DEFINITION OF CSR

“Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workplace and their families as well as of the local community and society at large”.

WHY SOCIAL RESPONSIBILITY OF BUSINESS?

• ‘The Business of business is Business’ was the motto of businesspersons in early times.

• To economists like Adam Smith and Milton Friedman, in a capitalist society profit maximization by the continued increase of efficiency is the most socially responsible way of conducting business. This implies making quick money, with utter disregard for the responsibility of business towards society.

• The ethical and social behavior of corporations is essential for the generation of profit, owing its source to the reputation the corporation would acquire in view of its social behavior.

ACCOUNTABILITY TO SOCIETY

• In a democratic society, any kind of enterprise exists for the sake of society.

• Industries are allowed to exist because they are perceived by the public to be useful in the attainment of the personal, social, and material goals of the people.

• So, corporations exist for the sake the public, they are accountable to the public and have a social responsibility.

CORPORATION’S DEBT TO SOCIETY

• Corporations, whether public or private, draw much from society.

• It depends on society for a developed infrastructure such as roads, water supply, electricity and an educated workforce.

• It also depends on society for the maintenance of law and order, public health, transport facilities and for reaching out to its customers through the mass media.

• Finally, all consumers of its finished products are drawn from society.

If a corporation draws so much from society it has to make its own contribution to society.

CSR may be classified into:-

• Classical economic model

• Socioeconomic model

THE CLASSICAL ECONOMIC MODEL

Adam Smith, father of the classical economic model, believed that an ‘invisible hand’ promoted the public welfare Smith believed that the public interest was served best by individuals pursuing their own self-interests.

THE SOCIOECONOMIC MODEL

• Business is seen as one sub-system among many in a highly interdependent society.

• Recognizes that companies have stakeholders other than their stockholders .

• A stakeholder audit allows companies to systematically identify all parties that could possibly be impacted by the company’s performance.

• Business has an obligation to respond to the needs of all stakeholders while pursuing its profit

Some of the driving forces behind the evolution of CSR are: -

• Concerns and expectations from citizens, consumers, public authorities and investors,

• Concerns about the impact of economic activity on the environment, and

• Increased transparency of business activities because of the development in IT

IMPLEMENTATON OF CSR

The systematic implementation of CSR means:• Adoption of strong organizational values

and norms depicting behaviors that are appropriate towards a variety of stakeholders.

• The continuous generation of intelligence about stakeholders issues, along with positive responses to these issues.

THEORETICAL JUSTIFICATION FOR CSR

1) TRUSTEESHIP MODEL2) SOCIAL ENTITY THEORY3) PLURALISTIC MODEL

What are corporations expected to do?Some economists argue that corporations depend on society for a number of facilities they enjoy such as• Developed infrastructure,• Peace and tranquility in the work place• A trained workforce• Maintenance of law and order• Mass media through which they reach their

customers• Above all, consumers of products, without

whom they have no reason for existence, are all drawn from the society.

Corporations have a moral responsibility to take a long and hard look at their values, practices and assumptions. They have to ensure that • The country’s name is not compromised

during their deals abroad, either as exporters or importers,

• Maintenance of quality of their products,• Create employment opportunities for the

disadvantaged persons by directly setting up ancillaries,

• Provide financial resources,• Make available marketing support by

purchasing from disadvantaged communities,

• Donate.

Private sector needs goodwill of the society• Historical reasons• Need for goodwill• Economic goals and social responsibility

objectives need not contradict each other

Models for implementation of CSR1) Ethical Model2) Statist Model3) Liberal Model4) Stakeholder Model

CSR as a business strategy for sustainable development

• “CSR is about capacity building for sustainable livelihoods”

• Manifold benefits to corporations both internally and externally.

Socially Responsible Investing is gaining importance because :-• Socially responsible companies offer long term value• Evaluating a company’s social impact on top of its

financial performance provides an additional hedge against the risk

• SRI blunts adverse sentiments against the company“CSR is an outcome for business models, which goes just beyond financial viability.”

Evaluation of CSR activity3 basic principles: -

• Sustainability• Accountability• Transparency

Advantages of CSR• Improved financial performance• Enhanced brand image and reputation• Increased sales and customer loyalty• Increased ability to attract and retain

employees• Reduced regulatory oversight• Innovation and learning• Risk management• Easier access to capital• Reduced operating costs

Scope of CSRThree levels of social responsibility can be identified: - • Market forces• Mandated actions• Voluntary actions

CSR addresses the following issues: • Community, assistance in solving community

problems• Health and welfare• Education• Human rights• Natural environment• Culture

Corporate social responsibilities to different group of stakeholders: -

1. To consumers and community• Quality• Reasonable prices• After-sales services• Free competition• Ethical advertising policy• Support for educational, charitable and other

programs• Honest trade policies• Impartiality towards political affairs• Social accountability• Progressive outlook

2. To employees• Promote espirit de corps• Pay fair wages• Provide reasonable work conditions• Help development of proper leadership• Guarantee religious, social and political

freedom to workers to take part in civic activities

3. To owners and inter-business establishments• Provide fair return• Develop healthy cooperative business

relationship• Check the advance of unfair practices• Help in control of monopoly and promotion of

healthy competition.