Business I Environment I Society - Rajesh K Satpathy

Corporate Social Responsibility

# The Concept & Dimensions of CSR

The Dimension

Assigning CSR activities has 3 (three theatre)/ Windows

Window 1

Philanthropy

Window 2

Operational Effectiveness through Sustainable Initiative

Window 3

Transforming into a Model

Theatre / window oneWindow 1

Focusing on Philanthropy…

Programs in this theatre are not designed to produce profits or directly improve business performance.

Examples: Include donations of money or equipment to civic organizations, engagement with various community initiatives.

Theatre / window oneWindow 2

Improving Operational Effectiveness…

Programs in this theatre function within existing business models to deliver social or environmental benefits in ways that support a company’s operations across the value chain, often improving efficiency and effectiveness.

Example: This include sustainability initiatives that reduce resource use, waste, or emissions, which may in turn reduce costs; and investments in employee working conditions, health care, or education, which may enhance productivity, retention, and company reputation.

Window 3

Transforming the business model…

This theatre create new forms of business specifically to address social or environmental challenges.

Improved business performance - a requirement of initiatives in this window - is predicated on achieving social or environmental results.

Model Focus Champions

Ethical Voluntary commitment by companies to public welfare

M.K. Gandhi

Statist State ownership and legal requirements determine Corporate responsibility

Jawahar Lal Nehru

Liberal Corporate responsibilities limited to private owners (Shareholders)

Milton Friedman

Stakeholder Companies respond to the needs of stakeholders-customers, employees, communities, etc.

R. Edward Freeman

Ethical Model (1930 – 1950)

One significant aspect of this model is the promotion of trusteeship that was revived and reinterpreted by Gandhi Ji. Under this notion the businesses were motivated to manage their business entity as a trust held in the interest of the community.

The idea prompted many family run businesses to contribute towards socioeconomic development. The efforts of Tata group directed towards the well being of the society are also worth mentioning in this model.

Statist Model (1950 – 1970s)

Under the aegis of Jawahar Lal Nehru, this model came into being in the post independence era. The era was driven by a mixed and socialist kind of economy. The important feature of this model was that the state ownership and legal requirements decided the corporate responsibilities.

Liberal Model (1970s – 1990s)

The model was encapsulated by Milton Friedman. As per the is model, corporate responsibility is confined to its economic bottom line. This implies that it is sufficient for business to obey the law and generate wealth, which through taxation and private charitable choices can be directed to social ends.

Stakeholder Model (1990 – Present)

The model came into existence during 1990s as a consequence of realization that with growing economic profits, businesses also have certain societal roles to fulfill. The model expects companies to perform according to “triple bottom line” approach. The businesses are also focusing on accountability and transparency through several mechanisms CSR needs to be understood within this context captured in the development oriented CSR framework.

Five Dimensions of Corporate Social Responsibility

Traditionally, companies have had one responsibility: to make a profit. But the concept of corporate social responsibility holds that companies should be responsible to more than just their owners. Corporate social responsibility holds that there are multiple dimensions that should affect a company's actions.

You need to understand these dimensions when planning your own company's corporate social responsibility efforts.

Five Dimensions of Corporate Social Responsibility

Environmental

The environmental dimension of corporate social responsibility refers to your business's impact on the environment. The goal, as a socially responsible company, is to engage in business practices that benefit the environment. For example, you might choose to use recycled materials in your packaging or ad renewable energy sources like solar power to your factory.

Five Dimensions of Corporate Social Responsibility

Social

The social dimension of corporate responsibility involves the relationship between your business and society as a whole. When addressing the social dimension, you should aim to use your business to benefit society as a whole. This could involve sourcing fair trade products, for example, or agreeing to pay your employees a livable wage. It could also involve taking on endeavors that benefit society, for instance using your resources to organize charitable fundraisers.

Five Dimensions of Corporate Social Responsibility

Economic

The economic dimension refers to the effect that corporate social responsibility has on the finances of your company. In an ideal world, where corporate social responsibility had no costs, there would be no reason to limit it. But in the real world it is important to recognize the financial impact that these actions have and to balance being a good corporate citizen with making a profit.

Five Dimensions of Corporate Social Responsibility

Stakeholder

The stakeholders are all of the people affected by your company's actions. These include employees, suppliers and members of the public. When considering the stakeholder dimension of corporate social responsibility, consider how your business decisions affect these groups. For example, you might be able to increase your output by having employees work more, but you should consider the impact it will have on them, not just your bottom line.

Five Dimensions of Corporate Social Responsibility

Voluntariness

Actions that fall into the voluntariness dimension are those that you are not required to do. These actions are based in what your company believes is the correct thing to do. They may be based in specific ethical values that your company holds. For example, you may believe that using organic products is the right thing to do even if you are not required to do so.

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Dimensions of Corporate Social Responsibility

According to Carroll, CSR is a multi-layer concept consisting of four inter-related aspects of responsibilities, namely, economic, legal, ethical, and philanthropic. He presents these different responsibilities as consecutive layers within a pyramid.

Hence, he offers the definition of CSR in these words: “Corporate social responsibility encompasses the economic, legal, ethical, and philanthropic expectations placed on organizations by society at a given point in time.”

Dimensions of CSR:

The facets and dimensions of corporate social responsibility include the obligations a business has to its interest groups also called ‘stakeholders.’ The stakeholders in a business include shareholders / owners, consumers, employees, government, society, etc.

Dimensions of Corporate Social Responsibility

Shareholders:

It is the primary responsibility of every business to see that the owners or shareholders get a fair rate of dividend or fair return on capital invested. This is a legitimate expectation of owners from business. Naturally the expectations have to be reasonable and consistent with the risks associated with the investment. Owners also expect economic and political security of the capital invested. If such security is not ensured, the inevitable consequence is withdrawal of capital and search for alternative channels other than business.

Dimensions of Corporate Social Responsibility

Employees:As regards responsibility towards employees, the major issues governing the employer-employee relationship pertain to wages and salaries, superior- subordinate relations and employee welfare. It is the responsibility of management to provide for fair wages to workers based on the principal of adequacy, equity and human dignity.

Maintaining a harmonious relationship between superiors and subordinates and providing for welfare amenities for employees are also the responsibilities of management. There are specific laws in India governing factory employment, which is having a provision of satisfactory working conditions for safety, health and hygiene, medical facilities, canteen, leave and retirement benefits are obligations on the part of employer.

Dimensions of Corporate Social Responsibility

Government:

Social responsibility of business towards government requires that:

(i) The business will conduct its affairs as a law-abiding unit, and pay all taxes and other dues honestly,(ii) Management will desist from corrupting public servants or the democratic process for selfish ends, and no attempt will be made to secure political support by money or patronage.

Dimensions of Corporate Social Responsibility

Community:

Arising out of their social responsibility towards the community and public at large, businessmen are expected to maintain a balance between the needs of business and the requirements of society. In general, business should be so managed as to make the public good become the private good of the enterprise rather than the old doctrine that “what is good for the business is good for the society”.The social responsibility of business firms should be reflected in their policies with respect to environmental protection, pollution control, conservation of natural resources, rural development, setting up industrial units in the backward regions, employment of the socially handicapped and weaker sections of the community, and providing relief to victims of natural calamities.

Dimensions of Corporate Social Responsibility

Community:

Arising out of their social responsibility towards the community and public at large, businessmen are expected to maintain a balance between the needs of business and the requirements of society. In general, business should be so managed as to make the public good become the private good of the enterprise rather than the old doctrine that “what is good for the business is good for the society”.The social responsibility of business firms should be reflected in their policies with respect to environmental protection, pollution control, conservation of natural resources, rural development, setting up industrial units in the backward regions, employment of the socially handicapped and weaker sections of the community, and providing relief to victims of natural calamities.

Thank You!