the Millennium Development

Goals (MDGs). It is lending at the interest rates that reveals a small mark up over its own

borrowings from capital markets. MDGs aim to lend ―middle income countries‖. IDA also

provides loans to low income countries with no or little access to international credit markets

at low or no interest. The first group of World Bank, International Bank for Reconstruction

and Development is a market based nonprofit organization. IBRD uses its high rating to lower

the interest rates on loan. On the other hand, International Development Association is

supported by periodic grants which are given by the member companies.

The major mission of the bank is to get development and to reduce poverty by aiding

development countries and their inhabitants. The bank provides them an environment for

investment, sustainable growth and jobs. Thus the bank promotes economic growth through

investment and also gives a chance to the poor to share the fruit of economic growth.

According to the World Bank, there are five key factors that are necessary for economic

growth. These factors help in the creation of business environment.

The first factor is to build capacity by educating government officials and strengthening

governments. The second factor is the creation of infrastructure by providing protection of

individuals and property rights, the honoring of contracts and installment of legal and judicial

systems for the establishment of business. Development of financial system is another

important key factor of economic growth. The strong systems support endeavors to finance

large corporate ventures from micro credit. Corruption is a big hurdle in economic growth so;

eradication of corruption is a big factor which supports economic growth of a country.

Research, training and consultancy also contribute in economic growth. The World Bank

offers opportunities to conduct training programs, for research on development issues and

consultancy.

44

In the world‘s financial markets, the funds for all the operations of bank are obtained through

the IBRD‘s sale of AAA-rated bonds. The IDA gets its funds from forty donor countries and

from loan repayments. These donor countries refill the funds of bank every three years.

The two basic types of loans which are offered by the bank include development policy loans

and investment loans. Social and economic developments projects are supported by the

investment loans. On the other hand, development policy loans support countries‘ policy and

institutional reforms by providing quick disbursing finance. IDA‘s credit cards are interest

free and IBRD offers loans with low interest rate.

The World Bank also provides analytical and advisory services to its member states. The bank

not only provides financial support but also provide such services which are required in many

under-developed countries for the implementation of the lasting economic and social

improvements. Moreover, the bank also provides necessary knowledge to the members to

resolve their development problems.

In conclusion, the World Bank is playing a very important in the world economy and it has

been always appeared as a helping hand for the developing and under-developed economies.

ING BANK

ING Bank is one of the good banks of the world. In the year 2007, the name of the bank was

changed from ING Bank to ING Direct. The bank has appeared as one of the best internet

banks in the world in 1997. Basically with the increasing internet media, people are relying

more on internet shopping and services. Therefore, the bank got the benefit and positioned

itself as one of the customer caring bank. ING Direct was founded in Canada when the five

major banks in the country were offering the similar services. The competition in the five

giant banks was very high in the Canadian market. However, ING Direct proved itself as one

of the best banks by offering low interest rates, banking fees and other service charges.

ING Direct easily captured its position in the Canadian market and Canadians also gave a

warm welcome to this bank. The bank was going smoothly and enjoying its serving to

millions of clients in Canada. Till 1999, ING Direct operated in its national borders however,

in 1999; ING Direct opened its branches in Spain and Australia. Once the bank operated

across its national border, it realized that it had the potential to expand further. Soon, ING

Direct started its operations in the United States and France. The further expansion of ING

45

Direct took place in 2001 when it started its operations in Italy. Finally ING Direct expanded

in the UK in 2003 and Austria in 2004.

In Canada, ING Direct is serving more than 1.4 million customers with 850 employees. The

assets of the bank are more than $22 billion. ING Direct has been providing best services to

its clients. In the last ten years, the bank has provided $2 billion interest to its clients however;

it has charges $0 from the customers for its charges and fees. Because of such offers, ING

Direct has been able to establish its position the banking industry.

ING Direct offers its clients convenience and access to its services for example, if you want to

open an account in the bank, you need to sign up online and your account will be opened.

There are different types of accounts offered by the bank and all kinds of accounts can be

opened online from the website of the bank. Before opening any accounts such as saving,

business, mortgage or mutual fund account, the rates are mentioned in front of the accounts;

therefore, you should not be worried about the rates. ING Direct has shown transparency in all

its products, processes and services.

The bank keeps on updating its customers regarding the latest news. For getting full benefits

from the services of the bank, you should check the movements of the loans and deposit

interest rates. The latest promos of the bank can also provide you good information about the

new offers of the bank. Most of the banks are not providing enough details to their customers

about the interest rate charges. However, ING Direct tells its clients the exact figures of the

interest rates. In other words, there are no hidden charges of the services of the bank. In the

―Accounts and Rates‖ section of the bank on the website, all rates and charges have been

mentioned. With this transparency and fairness, ING Direct is able to gain a huge profit in the

bank industry. Therefore, if you want to enjoy the services offered by the bank you should opt

for ING Direct.

HSBC

HSBC Bank is the largest international bank in the Middle East with 45 branches in the

United Arab Emirates, Oman, Bahrain, Qatar, Kuwait, Jordan, Lebanon, Pakistan and the

Palestinian Autonomous Area. HSBC Bank also has representative offices in Tehran, Iran and

Tripoli, Libya.

One of the latest endeavors of HSBC Bank is launching an international summer school in

collaboration with Mosaic. Mosaic is an integrated and thriving society for supporting

individuals in realizing their potential irrespective of their background. Mosaic is charitable

organization which was founded by His Royal Highness the Prince of Wales within his

46

charity Business in the Community for addressing the interests and issues of Muslim

community. HSBC Bank Middle East Limited has partnered this Summer School for aiming

to increase understanding of global social and environmental issues and for creating positive

relations between individuals from both the Muslim and non Muslim world. The International

Summer School has been founded in association with the United Kingdom Foreign and

Commonwealth Office.

The summer school is a two week program which will include debate and discussion around

key issues that are faced by the communities worldwide. These debates and discussion will be

carried out by the visiting projects across the UK to bring the discussions to life.

There would be delegates from different regions consisting of wide range of individuals from

very diverse professional and educational backgrounds such as teachers, HR professionals,

students, engineers and business leaders, from an age group between 20-40 years. These

individuals would be coming from countries like Bahrain, Oman, UAE, Qatar, Egypt, Jordan,

Saudi Arabia, Iraq and Pakistan.

The Regional Head of Corporate Sustainability, HSBC Bank Middle East Limited, Kaltham

Al Koheji says about the International Summer School that

This program presents a unique opportunity for HSBC Bank to nurture and support the young

people of our region. We hope it will go some way in making an impact on the education of

our talented participants. If today's students are taught the importance of good leadership

qualities, we believe they will go on to be better leaders as they move ahead with their

careers. The core of HSBC Bank‘s community investment is to encourage education as well

as promote diversity and this program delivers on these objectives.'

The first week of the program would be spent Cambridge and would be consisting of

seminars and discussion groups that would contribute to the theme of inspiring leadership in

the 21st century.

During the second week of the program, the delegation will be divided into groups who will

be visiting projects around the United Kingdom. After the visit they would come back to

London and share their learning as a group.

These delegates would become the alumni of this international summer school. This would

show their commitment to harbor positive relations and collaborative action between the

Muslim and non Muslim world. When they would return home, they would use their learning

to help bring a change in their local communities. They would help change and develop

positively various parts of the community such as education and business.

47

Such programs should be organized often. In the times when there anti Muslim sentiments are

increasing ay by day and the Muslims and non Muslims are moving far apart, such platforms

are badly needed. As for the nature of the program, it is a great opportunity for all the

participants to share there experiences. Everything is practices in a different manner in

different countries and cultures, be it business, education etc. It is good to the practices from

each other so the best ones can be adopted by the most.

GE MONEY BANK

GE Money Bank is a unit of General Electric Company aimed at meeting financial needs of

the population and small enterprises through the provision of services. It is a leading provider

of retail banking and credit services. GE Money Bank has its headquarters in London, UK.

The total assets of GE Money Bank are more than $200 billion.

In the year 2008 made a three year commitment with FINCA‘s Village Banking Campaign,

worth $1.5 million. FINCA is one of the leading organizations internationally when it comes

to micro finance organizations that are providing services to the entrepreneurs in low income

group all over the world. For more than 20 years FINCA has been giving community based

credit and savings opportunity to break the vicious circle of poverty. FINCA is operating in

21 countries to provide socio economic development to the disadvantaged low income group.

Through Village Banking Campaign, GE Money Bank and FINCa, is committed to provide

small loans, savings products and insurance to about one million low income entrepreneurs of

the world by the year 2010. As GE Money Bank‘s corporate social responsibility it is

committed to support and promote financial literacy, economic empowerment and

development. Therefore it has partnered with FINCA to provide value added services to the

impoverished and disadvantaged group of people.

This monetary donation to FINCA is part of the GE Money Bank‘s global philanthropic

program, ―Banking on Women.‖ GE Money Bank‘s President and CEO Bill Cary states that

―Banking on Women is about investing in the world‘s women because sharing knowledge,

time and experience can help transform lives, At GE Money, we‘re committed to improving

lives by promoting sound financial education, successful entrepreneurship and an investment

in the human spirit.‖

During the year 2008, FINCA used the first installment of $500,000 for providing additional

start-up capital for FINCA Jordan which was FINCA International‘s latest program in the

Greater Middle East. It also expanded FINCA‘s outreach in Malawi which is one of the

poorest countries in Africa.

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For entering into India, FINCA developed a business plan and feasibility study, one of its

priority countries. Operations in Ukraine were also started as part of the plan to expand to the

Eurasia region. Another most important project that was started was the initiation of health

education project in Mexico.

In the local market GE Money Bank organized financial education and entrepreneurial

training with the view to target the program to the specific needs of each community. GE

Money Bank‘s own employees volunteered to help people living in their surrounding to help

them have a better life.

FINCA‘s International Executive Director Rupert Scofield appreciated the commitment and

efforts of GE Money Bank and said that ―GE Money‘s commitment will allow us to more

rapidly advance our strategy of broadening and deepening our outreach in current programs,

as well as expanding into high-density populations where the need is tremendous, and the

supply is always lacking. In addition, GE Money‘s CSR commitment matches perfectly with

our goals of helping the industrious poor better manage their resources in order to achieve self

sufficiency over the long term.‖

The GE Money Bank has been quite generous in doing charitable activities. As in the year

2007 the GE Money Bank in Hungary, Budapest organized Day of Care. In this charity

program not only the bank employees volunteered but their families also took part in it. The

Day of Care was aimed at improving the overall environment of the Special Training and

Development Institute. The volunteers tried to make a difference to the lives of the

disadvantaged children. The bank also donated HUF 1,200,000 in cash for the betterment of

the school.

DEUTSCHE BANK

Deutsche Bank is an international universal bank. The headquarters of the bank are present in

Frankfurt, Germany. More than 81 thousand employs of Deutsche bank work in 76 countries.

A large percentage of employs belong to Europe, America, Asia Pacific and the emerging

markets. The major financial centers including Sao Paulo, New York, London, Toronto,

Tokyo, Moscow, Hong Kong, Sydney and Singapore have offices of Deutsche Bank.

Deutsche Bank is also investing in expanding markets including Middle East, Asia Pacific,

Latin America and Central and Eastern Europe.

The bank offers many services to its clients including sales, trading, origination of debt and

equity and M&A (mergers and acquisitions). Risk management products include wealth

management, derivatives, fund management, transaction banking, retail banking and wealth

49

management are provided for corporate and institutional clients along with private and

business clients. The business structure of the bank is very huge because of the various

operations and divisions controlled by the bank. It has been observed that through the

management of the proper business structure and model, the bank has been able to show good

performance in its industry. In fact the previous year‘s income of the Deutsche Bank shows

that it has been earning huge profitability in the previous years. To understand the

performance and popularity of Deutsche Bank, understanding the business structure of the

bank is very important.

Basically there are different divisions of the bank such as Abbey life; Assurance Company

and Abbey life are owned by Deutsche Bank. The pension polices of Abbey are closed now

but sold many polices in 1980s. Exit penalties, for all new and old polices, was scrapped by

standard Life and Norwich Union. Basically Deutsche Bank‘s CIB is considered as one of the

world‘s leading investment banking houses. Market-leading markets and Global Banking

Divisions of the bank come under CIB. Global Markets add a great contribution in Deutsche

Bank‘s profitability and revenues. Moreover, a major Merger & Acquisitions (M&A) is

controlled by Global Banking.

The business model of the bank consists of two pillars including the Corporate & Investment

Bank (CIB) and Private Clients & Asset Management. The private wealth management,

private & business clients and asset management have been controlled by divisions of Private

Clients & Asset Management (PCAM). This business division of the bank deals with the

investment management for private and institutional clients. Moreover, retail banking services

are also conducted by this division. The private banking arm of Deutsche Bank is Private

wealth Management which is serving the individuals of high net worth. This division of

Deutsche Bank has global presence. Another major division of Deutsche Bank is Private and

Business Clients which is the retail network of the bank. This division of the bank has

actually grown over the years. Deutsche Bank has also conducted global expansion in the past

two years by expanding its operations in the emerging markets such as India and China.

Deutsche Bank has global presence because over the years, the bank has expanded its

operation to various markets. In the history of Deutsche Bank various acquisitions and

mergers have taken place. These acquisitions have played a very vital role in changing the

business structure of the bank. Therefore, it can be said that the business structure of Deutsche

Bank is very dynamic. The business structure of Deutsche Bank matches with its mission

statement. The mission statement of Deutsche Bank advocates that the bank aims to become

the leading global provider of financial solutions.

50

BARCLAYS BANK

Barclays bank was founded n the year 1960 and is a major bank operating globally with 1800

branches in UK alone. It is providing commercial banking, investment banking and

investment management to millions of its customers. The headquarters of the Barclays Bank

is in London, England. It has its operations in many countries around the world.

Barclays Bank has passed through many phases and undergone many mergers and

acquisitions since its inception. The recent being that of Lehman Brothers. Barclays Bank

purchased investment banking and trading divisions of Lehman Brothers, including the New

York headquarters building. Lehman Brothers was an exemplary financial institution that got

hit by the economic crisis and finally had to be acquired by the Barclays Bank.

Over the years Barclays Bank has remained involved in many controversies. Many

controversies surrounded it for years.

Barclays Bank was accused of supporting the apartheid government in South Africa. It was

known as Boerclaysbank during the apartheid regime due to its alleged involvement in

supporting the government. Because of the apartheid government, people of South Africa

have suffered greatly so it was a great blow to their reputation to be associated with them. In

2006, The Jubilee South Africa backed Khulumani Support Group; an activist group in South

Africa lodged a case against Barclays Bank for supporting the apartheid government during

the 1970‘s and 1980‘s. The South African Ministry of Justice is seeking dismissal of the case

on the grounds that it deteriorates its national sovereignty.

This is not the only case of Barclays Bank involvement in supporting a controversial

government and assisting monetarily in violating human rights. There is another such case

and of the same region where people are suffering a great deal at the hands of their

government. The people of these regions have been dealing with civil war and instability. So

anyone who aids them in any manner would be accused in equal in the atrocities that they

have afflicted. One such example is Barclays Bank support of the Mugabe government in

Zimbabwe. Barclays Bank provided £30m loans to help sustain Mugabe‘s land reforms that

captured white-owned farmland and drive more than 100,000 black workers from their

homes. Many protested that the Barclays Bank involvement a 'disgrace' and an 'insult' to the

millions who have suffered human rights abuses. Not only this, Barclays Bank provided bank

accounts to two of Mugabe‘s associates, ignoring European Union sanctions on Zimbabwe.

51

Barclays Bank was accused of violating international anti-money laundering laws in 2009.

One of the branches of Barclays Bank had the account of Equatorial Guinean President‘s son

who was accused of siphoning oil revenues from the government funds.

Another controversy surrounding Barclays Bank is that even though the subprime mortgage

crisis in the US forced the bank to take a £1.6bn hit in 2007, Robert Diamond, a US-born

banker on the board of Barclays, received a £14.8m bonus in 2008.

Barclays Bank has also been involved in tax avoidance. One such report was published by

The Guardian. This report was removed form the website of The Guardian after Barclays

Bank obtained injunction for that. This created a great hue and cry that they are trying to hide

their tax details.

Barclays Bank is known to be involved in the arms trade as well. In fact it is known to be the

biggest arms dealer having a great share in the arms manufacturing company.

Controversies keep evolving and revolving. Sometimes these are started by the opponents to

mar the reputation of an entity. Sometimes they are realities. But there needs to be proof to

support them. In this world of turf war among corporate giants it is very difficult to believe

what the truth is.

BANK OF AMERICA

The year 2007 has brought with it the worst credit crisis. Bank of America is one institution

that has successfully survived this credit crisis. It would not have a slightest impact of the

credit crisis if bank of america has not purchased Merrill Lynch.

Bank of America is one of the largest financial services corporations which is the largest bank

by assets and the largest commercial bank by deposits. The number one underwriter of global

high yield debt is bank America.

The bank of America has passed through various phases over the decades. It has a very

diverse and rich history. Initially it was Bank of Italy founded in San Francisco in the year

1904.

Over the years this bank underwent various mergers and acquisitions and finally became Bank

of America in 1929.

The founder of the Bank of America was Amadeo Giannini. Giannini set out to build a

national bank by expanding into most of the western states as well as into the insurance

industry, under the aegis of his holding company, Transamerica Corporation. Regulators

succeeded in forcing the separation of Transamerica Corporation and Bank of America under

the Clayton Antitrust Act in 1953. Bank of America and Transamerica were separated

52

because a passage of the Bank Holding Company Act of 1956 prohibited banks from owning

non-banking subsidiaries such as insurance companies. Bank of America was again started

expanding its domestic consumer banking activity outside California after a change in federal

banking legislation and regulation in 1980‘s.

The Bank of America introduced the BankAmericard in 1958, which was later called VISA

after the change of name in 1975.

Bank America Corporation was established for the purpose of owning Bank of America and

its subsidiaries. Bank America expanded outside California in the year 1983 by acquiring

Seafirst Corporation of Seattle, Washington.

BankAmerica was dealt huge losses in 1986 and 1987 by the placement of a series of bad

loans in the Third World, particularly in Latin America. Bank America suffered great losses

in 1986 and 1987 due to series of bad placement of loans in the Third World, especially in

Latin America. In 1992 Bank America acquired its California rival, Security Pacific

Corporation and its subsidiary Security Pacific National Bank in California and other banks in

Arizona, Idaho, Oregon, and Washington. Bank America also acquired Valley Bank of

Nevada fro expansion in Nevada.

In 1997 NationsBank acquired Bank America for US$64.8 billion which resulted in the

combined assets of US$570 billion and 4,800 branches in 22 states.

In 2004, Bank of America purchased FleetBoston Financial for $47 billion in cash and stock.

All of the banks and branches of FleetBoston Financial were given the Bank of America logo.

FleetBoston was the seventh largest bank in United States at the time of merger, with $197

billion in assets, over 20 million customers and revenue of $12 billion.

1 January 2006 Bank of America purchased MBNA, a credit card giant, for $35 billion in

cash and stock. In the year 2996, Bank of America expanded its business in Brazil, Chile and

Uruguay.

Bank of America purchased The United States Trust Company from the Charles Schwab

Corporation for $3.3 billion in 2007. Bank of America‘s acquisition of ABN AMRO North

America and LaSalle Bank in 2007 lead to an increase in its presence in Illinois, Michigan,

and Indiana by 411 branches, 1.4 million retail customers, 17,000 commercial bank

clients, and 1,500 ATMs. In the year 2008, Bank of America bought Countrywide Financial

for $4.1 billion.

The latest acquisition of Bank of America is of Merrill Lynch. The deal closed in 2009. With

all these acquisitions and mergers Bank of America expanded greatly. But it sustained due to

its commitment and honesty to its customers.

53

ANZ

ANZ is a very popular financial institution which is offering full range of banking products

and services. The company is known for its expertise and reliability therefore, it has been able

to maintain its position in its industry. ANZ deals with managing cash flow to financing

complex deals. ANZ gives a great focus on customer relationship and your relationship

manager will connect you with the whole bank. The bank offers various kinds of products and

services. The financial services offered by ANZ include cash flow, loans, trade, and complex

finance. The transaction services of ANZ include account structuring, credit cards, electronic

solutions and merchant services. The investment and international services of ANZ include

investment accounts, managed funds, foreign exchange, risk management, trade finance, and

hedging products.

One of the major products offered by ANZ is its ANZ first card. The statement, `The ANZ

First Card is the first choice for low balance transfer` is very true. Let us justify this statement.

Basically the interest rates are very high nowadays and it will be very tougher for a person

who owes a significant amount of money on a card. Therefore, turning to ANZ first card to

reduce the stress is the best option. The balance transfer rate of ANZ first card is very low

therefore; you can save a lot of money. The free interest period of ANZ first card is also long

which is currently 44 days. There are many other features of ANZ first card that makes it

beneficial for the card holder. The ANZ first card offers online fraud protection through

which you can make safe online purchase each time when you will go online. The best thing

about ANZ card is that the company informs you about all kinds of charges so that you may

get all financial information.

ANZ first card is the perfect option for you because it offers free additional cardholders on

your account. The benefit of this option is that if you want your spouse of your kid on your

account, then you would not be charged extra dollar. It is ANZ first card which allows you to

enjoy the additional cards without any hidden cost or charges. Another benefit of ANZ first

card is that you can enjoy online banking. It provides great convenience and comfort to the

customers. You can pay all of your bills online. You can go anywhere in the world with this

card. You can check your balance online. ANZ bank considers the convenience of its clients

very keenly and it is evident from the features offered by the bank through its cards.

Moreover, the card offers very low cost for the balance transfers.

The competition among the banks and financial institutions is very high which makes it

overwhelming for the people to select a particular company. However, through proper

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evaluation of the features of the products you can easily find the best option for you. ANZ

first card is the perfect choice for those who are looking for convenience, low balance

transfers and protection from the online frauds. You may get such features from other cards as

well, however, the cost of ANZ first card is really low and it will help you to manage your

finances more efficiently.

In conclusion, ANZ bank offers high quality products and services to its customers at very

affordable rates.

ROYAL BANK OF SCOTLAND

In the history of banking all over the world The Bank of Scotland holds an iconic place

because it is the second oldest bank that has survived till date. It was established in the year

1695. It is based in Edinburgh, Scotland.

Two of the most mentionable features of The Bank of Scotland is the it is the only

commercial institution created by the Parliament of Scotland and also it is the first bank to

start printing its own banknotes. The Bank of Scotland is a subsidiary of Lloyds Banking

Group. Initially the Bank of Scotland was established to aid the Scottish business community.

It was not allowed to lend to government without the approval of the parliament.

The Bank of Scotland was the first bank in Europe to issue bank notes. Other banks were

allowed to issues notes after 1716 when the Bank of Scotland monopoly was lapsing. In the

second half of the 20th century The Bank of Scotland underwent many acquisitions and

mergers. The Bank of Scotland diversified its services by entering into consumer credit with

the purchase of North West Securities. It also merged with the Union Bank of Scotland. It

also established a merchant banking division.

Pioneer in many things already, it was the first bank in United Kingdom to install computer

for processing accounts centrally.

The Bank of Scotland started expanded its business internationally after moving into

financing the energy sector after the arrival of the North Sea Oil to Scotland. The first

international office of the Bank of Scotland was in Houston, Texas. It then moved onto

United States, Moscow, Singapore, Australia and New Zealand. It acquired Countrywide

Bank and Bank of Western Australia in New Zealand and Australia Respectively.

The Bank of Scotland met real competition when The Royal Bank of Scotland came into the

market. The real competition was on the issuance of banknotes. The Royal Bank of Scotland

devised a policy to either drive the Bank of Scotland out of business or to acquire. Since it

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could not succeed in acquiring it, it tried to outrun it by over issuing its own bank notes. The

Bank of Scotland suffered a great deal because of this and it had to ask for loans to pay for

these notes. The reputation of the Bank of Scotland suffered a lot. But fortunately it recovered

without giving in to the royal Bank of Scotland in the year 1729 and started lending again. It

was in the year 1751 that both banks started accepting each other‘s notes.

The Bank of Scotland was the only bank operating in English. But in the year 1972 it issued

its first Gaelic cheque book. Since that day the Bank of Scotland is operating in both English

and Gaelic.

The Bank of Scotland issued its one series of bank notes in 1995. They were known as

Tercentenary Series because they were issued in the year of the three hundredth anniversary

of the foundation of the bank. On the front of each denomination features Sir Walter Scott o,

and on the back are representations of industries that Scotland excels in as follows:

£5 note has a vignette of oil and energy

£10 note has a vignette of distilling and brewing

£20 note has a vignette of education and research

£50 note has a vignette of arts and culture

£100 note has a vignette of leisure and tourism

These notes have been replaced gradually with the 2007 series. The major difference of the

new notes from the old ones is that it has larger text than before. The Bank of Scotland has

survived and flourished a great deal over the centuries.

2.13 CRITICISM

Some critics of CSR, such as the economist Milton Friedman, argue that a corporation's

principal purpose is to maximize returns to its shareholders, while obeying the laws of the

countries within which it works. Others argue that the only reason corporations put in place

social projects is utilitarian; that they see a commercial benefit in raising their reputation with

the public or with government. Proponents of CSR, however, would suggest a number of

reasons why self-interested corporations, solely seeking to maximize profits are unable to

advance the interests of society as a whole.

Key challenges to the idea of CSR include:

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The rule of corporate law that a corporation's directors are prohibited from any activity

that would reduce profits

Other mechanisms established to manage the principal-agent problem, such as

accounting oversight, stock options, performance evaluations, deferred compensation

and other mechanisms to increase accountability to shareholders.

Because of this, it has been suggested that CSR activity is most effective in achieving social

or environmental outcomes when there is a direct link to profits: hence the CSR slogan

"Doing Well by Doing Good". Note that this requires that the resources applied to CSR

activities must have at least as good a return as that that these resources could generate if

applied anywhere else, e.g. capital or productivity investment, lobbying for tax relief,

outsourcing, off shoring, fighting against unionization, taking regulatory risks, or taking

market risks—all of which are frequently-pursued strategies. This means that the possible

scope of CSR activities is drastically narrowed. And corporations, with their constant

incentive to maximize profits, often have identified all areas where profits could be increased,

including those that have positive external social and environmental outcomes.

2.14 SCOPE OF CSR

The scope for CSR is thus narrowed to situations in which:

Resources are available for investment

The CSR activity will yield higher profits than any other potential investment or

activity

The corporation has been remiss in identifying this profit opportunity

A conflict can arise when a corporation espouses CSR and its commitment to Sustainable

Development on the one hand, whilst damaging revelations about its business practices

emerge on the other. For example the McDonald's Corporation has been criticized by CSR

campaigners for unethical business practices, and was the subject of a decision by Justice

Roger Bell in the McLibel case (which upheld some of these claims, regarding mistreatment

of workers, misleading advertising, and unnecessary cruelty to animals). Similarly Shell has a

much publicized CSR policy and was a pioneer in triple bottom line reporting, but was

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involved in 2004 in a scandal over the misreporting of its oil reserves which seriously

damaged its reputation and led to charges of hypocrisy.

2.10 HE 'HOW' OF CSR IN INDIAN BANKING INDUSTRY

Most Indian banks undertake initiatives, which in the strictest definition of the term qualify as

Corporate Social Responsibility. In the absence of

A structured approach to defining Corporate Social Responsibility and

A system for its deployment, banks are often unaware of the nature of CSR related

initiatives undertaken, the magnitude of their investments in CSR related initiatives

and since the investments (often substantial amounts) are not systematically deployed,

these at times prove to be ineffective.

KOTAK MAHINDRA BANK:

Their CSR actions focus on:

As they grow and expand as a bank they have to constantly endeavor to utilize themselves in

a more productive and consistent manner so that they achieve their business goals and become

great managers in the process.

In this journey, their role is critical in creating success stories exhibiting overall right

behavior and delivering their responsibilities aligned to their organization‘s values and

philosophy.

Appended are some of the behavioral DO’s and Don’ts which need to be followed for

proper CSR management.

People:

DO’s

Respect individuals and practice the Kotak Values. - Believe in ―CAN DO‖

Endeavour to bring out the best in people - Treat people not as they are, but what they

are capable of being.

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Tolerance - Give your team permission and the space to grow through honest

mistakes.

Encourage participation – In team meetings encourage questions and clarify doubts.

Build perception of integrity around yourself as it as important as practicing integrity.

Be as much a friend to your subordinate as much as a superior.

Respect an individuals work life balance needs.

Stick to issues at hand , do not personalize discussions

Command respect, do not demand it.

Build a transparent and approachable culture so that the employees feel free to share

their concerns with you first, rather than your supervisors.

Know your people as Individuals and not just as a resource. Treat them as adults with

whom you can have an intelligent dialogue.

Don’ts

Do not use foul language or abuse colleagues at work. No usage of profanity – It is an

integrity and values violation. Under no circumstances will abusive language be tolerated.

Counsel only on performance. Don‘t threaten any employee with termination.

Do not refer to the race of the only minority in a group.

Do not single out one individual's disabilities simply for the sake of identification.

Do not use words that imply victimization or create negative stereotypes.

Don‘t reprimand in public.

Don‘t add acrimony in your description of members of a group.

Don‘t indulge in loose talk.

It is strictly prohibited to discriminate on Gender. As a committed equal opportunity

employer it is expected of you to treat women employees with dignity and respect.

Do not criticize other departments or a person who is not present publicly.

Don‘t indulge in political talk , be transparent

Don‘t create an anxious atmosphere and unduly pressurize people , under pressure

people behave in undesirable ways

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Process:

DO’s

Concentrate on output while keeping high focus on input too – Quality of input will augment

output.

Strictly adhere to the KYC guidelines. Tampering of documents, misrepresenting

facts, use of fraudulent documents are grave offences and will call for severe punitive

measures.

Managers need to make sure all documents are signed and verified and in any case of

fraudulent documentation the manager will be penalized along with his/her team.

Make it a habit to check reports such as DSR‘s etc. on a daily basis.

Do start and finish all the meetings with positive or upbeat topics.

Consistently time your meetings. Start and end meetings on time.

Meet requisite customers with your team members in a month.

Ensure that all your team members are mapped correctly in HRMS and all transfers

are done online.

Each team member should sign the muster on a daily basis. In case he/she is on a call

make sure that the OD process is followed.

In case of non performance, PIP process needs to be followed.

In case of any disciplinary issues please take help of your HR – RM to sort out the

same.

Use and encourage usage of I Applaud for appreciating colleagues

Please be sensitive to the on-boarding and training needs of your team members.

Ensure you release your team members for all trainings.

Don’ts

Do not transfer newly recruited team members to a different branch for a minimum period of

6 months – Any deviation should be routed and approved by the HR - RM.

Do not change the meeting day or time for ANY reason. Changing the meeting sends a

signal that meetings are not important and shows a lack of respect for the attendee‘s

time. Also never delay the meeting start time because an attendee is late.

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You are not authorized to hold back conveyance reimbursements of your team. Under

no circumstances should conveyance reimbursements be used as a variable incentive.

It is strictly forbidden to use the PIP process as a threat to terminate. Use it as a

development tool to make your team a success.

It is strictly forbidden to Solicit or Accept and kind of monetary/non monetary benefit

from our customers/vendors.

Performance:

DO’s

Ensure that you and your team members have thoroughly understood SOP‘s/KRA‘s.

You must strive to make sure that all your subordinates earn incentive (if applicable)

or win contests, prizes.

Counsel on performance on a regular basis. Don‘t wait for the end of the month to

give feedback to an individual team member on his/her performance.

Performance will always remain a product of the knowledge an individual has. Ensure

that your team is kept abreast of all the product offerings of the bank.

Monitor performance of all your team members on a regular and an ongoing basis.

Please remember that the performance of your team is a direct reflection to your

performance as a leader.

Act as a coach and guide to your team members. Help them understand and work

towards the growth story the bank offers.

Use the PIP process not as a tool to ease out people from the system but as a tool to

help them scale up the desired performance level‘s in the organization.

Effective retention and performance of your team reflects your performance and

guidance as a manager.

Always introspect whether you have added enough value, in terms of coaching

mentoring , input tracking, activity tracking etc, to the employee to earn the right to

rate him harshly.

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Don’ts

Don‘t distribute business sourced by an individual to other team members. Give credit only

where it is due.

Your success as a leader and a manager is defined by the no of people whom you have

helped to scale up rather than the no of people whom you have asked to leave the

organization on performance issues.

Don‘t discuss your salaries or performance rating with your colleagues.

Don‘t exhibit favoritism. Treat every one with dignity and respect as an equal

contributing member of the team.

STANDARD CHARTERED BANK

In view of the fact that the group has adopted a triple bottom line approach, the Business

Director or the President (Business Group Head) is responsible for attainment of economic,

social and environmental targets. Though there is no separate Corporate Social Responsibility

policy or Social Policy, many of the group banks that are certified has environmental policies,

objectives and targets. Most of the group banks are signatory to the UN Global Compact,

which is construed as the CSR policy. In keeping with the triple bottom line (financial,

environmental and social) approach, the group banks report on environmental and social

performance in separate sections of their annual report.

PUNJAB NATIONAL BANK

Sustainability Policy

Punjab National Bank is India's one of the largest nationalized bank, believe in the

sustainability of growth.

Our approach to sustainable development focuses on the triple bottom lines of, Economic,

Environment, and People. As a business entity, we aim at improving stakeholder value

through improved eco-efficiency of operations, economic enlistment of the communities we

operate in, and the efficient use of capital and natural resources.

The nature of our activities makes efficient utilization of resources, environmental protection,

operational and transportation safety and employee‘s health, significant components for long-

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term sustainability of our business and we stand committed to these. Being a responsible

corporate citizen, we understand our role towards society. We encourage and practice open

dialogue with all our stakeholders and value their considered opinion, reflecting them in our

strategic plans. We also recognize that development and empowerment of our human

resources are crucial to achieving our stated objectives. We shall adopt a structured approach

for the implementation of the policy and regularly monitor the progress.

CITIBANK

Citibank has already made its mark in 2008 on the issues of climate change and sustainability.

In February, Citi Bank, JP Morgan and Morgan Stanley jointly released the Carbon

Principles. The Carbon Principles offer guidelines for lenders to US power companies, in

light of the increase in financial risks power companies are expecting from pending carbon

regulations.

At the end of March 2008, Citi Bank became a Ceres network company, joining with over 70

companies that work as members of Ceres to tackle sustainability and climate change.

In January, Ceres‘ report ―Corporate Governance and Climate Change: the Banking Sector‖

was released. The report scored Citi as the highest ranked US bank for their climate change

governance practices.

Citigroup and Bank of America jointly have pledged billions of dollars to help fight climate

change while a new report questions Chinese banks' environmental policies.

In June 2007, Citigroup announced an allocation of $50 billion in investments and financing

to mitigate climate change over the next decade. This followed Bank of America‘s

announcement in March 2007 that they are pledging $20 billion to support environmentally

sustainable businesses and combat climate change. With the US‘s two largest banks pledging

to change the way they do business to support sustainability and the environment, it seems

there is a new awareness of the need to do something to alleviate and adapt to global climate

change.

Citigroup has already invested $10 billion of the $50 billion in helping fight climate change. It

plans to reduce its own greenhouse emissions 10% by 2011 across its more than 14,5000

global facilities. BoA likewise pledges to reduce greenhouse gas emissions 9% by 2009. Bank

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of America (BoA) has a program that is putting more gas efficient cars on the road for its

employees with a $3,000 hybrid vehicle reimbursement program.

Both BoA and Citigroup are constructing greener buildings. Citi and BoA are working for

certification of their new buildings from Leadership in Energy and Environmental Design

(LEED) for both their office buildings and retail branches. BoA is currently putting up offices

in New York City and Charlotte, NC that are more environmentally efficient.

Citi‘s Market and Banking Group plans to put over $31 billion in clean energy and

technologies, building on its current commitments of $7.5 billion. Citi recently financed the

$2.15 billion ownership of a wind portfolio by Energias de Portugal (EDP) that brings new

wind developments to market. Citi also offers Citi Alternative Investments and Citi Property

Investors, which offer environmentally friendly investments and investment in sustainable

building projects. In April, Citi created Sustainable Development Investments (SDI) and plans

to commit $2 billion of private equity over the next ten years to clean technologies and

renewable energy sources.

BoA is committing $18 billion to help commercial clients use and produce environmentally

sustainable products and technologies. Part of this initiative is a carbon-emission trading

program that will allow clients to trade carbon emissions credits to achieve carbon emission

neutrality. Pending regulatory approval from the Office of Currency Control (OCC), BoA

plans to participate in the evolving emissions markets globally via the Chicago Climate

Exchange and the European Union Greenhouse Gas Emissions Trading Scheme (EU ETS).

Individual consumers at the banks can chose climate friendly credit cards, mortgages and

other banking products. Citi will plant a tree for each customer that chooses a paperless

statement while BoA consumers can choose an eco-friendly credit card that for every dollar

spent on the card, BOA will contribute to an environmentally organization.

While many environmental activists applaud the banks‘ pledges, some also question how

committed to clean energy the banks truly are. The Rainforest Action Network (RAN) points

out that Citigroup is the largest financier of the energy industry that produces many

greenhouses gases.

There are four pillars that hold the Community Support Programme at Citigroup:

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1) Funding through the organisation

Critical, as without funding it is difficult for any activity to be sustainable. The philanthropic

arm of the corporation, Citigroup Foundation head quartered in New York provides the initial

financial support for these activities.

2) Cause related marketing

This brings in a unique dimension to our programme. Cause related marketing is designed to

be able to engage customers in social responsibility areas identified by us. One such example

is with Citibank‘s cards business, the co-branded affinity cards, we have a suite of them -

Citibank Woman's Card, Citibank WWF card and the Citibank CRY card. Each time you use

your Citibank Woman's Card, Citibank will contribute a percentage of its earnings on your

behalf to 2 NGO partners of the woman's microcredit program - Society for Promotion of

Area Resource Centers(SPARC) and Friends of Women World Banking (FWWB). Similarly,

the WWF Citibank Card is unique, in collaboration with the Worldwide Fund for Nature. And

likewise the CRY Citibank Card gives you the power to change a child's life for the better.

Every time you use this Card, a percentage of what you spend is sent to CRY as contribution

on your behalf. Through such initiatives, the bank endeavours to link its customers with the

cause.

3) Employee volunteerism

Many organizations do social responsibility but their employees may not find avenues to

participate. In Citi‘s case, the bank encourages employees to participate. Essentially each and

every employee down the line is aware that the company believes in supporting the

community through employee action as well, and they are mostly kept aware of the

opportunities to participate. Also the information cycle is very clear and transparent for

anybody wishing to participate or to know more about it. But as banking jobs are high-

pressure jobs, so it is entirely up to each employee on how and when they can find ways to

engage themselves.

4) Advocacy

Citigroup tries and optimizes their spokespersons and global speaker opportunities to

advocate as far as possible their NGO partners and programs, as and when possible for the

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issues that are of concern. Citibank also provides their communication channels if required for

advocacy as they believe in promoting and engaging in collaborative efforts.

At Citigroup, employees & management do make time certainly on a quarterly basis. They

make themselves available for meetings with NGOs, attend their presentations or give talks at

the MDP programs etc. They engage in understanding of programmes, and if they find any

gap areas they come in to fill these.

Top management is very supportive in internal communication to encourage people to be a

part of it. They are not only supportive but also vocal in promoting it within the internal

senior management globally.

This has definitely helped India come up on the map of social responsibility within Citigroup.

They are very open and available to take any issue up the chain to our head quarters whenever

required for getting any special kind of support from them.

There are instances where CEO could be very happily or voluntarily be on a pay roll

committee, they may visit NGOs Citigroup works with, spending an hour or two,

understanding, sharing ideas and thoughts. So there's a considerable amount of involvement.

Micro Credit / Micro Finance : State Bank of India

SHG Movement - A Mission

SBI has taken up SHG movement as a mission .A noble mission to reach those families who

were hitherto having no access to the credit by any formal financial institution and, therefore,

were depending on informal sources and money lenders.

Micro Finance - Deep Roots in SBI

Micro finance is not new to State Bank of India. Bank‘s association with non-government

organizations (NGOs) or voluntary agencies in extending financial help can be traced as far

back as 1976 well before NABARD introduced SHG-Bank Credit Linkage Programme as a

pilot project in 1992.

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Steady Growth in SHG - Bank Credit Linkage Programme

SBI has actively participated in SHG-Bank Credit Linkage programme since its inception in

1992 as a pilot project of NABARD. Since then the Bank has made a steady progress in

financing SHGs. As on March 2006, SBI's branches spread throughout the length and breadth

of the country have opened 6,30,067 Savings Bank account of SHGs out of which more than

5.41 lac SHGs have been provided with credit facilities thus benefiting more than 75 lac poor

people. Majority of these SHGs are women SHGs. The year-wise cumulative position of

SHGs-Bank Linkage programme for the last 4 years is as under:

Year March - 03 March - 04 March - 05 March - 06

SHGs linked (financed) 1,07,553 1,74,666 3,43,691 5,40,481

No. of beneficiaries 12,33,660 21,50,752 48,11,674 75,68,842

Amount disbursed 324.84 cr. 614.87 cr. 1311.45 cr. 2262.95 cr.

Amount outstanding 269.43 cr. 462.77 cr. 872.08 cr. 1459.89 cr.

No. of SHGs maintaining

Savings a/c in the Bank

2,79,466 3,69,568 5,08,396 6,36,067

Amount in Savings a/c

(Amt. in Rs.)

261.36 cr. 348.31 cr. 411.82 cr. 434.07 cr.

SBI - Leader in SHG - Bank Credit Linkage

SBI is maintaining its position as a leader among Commercial Banks in credit linking of

SHGs and is a prime driver for the movement. As at the end of March 2006, SBI with a share

of approximately 47% of total SHGs financed by Commercial Banks is far ahead of others.

Innovations & Initiatives

Bank has successfully initiated various measures toward widening its SHG network.To list a

few examples:

i. Sensitization of staff Bank's aim is to sensitize the entire staff from Manager to

Messenger working in rural and semi-urban branches towards the programme.

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ii. Special training programmes in SHGs are being conducted at 54 training centers of the

Bank in the country apart from State Bank Institute of Rural Development,

Hyderabad.

iii. Close liaison with NGOs Operating functionaries at branch level and region level are

in close contact with NGOs in their area to take the movement ahead. For the purpose,

regular meetings are arranged with the NGOs and their support is solicited.

iv. SHG cells: Special SHG cells have been opened at major branches.

v. Lending to NGOs / Federations of SHGs: Lending to credible NGOs / Federations of

SHGs on selective basis for on lending to SHGs is being encouraged.

vi. Sahayog Niwas: SBI has launched its Housing Loan product ‘SAHAYOG NIWAS

meant for SHG members. Under the scheme formulated keeping the socio economic

conditions of villages insight, housing loans are given to the SHG members without

any mortgage of house / land. Response to this product is very encouraging.

vii. SBI Life - Shakti: SBI Life, our insurance subsidiary, is the first to introduce a life

insurance scheme, especially designed for SHG members. Special feature of the

scheme is that entire premium amount paid by the member is refunded after maturity,

i.e., 10 years.

viii. Rural training institutes: To help the rural youth to stand on their feet, two RUDSETI

type training institutes have been established at Gulbarga and Gadag in Karnataka

State, to impart training in self employment to youth free of cost.

ix. SBI staff as SHPI: The main role of formation and nurturing of SHGs have been

played by NGOs who, apart from their fundamental role of social service, also aim to

make the poor economically self sufficient. But in SBI, our committed work force is

not lagging behind and a number of committed staff members have worked hard to

form and nurture SHGs on their own.

x. Appreciation by Government: A number of our branches / Circles have also received

commendation and appreciation from various State Governments for doing excellent

job in SHG-Bank Credit Linkage programme. NABARD felicitated 15 SHGs at a

function organized in New Delhi on 13th

September 2005.The function was presided

over by the Honorable Union Finance Minister. Out of total 15 SHGs felicitated, 4

were financed by our branches, one each from Orissa, Jharkhand, Madhya Pradesh and

Uttaranchal.

xi. Samanwita: Bank has sponsored and financially supported NGO SAMANWITA in

collaboration with Government of Orissa for supplementing the process of socio

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economic upliftment of the tribals and the downtrodden in the poorest and most

backward Kandhamal district of Orissa State where 52% of the population is that of

tribals. Core activities performed by Samanwita is empowerment of people through

.promotion of SHGs, especially women SHGs and development of human resources.

xii. SHPI status: State Bank of India is the first Commercial Bank to which NABARD has

recently given SHPI status.

Future Plans

SBI has set for itself an ambitious target of credit linking 1 million SHGs up to March 2008.

The Bank has started to leverage our vast SHG network for various services beyond credit

delivery

CORPORATE Social Responsibility (CSR) is gaining importance in the world of

globalization with increased number of informed citizens and changing social expectations.

With a strong linkage and correlation between CSR and business, between social

empowerment and commercial sustainability, the Confederation of Indian Industry (Northern

Region) and the YES Bank have jointly brought out a knowledge report on CSR as a tool for

inclusive growth, social equity and affirmative action. CII Northern Region chairman Deep

Kapuria says CSR is an important business strategy because wherever possible consumers

want to buy products from companies they trust; suppliers want to form business partnerships

with companies, employees want to work for companies they respect and NGOs want to work

with companies seeking feasible solutions and innovations in areas of common concern. He

said in conjunction with a development paradigm that ensures sustainable growth, CII works

with strategic partners to build on shared synergies, conserve the environment and create

sustainable value in sync with its unique theme for the year,‘ Building people, building India.‘

YES Bank MD and CEO Rana Kapoor claimed that the bank has identified itself in a

leadership position in the country‘s march to economic and human development. YES Bank

remains committed to assisting stakeholders in developing sustainable and commercially

viable CSR projects on a public private partnership (PPP) mode incorporating the principles

of social equity and community participation. CSR involves a business identifying its

stakeholder groups and incorporating their needs and values within the strategic and day-to-

day decision-making process. It, however, goes beyond the occasional community service

action as CSR is a corporate philosophy that drives strategic decision-making, partner

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selection, hiring practices and, ultimately, brand development. The report points out that CSR

is now being looked at as a concept different from pure philanthropy and more in tune with

strategic intervention that ultimately benefits industry. CII has adopted the visionary route of

formulating a code of conduct for affirmative action. The company affirms its recognition that

its well being is interlinked to all sections of the society. The company believes in equal

opportunity in employment for all sections of society and considers it a component of its

growth and competitiveness.

HSBC

Climate change is an important issue for HSBC to understand and there is a clear need for

them to manage its impact for the bank, its employees, customers and stakeholders. The

global HSBC Climate Partnership created in collaboration with Earth watch, the Climate

Group, World Wide Fund for Nature (WWF) and Smithsonian Tropical Research Institute

helps understand the impacts of climate change on people, forests, cities and water. Locally,

the bank has created Earth Sciences Forum as a public private partnership which is

succeeding in bringing together key stakeholders to find adaptation and mitigation solutions

to climate change. HSBC employees volunteer enthusiastically on a number of environment

initiatives and more recently, HSBC participated countrywide in celebrating Earth Hour on

March 28.

Corporate Social Responsibility, Sustainable Development & Non-Financial Reporting –

Role of Banks

At present, the world over, there is an increasing awareness about Corporate Social

Responsibility (CSR), Sustainable Development (SD) and Non-Financial Reporting (NFR).

Consequently, there is a concerted effort among all types of organizations, to ensure that

sustainable development is not lost sight of, in the pursuit of their respective goals - profit

making, social service, philanthropy, etc. CSR entails the integration of social and

environmental concerns by companies in their business operations as also in interactions with

their stakeholders. SD essentially refers to the process of maintenance of the quality of

environmental and social systems in the pursuit of economic development. NFR is basically a

system of reporting by organizations on their activities in this context, especially as regards

the triple bottom line, that is, the environmental, social and economic accounting.

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The contribution of financial institutions including banks to sustainable development is

paramount, considering the crucial role they play in financing the economic and

developmental activities of the world. In this context, the urgency for banks to act as

responsible corporate citizens in the society, especially in a developing country like ours, need

be hardly overemphasized. Their activities should reflect their concern for human rights and

environment.

Global warming and climate change are particularly important in the context of sustainable

development, especially for developing countries, which tend to be ill-equipped for such

changes. According to recent studies on climate change, the majority of Asian companies are

―largely oblivious‖ to the risks posed by climate change issues to their business models and

the environment. Nearly two-thirds of the respondent companies were given a zero score for

their approach to climate change. The findings suggest that, generally, Asian businesses are

far behind their US and European rivals on this issue. Another joint study by Asian

Development Bank (ADB), UNDP and ESCAP on the 'Millennium Development Goals

(MDG): Progress in Asia & the Pacific 2007' shows that on environmental sustainability,

which is one of the eight goals of the MDG, India has regressed in the matter of carbon

dioxide emission and consumption of ozone-depleting CFCs

Bank Of India

Bank of India has always been a pioneer and taken the lead in helping the poor, deprived and

under-privileged sections of society. The Bank, being a major public sector bank, always

endeavours to strike a viable equilibrium between its commercial objectives and social

responsibilities. The Bank‘s commitment to the community and society at large, and its

earnestness in pursuing social causes is reflective of its corporate social responsibility agenda

of which FINANCIAL INCLUSION has now assumed considerable emphasis.

―Why Financial Inclusion?‖ Is the first question that comes to one‘s mind? The answer to that

is ―any growth strategy that does not pay attention to the inclusive growth of the millions of

the under-privileged people is not sustainable.‖ Hence, Bank of India has taken up financial

inclusion as a social cause and is implementing the same as a mass movement. Given the

economic status of the rural people, the spread of the population in remote inaccessible

villages and pockets, the standardized brick and mortar structure cannot possibly cover all the

71

people, hence the Bank in order to give greater thrust and acceleration to its mission to uplift

the downtrodden sections of the society and enhance scalability, has embarked upon an e-

enabled financial inclusion scheme. This will ensure that excluded and poor people are

brought into the fold of the formal banking system at a rapid pace.

‖Banking the unbanked‖ is also another interpretation of financial inclusion, which involves

delivery of banking services at an affordable cost to the vast sections of the disadvantaged and

low income groups. In fact, financial inclusion has become the buzzword and predominant

issue, drawing the attention of the present day policy makers and officials of Reserve Bank Of

India (RBI). The RBI, has issued a number of directives and initiated several policy changes

in order to bring the unbanked, mostly the poor, the downtrodden and marginalised sections

of society into the mainstream of the formal banking fold.

A few of the measures initiated by BOI include:

Simplification of KYC norms for BPL segment;

Provision of banking services through business facilitators (BFs) and business

correspondents (BCs) in inaccessible rural areas;

Enhancing the scalability of financial inclusion through electronic connectivity,

handheld devices and biometric smart cards; and,

Opening ‗no-frills‘ accounts for the poor. All this are a pointer towards financial

inclusion as an essential pre-condition for building sustained and inclusive economic

development, ushering in greater economic and social equity and a vital instrument to

bridge the inequality prevailing in society. However, it has to be immortally

remembered that relief measures, subsidy linked programmes and spending on social

causes are excellent, but the same can be sustained only if it is linked to eradication of

poverty and results in economic growth and empowerment of common people.

Bank of India has taken up financial inclusion as a social cause and is implementing the same

as a mass movement. Since the standardized brick and mortar structure cannot possibly cover

all, the Bank has embarked upon an e-enabled financial inclusion scheme.

72

Even though the path to financial inclusion continues to be daunting without any short cuts,

Bank of India has made big strides in its implementation. The Bank till date has opened 2.5

million ‗no-frills‘ accounts. To facilitate access of the banking system to people living in

remote pockets and belonging to backward sections of society, the Bank has leveraged

technology through the system integrator, Integra Micro Systems, and till date issued 80,000

biometric smart cards, which are voice enabled so as to give a voice message to the illiterate

persons, who understand the language but can neither read nor write.

This has obviated the hurdles and stumbling blocks like cost of transportation, loss of daily

wages and other incidental expenses for the poor people in getting the intended benefit.

Implementation of the financial Inclusion programme has positively impacted the lives of

millions of under-privileged and deprived people. The benefits that have accrued are

immensely satisfying to the Bank and they include:

Impacts poverty reduction positively;

Enables the poor to build assets and thereby reduces their vulnerability;

Empowers women and enhances contribution to household income, enabling

better control over household decisions;

Dependence on non-formal, high cost intermediaries reduced;

Aids greater spending on education and health; and,

Reduces child mortality and leads to improved health, especially among women.

Extending the banking habit among the less privileged in urban and rural India to wean them

away from unorganized money markets and moneylenders brings in a wholesome

enhancement in the quality of life. In consonance with the directives from the Government

and the Reserve Bank of India, the Bank has already charted out its future roadmap, which

includes urban financial Inclusion and striving for 100 per cent financial inclusion at the

earliest in all 48 lead districts, where the Bank has lead responsibility. The Bank has already

achieved 100 per cent financial inclusion in six districts and another seven lead districts are on

the verge of achieving 100 per cent financial inclusion by opening ‗no-frills‘ savings

accounts.

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Inclusive growth is linked to many factors, hence a macro approach, in other words a holistic

view needs to be taken. Along with financial inclusion, Bank of India has introduced several

novel schemes such as solar energy home lighting systems for use of renewable energy

sources; Nirmal Gram Yojana for a clean and hygienic environment as the bank believes in

the paradigm ―health is wealth‘; ABHAY, credit counselling centres for the debt trapped and

other financial literacy programmes; and Star Swarozgar Prashikshan Sansthan for

development of entrepreneurship and skills.

The Bank has set a target of 4 million ‗no-frills‘ accounts by March 2010, which it will

achieve. The Bank true to its slogan ―Relationship beyond Banking‖ is ready to overcome any

obstacles in the way of financial inclusion.

YES BANK

YES BANK, as a Bank for “Emerging India” has a philosophy to contribute positively to

India‘s development. Responsible Banking is one of the pillars of the YES BANK value

proposition to our customers and is a key differentiating factor within our competitive

strategy. By internalizing and externalizing CSR and Sustainability, the Responsible Banking

team will help to build YES BANK as an organization of enduring value, enhancing its

competitiveness, and charting a high leadership growth trajectory. Recently YES BANK CSR

practice has been awarded the Social and Corporate Governance Award by BSE/ NASSCOM

.

About YES BANK:

YES BANK, India‘s new age private sector Bank, is the outcome of the professional

commitment of its Founder, Rana Kapoor and his highly competent top management team, to

establish a high quality, customer centric, service driven, private Indian Bank catering to

―Emerging India‖.

YES BANK has adopted international best practices, the highest standards of service quality

and operational excellence, and offers comprehensive banking and financial solutions to all its

valued customers. A key strength and differentiating feature of YES BANK is its knowledge

74

driven approach to banking and an unprecedented customer experience for its retail and

wealth management clients.

YES BANK is steadily building corporate and institutional banking, financial markets,

investment banking, business and transactional banking, retail and private banking business

lines across the country. The Bank‘s constant endeavour is to provide a delightful banking

experience expressed with simplicity, empathy and totality.

CSR Efforts of State Bank of Bikaner & Jaipur

As a Corporate Social responsibility (CSR), the State Bank of Bikaner & Jaipur, continues to

undertake various community based social activities. In order to extend financial support to

the needy parents of meritorious girl children, a need has been felt that our Bank should

provide financial support by way of stipend to such school going girl children.

A scheme has been formulated by the Bank to help the girl children pursuing studies in

Government school by providing financial support in the form of stipend of Rs.500/- per

month. For this purpose each branch of State Bank of Bikaner & Jaipur will adopt one girl

child each pursuing education in 6th standard onwards in a Govt./municipal school. The basis

of selection is merit cum need.

J & K Bank

CSR Aspect of the Bank-

The Corporate Social Responsibility (CSR) of the J&K Bank seeks to recognize

obligations towards society and aims to integrate the CSR ideals into its mission for

optimizing both business and social performance. It stresses on promoting work life

balance, give attention to social and environmental concerns and host of factors that

facilitate business pursuits and accomplishment of economic goals. The CSR is not

just recognized as promulgating the Bank's own values and principles of philanthropy

but also the values and principles of all those who have a stake in it or are affected by

its operations. By supporting social cause aligned to the mission the CSR strategy

differentiates the Bank's brand and enhances its reputation. The Bank manages social

issues in the same manner as any other strategic business issues.

75

The Bank besides playing its role in economic development of the State and country

contributes significantly towards the social cause. The Bank has established its

credentials for the poor and needy by donating generously for various philanthropic

activities aimed at ameliorating their sufferings. Be it victims of natural calamity, like

fire, flood, snowstorm or tsunami and disabled or patients with serious ailment who

lack reliable means of survival, the bank has been all through supporting them. The

one and a half decades long turmoil in the State of J&K has added to the agonies of

people with hundreds of children losing their parents to fend for themselves in this

harsh world. The Bank realizing its responsibility of saving the life/ future of these

blooming children, adopt several of them by providing financial support either through

various orphanages where they are sheltered or directly to the orphans by bearing their

educational or other expenditure. The Bank would continue to provide study

scholarships to the poor and needy students including students from far-flung areas,

who without such support would have been school dropouts. The Bank shall continue

donations for the development of infrastructure (computers, books, TV's, prosthetic

support etc) to various NGOs, societies, trusts, institutions, etc. involved in socio-

economic development of the society. The physically challenged persons belonging to

socially and economically deprived classes especially children shall be helped by

acquiring prosthetic support by meeting partly or fully cost of surgery with pre and

post medication.

In order to enable socially and economically weaker classes to live a healthy life the

bank shall endeavor to give financial support to the needy and poor patients, afflicted

with dreaded diseases like Cancer, cardiac failure, Kidney failure etc. for their

treatment / surgery.

Heritage preservation is an important responsibility of every conscious individual,

institution or agency. The thrust areas to assist in this respect for the Bank will be

preservation of historical/religious monuments, development of tourist sites, national

properties, museums, libraries, protection of environment/ecology etc. and sponsoring

seminars and awareness camps, art and literary works, 3rd cultural activities, social

service camps, college or university students clubs etc.

The Bank has been playing a vital role in the promotion of tourism and it is in this

backdrop that the Bank has been shouldering the responsibility of registering yatris for

the Shree Amarnathji Yatra through its extensive network of branches spread across

the country. The yatra is an annual religious function of Hindu community, wherein

76

devotees travel by foot to pay obeisance to Holy Shiv Lingam at Shree Amarnathji

cave. The Bank puts in place special registration counters at all branches of the Bank

outside the state and some selected branches in Jammu and Kashmir State. In addition

to this, accidental insurance cover facilitity of Bajaj Allianz General Insurance Co.

Ltd. to the pilgrims at a nominal premium is made available to the yatris. During the

yatra, the bank establishes mobile branches even at the holy cave. People in general

and pilgrims in particular all over the country have appreciated this effort and won lot

of applause for the Bank .

Apart from above activities the Bank has been constructing/developing the public utility

service like public parks, bus stands, drinking water posts, lavatories, conveniences, rain

shelters. In addition to this, the bank organizes relief camps, service camps, night shelters,

health resorts, health clinics, disaster & calamity management centers, rehabilitation centers

etc.

Policy

With the objective of promoting the philanthropic activities, other social and

environmental issues, the bank has a CSR policy in place embodying the broader

principles for providing donations. The donations are made within the prescribed limit

of 1% of the published profit for the previous year. It focuses on economic, social,

cultural and geographical backwardness of the area.

Key Features-

The bank provides financial assistance for the benefit of Handicapped persons/

orphans/ poor patients suffering from serious ailments.

Provides direct assistance or through Prime Minister's Relief Fund or Chief Minister's

Relief Fund or any other national level or state level calamity relief fund to needy who

have suffered due to natural disaster and calamities.

Helps in rehabilitation of handicapped children/ persons belonging to depressed

classes of society.

Provides for procurement of devices / apertures for kidney transplantation; cardiac

interventions; cancer patients; AIDS HIV and other dreaded diseases, philanthropic

support for people belonging to economically deprived sections of the society.

77

Provides financial support to orphanages.

Provides scholarships to meritorious students of depressed sections of the society at

various levels with focus on the needy.

Provides technical and financial support for the Heritage Preservation through

sponsorship of awareness seminars, organizing social service camps, sponsoring Art &

Literary works and preservation and development of important Historical, religious,

tourist sites, museums, libraries, archives, scientific organizations and National

properties.

Provides financial assistance for protection of Environment/ecology.

Constructs and develops the public utility services like bus stands, development of

parks, construction of drinking water posts, lavatories, conveniences etc.

The donations are directly made to depressed class of society including physically

challenged person or through a Non Governmental Organization engaged in the

ameliorating of the suffering of this class of society.

To ensure transparency in selection of deserving beneficiaries followed by

disbursement of proceeds to the donees, the following precautionary measures are also

ensured.

o The applicant should not be an employee of any Institution, semi-Government,

quasi- Government or Government organization entitled to Medical Aid

benefits.

o The applicant is not a professional beggar.

o The applicant is not a dependent family member of Bank's own staff.

The Bank's CSR is rooted in its Corporate Governance philosophy, which in turn is

woven around Bank's commitment to ethical practices in the conduct of its business,

while striving in the constant quest to grow with profits and enhance shareholders

value and align interests of the shareholders, stakeholders and society through

adoption of best international practices and standards. Managing CSR is not viewed as

an extra cost or burden but is viewed not only as making good business sense but also

contributing to the long-term prosperity of our Bank and ultimately its survival. Being

a good neighbour and showing that you care on the one hand and being a successful

business on the other, are flip sides of the same coin.

78

The Bank donated Rs.one lakh to Maharaja Ranjit Singh Trust, New Delhi, for the

upliftment of downtrodden sections of the society. The Bank gave donation to the

Foundation for inter-community Relations Delhi for upliftment of society. A financial

assistance to the tune of Rs.1.00 lakh for the welfare of Gujjars was given to Gurjar

Desh Charitable Trust, Jammu. The Bank donated sewing machines to destitute

widows through Bhartiya Dalit Sahitya Academy, Jammu. Showing its eagerness for

the upliftment of women, the Bank donated embroidery machines to Women's Welfare

Society, Kachhama, Kupwara. The Bank also gave donation to NGO Friends

Association for Ladies and Orphans Welfare (FAOW), Srinagar.

Devastating fire in village Batpora (Wathora), Kashmir rendered hundreds of people

homeless and two persons lost their lives. The Bank organized a relief camp and

distributed 50 kgs of rice and Rs.5,000 to each of the affected family. Similarly,

another relief camp was organized for the fire victims at Seer, Anantnag (South

Kashmir), where blankets, eatables and domestic utensils were distributed among the

sufferers. A camp was also organised by the Bank at Lasipora, Pahalgam, where cash

was distributed among the fire victims.

With a view to help Kargil war sufferers of Drass area in Ladakh region in their

rehabilitation, the Bank organized a relief camp. Blankets and eatables were

distributed among the people covering about 1500 families settled in 17 villages in

and around Drass, who had migrated to Sankoo, Saliskote and other far flung areas of

Kargil. Stationery items were distributed among the school going children.

GLIMPSES OF SOME PROGRAMMES-

1. Poverty Alleviation Programme

Objective: To educate and provide the underprivileged sections financial services

through intervention and community participation.

Poverty is an age old and worldwide phenomenon. It affects the quality of life of the people in

the society in one form or other. India is a developing country with huge percentage of

population living below poverty line. India has a massive poverty.

79

The analysis of poverty scenario in India is a complex one. The

unemployment/underemployment, underdeveloped agricultural sector, unbalanced

development with huge regional imbalances, illiteracy, shortage of capital, lack of

entrepreneurs, etc are some of the major causes of poverty in India.

Keeping this in view, the Bank during the year 2005-06 launched a comprehensive

programme for upliftment of poor and to raise the living standard of masses and ameliorate

their socio-economic conditions so as to achieve balanced economic growth with social

justice.

Bank targeted those people who have certain entitlements in the form of productive assets,

education & skills, the possession of which otherwise can generate incomes to buy the food

requirements above the subsistence level. However, the programme recognized that poverty

cannot be eradicated by relief. It needs to be removed through creation of productive

employment opportunities and other social conditions. Productive employment generates

growth, creates assets and thus improves the economic conditions of the poor who get

engaged in such pursuit. At the same time, growth through productive employment creates a

multiplier effect for bringing about a change in the economic scene. Further, poverty

originates in villages and Bank took various initiatives to contain it there so that its overflow

to towns and cities in the form of social migrations and slum dwellers is stopped. Therefore,

the focus of Bank's poverty eradication programme 'WE ARE FOR THE POOR' was rural

centric.

Under the programme, the Bank undertook number of initiatives to raise the standard of

people and alleviate poverty. The programme covered areas of agriculture, horticulture,

village and cottage industries, fisheries, tourism, handicrafts on one hand and promotion of

health, sanitation, communication and education on the other.

2. Environmental Excellence Programme

Objective: To preserve and promote green & pollution free environment.

In the last few years environmental degradation has reached to immense proportion owing to

unabated exploitation of nature and natural resources. The major factors responsible for

degradation of environment in India have been heavy industrialization, deforestation, increase

80

in traffic in cities, population explosion, illiteracy, etc. Accordingly, in order to preserve

environment and promote pollution free environment, the Bank has launched a

comprehensive programme to preserve and promote green & pollution free environment.

Under the programme, the bank undertook number of measures like planting trees, developing

parks and gardens at barren lands, undertaking cleanliness drives etc. Awareness camps are

organized on continuous basis at number of places to educate people to keep their

environment clean

The preservation of environment is a top most priority for the Bank. The Bank has been

playing a pivotal role in protecting the environment by organising cleanliness drives

throughout the country particularly in the state of J&K. During "Plantation Week" massive

plantation drives are organised at various parts of the Jammu and Kashmir State. On the eve

of World Arboriculture Day, the a massive plantation drive was undertaken at Badamwari,

Srinagar where almond sapling were planted. The plantation drive at Badamwari was

undertaken as a part of the Bank's plan to revive the famous almond garden, which had lost its

fame over the years due to negligence and oblivion.

Nostalgic feelings about the past had never been so strong as they were on March 25, 2008

when J&K Bank dedicated the revived and redesigned pride past of Kashmir, Badam Vaer to

the people of Kashmir. Developed around the famous Waris Khan Chah , Badam Vaer is a

solid reminder of the past and a walk around it refreshes and resurrects the sense of history.

The Bank has been extending support to municipalities and hospitals in Srinagar and Jammu

cities for ensuring better hygienic conditions. The Bank developed a public park at Iqbal Park,

Srinagar. The park at one time was in a dilapidated condition and a thriving place for all kinds

of insects. Even the garbage of most of the areas of the city was being dumped in the park and

also main vegetable & fish market used to operate in the park. The park had become nuisance

for people in general and residents of area in particular as foul smell used to emanate from the

park. The park is now presenting a new look and has become a major attraction for people,

which reflects the J&K Bank's environmentalist approach. The Bank has converted barren

piece of lands into green pastures in the state. The bank has developed children's amusement

park in the world-renowned hill station of Pahalagam in the heart of Kashmir valley. The park

not only commensurate fully with the flora & fauna of the place but also complements the

natural scenic beauty of the place. The park is spread over an area of 42 kanals, where

different kinds of rides have been installed for children over an area of just three Kanals. The

81

majority of area of the park has been developed as Landscape. The arcade and restaurant have

been constructed in such a manner that they fully blend with the natural scenic beauty of the

place. The park also encompasses an artificial lake of about 15,000 square feet area where the

visitors enjoy swan boat rides. The main attraction of the park, however, is a musical fountain

which has been established just at the arcade. A baby train is something that every child loves

to board and enjoy. The entire project was completed in a record time of four months only.

The Bank developed another amusement park "Bagh-I-Wazir", Bun Bagh, Anantnag,

Kashmir. Different kinds of rides have been installed in the park for children. In a short span

of time, the park has become a major tourist attraction in the region. The bank also has plans

to establish such types of leisure and pleasure destinations in other tourist places of the state

as a supplement to ecological/environmental development.

The development of Rajinder Park at Ranbir Canal and a walk way along the canal has

delghited the people. In order to stop the wastage of water, the Bank donated Rs.1.00 lakh for

construction of service reservoir at Spring for the people of Seer, Anantnag, Kashmir. Due to

the efforts of the Bank, more than 200 families were able to get pure drinking water in the

area. The Bank organized sanitation and cleanliness drives in Srinagar and Jammu cities.

Similar drive was organized at Sher-I-Kashmir Institute of Medical Sciences (SKIMS).

3. EDUCATION FOR ALL PROGRAMME.

Objective: To promote education among the employees and the deprived sections of the

society.

In order to promote talent and creativity among the youth, the Bank sponsors various such

programmes where they are encouraged to explore their talent and creativity. The Bank

provides financial assistance to the bright students belonging to poor families so as to help

them to complete their education. Since the last year, the Bank has adopted number of

students to bear their educational expenses. The Bank also provides financial and other kinds

of support to those organizations that are involved in the process of promoting education

across the country. The Bank donates computers and other kinds of equipments to schools and

other educational institutions from time to time. Recently, a poor student of Rajouri got

admission in Government Medical College Jammu. The Bank extended him financial help for

the purchase of books. Similar assistance was given to a poor student to pursue his M.Sc

82

Chemistry in Kashmir University. The Bank also bear house rent, bus fare, examination fee

and tuition fee of a poor student pursuing studies in SKIMS Medical College. Similarly, a

student hailing from Rajouri pursuing his studies in Engineering was provided financial

assistance to the tune of Rs.13,000. The bank has extended a number of scholarships to

deserving Kashmir University students.

The Bank has provided books free of cost to the students of Government Medical College,

Srinagar, who had lost all their belongings including books in a devastating fire that engulfed

the College Hostel. The bank has adopted nine orphan children from Shehjar Orphanage and

is bearing all expenses related to their studies. In this age of Information Technology, the

Bank is making efforts to take computer education to far flung areas for poor students. The

Bank has been generous to donate computers to Apna Ghar orphanage at Beerwah (Budgam),

VAZR School at Kupwara, Law Department (Kashmir University) and Sultan-ul-Arfeen Trust

(Srinagar). A physically handicapped student hailing from Anantnag was given a computer

node by the Bank.

ABN AMRO BANK

ABN AMRO stands out from its peers in the sector. The bank has made significant progress

in integrating its sustainability criteria throughout its business units and subsidiaries, to reduce

lending and investment risks, as well as contributing to product innovation.

It lends at favorable rates for environmental projects, sustainable construction and corporate

environmental improvements, and is active in microfinance. It has been heavily involved in

global initiatives on sustainable finance, including as one of the initiators of the Equator

Principles, a set of voluntary guidelines for managing social and environmental issues related

to the financing of development projects.

ABN‘s lending in developing countries is based on World Bank guidelines and in August

2002, it announced that it was placing limits on the level of environmental risk it would

accept in lending to mining, oil and gas and forestry projects. The bank has previously pulled

out of investments, such as the Maheshwar Dam project in India, due to social and

environmental concerns, and ABN has now publicly formalized its commitment through its

role in the Equator Principles.

83

Ambitious goals include the 2006 objective to improve energy efficiency by 25% and a 100%

waste re-use/recycle/waste-to-energy target. The traditional governance system is well-

structured and has been further strengthened in accordance with recent new Dutch and US

governance codes.

Given its long positive track record, minimal regulatory problems, leading business practices

and continual engagement in the evolving challenges presented by sustainable finance, ABN

is the clear leader in addressing corporate social responsibilities within the banking sector.

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CHAPTER-3

RESEARCH METHODOLOGY AND ANALYSIS

3.1 RESEARCH METHODOLOGY DEFINED

Research methodology is a way to systematically solve the research problem. It may be

understood as a science of studying how research is done scientifically. In this we study

the various steps that are generally adopted by researcher in studying this problem along

with the logic behind them.

3.2 RESEARCH DESIGN

The research design selected is of descriptive type. Data is collected through Primary

and Secondary sources.

Primary Source-

A Questionnaire is prepared to study the awareness of various CSR activities among the

employees of various Indian banks. The questionnaire was a made on a five point scale

ranging from strongly agree to strongly disagree. Various demographic details like age,

gender, designation of the employees have also been found out through the questionnaire

to analyze their impact on the awareness of the CSR activities among the employees.

Also, some open ended questions also formed the part of the questionnaire in order to

make adequate conclusions and recommendations.

Sample Size

A sample size of 80 employees has been used for the purpose of my study. The

questionnaires were being filled from eight banks; ten employees each, from middle and

lower level of their respective banks.

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Statistical Tools

Various statistical tools have been used for the purpose of the study which is as follows:

Mean

Mean of all the statements has been calculated and has been ranked which helps us to

analyze. The statement with the highest mean is ranked 1 and is considered to be the most

favorable one i.e., maximum number of respondents agree with that statement, similarly,

the statement with the lowest mean is ranked last and is considered to be the least

favorable one i.e., minimum number of respondents agree with the statement.

Median

Total of each respondent is taken out in order to find out the median. Median has been

used to find out the respondents who have a total score of less than the median and who

all have a total score of more than the median.

Chi Square Method

On the basis of median association between the various demographic factors and the

awareness among the employees has been found out using chi- square method.

Secondary Source-

Journals and articles in the magazine, news paper and internet have been used to give a

layout of various CSR activities that the few Indian banks are practicing.

86

ANALYSIS OF THE DATA

3.3 ANALYSIS

3.3.1 Sample Description

Age:

Figure 3.3.1(1)

65%

35%

20-30 Years

30 and above

There are 52 respondents or 65% respondents out of the total sample size of 80 under the

age group 20-30 years who have filled the questionnaire and 28 respondents who are of

age group 30 years and above.

87

Gender:

Figure 3.3.1(2)

76%

24%

Males

Females

There are 61 or 76 % males out of a total sample size of 80 who have filled the

questionnaires and 19 or 24 % females.

Designation:

88

figure 3.3.1(3)

65%

35%

Middle level

Lower level

There are 52 or 65 % of employees of middle level out of a total sample size of 80 who

have filled the questionnaires and 19 or 24 % of employees of lower level.

3.4.2Analysis of a few statements

Fulfillment of responsibilities to consumers

Figure-3.4.2(1)

41%

45%

14%

Strongly Agree

Agree

Don’t know

From the above pie chart the analysis shows that 41% respondents strongly agree for the

above statement, 45% agree, 14% don‘t know about it and 0% disagrees with it.

Sustainable corporate culture

89

Figure 3.3.2(2)

18%

64%

10%

0%

8%

Strongly Agree

Agree

Don’t know

Disagree

Strongly disagree

From the above pie chart the analysis shows that 18% respondents strongly agree for the

above statement, 64% agree, 10% don‘t know about it and 8% strongly disagree with it.

Resource cycling and waste reduction

Figure 3.3.2(3)

16%

42%

33%

4%

5%

Strongly Agree

Agree

Don’t know

Disagree

Strongly disagree

From the above pie chart the analysis shows that 16% respondents strongly agree for the

above statement, 42% agree, 33% don‘t know about it, 4% disagree with it and 5 %

strongly disagree with it.

Information Disclosure/Communication

90

Figure 3.3.2(4)

16%

61%

5%

5%

13%

Strongly Agree

Agree

Don’t know

Disagree

Strongly disagree

From the above pie chart the analysis shows that 16% respondents strongly agree for the

above statement, 61% agree, 5% don‘t know about it, 5% disagree with it and 13 %

strongly disagree with it.

Engagement of the Banks in CSR activities

Figure 3.4.2(5)

46%54%

fully engaged

Partially Engaged

There are 37 or 46% respondents according to whom their respective bank is fully

engaged in CSR activities and 43 or 54% respondents according to whom their respective

company is partially engaged in CSR activities.

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CSR Reported and Published

0

10

20

30

40

50

60

70

80

No. of

Respondents

Yes No

Figure 3.3.2(6)

The analysis shows that 45 respondents are aware and agree that the CSR activities are

reported and published whereas 35 say that it is neither reported nor published.

3.3.3 Analysis with Mean and Rank

MEAN of each statement is taken out for all respondents, using the formula below

Mean = Σ X/n, where N is the total of each statement and n is the number of respondents.

On the basis of the means ranking is done (Figure-3.4.3)

Statement Mean Rank

Fulfillment of responsibilities to consumers 4.275 2

Formation of safe, healthy work environment 4.2875 1

Contribution to regional lifestyles 3.325 20

Equality of opportunities 3.675 10

Continuity and creation of regional culture 3.225 21

Balance between work and personal life 3.3875 19

Sustainable corporate culture 3.85 5

Support for environmental and social activities of 3.7375 8

92

suppliers

Resource cycling and waste reduction 3.825 6

Reduction of environmental burden-transportation 3.6125 14

Prevention and remediation of soil contamination 3.4625 18

Reduction of green house gases that lead to Global

Warming 3.5875 16

Preservation of water resources and water quality 3.8875 4

Reduction of environmental burden- product and

services 3.525 16

Preservation of bio-diversity 3.6 15

Quantitative material and energy data 3.65 11

Compliance 3.9 3

Corporate Governance 3.7 9

Risk Management 3.7875 7

Education to society 3.525 17

Management Philosophy 3.6375 12

Information Disclosure/Communication 3.6375 12

3.3.3.(1)Analysis with Mean

1. Fulfillment of responsibilities to consumers - 4.275

This shows that maximum respondents agree to the above statement.

2. -Formation of safe, healthy work environment- 4.2875

This shows that maximum respondents agree to the above statement.

3. Contribution to regional lifestyles- 3.325

This shows that maximum respondents don‘t know about the above statement..

93

4. Equality of opportunities- 3.675

This shows that maximum respondents agree to the above statement.

5. Continuity and creation of regional culture- 3.225

This shows that maximum respondents don‘t know about the above statement.

6. Balance between work and personal life- 3.3875

This shows that maximum respondents don‘t know about the above statement

7. Sustainable corporate culture- 3.85

This shows that maximum respondents agree to the above statement.

8. Support for environmental and social activities of suppliers-3.7375

This shows that maximum respondents agree to the above statement

9. Resource cycling and waste reduction- 3.825. This shows that maximum

respondents agree to the above statement.

10. Reduction of environmental burden-transportation- 3.6125.This shows that

maximum respondents agree to the above statement

11. Prevention and remediation of soil contamination-3.4625.This shows that

maximum respondents don‘t know about the above statement.

12. Reduction of green house gases that lead to Global Warming- 3.5875. This shows

that maximum respondents agree to the above statement.

13. Preservation of water resources and water quality-3.8875.This shows that

maximum respondents agree to the above statement.

14. Reduction of environmental burden- product and services-3.525. This shows that

maximum respondents agree to the above statement.

15. Preservation of bio-diversity-3.6. This shows that maximum respondents agree to

the above statement.

94

16. Quantitative material and energy data-3.65. This shows that maximum

respondents agree to the above statement

17. Compliance- 3.9. This shows that maximum respondents agree to the above

statement

18. Corporate Governance-3.7. This shows that maximum respondents agree to the

above statement.

19. Risk Management- 3.7875. This shows that maximum respondents agree to the

above statement.

20. Education to society– 3.525. This shows that maximum respondents agree to the

above statement.

21. Management Philosophy- 3.6375. This shows that maximum respondents agree to

the above statement.

22. Information Disclosure Communication- 3.6375. This shows that maximum

respondents agree to the above statement.

3.3.3(2) Analysis with Rank

The above analysis show that respondents have highest perception about the CSR

activity: formation of safe, healthy work environment existing in their organization and

have the lowest perception for the CSR activity: Continuity and creation of regional

culture in the organization.

3.3.4 Analysis with median

In order to find out the median total scores of each respondent is taken out and values of

totals are arranged in ascending order and median is taken out using the formula given

below

Median for even numbers = N+1/2

81/2= 40.5

Now 40th

term + 41st term/2

95

83+83/2 = 83. Therefore 83 is the median value

Hence, the number of values less than median and number of values greater than equal to

median are found out.

0

20

40

60

80

No. of

Respondents

Less than 83 More than

83

Figure 3.3.4

The Median value of total scores = 83.

The analysis shows that 39 respondents have a total score of less than 83 and 41

respondents have a total score of more than 83.

3.3.5 Association between age and the awareness of CSR activities among the

employees in various Indian banks

This has been done using Chi-Square method

Null Hypothesis Ho= Age has no implication on the awareness of CSR activities among

the stakeholders.

Alternate Hypothesis H1= Age has an implication on the awareness of CSR activities

among the stakeholders.

96

We now

calculate the 2: For this we calculate (O) and (E): observed and expected values, and (O-

E) 2:

Applying the formula

(Table 3.4.5)

Observed

Frequencies

(O)

Expected

Frequencies

(E)

30 25.35 21.6225 0.853

22 26.65 21.6225 0.811

9 13.65 21.6225 1.584

19 14.35 21.6225 1.507

=4.755

20-30

years 30& above Total

Respondents having total score

of less than 83

30 9 39

Respondents having total score

of more than or equal to 83 22 19 41

Total 52 28 80

97

We get the computed value of chi-square (2) = 4.755.

Degrees of freedom => (R-1) (C-1) i.e., (2-1) x (2-1) =1

The critical value of 2at 10% level of significance for 1 degree of freedom is 2.71

{(2calculated=4.755 and

2 table= 2.71)}

Interpretation

Since the calculated value is more than the table value, therefore the hypothesis is

rejected. Thus age has an implication on the awareness of CSR activities among the

stakeholders.

3.3.6 Association between gender and the awareness of CSR activities among the

employees in various Indian banks

Null Hypothesis Ho= Gender has no implication on the awareness of CSR activities

among the stakeholders.

Alternate Hypothesis H1= Gender has an implication on the awareness of CSR activities

among the stakeholders.

Male Female Total

Respondents having total score

of less than 83

27 12 39

Respondents having total score

of more than or equal to 83 34 7 41

Total 61 19 80

98

We now calculate the 2: For this we calculate (O) and (E): observed and expected

values, and (O-E) 2:

Applying the formula

(Table 3.4.6)

Observed

Frequencies

(O)

Expected

Frequencies

(E)

27 29.74 7.51 0.253

34 31.26 7.51 0.240

12 9.26 7.51 0.811

7 9.74 7.51 0.771

=2.075

We get the computed value of chi-square (2) = 2.075.

Degrees of freedom => (R-1) (C-1) i.e., (2-1) x (2-1) =1

The critical value of 2at 10% level of significance for 1 degree of freedom is 2.71

{(2calculated=2.075 and

2table= 2.71)}

Interpretation

99

Since the calculated value is less than the table value, therefore the hypothesis is

accepted. Thus gender has no implication on the awareness of CSR activities among the

stakeholders.

3.3.7 Association between Designation and the awareness of CSR activities among

the employees in various Indian banks

Null Hypothesis Ho= Designation has no implication on the awareness of CSR activities

among the stakeholders.

Alternate Hypothesis H1= Designation has an implication on the awareness of CSR

activities among the stakeholders.

Middle

Level Lower Level Total

Respondents having total score

of less than 83

26 13 39

Respondents having total score

of more than or equal to 83 26 15 41

Total 52 28 80

We now calculate the 2: For this we calculate (O) and (E): observed and expected

values, and (O-E) 2:

Applying the formula

100

(Table 3.4.7)

Observed

Frequencies

(O)

Expected

Frequencies

(E)

26 25.35 0.4225 0.017

26 26.65 0.4225 0.016

13 13.65 0.4225 0.031

15 14.35 0.4225 0.029

=0.093

We get the computed value of chi-square (2) = 0.093.

Degrees of freedom => (R-1) (C-1) i.e., (2-1) x (2-1) =1

The critical value of 2at 10% level of significance for 1 degree of freedom is 2.71

{(2calculated=0.093 and

2table= 2.71)}

Interpretation

Since the calculated value is less than the table value, therefore the hypothesis is

accepted. Thus designation has no implication on the awareness of CSR activities among

the stakeholders.

101

CHAPTER-4

FINDINGS AND DISCUSSIONS

4.1FOLLOWING ARE THE FINDINGS OF THE REPORT

Different interviewed banks belong to the so-called ―innovators‖ and ―early adopters‖ of

environmental principles. They stressed that this requires high financial investments and

makes the product price higher. According to these banks this can have a negative effect

on their competitiveness.

Concerning India, banks are of the opinion that double standards are used. According to

one private bank, foreign banks have to fulfill much higher (environmental) standards

than Indian banks when investing in projects in India. This brings them in a

disadvantaged position in comparison with Indian nationalized banks.

Most banks confine environmental implementation measures to in-company measures.

Not many initiatives with respect to the supply chain, i.e. product related, were found.

Some good practices were found with private banks which work on product stewardship

with suppliers and perform impact assessments with respect to their projects or

investments.

Several private banks participate in an international initiative to apply environmental

standards with respect to their private project financing, the so-called Equator Principles.

It is not clear yet what the exact implications of these principles will be.

Liability is a sensitive subject. Only one bank explicitly mentions this principle in its

guidelines and gave examples of compensation which it provided to local communities

for environmental damage.

The absence of explicit statements in this field might result from the fact that liability is

regulated by law. But often the perpetrator of environmental legislation (even if

accidentally) cannot be traced, especially in India where enforcement is low. This results

in pollution and no one taking responsibility.

102

The banking sector is quite active in incorporating environmental aspects into their policy.

This is partly a result of negative publicity in the past. They focus more on the

environmental impact of their investments than on in-company measures, because their

investment policy has a much larger impact on the environment.

• Large banks with a sustainability report have developed environmental indicators and

have formulated environmental targets.

• The sector is trying to develop a product-oriented environmental management system.

• The banking sector has developed the Equator principles, which contain (among others)

environmental criteria for private project financing.

Most banks take this principle into account with respect to the quality and safety of their

products, and less with respect to the environmental impact of their processes, products

and services, unless legislation requires so.

The respondents have highest perception about the CSR activity: formation of safe,

healthy work environment existing in their organization and have the lowest perception

for the CSR activity: Continuity and creation of regional culture in the organization.

The statements to which maximum respondents agree are:

Fulfillment of responsibilities to consumers

Formation of safe, healthy work environment

. Equality of opportunities

Sustainable corporate culture

Support for environmental and social activities of suppliers

Resource cycling and waste reduction

Reduction of environmental burden-transportation

Reduction of green house gases that lead to Global Warming

Preservation of water resources and water quality

Reduction of environmental burden- product and services

Preservation of bio-diversity

Quantitative material and energy data

103

Compliance

Corporate Governance

Risk Management

Education to society

Management Philosophy

Information Disclosure/ Communication

The various activities done by the banks with respect to these activities are:

Different banks focus on sustainable development to follow on the triple bottom lines of

Economic, Environment and People. As a business entity, they aim at improving stakeholder

value through improved eco-efficiency of operations, economic upliftment of the

communities we operate in, and the efficient use of capital and natural resources.3. The

statements about which maximum respondents don‘t know about their being followed in the

banks are

Contribution to regional lifestyles

Continuity and creation of regional culture

Balance between work and personal life

Banks believes that the loyalty and commitment of its employees depend upon the

quality of life they are provided with at work and at home. Consistent with the Group

Purpose, they declare in their vision statement that they will constantly strive to improve

the quality of life of the communities it serves through excellence in all facets of its

activities.

All the banks have developed manuals to explain their CSR principles to personnel and

public. This gives more clarity and transparency on the commitment of the company

towards its stakeholders and should be encouraged. It is also a transparent way for a

company to discuss its dilemmas in the field of CSR.

104

Approach towards different stakeholders

Employees

Those banks having a CSR policy (written down or informal) communicate these aspects to

their employees. They use different methods for internal communication on CSR:

• Management manuals (most large Multinational Banks)

• Training

• Meetings in which the mission statement is shared and discussed with employees

• Management conferences

• Internal newsletters

With respect to the daughter banks in India, many banks focus their communication on the

management. This is quite logical from a practical point of view, but it incurs the risk that

staff at the local level does not absorb the CSR policy in the same spirit as intended by the

mother company.

The involvement of banks, let alone its employees or other stakeholders, in the

development of the CSR policy seems to be quite limited still. Some banks attribute this to

the fact that they have not been working in India for such a long time yet.

Several banks indicated that they do not have a positive impression of Indian trade unions

and therefore preferred not to get involved with them.

The presence of trade unions in banks possibly allows employees in the development of the

CSR policy of banks, even though a large part of this CSR policy has a direct impact on

employees.

All interviewed banks have a pro-active attitude towards NGOs. They have initiated some

sort of dialogue with NGOs and mainly act on it when they are under pressure. All banks in

India indicated that they are regularly approached by local NGOs and representatives of the

local community to contribute to community development.

105

Large Multinational banks run the risk to become subject to pressure of community leaders

who are only concerned with personal material benefits. In order to countervail this against

these leaders, the stakeholder suggests that banks use institutional mechanisms that have

community participation or help to develop such mechanisms.

Several Multinational banks expressed criticism towards the role of NGOs in their dialogue

with banks:

Recently several international banks formulated the Equator Principles which contain

criteria for private project financing. These principles also mention biodiversity, including

endangered species and sensitive ecosystems, and land use.

A large bank has formulated a biodiversity standard with respect to: protected areas,

maintenance of ecosystems and contribution to conservation.

―Green‖ environment is a relatively new environmental issue and it seems that banks are

more reactive on new CSR issues than pro-active.

A reactive approach was demonstrated by Indian banks, which only formulated an

investment policy with respect to the preservation of forests after they had received a lot of

negative publicity.

Banks also expressed expectations towards governments in the field of CSR.

Legislation should be unambiguous, transparent and stimulating. Banks did not support

this statement with examples in India.

Governments should give guidance with respect to political sensitive issues.

Sector wide initiatives are another way of stakeholders‘ involvement, namely by improving

CSR conditions in the sector and sharing of best practice with other banks.

The number of sector wide initiatives on CSR seems to be the largest in the banking sector.

More and more banks are adopting CSR criteria in their investment policies, to a large

extent under public pressure, but also to limit the investment risks. Since competition is

high, banks prefer sector-wide initiatives which enable them to create a level playing field.

106

The involvement of the interviewed banks with sector-wide initiatives was quite limited.

Corporate Social Responsibility at Citigroup is a little unique in its model.

Citibank focuses on sustainable development, and felt that instead of spreading ourselves

thin by being everywhere, we should instead focus on areas that are more synergistic to

what we do, what we stand for, and where our employees also can contribute.

Transparency and reporting

Transparency

Banks seem to be very concerned with the issue of adequate transparency towards

stakeholders, although it is only a very recent development. There are however many

grades of transparency and many banks are more transparent on intentions than on

performance and especially on shortcomings. Larger banks have in general developed a

pro-active communication, thereby actively seeking contact with their stakeholders. This is

less so for the small banks.

Media

Media used for external communication are:

• Brochures, Internet, publications (most banks)

• Sustainability report (few Multinational banks)

• Presentations at conferences and forums (most banks)

• Formal complaint system (few banks)

Confidentiality

A major bottleneck forms the dilemma between transparency at one hand and

confidentiality on the other. According to banks, confidentiality has two backgrounds:

107

Confidentiality with respect to clients is especially very necessary in the case for banks,

and plays also a role with respect to project partners for other banks. Confidentiality is

deemed necessary to protect sensitive information from competitors.

According to banks the boundaries between transparency and confidentiality are difficult

to define since it is very case related.

An example is the financing criteria of banks. Contrary to their finance criteria for the

private sector for which they have recently signed the Equator Principles, banks are not

transparent on their criteria for projects in the public sector. They argue that banks are not

supposed to get involved with politics and that it should be the role of international

institutions like the UN to give guidance on political sensitive issues.

This means that in the end the banks are the ones who decide if certain information is made

public or not. As a result, a lot of information provided by banks stays at an abstract policy

level and for NGOs it is hard to obtain insight in CSR criteria, considerations and

performance in a specific case.

Reporting

Reports on sustainability achievements are the latest development: most Multinational

banks have just started publishing one or are in the process of composing one. The distinct

ways in which the sustainability reports are composed makes comparison difficult for

stakeholders. Most of the information has a very general character and quantified data are

rare. .

(Internal) monitoring: the procedures and practices a bank itself carries out to check that

CSR standards have been implemented and are continuously observed by the bank.

Auditing: a formal, often periodic examination and cross checking of CSR records within

the bank to verify their correctness.

Independent verification: the process of verifying code compliance and evaluating CSR

conditions. Because the essence of verification is credibility, it must be performed by

banks.

108

Auditing

Auditing on CSR seems to be the concern of only the Multinational banks. Most have

formulated CSR targets for their business units and/or daughter banks. These targets are

also translated into personal targets for management and employees.

In order to implement a proper monitoring system banks consider it necessary to quantify

the CSR information. This appears to be quite difficult, especially for social aspects.

Banks rely on their suppliers to have a good reputation in the field of CSR. . Many banks

currently hire commercial auditing firms or traditional quality auditors. This is often called

third party verification. Another criticism against the audit firms currently being used by

many banks, is the fact that the banks hire these firms, and therefore, they cannot be

considered to be independent from the company in question.

Tables with findings on social CSR aspects

Human rights and respect for national sovereignty

NGO Principles CSR practice in India

1. Promotion of human

rights in host country

• Bottleneck: Several Indian daughter banks

maintained a distance from political issues and therefore

declined to take a position with respect to human rights

violations in the country. It concerned banks which

mother company has a policy on human rights. .

• Indian NGOs see it as an obligation of banks to

take a stand on human rights violations: ―Short term

interests prevent banks to do so (they want to keep the

relation with the government smooth), but it is in the long

term interest of the company to speak out: security,

productivity and exports get affected, it will have a

positive rub-off on public perceptions.‖

109

Labour

NGO Principles from CSR CSR practice in Indian Banks

1. Respect and ensure

the freedom of association and

the right to collective

bargaining

• Bottleneck: Almost all of the visited banks had a

trade union.

• According to several banks, employees are

interested to join a trade union.

• Trade unions find it difficult to get into contact

with employees when they are not educated.

• According to the trade unions, working

conditions are better where workers are organized.

• Communication in the Indian culture is more

indirect • According to a trade union not much collective

bargaining takes place because workers try to protect

their own job.

.

110

CHAPTER-5

CONCLUSIONS AND SUGGESTIONS

5.1CONCLUSION

―CSR is a concept whereby financial institutions not only consider their profitability and

growth, but also the interests of society and the environment by taking responsibility for

the impact of their activities on stakeholders, employees, shareholders, customers,

suppliers, and civil society represented by NGOs. Banks must take on new responsibilities

that go beyond a simple policy of ―paternalism‖ vis-avis their suppliers, customers and

employees, such as that practiced up until recent times‖

CSR is very much part of the direct business interest of corporate organizations themselves.

Although corporate initiatives for a cleaner environment are definitely on the rise, but there

is a need for still greater understanding of what Indian banks are currently doing to

demonstrate their sense of responsibility to society. Banks are now expected to perform

well in non-financial areas such as human rights, business ethics, environmental policies,

community development, and workplace issues.

A modern bank realizes that a proactive approach to the environmental impacts of its

business activities affects its financial bottom line in the long run. Responsibility towards

the environment is a crucial part of CSR. Initiatives such as partnerships with governments,

local communities and other stakeholders towards preserving the environment are therefore

important ways for a company to humanize the ‗businesses of its business.

Financial institutions can do a lot to assist efforts for corporate social responsibility and

achieve sustainability. Internal efforts to make day-to-day operations cleaner, more

efficient, and supportive of social structures can help. Integrating issues into strategic

operations is also important. In this way, financial institutions not only ensure that internal

activity is sustainable, but they can also help financing itself become more sustainable.

Sustainable finance should be promoted. This can encompass incorporating E&S

(environmental and social) assessments into financial analysis, or developing products with

an explicit E&S focus, such as sustainable & responsible investment (SRI) funds. SRI

111

(sustainable and responsible investment/socially responsible investment) is an investment

strategy that identifies investment targets that carry net E&S benefits, or no net E&S

detriment, as well as provide financial growth. Sound financing of sustainable economy

can be promoted by the banks itself. A lot more can be done by bank so as to practice the

corporate social responsibility.

The follow up of the Equator Principles and other CSR supporting measures shall be

strictly dealt and implemented. Until and unless environmental authorities are serious and

stricter about this, the financial institution will face a lot of problems. There would be

general social and economic benefits that would accrue to society, if business recognized

broader social goals in its decisions.

5.2 SUGGESTIONS

It is vitally important that governments be effective in enforcing national legislation

all through their territories, creating a framework through which CSR can flourish.

CSR awareness should be spread through various ways like:

Through websites providing all the necessary information.

Weekly newsflash services.

On-line information resource with archives of news clippings/ periodicals/

documents etc.

Quarterly newsletter/periodical on the updated CSR activities should be

made available

Publications in the form of booklets, pamphlets, and books should be

circulated.

Talks, seminars, workshops and training programmes should be conducted.

CSR activities should be regularly published and reported.

Operational CSR aspects

Accountability: the focal point in the CSR debate should be accountability of banks

rather than responsibility.

112

Communication: A valuable aspect of this project is that it has lead to discussions

within Multinational banks about CSR issues.

Stakeholder involvement: A discussion is necessary to find where different

organizations such as consultancies and trade unions can strengthen each others‘

work on CSR. Consultancies on their own can monitor banks‘ behavior but without

input and follow-up of trade unions it remains toothless. Trade unions and

employees can make use of the technical expertise and more ‗objective fact finding

role‘ of consultants.

Business case: The business case for banks with respect to CSR is to a large extent

their reputation. They run a large risk if they invest in banks which contribute to

environmental degradation and exploitation of labour. Therefore, the best

protection for a bank is to know its customers, i.e. the banks or projects they invest

in and the people putting money into the bank.

Business case: Banks should realize that costs are not a valid reason not to adopt a

CSR policy. The costs will not be enormous, if one compares it for example with

the costs spend on advertising. Above that, the benefits will exceed the costs. It is a

matter of priorities.

Policy development: The drivers for the CSR policy of foreign banks operating in

India should be national, a bottom up approach from daughter to mother company

is necessary. The foreign company should not impose the legislation of its home

country upon India. On the other hand it is necessary that India brings its legislation

in line with international requirements. Concerning the CSR policy certain CSR

principles work across countries; these are the so called core principles.

Implementation: CSR is so far a game of heroes and heroines, where mainly the

concept is being discussed. It has however not institutionalized yet.

The focus in the CSR discussion is now too much on the value aspect (content of

the principles), but the process if and how CSR is implemented in the company is

much more important.

Monitoring mechanisms: A trade unionist brought forward that CSR from the

western perspective entails the assumption that banks and consumers will regulate

CSR. There is however no such evidence, and therefore a third way should be

113

introduced: social regulation. Market mechanisms will not be sufficient in order to

force banks to comply with CSR standards. Even banks which claim to adhere to a

code of conduct do not have any process or system to implement the code, monitor

it or have it verified. Therefore, social mechanisms are necessary, at par with the

expectations of society. From a labour point of view, this mechanism is provided

by the right to organise and collective bargaining. Because by definition there will

be a conflict of interest among different stakeholders a political process is needed

to develop such a social framework. In other words, legislation is deemed necessary

to ensure a balance for all concerned parties in the CSR practice of banks.

Verification: verification of compliance with the CSR policy is essential. This

could be done by a coalition of for example government, NGOs and trade unions.

Social CSR aspects

Women: The position of specific disadvantaged/marginalized groups like women

tends to disappear in the debate on CSR. Their interests may conflict with those of

other groups, and therefore need to be specifically addressed.

Trade unions: A trade unionist pointed to the fact that the CSR discussion involves

a conflict among stakeholders by definition. A company needs to address all but

how can it realise this? Workers could play an important role in the monitoring

process. Many CSR models have been made but without participation of workers

and trade unions. An internal instrument is necessary which involves the workers.

Work security: The CSR policy of banks should also address the concept of

informal labour in the Indian context.

114

Consumer protection: Another hiatus in consumer protection in India is that although there

is a consumer protection act, many cases are in the consumer courts for years. If consumers

should be educated on CSR it is not effective to approach them on an individual basis.

Transparency and communication is needed so that consumers know where the money

goes. Also the link between corporate social responsibility and bank debt. We find that

firms with the worst social responsibility scores pay up to 20 basis\ points more than the

most responsible firms. However, we find that for the majority of firms, the impact of CSR

is not economically important. The modest premiums associated with CSR suggest that

banks do not regard corporate social responsibility as significantly value enhancing or risk

reducing.

115

BIBLIOGRAPHY

REFERENCES

BOOKS:

CSR Concepts and Cases, The Indian Experience- Edited by

CV Baxi and Ajit Prasad

Business Unusual- Changing CSR- RK Pachauri

Altered Images- The 2001 stage of Corporate Responsibility, Indian Role – Ritu

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Profiting from Environmental improvement in Business, An eco friendly kit by

Australian Industry published by Environment Australia.

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http://www.mallenbaker.net/csr/

http://www.mallenbaker.net/csr/csrfiles/definitionhtml/

http://www.bsr.org/

http://en.wikipedia.org/wiki/corporatesocialresponsibility

http://drreddys.com/coverview/sustainabledev.htm

3 Adrian Henriques, ‗Ten things you always wanted to know about CSR (but were

afraid to ask); PartOne

: A brief history of corporate social responsibility (CSR),‘ Ethical Corporation

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http://www.ethicalcorp.com/content.asp 4

R. Edward Freeman & Jeanne Liedtka‘s Corporate Social Responsibility: A Critical

Approach

Corporate Social Responsibility no Longer a Useful Concept ; refer Business

Horizons, July-August 1991, as retrieved on 25/11/2008

116

Gerard Fonteneau‘s Corporate Social Responsibility: Envisioning its Social

Implications

Ibid footnote no. 3 ; also refer Lew Jan Olowski‘s Corporate Social Responsibility:

Its history, Ethical justification, And Abuses in the business world, EC3000

Refer http://www.mainstreamweekly.net/article646.html, retrieved on 28/09/08

―The Good Company‖, The Economist (2005-01-20). Retrieved on 2008-25-07

Kytle, Beth; John Gerard Ruggie (2005). ―Corporate Social Responsibility as Risk

Management: A Model for Multinationals‖ (PDF). Social Responsibility Initiative

Working Paper No. 10.

John F. Kennedy School of Government, Harvard University. Retrieved on 2008-

25-07. A recent longitudinal Harvard University study has found that ―stakeholder

balanced‖ banks showed four times the growth rate and eight times employment

growth when compared to banks that focussed only on shareholders and profit

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ANNEXURE

Dear Sir/ Madam,

I ,Shalini Kakkar, a research Scholar, is pursuing M.Phil from Global Open University,

Nagaland, as a part of my thesis on the topic ‗Role of Corporate Social Responsibility in

Indian Banks, need your opinion for my study. Kindly fill the questionnaire which will be

useful for my research. Your responses will be kept confidential and will only be used as a

part of my research purpose.

Questionnaire

SECTION A

Age: 20-30 yrs 30 yrs and above

Gender: Male Female

Designation:

Q1. Is your bank engaged in CSR activities?

Fully Partially Not at all

Q2. Is it reported and published?

Yes No

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SECTION B

Following are the statements relating to certain CSR activities followed in the banks.

Kindly give your opinion for the statements by putting a tick mark in the relevant column.

Statements Strongly

Agree

Agree Don‘t know Strongly

Disagree

Disagree

Fulfillment of

responsibilities to

consumers

Formation of

safe, healthy work

environment

Contribution to

regional lifestyles

Equality of

opportunities

Continuity and

creation of

regional culture

Balance between

work and personal

life

Sustainable

corporate culture

Support for

environmental and

social activities of

suppliers

Resource cycling

and waste

reduction

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Reduction of

environmental

burden-

transportation

Prevention and

remediation of soil

contamination

Reduction of

green house gases

that lead to Global

Warming

Preservation of

water resources

and water quality

Reduction of

environmental

burden- product

and services

Preservation of

bio-diversity

Quantitative

material and

energy data

Compliance

Corporate

Governance

Risk Management

Education to

society

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Management

Philosophy

Information

Disclosure/

Communication

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SECTION-C

1. What do governments require? Do you need to ensure that these requirements are

being met?

2. What do consumers and other groups expect of businesses in this situation? Does

your work meet their expectations?

3. Where are the opportunities for a single firm or brand to gain advantage over its

competitors? Can you identify and harness them?

4. Where is there no likelihood of profit but a great likelihood of harm? Is this

impossible to resolve by firms that must make profits? Can your organization

contribute to a resolution?

5. Which codes of conduct and other expectations govern the choices of business in

this context?

6. What problems can be tackled that will enhance the value, brand, or profits of a

specific firm?

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APPENDIX-1

Putting Teeth in Corporate Social Responsibility

Corporate social responsibility (CSR) has become a fashionable, if not particularly well-

defined, term in recent years. The concept encompasses a broad range of activities that

corporations may engage in, with varying degrees of enthusiasm, to demonstrate that they

are addressing important human rights, environmental, and labor issues - many of which

have been brought to their attention by activist groups.

A key component of the general discourse around CSR has been so-called multi-

stakeholder initiatives, which bring together corporations, governments, and non-

governmental organizations to talk about and in some cases develop mechanisms for

addressing, particular areas of concern. The era of globalization has been replete with such

initiatives intended to promote greater respect by transnational corporations of human

rights and environmental principles. Among these are the UN‘s Global Compact,

the Voluntary Principles on Security and Human Rights, the Kimberley Process for

monitoring the global diamond trade, and the Extractive Industries Transparency Initiative.

These initiatives have represented an effort to retake some of the control over the actions

of transnational corporations that globalization has forced states to concede. Indeed,

globalization has largely been defined by efforts to reduce state involvement in economies

and reduce barriers to entry by corporations. Free-trade agreements, one of the key pillars

of globalization architecture, contain provisions designed to limit states‘ abilities to adopt

and enforce regulations on corporations for purposes of protecting the environment and

public health.

The CSR initiatives in a general sense have been useful venues for public debate about

these issues. They may also have helped elevate the issues they seek to address to higher

levels of awareness among policymakers and corporate leaders than would otherwise have

been the case. Despite the existence of such initiatives, however, human rights and

environmental problems continue to affect a broad range of corporate operations around

the world, particularly in the oil and mining sectors.

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A key problem affecting all of the voluntary CSR initiatives is that they are just that:

voluntary, and thus lack any real enforcement mechanism for sanctioning corporations that

fail to comply with the principles or standards promoted by the initiatives. The Voluntary

Principles have recently faced difficulties arising from the refusal of banks to agree on

criteria for expulsion from the process for noncompliance. The lack of enforcement

capacity has led some skeptics to argue that these initiatives are nothing more than

corporate "greenwash" that enable corporations to argue that they are taking CSR issues

seriously but are in reality not fundamentally changing the ways they operate.

What can be done to put some teeth into CSR so that it becomes more than just an excuse

to create more "talking shops" or glossy reports to be downloaded from a company‘s

website?

There are two key areas in which to look for answers to this question. One lies in

strengthening governments' abilities and incentives to regulate corporations. Ultimately,

governments have a responsibility to hold corporations accountable for operating

responsibly. But fulfilling this responsibility is unlikely to happen given the inequitable

power structure in the global economy that serves the interests of the rich countries (and

the corporations that are headquartered there). Moreover, the skewed power imbalances in

developing countries themselves enable the elites to benefit from globalization while

leaving everyone else in the dust.

Recent efforts to hold corporations legally accountable for human rights violations via

lawsuits in U.S. courts are a positive development, but the legal basis on which such cases

have been filed may be too limited to have a broad impact on the corporate sector more

generally. Efforts to "normative" corporate obligations under international human rights

law, such as the recently adopted UN Norms on Transnational Corporations, are also

positive. But again they lack a vehicle for enforcement.

A second area is perhaps more promising. It lies in identifying what corporations are most

interested in. Two items are critical for corporate profitability: Access to capital and access

to markets. If ways can be found to link corporate performance on CSR issues to continued

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access to both of these things, real leverage could be established for holding corporations

accountable.

For capital linkage, the focus should fall on the private banks that finance transnational

corporations. They provide the lifeblood to corporations. Respect for human rights and

environmental standards could be made a legally-binding part of the loan agreements

between the banks and the corporations. In other words, capital will be cut off from a

project if serious human rights or environmental violations are found to have occurred.

The World Bank has tried this approach with its social and environmental safeguard

policies. The problem, however, is that the Bank has only once in its history ended a

relationship with a company based on a social or environmental policy violation. The

institution has effectively taken its ultimate enforcement mechanism—threat of

divestment—off the table. Similarly, a group of private banks has adopted the Equator

Principles, essentially committing to following World Bank standards for projects it lends

to. Yet here again, there is no real sanction for violations of these policies.

What incentive would these banks have to require compliance with CSR criteria? Clearly,

one or more major private banks would have to establish a moral leadership position and

reap the benefits that position might produce, such as positive public relations, happier

employees, etc.

Private banks also often have lower reputational risk tolerance than do large corporations,

particularly in the extractive sector. Mining and oil banks are used to "keeping their heads

down and letting the bullets fly over the top," as one mining company official once

described it to me. Private banks are not. There is empirical evidence that social and

environmental irresponsibility is increasingly translating into real financial risk. In this

sense, banks will see a growing business case for ensuring real responsibility to protect

against risk.

As for the other area of linkage, much could be done to deny markets to corporations that

violate human rights and the environment. Large institutions, such as public utilities,

universities, pension funds, and corporations that consume significant volumes of materials

127

or are brand-sensitive could adopt legally binding contracts that discontinue materials or

stock purchases from corporations that operate irresponsibly. In this way, such institutions

could force corporations to compete with each other to provide the most responsibly

produced products.

Market-based incentives could be found in a purchasers desire to maintain a clean

corporate image and reduce supply-chain risk. Corporations that supply products to these

markets must face a real risk of losing key clients if they act irresponsibly.

Putting teeth into CSR is a challenge. Incentivizing lenders and purchasers to care enough

to recall their capital or cancel contracts if problems arise is a conundrum, but may be

becoming easier to crack. Answering this question is about hitting corporations where they

live—in the worlds of capital and markets—rather than in the comfortable confines of CSR

dialogues. In this way, we can bite back some of the ability to hold corporations

accountable that globalization has chewed away.

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APPENDIX-2

Corporate Social Responsibility

We assist business owners by discussing opportunities and risks in the economic, social

and environmental field at an early stage. Our organisation also provides support by

stimulating innovations in areas including cleantech, sustainable energy and the

environment. We furthermore offer products and services that contribute to the sustainable

development of wealth and welfare for our clients and society. These activities make

Rabobank one of the top three most sustainable banks worldwide.

Vision and Mission

We are committed to conducting business with you in a respectable and transparent

manner by providing our sustainable and socially responsible banking services. This

commitment is reflected in our core values of respect, integrity, professionalism and

sustainability.

Products and services

Rabobank is firmly committed to achieving maximum client value, and that commitment

has proved to be fully compatible with our commitment to CSR.

Dialogue

One of the pillars of Rabobank‘s issue management policy is the ‗multi-stakeholder

dialogue‘. This entails bringing together relevant stakeholders who are involved with one

or more CSR issues within a sector or production chain. The related objective is to develop

mutual trust and to provide a platform for exchanging knowledge.

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Employees and CSR

Involved employees are vital to the success of Rabobank Group. Employees that are

committed to the shared ambitions, values and standards of the Group can really make the

difference when it comes to realizing our business objectives.

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APPENDIX-3

The Karmayog Corporate Social Responsibility Study and Ratings of Indian Banks was

undertaken to explore and understand the role that corporates are playing...in finding

meaningful solutions to the problems facing India today...Karmayog undertook...rating to

understand the CSR activities of all banks on an equal level, thus showing up banks doing

no CSR, as well as showcasing banks doing good work...

Study Finds that Largest Indian Banks Need to Improve CSR Activities and

Reporting

Robert Kropp, SocialFunds.com 13 Apr 2009

UN engages banks to light up rural India; Solar loans, energy access transform life

for poor

UNEP 29 Apr 2007

Life for an estimated 100,000 people in poverty-stricken rural India has been improved

dramatically by several hours of reliable solar-powered lighting every night, made

available by a UN-led pilot project to facilitate household financing for solar home

systems...[Core funding is provided by] UN Foundation...[&] Shell Foundation...Two of

India's largest financial institutions became the project's initial partners: Canara Bank and

Syndicate Bank. Two more banks, the Bank of Maharashtra and Sewa Bank, were added as

partners this year...Encouragingly, Indian banks not included in the initial partnership have

launched competing solar loan products and competition is heating up.

Lupin Labs Bags Corporate Social Responsibility Award [India]

Hindu Business Line 20 Dec 2003

Lupin Laboratories Ltd has bagged the Businessworld-FICCI-SEDF Corporate Social

Responsibility (CSR) Award 2003 for its contribution in the field of community

development. The company has taken significant initiatives towards empowering women

in Bharatpur district of Rajasthan by encouraging self-help groups. Lupin has also

undertaken various projects to upgrade water, agriculture, income generating programmes

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and health. [other awards to Canara Bank, Gujarat Ambuja Cements, Indal (part of Aditya

Birla Group), ITC Ltd, Wipro Ltd]

INDIA: Banks, UNEP Launch Solar Power Initiative

UN Wire 05 Mar 2003

The U.N. Environment Program and two of India's largest banks [Syndicate Bank, Canara

Bank] yesterday launched a $7.6 million solar power initiative aimed at helping 18,000

households in southern India conserve energy and emit fewer pollutants...UNEP backed

the project along with the United Nations Foundation and the Shell Foundation.

APPENDIX-4

February 3rd, 2009 Trust and Corporate Social responsibility: Lessons from India

Ashwani Singla

Chief Executive Officer, Genesis Public Relations Pvt. Ltd. & Prema Sagar Founder &

Principal, Genesis Public Relations Pvt. Ltd. “On action alone be thy interest, Never on its

fruits. Let not the fruits of action be thy motive, Nor be thy attachment to inaction.“

Bhagavad-Gita, Chapter

Spirituality and Corporate Social Responsibility have had a deep-rooted connection in

India.

A phenomenon that has preceded the coining of the term ‗CSR‘, the link between the

‗karma‘ as espoused by sacred Indian texts and initiatives anchoring corporates as

responsible citizens has been amply evident in India since the early days.

This is widely divergent from the perspective of corporate social responsibility in Western

economies as reflected in the observation by Arthur Page, vice president of public relations

at AT&T for around 20 years and former advisor to the US President:

―… all business in a democratic country begins with public permission and exists by public

approval ….‖

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Viewed from this perspective, public relations professionals are the custodians of trust for

the corporate world. While the global spotlight today focuses on debates on corporate trust,

India can proudly flaunt a head start in this arena.

Yet, before we present India‘s case, let‘s briefly scan some recent happenings, particularly

in the US, that led to an erosion of trust in Corporate Inc. worldwide.

Erosion of Trust in Corporate Inc.

The turn of the millennium has witnessed mammoth bankruptcies, accounting scandals and

obstruction of justice allegations. The consequent tarnishing of gilt edged names like

Enron, WorldCom, Xerox, Arthur Andersen, Kodak, to name a few, has had widespread

ripple effects in the corporate world. Yet news continues to pour in…

KPMG, the big accounting firm, agreed to pay $200 million in suits arising from audits of

Rite Aid and Oxford Health…

Bristol Myers, the pharmaceutical giant, inflated sales by $2.75 billion in 1999-2002. The

National Association of Securities Dealers (NASD) has charged an executive of CSFB

with fraudulent allotment of hot IPOs to 300 of his corporate executive friends, to persuade

them to prefer CSFB for their investment banking business. The new management of Tyco,

whose CEO and CFO are under criminal prosecution for frauds totalling $600 million, is

discovering more new scandals. Health South has been charged with an accounting fraud

of $1.4 billion by inflating insurance claims. There are a number of suits, in what could

turn out to be the biggest case, against Citigroup, J P Morgan and other investment banks

for helping Enron and other banks to commit fraud, and for rigging IPOs to defraud the

investing public. Needless to say, this is hardly an exhaustive list.

The repercussions have been immense

According to a survey by BusinessWeek, 92% of respondents have ―only some‖ or ―hardly

any‖ confidence left that the market treats individual investors fairly. Some 93% have

―only some‖ or ―hardly any‖ confidence in those who run big banks. About 95% feel the

same way about big auditing banks, such as Arthur Andersen.

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Some 82% are either ―not too confident‖ or ―not at all confident‖ that corporations

accurately report how much money they make.

And few of the respondents really believe that anyone can or will do much about all this.

For instance, 94% have ―only some‖ or ―hardly any‖ confidence that Congress can write

effective rules governing corporate financial practices. Some 93% have the same view of

the chances that federal regulatory agencies can do the job. And 60% strongly disagree that

corporations can successfully reform themselves.

According to another survey by Business for Social Responsibility, a global organization,

90 per cent of American respondents want banks to look beyond the bottomline. BSR also

found that nearly 50 per cent form an impression of a company based on its behavior and

39 per cent react negatively to a company that is perceived not to be socially responsible.

These are challenging times for banks, pension funds and individual investors. The

Teacher Retirement System of Texas and the Texas Employee Retirement System is the

last fund that you would expect to be impacted by corporate scandal. But look again. With

approximately $100 billion to protect, they have to make wise investment choices for their

members. Both funds invested in Enron, and both talk about their losses on their respective

websites.

In the communications business, we confront the challenge of this changing environment

every day. We see stakeholders hold banks under the magnifying glass, checking

accountability, monitoring performance and assessing a company‘s impact in a community

or on the environment. We have seen and continue to see how this intense scrutiny has

affected businesses.

India too has seen some repercussions of the global mood

There has been a general mood breeding a lack of trust in regulators following recent

scams unearthed in the Indian stock markets.

The brooding has had its fallout on unsuspecting banks, as ICICI Bank, one of the

country‘s largest banks, would confirm. A short message service that the bank was on the

verge of bankruptcy started the run, gathered momentum as messages were flashed across

cell phone networks, ICICI Bank branches across many cities witnessed the unedifying

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spectacle of queues of people waiting to withdraw their money as fast as they could. The

Reserve Bank of India had to step in to calm things down.

The importance of trust

Research by Burson Marsteller, called ―Building CEO Capital‖ reveals dramatic findings.

After speaking with more than 1,100 business influentials – CEOs and other senior

executives, financial analysts, institutional investors, the business media and government

officials in the United States – the research infers that the CEO‘s reputation is a key factor

in a company‘s reputation. In fact, the research data reveals that:

CEO reputation accounts for a staggering 48 per cent of a company‘s reputation.

Banks whose CEOs were rated ―most admired‖ achieved a 13 per cent compound

annual shareholder return over a three-year period. Banks with CEOs who were

rated less favorably delivered a negative return.

Eighty-eight per cent of respondents said that the CEO‘s reputation would

influence whether they would recommend a company as a good place to work.

Ninety-four per cent would believe the company if under media pressure. Ninety-

two per cent would maintain confidence in the company when share price is

lagging.

The growing importance of trust is also embedded in a number of other

developments:

The rise in the number, influence and sophistication of non-governmental

organisations that monitor, track and inspect global corporate players. Less than 30

years ago, there were 1,400 NGOs. In 1995, there were nearly 30,000. Today that

number has grown 10 fold.

An increase in shareholder activism. Of the more than 700 shareholder resolutions

filed in the US in 2002, more than a third of them were based on social issues.

Greater disclosure requirements of social and environmental performance as part of

their ―new economic regulations‖ by Governments, particularly in Europe.

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Just three years ago, the concept of triple bottom line reporting – that means assessing and

providing an accounting of a company‘s social, environmental and economic impact and

performance – was embraced by only an enlightened few. Today, such reporting is

embraced by the majority to prove they are acting responsibly.

The recognition of the importance of Trust is well entrenched in India

Respect is, in some ways, an intrinsic part of Indian culture. The Indian ritual of touching

the feet of elders is a good example of how respect manifests itself in everyday life.

This transcends into the corporate world. For decades now, since Independence, corporate

majors such as the Tata and Birla group banks have led the way in making corporate social

responsibility an intrinsic part of their business plans. These banks have been intensely

involved with social development initiatives in the communities surrounding their

facilities. Jamshedpur, one of the prominent cities in the northeastern state of Bihar in India

is also known as Tata Nagar and stands out at a beacon for other banks to follow.

Respect is a much sought after tag in the Indian corporate world. This is one of the reasons

for the immense popularity of The Most Respected Banks of India survey, initiated by one

of India‘s premier business magazines, BusinessWorld in 1983, long before skeletons

began toppling out of the corporate closets around the globe. In fact, the magazine

admitted in a cover feature following its first survey that the overwhelming reader response

to its first ever ranking of corporate reputations indicated that ―there is a great deal of

interest within the management community in the subject of corporate reputations‖ and

that this interest was ―more than academic.‖

Respect, as viewed by the survey was an aggregation of two broad parts of a company‘s

deliverables: quantitative (like profitability) and qualitative (like community

responsibility).

The parameters for corporate respect in this survey are wide ranging: Overall quality, top

management leadership, depth of talent, belief in transparency, ethics, social

responsiveness, and environmental consciousness.

136

Criteria for ranking India’s most respected banks

Source: Businessworld, January 2003 [India‘s most respected banks] What the survey

clearly reveals is that impressive financials are not enough to earn respect…You were

respected not because you were big and powerful, but because you were transparent, your

stakeholders trusted your policies, your HR guidelines were fair, you were ethical, and you

contributed to society. Transparency and ethics were the most important.

―Respect is the first thing we look for when doing anything,‖ says N.R. Narayana Murthy,

Chairman Infosys Technologies, the company that was crowned the Most Respected

Company in the survey this year.

Top Ten Most Respected Organizations in India, 2003 in terms of CSR.

No.1 Infosys Technologies

No.2 Hindustan Lever

No.3 Reliance Industries

No.4 Wipro

No.5 ICICI Bank

No.6 Gujarat Co-operative Milk Marketing Federation

No.7 Dr. Reddy‘s Laboratories

No.8 HDFC

137

No.9 ITC

No.10 Hero Honda

Source: Businessworld, January 2003 [India‘s most respected organisations]

As per Narayanmurthy, ―At the end, respect comes to people who do desirable things and

who can be trusted. When you make a statement, people should say, we believe.‖

It is no surprise that Narayanmurthy holds J.R.D. Tata in great esteem as an icon. The first

name that comes to any Indian on the subject of CSR is that of the Tata Group.

There has been a long history of CSR in India and the Tatas have been the role models on

this path. Explains the chairman of the Tata Group, Ratan N. Tata, ―We do not do it for

propaganda. We do not do it for publicity. We do it for the satisfaction of having really

achieved something worthwhile.‖ The Tata Business Excellence Model integrates social

responsibility into the framework of corporate management wherein social responsibility is

encapsulated as Key Business Process. In fact all social service departments in Tata banks

have annual programmes and budgets… and all this is aligned to the MD‘s Balanced Score

Card.

Corporate Social Responsibility programmes at the Tata group of banks extend across a

wide spectrum including rural development, community development and social welfare,

family initiatives, tribal development and water management.

About 7000 villages around Jamshedpur and Orissa benefit from development programmes

run by the Tata Steel Rural Development Society (TSRDS). programmes of TSRDS cover

issues like education, irrigation, a forestation, adult literacy, vocational training,

handicrafts and rehabilitation of the handicapped persons. The Community Development

and Social Welfare Department (CDSW) at Tata steel carries out medical and health

programmes, blood donation drives, mass screening of Tuberculosis patients immunization

camps and drug de-addiction. In 1999, Tata Steel embarked on an AIDS awareness

programme, which has now become an integral part of all training programmes. Routine

activities like immunization programmes, sterilization operations and mother and child

138

health care programmes are conducted through 9 family welfare centres, 9 child clinics and

6 community-based clinics. In fact, Tata Steel‘s Centre for Family Initiatives (CFI) was

successful in influencing 59 per cent of Jamshedpur‘s eligible couples practicing family

planning, compared to the national figure of 35 per cent. A commitment to the welfare of

the community has long been central to the value system of banks in the Tata Group. To

build upon this heritage the Tata Council for Community Initiatives (TCCI) has created the

Tata Guidelines on Community Development, an effort of over three years from the field

evolved into a framework of best practices.

The Birla group of banks are also among the pioneers in the field of corporate social

responsibility in India. As part of the Aditya Vikram Birla Group‘s Social Reach, the Birla

group runs as many as 15 hospitals in India; includes Adult education and schools

conducting as many as 78 schools all over India; rehabilitates Handicapped persons having

touched more than 5000 physically challenged individuals. More than 1,00,000 patients

have been examined under the Group‘s medical programmes. Over 15,000 children along

with 2000 pregnant women have been immunized, over 500 cataract patients operated,

2000 TB patients provided medical care, 100 leprosy-afflicted attended to, free of cost.

It also provides Vocational Training, having provided training to over 3000 women and

having distributed over 1400 tool kits in a variety of areas like electrical, auto repair,

electronic equipment maintenance and repair and tailoring. It has adopted several villages

under its Village Infrastructure Development programme and has provided extensive

training to over 10,000 villagers in its Carpet Weaving Center.

Among corporates who have displayed deep commitment to Corporate Social

responsibility over long years is Mahindra & Mahindra. The late Mr. K. C. Mahindra for

promoting education among Indians at all levels established the K. C. Mahindra Education

Trust in 1953. Every year the Trust offers up to 30-40 interest-free loan scholarships to

post-graduate students going abroad for higher studies. The Mahindra Search for Talent

Scholarships is a scheme established in 34 schools in India to enthuse and reward students

who have achieved excellence in their academic pursuits. The Mahindra All India Talent

Scholarships are awarded every year from all over India to over 300 students from lower

income group families with good scholastic record pursuing job-oriented diploma courses

in various polytechnics.

139

Similar commitment to CSR has been displayed by several corporates in India. The list,

which at best can be far from complete, includes Arvind Mills, Escorts, Dabur, Bajaj,

Godrej, Hero Honda, DCM Sriram, Ashok Leyland, Ballarpur Industries, Eicher, Kinetic

Group, Kirloskar, Infosys, Reliance, Ranbaxy, Wipro, each of which has been deeply

committed to their communities engaging in programmes encompassing education, health,

education, integrated rural development.

Beyond the private sector, corporate players in India‘s public sector too have been actively

involved in corporate social responsibility initiatives.

Most public sector units in the heavy engineering industry have not only set up a township

around the plant, but also established a school, a hospital and several other civic facilities

for its employees and those that live in that area.

Private sector banks have been encouraged to undertake rural development programmes

down the years through fiscal incentives by the government. For instance, special benefits

are offered in the industrial policy to banks that set up industries in backward areas and tax

incentives are also offered to banks that set up water purification projects.

In India, it has also been noticed that when it comes to individual CSR activities, the

‗anonymous‘ donor mentality prevails. That most people tend to keep a low profile was

confirmed by The Economic Times, a leading business daily in India. It conducted a straw

poll and talked to several professionals involved in the field and NGO circuit to get an idea

about the leading lights.

Of course, with the intense spotlight on the subject, the interest in corporate social

responsibility is spreading in India as well. The Corporate Social Responsibility Survey

2002–India, jointly conducted by the United Nations Development Programme, British

Council, Confederation of Indian Industry and PricewaterhouseCoopers, covering 19

industry sectors reveals that this interest is growing as more and more banks in India are

keen to project themselves as good corporate citizens. This was the most important factor

driving CSR in India, according to the survey. Good corporate citizenship and CSR

initiatives are inextricably linked with improved brand reputation, which is one of the most

important drivers of CSR identified by the respondent banks. The other key drivers of

Corporate Social Responsibility in India were diverse ranging from stated philosophy of

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founding fathers to improving relationship with local communities to enhanced shareholder

value.

Drivers of CSR

Source: Corporate Social Responsibility Survey 2002 – India (United Nations

Development Programme, British Council, CII, PriceWaterHouseCoopers

As part of the survey, over 100 companies—ranging from large to mid-sized

corporations—responded to questionnaires sent to around companies during September-

October 2002. Besides, a group of researchers conducted an in-depth study of CSR

programmes in top business houses. The respondents unanimously acknowledged that

social responsibility was no longer an exclusive domain of the government and CSR is

much more than ―passive philanthropy.‖

―India has a strong tradition of philanthrophy…,‖ states the foreword to the survey, ―…It is

encouraging to note that many are beginning to make a shift from a tunnel vision on

corporate social responsibility to an integrated model that mainstreams through business

vision and processes.‖ In fact the most striking feature of the survey was the overriding

response that ‗passive philanthropy‘ alone no longer constitutes corporate social

responsibility.

The Survey broadly categorises the main types of CSR activities undertaken by Indian

corporates as under:

Areas of CSR addressed in Corporate Policies

Source: Corporate Social Responsibility Survey 2002 – India

(United Nations Development Programme, British Council, CII, PriceWaterHouseCoopers

The Public Relations link

Interestingly, the website Indian NGOs.com, a site intended to be a repository of

information on the developmental sector, conducted personal interviews on social

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responsibility with 196 Indian corporates, and supplemented this with secondary research

on the CSR policies of all the Fortune 500 banks. According to the results of the study, in

58 per cent of the corporates, the public relations department shoulders the responsibility

for CSR initiatives.

Departments handling CSR

PR 58%

Foundation staff 12%

CSR Dept 5%

Other Depts handling CSR: HR, Admin 25%

The fact that this was not a recent phenomena was evident in the fact that the more than a

third of these departments handling had been in existence for over 15 years and over 60 per

cent had been in existence for over 5 years.

This link is a reflection of the role that public relations play in generating trust through

corporate social responsibility. Public relations, in fact, is the social face of an organization

driving stakeholder relationships. This connect has only reinforced this role, often lost in

the myopic vision of media relations, as banks are focusing on communicating their CSR

initiatives through multiple platforms, transforming their websites, issuing reports and

signing up to speak on conference panels.

As professionals who have been avid observers of corporate social responsibility initiatives

in India and intensely involved as they link in with public relations, it is extremely

important to point out the need to take into account the sensitivities and sensibilities of the

Indian populace while undertaking such programmes.

The importance accorded to respect for elders, relationships and family values are the

pillars upholding the symbiotic relationship between the community and businesses in

India. The deeply engrained belief in karma as espoused by the Bhagwadgita extends into

the role of business in this society, breaking across the barriers of culture, religion and

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language. Well-advised multinationals operating on Indian soil like Ford India and Cargill

has shown deep respect for local sensitivities and pride.

Navigating this sometime difficult environment presents businesses with new challenges

yet also offers new opportunities. But sound practices and relationships with stakeholders

better prepare us to deal with unique issues thrown up by distinct regions.

It is however important to ensure that at every level, employees involved in CSR activities

understand their role in making certain the company follows through on its commitments.

This is where public relations come in. Formally or informally, it has been bridging the gap

between trust and CSR initiatives in India, making the Indian experience a success.

Currently published in the US-based Journal of Communication Management in 2003