In this essay we will discuss about Corporate Social Responsibility:- 1. Introduction to CSR 2. Components of CSR 3. World Vision 4. Recent Trends 5. Legal Aspects 6. CSR Implementation Guide for Business 7. Examples 8. CSR and NGOS.
Contents:
- Introduction to CSR
- Components of CSR
- World Vision on CSR
- Recent Trends of CSR
- Legal Aspects of CSR
- CSR Implementation Guide for Business
- Examples of Corporate Social Responsibility
- CSR and NGOS
Essay # 1. Introduction to CSR:
CSR is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large.
Thus the concept of social responsibility can be defined as the obligation of business community for the well-being of the people, the state and the environment in which they operate.
The definition encompasses the following:
1. The business community is required to safeguard the health and well-being of the society.
2. The business organizations are required to produce to the maximum extent possible.
3. The business people should have concerns to the public.
4. They should give priority to the goals set by the government for the betterment of the people.
5. They are required to solve many social and ecological problems such as urban congestion, environmental pollution, industrial discharges to river waters, depletion of natural resources, etc.
6. It is also the responsibility of the business people to cooperate with the government in the eradication of poverty, unemployment, regional backwardness, etc.
7. They have certain responsibilities with regard to consumers, investors, employees and the government.
8. The producers by producing products of high quality and fixing reasonable prices, can discharge their moral obligations to the consumers.
9. The products produced must have utilization value and their consideration is not solely on profit but on profit with services.
Essay # 2. Components of CSR:
Because there is no single accepted definition of CSR, therefore, there is no commonly accepted classification of its main components.
The World Bank includes the following as components of CSR:
1. Environment
2. Labour issues
3. Human Rights
4. Community Involvement
5. Business standards
6. Marketplace
In a broader sense, CSR also covers-
7. Enterprise and economic development
8. Health protection
9. Education and Leadership Development
10. Human Disaster Relief
Essay # 3. World Vision on CSR:
The rising awareness of Corporate Social Responsibility (CSR) is changing the way businesses operate around the world. It is a driving factor that is shaping corporate strategies and business principles towards a more sustainable future. Business is no longer just about profitability; it is about the culture to create a compassionate marketplace.
CSR acknowledges that companies have an impact on the society, environment and economy through their operations, products, and services as well as through interactions with key stakeholders. It involves efforts to manage this impact in order to add value to the company and to improve social, environmental and economic well-being of the present and future. Hence, companies need to be proactive in their CSR initiatives in order to remain competitive in the industry.
Corporate Social Responsibility (CSR) is an essential business aspect that companies need to prudently strategies to ensure Success and progress of the company’s future direction. Approximately 80% of the top global brands are actively contributing towards CSR efforts, while many companies are still at the threshold of their CSR initiatives.
This is the crucial time for companies to start or enhance their CSR programme, especially in the Asian region most companies are still not exposed to the concepts of CSR or have not acquired the right knowledge to start a CSR campaign. The implementation of a proper CSR strategy will pave the way towards better business growth and sustainability.
It provides better accountability of the Triple Bottom Line (TBL) that focuses on organizational success in improving the welfare of people, where planet as well as profit and it is a good performance (PPP) indicator in measuring the organizations wider impact.
The Corporate Social Responsibility (CSR) journey is a long path that requires continuous support from the corporate organizations. Environmental conservation efforts that have received enormous respond from corporate companies to prevent climate change includes carbon emission reduction, marine pollution control, wildlife protection, reforestation, waste management and other green energy technological improvisation.
Social welfare contributions from corporate organizations towards social development includes sponsorship for education and culture, financial and technology assistants to less fortunate communities, relieve aid to victims of catastrophe, medical donations, health awareness and other initiatives to improve the lives of people. Economically, corporate organizations play an important role in maintaining an ethical business environment that emphasizes quality in products, work ethics and lifestyle.
This is achieved through company CSR policies to provide an encouraging work environment, optimistic employment opportunities and an aspiration to improve the lives of our global community. The CSR objectives can be achieved through the way companies conduct their businesses.
Cause Related Marketing (CRM), strategic partnership with charitable organizations and fund raising campaigns are some approaches to CSR that would add greater value to the corporate brand as consumers are becoming more supportive of companies with a better CSR reputation.
Socially Responsible Investment (SRI) is also gaining more significance in the share trading market. CSR Reporting is an important mission that companies need to take on in today’s competitive business world as more emphasis is now placed on the accountability of CSR efforts.
A resolution adopted by the European Parliament on November 25, 2010 increases the likelihood that the days of CSR as a purely voluntary initiative are numbered. Approved by a margin of 480 votes to 48, the resolution on corporate social responsibility in international trade agreements calls on the European Commission to include a CSR clause in all of the European Union’s trade agreements.
Such a clause would require, inter alia, companies to publish “CSR balance sheets,” report on due diligence seek free, prior and informed consultation with local stakeholders. The proposed CSR clause would also provide for monitoring and judicial cooperation in pursuing and punishing breaches of CSR commitments. More generally, the resolution also calls on the Commission to reinforce its promotion of CSR in multilateral trade policies and to conduct sustainability impact assessments before and after trade agreements are signed.
The note provides moral, socio-economic, and political justifications for Europe to address CSR in the context of its trade agreements-
a. First, European companies enjoying the benefits of trade must be asked to conduct themselves in a socially and environmentally responsible manner in developing countries and elsewhere.
b. Second, “non-compliance with CSR principles constitutes a form of social and environmental dumping” in developing countries to the detriment of companies and workers in Europe, who are required to meet more stringent social and environmental standards.
c. Third, the EU’s trade policy must be consistent with and complimentary of its other foreign policy priorities on matters such as environmental protection and development aid.
Many of the EU’s international trade agreements already address social and environmental concerns. The significance of the proposed CSR clause is that it would place an onus on companies – not just the State parties to the trade agreements – to act in a socially and environmentally responsible manner. Also, while recent trade agreements concluded by the EU with South Korea, Colombia and Peru vaguely mention the State parties’ intent to promote CSR, the proposed CSR clause would require specific actions by companies.
Among the proposed requirements for the CSR clause are the following:
1. Companies would be required to publish CSR balance sheets in two or three year intervals in order to reinforce transparency and reporting and encourage visible and credible CSR practices;
2. Companies would be required to conduct due diligence in order to identify and prevent “violations of human and environmental rights, corruption or tax evasion, including in their subsidiaries and supply chains”;
3. Companies would be required to commit to “free, open and informed prior consultation” with local and independent stakeholders prior to commencing a project that impacts a local community.
The resolution envisions that other provisions enforcing implementation of CSR would accompany the CSR clause. It recommends, for example, that in addition to establishing appropriate investigatory mechanisms, State parties should be willing to “name and shame” companies in serious breach of their CSR commitments. The resolution also foresees judicial cooperation and training as a means of facilitating judicial redress for victims of inappropriate corporate conduct.
Essay # 4. Recent Trends of CSR:
A Cause because survey done about CSR; socially responsible brands popular among Delhiites showed that consumers in the National Capital Region prefer to be loyal to companies that embrace CSR principles.
Looking at the global preferences, similar findings came from Burson Marsteller’s 2010 Corporate Social Responsibility Perceptions Survey, Cone 2010 Shared Responsibility Study, GfK’s Green Gauge Global report, and most recently, the 2010 Edelman good purpose study. The percentages and the brand preferences differ across these studies, but the core message – consumers prefer ‘responsible’ brands – remain the same.
A recent National Geographic survey, which studied 17,000 consumers in 17 countries, stated that Indians are the most ecofriendly consumers in the world. India topped the Consumer Greendex, where consumers were asked about energy use and conservation, transportation choices, food sources, the relative use of green products versus traditional products, attitudes towards the environment and sustainability, and knowledge of environmental issues.
Hence, Indian companies are now expected to pardon a bit of their shareholder responsibilities and focus more on their societal, social and environmental obligations – the wealth maximization goal cannot be achieved by ignoring these responsibilities. It can also be stated otherwise – fulfilling societal or social obligation can indirectly help in wealth generation.
Nearly all leading companies in India are somehow engaged in one or the other corporate social responsibility programme. The major focus areas include education, health, livelihood creation, skill development, and empowerment of weaker sections of the society.
In 2010, notable efforts have come forth from Tata Group, Infosys, Bharti Enterprises, ITC Welcome group, Reliance Industries, Wipro, Indian Oil Corporation and ONGC, among others.
According to a study undertaken by an industry body in June 2009, which studied the CSR activities of 300 corporate houses, corporate India has spread its CSR activities across 20 states and union territories, with Maharashtra gaining the most from them. About 36 per cent of the CSR activities are concentrated in Maharashtra, followed by about 12 per cent in Gujarat, 10 per cent in Delhi, and 9 per cent in Tamil Nadu.
The companies have, on an aggregate, identified 26 different themes for their CSR initiatives including community education, environment, health and rural development.
A report by The Economic Times revealed that donations by listed companies grew by eight per cent during the fiscal year 2010. The study of disclosures made by companies showed that 760 companies donated US$170 million in FY09, up from US$156 million in the year-ago period. As many as 108 companies donated over US$216,199, up 20 per cent over the previous year.
Essay # 5. Legal Aspects
of CSR:
Another driver of CSR is the role of independent mediators, particularly the government, in ensuring that corporations are prevented from harming the broader social good, including people and the environment. CSR critics such as Robert Reich argue that governments should set the agenda for social responsibility by the way of laws and regulation that will allow a business to conduct themselves responsibly.
The issues surrounding government regulation pose several problems. Regulation in itself is unable to cover every aspect in detail of a corporation’s operations. This leads to burdensome legal processes bogged down in interpretations of the law and debatable grey areas.
For example- General Electric failed to clean up the Hudson River after contaminating it with organic pollutants. The company continues to argue via the legal process on assignment of liability, while the cleanup remains stagnant.
The second issue is the financial burden that regulation can place on a nation’s economy. This view shared by Bulkeley, who cites the Australian federal government’s actions to avoid compliance with the Kyoto Protocol in 1997, on the concerns of economic loss and national interest. The Australian government took the position that signing the Kyoto Pact would have caused more significant economic losses for Australia than for any other OECD nation.
On the change of government following the election in November 2007, Prime Minister Kevin Rudd signed the ratification immediately after assuming office on 3 December 2007, just before the meeting of the UN Framework Convention on Climate Change. Critics of CSR also point out those organisations pay taxes to government to ensure that society and the environment are not adversely affected by business activities.
Denmark has a law on CSR. On 16 December 2008, the Danish parliament adopted a bill making it mandatory for the 1100 largest Danish companies, investors and state-owned companies to include information on corporate social responsibility (CSR) in their annual financial reports. The reporting requirements became effective on 1 January 2009.
The required information includes-
1. Information on the companies’ policies for CSR or socially responsible investments (SRI)
2. Information on how such policies are implemented in practice, and
3. Information on what results have been obtained so far and management’s expectations for the future with regard to CSR/SRI.
CSR/SRI is still voluntary in Denmark, but if a company has no policy on this it must state its positioning on CSR in their annual financial report.
Essay # 6. CSR Implementation Guide for Business:
CSR implementation is a complex arena and goes much beyond voluntary or philanthropic approach. It is a market and society based obligation which ultimately can be related to legal requirements.
The CSR Policy should normally cover following core yet simple elements:
1. Care for all Stakeholders- The companies should respect the interests of, and be responsive towards all stakeholders, including shareholders, employees, customers, suppliers, project affected people, society at large etc. and create value for all of them. They should develop mechanism to actively engage with all stakeholders, inform them of inherent risks and mitigate them where they occur.
2. Ethical functioning- Their governance systems should be underpinned by Ethics, Transparency and Accountability. They should not engage in business practices that are abusive, unfair, corrupt or anti-competitive.
3. Respects for Workers Rights and Welfare- Companies should provide a workplace environment that is safe, hygienic and humane and which upholds the dignity of employees. They should provide all employees with access to training and development of necessary skills for career advancement, on an equal and non-discriminatory basis.
They should uphold the freedom of association and the effective recognition of the right to collective bargaining of labour, have an effective grievance redressal system, should not employ child or forced labour and provide and maintain equality of opportunities without any discrimination on any grounds in recruitment and during employment.
4. Respects for Human Rights- Companies should respect human rights for all and avoid complicity with human rights abuses by them or by third party.
5. Respects for Environment- Companies should take measures to check and prevent pollution; recycle, manage and reduce waste, should manage natural resources in a sustainable manner and ensure optimal use of resources like land and water, should proactively respond to the challenges of climate change by adopting cleaner production methods, promoting efficient use of energy and environment friendly technologies.
6. Activities for Social and Inclusive Development- Depending upon their core competency and business interest, companies should undertake activities for economic and social development of communities and geographical areas, particularly in the vicinity of their operations. These could include- education, skill building for livelihood of people, health, cultural and social welfare etc., particularly targeting at disadvantaged sections of society.
Implementation Guidance:
The CSR policy of the business entity should provide for an implementation strategy, which should include identification of projects/activities, setting measurable physical targets with timeframe, organizational mechanism and responsibilities, time schedules and monitoring. Companies may partner with local authorities, business associations and civil society/non-Government organizations.
They may influence the supply chain for CSR initiative and motivate employees for voluntary effort for social development. They may evolve a system of need assessment and impact assessment while undertaking CSR activities in a particular area. Independent evaluation may also be undertaken for selected projects/activities from time to time.
Companies should allocate specific amount in their budgets for CSR activities. This amount may be related to profits after tax, cost of planned CSR activities or any other suitable parameter.
To share experiences and network with other organizations the company should engage with well-established and recognized programmes/platforms, which encourage responsible business practices and CSR activities. This would help companies to improve on their CSR strategies and effectively project the image of being socially responsible.
The companies should disseminate information on CSR policy, activities and progress in a structured manner to all their stakeholders and the public at large through their website, annual reports and other communication media.
CSR Guidelines for Public Sector Enterprises:
The Department of Public Enterprises had issued Guidelines on Corporate Social Responsibility (CSR) for CPSEs in April, 2010 which have been issued formally to the Ministries/Departments for compliance in the Central Public Sector Enterprises (CPSEs) under their administrative control.
Following are the salient features of guidelines on CSR & Sustainability:
1. Corporate Social Responsibility and Sustainability is a company’s commitment to its stakeholders to conduct business in an economically, socially and environmentally sustainable manner that is transparent and ethical.
2. In the revised guidelines, CSR and Sustainability agenda is perceived to be equally applicable to external and internal stakeholders, including the employees of a company, and a company’s corporate social responsibility is expected to cover even its routine business operations and activities. CPSEs are expected to formulate their policies with a balanced emphasis on all aspects of CSR and Sustainability – equally with regard to their internal operations, activities and processes, as well as in their response to externalities.
3. In the revised guidelines CSR and Sustainable Development have been clubbed together in one set of guidelines for CSR and Sustainability because of close linkage between the two concepts.
4. Public Sector enterprises are required to have a CSR and Sustainability policy approved by their respective Boards of Directors. The CSR and Sustainability activities undertaken by them under such a policy should also have the approval/ratification of their Boards. Within the ambit of these guidelines, it is the discretion of the Board of Directors of CPSEs to decide on the CSR and Sustainability activities to be undertaken.
5. The financial component/budgetary spend on CSR and Sustainability will be based on the profitability of the company and shall be determined by the Profit After Tax (PAT) on the company in the previous year.
6. PAT of CPSES in the Previous year Range of the budgetary allocation for CSR and Sustainability activities (as % of PAT in previous year).
Less than Rs. 100 crore – 3%-5%
Rs. 100 crore to Rs. 500 crore – 2%-3%
Rs. 500 crore and above – 1%-2%
All CPSEs are expected to maximize their spending on CSR and Sustainability activities and move towards the higher end of their slabs of budget allocation.
Essay # 7. Examples of Corporate Social Responsibility:
Listed below are a handful of initiatives that will give a fair indication of the CSR commitment of various organizations in the country:
1. Reliance Industries and two Tata Group firms – Tata Motors and Tata Steel – are the country’s most admired companies for their corporate social responsibility initiatives in the field of education, environment conservation and public health, according to a Nielsen survey.
2. Under its Corporate Service Corps (CSC) programme, IBM joined hands with the Tribal Development Department of Gujarat for a development project aimed at upliftment of tribals in the Sasan area of Gir forest.
3. Towards curbing of carbon footprints at office, 2010 witnessed various initiatives including application of renewable energy technologies, moving to paperless operations, and recognition of environmental standards.
Financial organizations—where paper usage is comparatively higher than other sectors—including HSBC India, Max New York Life and Standard Chartered Bank continued with the year-before’s resolution of asking their customers to shift to e-statements and e-receipts. Telecom operators including Airtel, Aircel, Vodafone and Idea, too, pushed their efforts to shift as many customers to e-bill and save paper.
4. State-owned navratna company Coal India Ltd (CIL) will invest US$67.5 million in 2010-11 on social and environmental causes.
5. Public sector aluminium company NALCO has contributed US$3.23 million for development work in Orissa’s Koraput district as part of its CSR.
6. Mangalore Refinery and Petrochemicals Limited (MRPL) spent Rs. 12.70 crore on various CSR activities during 2009-10. This is a quantum jump in the amount allocated for CSR, considering that MRPL in 2008-09 spent Rs. 3.69 crore on such activities.
7. NASSCOM Foundation, the social development arm of NASSCOM, in partnership with Microsoft announced Connect IT Workshops for NGOs and government officials in Karnataka. The workshops will start in the months of January and February 2011, and aim to utilize information technology for everyday development work.
8. As part of its CSR, pharmaceutical major GlaxoSmithKline (GSK) dedicated its new Albendazole manufacturing unit in its existing Nashik facility to the World Health Organization’s (WHO) global programme to eliminate Lymphatic Filariasis (LF).
9. National Thermal Power Corporation (NTPC) announced that it will set up a medical college and an engineering college in Orissa as part of its CSR activities.
10. In recognition of its commitment to energy conservation and efficiency, Jindal Steel and Power Limited’s (JSPL) Raigarh (Chhattisgarh)-based plant has been conferred with the National Energy Conservation Award (NECA) 2010.
11. PVR Nest, the CSR arm of PVR Ltd, was ‘highly commended’ under the Best Green Educational Project category (promoting sustainable development issues) at the Global Green Award 2010 in London.
12. New Delhi Municipal Council (NMDQ was felicitated and conferred with Pragya Puraskar for its outstanding initiatives towards CSR activities for socio-economic and cultural upliftment of weaker sections in the society.
13. Tata Power, Mahindra and Mahindra, IBM India and Hindalco Industries became recipients of the Golden Peacock Global Awards for corporate social responsibility, at Lisbon in Portugal.
Let’s also take a look at three multinational companies that made news—some good, some bad—for their responsible initiatives in 2010-
a. British Petroleum- Causing the largest oil misfortune in the United States’ history brought down BP’s much-hyped Beyond Petroleum campaign. The company was charged for using cost-cutting measures that caused numerous deaths and severe environmental damage. Fingers were pointed at the core values and meaning of the company’s CSR policies.
A section of the media labeled the company as a bad example of CSR – one that ignored basic human and environment safety norms but went on to do other symbolic activities in the name of CSR.
b. Wall Street- The crash of Wall Street two years ago is probably the biggest consumer betrayal in recent history. The ripple effect shook the world economy and brought down countless industries. Two years later, the investigations continue to reveal the murky business practices followed by the company. Various experts suggest that had the Wall Street banks worked to encourage a responsible corporate culture, this collapse could have been avoided.
c. Toyota- When General Motors almost collapsed, Toyota was expected to make rapid gains but several basic safety calls held it back. The company’s calls to take back already sold cars either for repairs or replacements got mixed reactions from the CSR experts – while a section called them ‘under compulsion’ activities camouflaged under CSR, others commended the company’s efforts. CB Bureau, New Delhi, January 3, 2011
Essay # 8. CSR and NGOS:
A very large number of social and voluntary organizations are contributing to the field of Corporate social responsibility by making it an important agenda where they clearly harp for all the corporate bodies to adhere to the morns of CSR at all costs. In fact, these voluntary organizations always go on devising newer and more pragmatic/stringent norms of application of the requirements of Corporate social responsibility.
Many CSR initiatives are executed by corporates in partnership with Non-Governmental Organizations (NGOs) who are well versed in working with the local communities and are experts in tackling specific social problems.
For example- SAP India in partnership with Hope Foundation, an NGO that works for the betterment of the poor and the needy throughout India, has been working on short and long-term rebuilding initiatives for the tsunami victims. Together, they also started The SAP Labs Center of HOPE in Bangalore, a home for street children, where they provide food, clothing, shelter, medical care and education.