CONCEPTUAL FRAMEWORK

“Wealth created from society has to be ploughed back into

Society.”

Mahatma

Gandhi

This is the concept on which the foundation of Corporate Social

Responsibility of CSR as it is popularly known as is laid. CSR is a genuine

attempt by a company to build meaningful relationship between the corporate

sector & the rest of society. CSR is achieved when a business adapts all of its

practices to ensure that is operates in ways that meet, or exceed, the ethical,

legal, commercial & public expectations that society has of business. To be

considered effective, Corporate Social Responsibility must be an integrated

part of day-to-day business, engaging all stakeholders & including strategies to

support individual managers to make socially responsible decisions, confirm to

ethical behavior & obey the law.

Corporate Social Responsibility (CSR) is a growing phenomenon

worldwide that’s trying to change the role & nature of corporations. CSR deals

with the thorny issues ground a corporation’s responsibility to society, & how

it relates to the company’s traditional commitment to maximize share holder

profits.

Organizations & industries of all sizes find it necessary & desirable to

consider Corporate Social Responsibility in Strategic decision making

processes. In some companies this has had a profound effect from the shop

floor to the executive suite. Not surprisingly the maintenance department has

potential to be a leader in implementing initiatives that align with CSR related

goals & objectives, including improved safety on the job, waste

Reduction, improved energy management, selection of vendors that can

supply “CSR approved” parts, increased employee diversity, alternative

working arrangements & balancing work and lifestyle.

Corporate Social Responsibility (CSR) has been influenced by two major

concepts stake-holder model, wherein it is recognized that good business

practice entails engaging all stake holders in company business. So good

business is not only seen as maximizing shareholder value but also stakeholder

value. The other concept is triple bottom line, where companies would no

longer be judged by the conventional single i.e. financial bottom line, but also

on there performance in social & environmental bottom-lines

CSR is a concept that an enterprise is accountable for its impact on all

relevant stake holders to behave fairly and responsibly, contribute to economic

development while improving the quality of life of the workforce and their

families as well of the local community and society at large. By expressing their

social responsibility, companies are at firming their role in societal and

territorial cohesion, quality and environment.

Corporate Social Responsibility is the commitment of business to

contribute to sustainable economic development working with employees and

their families, the local community and society at large to improve their quality

of life in ways that are good for business and good for development.

1.1 CONCEPT

The role of business in society has been debated in economic literature

for a long time. By the term Corporate Social Responsibility (CSR), what is

generally understood is that business has an obligation to society that extends

beyond its narrow obligation to its owners or shareholders, this idea has been

discussed throughout the twentieth century but is was Haw ard R. Bowen’s

book on “Social Responsibilities of Businessman” published in 1953, which was

the origin of the modem debate on the subject. Bowen reasoned that there

would be general social and economic benefits that would accrue to society, if

business recognized broader social goals in its decisions.

Corporate Social Responsibility is nothing but what an organization does

to positively influence the society in which it exists. It could take the form of

community relationship. Volunteer assistance programmes, healthcare

initiatives, special education running programmes ad scholarships,

preservation of cultural heritage and beautification of cities. The philosophy is,

basically to give back to the society, what’s (business) has taken from it, in the

course of its quest for creation of wealth.

The debate, on whether responsibility of a business enterprise is only to

its shareholders (owners) or to all stakeholders, including environment and the

society at large, is an ongoing one and continues. In present literature

“Stakeholder”, as an expression is fairly recent in origin, reportedly appearing

first in an internal memorandum of the Stanford Research Institute in the year

1963. According to a definition given by Edward Freeman “A stakeholder is any

group of individual who can effect, or is effected by the activities and

achievements of an organization”. “Friedricn N’eubauer and Ada Demb”“The

Legitimate Corporation” indentify six groups of distinguishable stakeholders

(not necessarily in this order) as follows —

Providers of funds

Employees

General public

Government

Customers and Suppliers

On the one hand experts have argued that shareholders put their risk

capital in a Joint Stock Company (or business) and therefore, companies 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 the maximization of profits or the

bottom line should be ultimate objective of the management. On the other

hand, a number of experts will not agree with this position For example, in

Japan employees are treated as family. It is felt that an employee who devotes

his or her life to the company has a bigger stake in it as compared to a

shareholder. Germany is another nation where stakeholder recognition is high.

Prominent among the experts who has taken a broader view is Minks who has

argued that any company with a short term in view, only maximizing profits for

the shareholder, will destroy value in the medium to long run.

It is felt that the moot point here is the time frame. And that in the long

run, the sustainability of the enterprises will be of paramount importance. In

the long run, interests of both the stakeholders and the shareholders are not

only likely to converge, but also have to be balanced.

In the tradition of Hobbes, Locke & Jean lacque Russeau (writing in year

1962), society and corporation must co-exist and contribute to the well being

of each other. There is a contract, which is at once explicit and implicit, that

governs the operation of business within a given community. Benjamin

Franklin has also expressed a similar sentiment when he says that “Doing good

is not a private act between a bountiful giver and a grateful receiver, it is a

prudent social act.”

1.2 HISTORICAL PERSPECTIVE

The view that a business can have obligations that extend beyond

economic roles is not new in many respects. Throughout recorded history the

roles of organizations producing goods and services for the market place were

frequently linked with and include political, social, and/or military roles. For

example, throughout the early evolutionary stages of company development in

England (where organizations such as the Hudson Bay Company and the East

India Company received board mandates), there was a public policy

understanding that corporations were to help achieve societal objectives such

as the exploration of colonial territory, setting up settlements, providing

transportation services, developing bank and financial services, etc. During the

nineteenth century, the corporation as a business form of organization evolved

rapidly in the US. It took on a commercial form that spelled out responsibilities

of the board of directors and management of shareholders (i.e. fiduciary duty).

In this later evolutionary form, public policy frequently addressed specific

social domains such as health and safety for workers, consumer protection,

labour practices, environmental protection, etc. Thus corporations responded

to soci1 responsibilities because they were obligated to be in compliance with

the law public policy. They also responded voluntarily to market demands that

reflected consumer morals and social tastes.

By the mid-point of the twentieth century, corporate social responsibility

was being discussed in the US by business management experts such as Peter

Druckers and being considered in business literature. In 1970, economist

Milton Friedman outlined his view that the social responsibility of corporations

is to make profits within the boundaries of society morals and laws (but

cautioned that socially responsible initiatives

By corporations could lead to unfocused management directions,

misallocations of resources and reduced market competition, opportunity and

choice). CSR emerged and continues to be a key business management,

marketing, and accounting concern in the US, Europe, Canada, and other

nations.

In the last decade, CSR and related concepts such as corporate

citizenship and corporate sustainability have expanded. This has perhaps

occurred in response to new challenges such as those emanating from

increased globalization on the agenda of business managers as well as for

related stakeholder communities. It is now more a part of both the vocabulary

and agenda of academics, professional’s, non-governmental organizations,

consumer groups, employees, suppliers, shareholders, and investors.

Values, Ethics & Social Responsibility

Business ethics is not a distinct and separate aspect of corporate life. It

permeates all aspects and departments of the firm, its operations and its links

with the community. At times, the word ethics and values are used

interchangeably. Values, are set of beliefs germane to the individual, group or

organization and is the basis for action. It is something, which is held in regard,

importance or worth. Values, is essentially a thought based concept. While

ethics is a set of actions, born out of beliefs, attitudes and values. It is a branch

of knowledge concerned with moral principles that govern influence conduct.

Ethics, is essentially an activity based concept.

Ethics is person specific, context specific and culture specific. It is also

important to distinguish between ‘managerial ethics’ and ‘business ethic’.

While the former is a micro view and is an examination of individual

Level behavior. The latter is a macro view and examines organizational

behavior. It is important to look at the micro level behavior because (a) Most

unethical decisions emanate at the individual level, rather than as collective

decision of boards or committees, and (b) Individual sensitivities will contribute

to companies taking an active ethical stand while making decisions.

Ethics and CSR are closely related concepts. Ethics deal with issues

pertaining to organizations and its stakeholders in day-to-day business

transactions. Social responsibility refers to a company’s posture relative to the

community either narrowly or broadly defined. Ethics tends to be more

internal in orientation, while social responsibility is more external, but this

orientation is not an absolute one. Many companies that are highly ethical also

exhibit heightened levels of social responsibility. In fact, the term corporate

citizenship is used now to denote many of the activities that fell under the CSR

umbrella earlier.

Social Accounting & Reporting

An increasing number of companies are reporting publicly on their

social, environmental and ethical performance, both as a communication to

stakeholders, and as a management tool. However, as this practice has only

become more widespread since the mid 1 990s, there is as yet no standard

format to address the type of information companies choose to report, or how

that information is collected, analyzed and presented.

At the same time, many stakeholders are becoming increasingly

sophisticated in the type and quality of information they are demanding from

companies. In an effort to meet these demands — as well as to strengthen the

credibility of their social and environmental reports-some companies are

Choosing to have their reports externally verified. In doing so,

companies recognize that verification by a third party can add value to the

overall social and environmental reporting process by enhancing relationships

with stakeholders, improving business performance and decision-making,

aligning practice with organizational values, and strengthening reputation risk

management.

A small, but growing, number of companies are producing verified social

and environmental reports, with the social report movement, in particular,

being led in large part by European companies. Verification refers to any

independent assessment as to the quality, accuracy, or completeness of a

company’s report and can include audits, reviews, attestations, or other forms

of assurance.

As shell has noted in its Principles and Profits Report, society has moved

from a ‘Trust Me’ position, through a ‘Tell Me’ position to a ‘Show Me’

position, implying that verbal assurances by corporate management are no

longer sufficient to gain the trust of stakeholders. Independent verification of

social and environmental reports is one way in which companies are

addressing this lack of trust.

During the 1 990s, calls for greater corporate social accountability by

activists, non-governmental organizations (NGOs), governments and the

general public increases, both in the United States and internationally.

Additionally, increasing numbers of investors taking companies’ social and

environmental performance into account in their investment decision.

The trends in environmental reporting have begun to be duplicated in

social reporting. Standards developed by non-corporate organizations provide

targets against which social performance may be measured. Guidelines also

address how social performance can and should be reported.

For example, SA8000, launched in 1997 by Social Accountability

International (formerly Council on Economic Priorities Accreditation Agency) is

an auditable standard specifically addressing labor and workplace conditions.

The Global Reporting Initiative Sustainability Guidelines, revised in June 2000,

provide a framework and principles for reporting on environmental, social and

economic corporate performance. AA1000, a standard for the social reporting

process, was developed by the Institute of Social and Ethical Accountability and

publicly released in 1999.

During the late 1980s and 1990s, non-governmental organizations have

been at the forefront of campaigns on social and environmental issues,

becoming a powerful force in both publicizing a wide range of corporate social

responsibility issues and in pressuring companies to address them.

Representing particular stakeholder issues, they have challenged corporate

reporting of social and environmental performance and demanded

independent monitoring of social issues, as well as audits of social and

environmental reporting processes.

• Global Reporting Initiative - Sustainability Reporting Guideline:

The Global Reporting Initiative (GRI) is multi-stakeholder initiative,

formed to develop globally applicable guidelines that can be used voluntarily

by reporting organizations. The Sustainability Guidelines on Economic,

Environmental and Social performance, launched in May 1999 and updated for

re-release in June 2000, were designed to help companies report on the

economic, environmental and social impact of their business operations. The

guidelines acknowledge independent verification as a measure of providing

assurance for reliability and completeness of sustainability reports. They also

recognize the potential for verification to “enhance the quality of

Information within an organization and the underlying management

systems and processes.” An annex of the guidelines outlines principles for

verification and offers advice as to what may be expected from verifiers —

such as contents for inclusion in the verification report. The guidelines suggest

the principles and standards for verification of social reports need to allow for

more diverse approaches than are used in traditional financial auditing, while

maintaining fundamental audit concepts necessary to provide assurance and

credibility.

Accountability 1000 (AA1000): AA1000, developed by the Institute of

Social and Ethical Accountability and launched in November 1999, is a ‘process

standard’ setting out principles and a method for social reporting that focus on

the process rather than the content of the social report. Within the standard

are guidelines addressing principles for the conduct of the social and ethical

auditor. They also offer a framework for the audit process, covering the terms

of engagement through to reporting the audit. These guidelines however, do

not form part of the AA1 000 standards and are not for the purpose of

certifying a social report ‘AA1000 compliant’. They are aimed to be a tool for

companies and a framework that can be referenced by auditors, in order to

describe to readers of the report, the audit process and principles that have

been followed.

• Social Accountability 8000 (SA8000): Social Accountability International

(formerly Council on Economic Priorities Accreditation Agency) launched

SA8000 in 1997, as a standard labor and workplace

• Conditions. It is also a system for independent verification of factories’

compliance to the standard. The SA8000 system is modeled

On the International Standards Organization (ISO) standard, ISO 9000, used by

companies to ensure quality control and to demonstrate the quality of

business systems and operations to customers. SA8000 builds on ISO auditing

techniques: specifying corrective and preventive actions; encouraging

continuous improvement; and focusing on management system and

documentation proving these systems’ effectiveness. SAl accredits firms —

usually known as certification bodies — to be external auditors, certifying

manufacturing facilities for conformance to SA8000. While SA8000 uses

independent auditors to certify companies as compliant with the standard, this

certification and audit relates to companies’ actual performance in regard to

labor condition, rather than the public reporting of their performance. It is

including here however, as a significant contributor to the development of

‘auditable’ social performance factors.

International Standards Organization: The International Standards

Organization (ISO) has produced a number of auditable standards and

accreditation systems for reporting on corporate performance. In particular, it

provides on environmental management systems (ISO 14000 series). ISO

14002 is a guide for environmental auditing and qualification criteria for

environmental auditors. As yet, however, there are no ISO standards that

specifically address social reporting and auditing.

International Audit Practices Committee (IAPC) International Standards

on Auditing (ISAs): the Committee is part of the International Federation of

Accountants, and organization of national professional accountancy

organizations that represent qualified public

Accountants. Recognizing the differences in national auditing standards,

the IAPC has developed International Standards on Auditing that can be

applied to the practice of financial audit internationally. However, they contain

standards and principles that can be applied and adapted to the audit of non-

financial information.

Coalition of Environmentally Responsible Economies (CERES):

The CERES Report is a standardized format for corporate environmental

reporting developed through collaboration by companies, institutional

investors and environmental organizations. The CERES Report establishes the

environmental performance data that should be disclosed, suggests methods

of measurement, and thereby helps companies to track their environmental

performance in quantifiable ways. Participating companies receive feedback on

their reports, and the reports undergo a joint prepublication review to ensure

clarity and conformity to the standard.

The idea that business has stakeholders other than shareholders is not

new, at least in the western advanced economies. Large auditing firms like

KPMG and Price water House Coopers continue to receive assignments of audit

“Triple Bottom lines” — the financial bottom-line, environmental bottom lines

and ethical/social bottom lines.

1.3 CORPORATE SOCIAL RESPONSIBILITY DEFINED

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 sole 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.

Different organization has framed different definitions:

The World Business Council for Sustainable Development

(WBCSA) in its publication “Making Good Business Sense” by Lord Holmes and

Richard Watts, Used the following definition.

“Corporate Social Responsibility is the continuing commitment by

business to 1? have 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”.

The same report gave some evidence of the different perceptions of

what this should mean from a number of different societies across the world.

Definitions as different as “CSR is about capacity building for sustainable

livelihoods. It respects cultural differences and finds the business opportunities

in building the skills of employees, the community and the

From Ghana, through to “CSR is about business giving back to

Government”

Society” from the Philippines.

Traditionally in the United States, CSR has been defined much more in

terms of a philanthropic model. Companies make profits, unhindered except

by fulfilling their duty to pay taxes. Then they donate a certain share of the

profits to charitable causes. It is seen as tainting the act for the company to

receive any benefit from the giving.

The European model is much more focused on operating the core

business in a socially responsible way, complemented by investment in

communities for solid business case reasons. This model is more sustainable

because:

1. Social responsibility becomes an integral part of the wealth creation process

which if managed properly should enhance the competitiveness of business

and maximize the value of wealth creation to society.

2. When times get hard, there is the incentive to practice CSR more and better

— if it is a philanthropic exercise which is peripheral to the main business, it

will always be the first thing to go when push comes to shove.

The business for social responsibility defined CSR. as follows:

“Corporate social responsibility operating a business in a manner which

meets or excel the ethical, legal commercial and public expectations that a

society has from business”.

“Corporate social responsibility is essentially a concept where by

companies decide voluntarily to contribute to a better society and a cleaner

environment” is how phrased in the European green paper” Promoting

European frame work for CSR”.

In the words of Millen baker “CSR is about how companies manage the

business processes to produce an overall positive impact on society”.

CSR is accepted as applying to firms where ever they operate in the

domestic and global economy. The way business engage/involve the

shareholders, employees, customers, suppliers, governments,

nongovernmental organizations (NGO’S), International organization and other

stake holder is a key feature of the concept. While business compliance with

laws and regulations on social, environmental and economic objectives set the

official level of CSR performance.

From a progressive business prospective, CSR usually involves focusing

on new opportunities as way to respond to interrelated economic, societal and

environmental demands in the market place. Many firms believe that this

focus provides a clear competitive advantage and stimulates corporate

innovation.

CSR is seen as the business contribution to sustainable development

which has been defined as “development that meets the need of the present

without compromising the ability of the future generation to meet their own

needs”.

CSR commitments and activities typically address aspects of a firms

behaviors (including its policies and practices) with respect to such key

elements as: health & 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.

Thus, CSR is viewed as a comprehensive set of policies, practices and

programs that are integrated throughout business operation and decision

making process that are supported and rewarded by top management.

1.4 THEORETICAL VIEWS:

Many experts feel that business corporation exist primarily to produce

goods and service that society wants and needs. There are three or four

theoretical views about Corporate Social Responsibility. They are discussed in

the following paragraphs.

Milton Friedman, a Nobel laureate, held the view that the only social

responsibility of business was to maximize profits for shareholders, staying

within the realm law. Achieving this is their

First objective and foremost responsibility. If they are unsuccessful in this

mission, they cannot reasonably be expected to assume other responsibility.

His very famous statement says it all

“The business of business is business”. Friedman’s defense of this theory

depends importantly on the factual claims about the efficient working of the

markets. He has also proposed the following arguments:

(a) Business executives have no special competence to directly promote th

general welfare. And since they are not democratically elected and are not

accountable to the general public, business executives should not impose their

own vision of the public good on the society.

(b) When business sacrifices profits for the sake of promoting social ends, they

are violating the rights of the shareholders, and in effect stealing their money.

Wang & Coffey also hold a similar view, when they saw that “Business has no

democratic mandate, historic role or other basis for legitimacy in this area. Any

choices made by them e.g. to back one type of cause or another, are not

sanctioned by any agreed system of legitimacy and end up reflecting the

interest, prejudice and aims of current corporate leaders.”

Hayek and Heilbroner also express similar view in their well-known essay ‘In

the Name of Profit’. Task Force set up in the USA as also the Libertarian Party

in the USA is known to have taken similar position on the subject.

Andrew Carne2ie, The legendary steel tycoon, writing in the year 1889

believed that rich had the moral obligation to give away their fortunes and that

personal wealth beyond the family’s needs should

Be regarded as trust fund for the benefit of the society. “The Trusteeship

Concept” advocated by M.K. Gandhi in India is something very similar. The

steel tycoon also believed that the money should be given during the

benefactor’s lifetime to ensure that it achieved the maximum good. Carnegie

had identified seven best uses to which a millionaire can devote the surplus of

which be must regard himself as only the trustee. These were:

• The founding of a university

• Providing free libraries

• Founding or extension of hospitals, medical colleges and laboratories

Public parks

• Providing halls suitable for meetings and concerts of elevating music.

• Public swimming baths

• One’s own church and churches in poor neighborhoods.

He advocates benevolent, paternalistic leadership and has enunciated

the Charity Principle and Stewardship principal

Keith Davis feels that social responsibility is often referred to as having risen

from an Enlightened Self Interest where organisations realize that it is in their

own best interest to act in ways that community considers socially responsible.

He talks about the

“Iron Law Responsibility”. In the long run, those who do not use power

in a way society considers responsible will tend to lose it.

In USA, there is 5% club, where a group of companies donate five

percent of their pre-tax profit to charity. In India, many large companies do the

same thing in the name of religion either build temples (mainly Hindu), run

charitable religious trusts (mainly Paris), give to the church fund (mainly

Christian) or promote the study of religious (mainly Kuranic) literature. Some

experts classify these as enlightened self-interest.

Tom Cannon, holds the view that society and the corporation or

business have to co-exist and have a mutually beneficial relationship. Business

is expected to create wealth, supply market, generate employment, innovate

and produce a sufficient surplus to sustain its activities and improve its

competitiveness while contributing to the maintenance of the community in

which it operates. Society is expected to provide an environment in which

business can develop and prosper, allowing irwestors to earn returns while

ensuring that the stakeholders can enjoy the benefits of their involvement

without fear of arbitrary and unjust action.

Business depends for its survival and long-term prosperity on society providing

the resources — people, raw materials, services, infrastructure. To convert raw

material into profitable goods/services, it needs these inputs from the society.

Business relies on society.

a) Supplying a mean of exchange — typically money — to allow it to convert

the goods it produces into assets.

b) Without a legal, judiciary and a policing system, business could not be

certain that it was safe to enjoy the rewards of its enterprise.

c) Trade agreements and defense are needed to ensure long term stable

trading conditions.

SOCIETY provides BUSINESS provides

> Means of Exchange > Products & Services

> Trained Manpower > Direct & Indirect Employment

> Legal & Banking > Income Generation in

System terms of Wages,

dividends, taxes, interest

> Social infrastructure

Like Road, Schools,

Hospitals etc.

In addition to the above, with the advent of the joint Stock Company society

grants to business two very special rights to assist business in performing its

role-The first is “Potential immortality” and the second is “Limited Liability”.

Thus, according to Cannon, in return for these special privileges being granted

to business, it does have a responsibility to fulfill to the society/community at

large.

1.5 ACTION PLAN FOR CORPORATE SOCIAL RESPONSIBILITY

There are several areas of action plan for corporate socialresponsibility.

1- Environment and Eco1oy

• Reduce consumption of energy, water and other natural resources and

emission of hazardous substances.

• Established environment management system.

• Use recycled and recyclable products.

• Increase durability of products and minimize packaging.

• Train staff in environmental issues.

2. Health and Well Being

• Establish policies to ensure the health and safety of all employees — which

are known to employees.

• Involve employees in business decisions that affect them.

• Operate open book policies.

• Consult employees on how to handle a down turn in the business if layoffs

are avoidable, offer outplacement services, retraining and severance benefits.

Provide training opportunities.

• Extend training to life management, retirement planning and dependents

care

3. Diversity and Human Rights

• Work with charities, job centers to redesign jobs to make them accessible to

disadvantaged.

• Set the tone in not tolerating sexist, racist, homophobic jokes.

• Support organizations that promote fair trade and human rights compliance.

• Make sure that staff member is aware that there are explicit policies against

discrimination in hiring, salary, promotion, training, or termination of any

employee on basis of gender, race, age, ethnicity, disability.

4. Community

• Encourage employee volunteering in the community, payroll giving and back

up with financial contributions and help in kind.

• Make some of business products or services available free or at cost to

charitable products.

• Look for opportunities to make surplus product and redundant equipment

available to local schools, charities and community organizations.

• Offer quality work experience for school children and students.

• Collaborate with local teachers to make the activity of business the subject of

school project. Use business experience to help local school of charity.

• Use marketing budget to associate business with social cause.

1.6 EMERGING AREAS OF CORPORATE SOCIAL RESPONSIBILITY

There are several emerging areas of corporate social responsibility — social

responsibility, business responsibility, environmental responsibility and

stakeholder involvement.

Areas of social responsibility include — respecting human rights, contributing

to social economic development, employee welfare — this includes right to

organize, eliminating child labour, non discrimination, living wage and social

security, training, safety, health and well being, lifelong learning,

empowerment of employees etc.

• Consumer protection includes right to information.

• Respect for national sovereignty and local communities for multinationals.

• Sharing resources with underprivileged communities.

• Investing in sustainable development programmes for the community.

Areas of environmental responsibility include — respect for environment and

environment friendly technologies.

• Use, conservation and discharge of energy, material and water in eco-

friendly manner.

• Adopting preventive and precautionary measures for environment pollution

control.

• Rectifying environmental damage at source.

• Treating waste before disposing it.

• Preservation of biodiversity.

• Promoting and implementing an environmental policy for sustainable energy

and environment.

Areas of business responsibility include — Compliance with tax laws and

other regulations.

> Investing in developing science and technology.

> Fostering ethical trade practices.

Regulating supplier’s CSR practices and distributor’s CSR practices and

transparent financial reporting.

Areas of corporate social responsibility includes — Extension of principles and

ethical values enshrined in organization to all its stakeholders such as

authorities, customer groups, business partners and external influences.

1.7 WHY CORPORATE SOCIAL RESPONSIBILITY?

David Wheeler and Maria Silanpa in “The Stakeholder Corporation” state that

by 1998. 51 out of the 100 largest economies were not nation states, but

corporations. According to Wheeler & Sillanpa, in 1998. General Motors was

bigger than Denmark. Toyota was bigger than South Africa. Yet at the

beginning of the 2l century, the gap between the world’s rich and poor is wider

than ever before.

In 1999, The United Nations reported that the world’s then three richest

people — Bill Gates of Microsoft, the Suttan of Brunei and the Watton family of

the Wall Mart retail chain were worth more than the combined gross domestic

product of the world’s 34 poorest nations. Thus, the modern day large

corporations are often large than nation states. Rich individuals on and

command resources that are so large, often larger as compared own

smaller/poorer nations. With great power (and size), comes great

responsibility.

The second important development in the late 20th “century has been the

rollong back of the State. It is increasing being realized that the State cannot

and should not perform all functions it was performing in the earlier periods. In

many countries, national and local governments have taken a “hands off’

approach to regulating business, both due to

(a) Globalization of Trade & Commerce — most experts are averse to legal

interventions. Internationally self-regulation linked to openness, transparency

& accountability seems to generate by far the maximum response, in response

to liberalization role of state is shrinking.

(b) Shrinking of resources Most of the government at the national and local

levels are experiencing shortage of funds and a shrinking resource base.

Over the past decades, a growing number of companies have recognized

the business benefits of — CSR polices and practices. Their experience has

been bolstered by a growing body of empirical studies, which demonstrate

that CSR has a positive impact on business economic performance and it is not

harmful to shareholder value.

Companies have also been encouraged to adopt and / or expand CSR

effects as a result of pressures from customers, suppliers, employees,

communities, investors, activist organization and others stake holder.

As a result, CSR has grown dramatically in recent years with companies

of all sizes and sectors developing innovative strategies.

1.8 BUSINESS CASE FOR CSR (BENEFITS)

The factors that have become the primary measures of an organization

credibility for today’s CSR success are as follows:

1. Improved financial performance: - A recent longitudinal Harvard University

study has found that “stakeholder balanced” Companies showed four times

the growth rate and eight times employment growth when compared to

companies that focused only on shareholder and profit maximization,

2. Enhanced brand image & reputation — A company consultant socially

responsible can benefit both by its enhanced reputation with the public, as

well as reputation within the business community, increasing a company’s

ability to attract capital and trading partners. For example, a 1997 study by two

Boston College management professors found that excellent employee,

customer and community relations are more important than strong

shareholder returns in earning corporations a place and Fortune magazine’s

annual “Most Admired Companies” list.

3. Increased sales and customer loyalty - A number of studies have suggested a

large and growing market for the products and service of companies perceived

to be socially responsible. While business must first satisfy customers key

buying criteria — such as price, quality,

Appearance, taste, availability, safety and convenience. Studies also show a

growing desire to buy based on other value-based criteria, such as

“sweatshop-free and “child labour-free” clothing, products with smaller

environmental impact, and absence of genetically modified materials or

ingredients.

4. Increased ability to attract and retain employees — Companies perceived to

have strong CSR commitments often find it easier to recruit employees,

particularly in tight labour markets. Retention level may be higher too,

resulting in a reduction in turnover and associated recruitment and training

costs. Tight labour markets as well the trend toward multiple jobs for shorter

periods of time are challenging companies to develop ways to generate a

return on the consideration resources invested in recruiting, hiring, and

training.

5. Reduced regulatory oversight - Companies that demonstrate that they are

engaging in practices that satisfy’ and go beyond regulatory compliance

requirements are being given less scrutiny and more free reign by both

national and local government entities. In many cases, such companies are

subject to fewer inspections and paperwork, and may be given preference or

“fast-track” treatment when applying for operating permits, zoning variances

or other forms of governmental permission.

6. Easier access to capital - The Social Investment Forum reports that, in the

U.S. in 1999, there is more than S2 trillion in assets under management in

portfolios that use screens linked to ethics, the environment, and corporate

social responsibility. It is clear that companies addressing ethics social and

environmental responsibility

Have rapidly growing access to capital that might not otherwise been available.

1.9 FACTORS AFFECTING CSR

Important factors which influence the CSR of companies include the

following Promoters and top mana2ement — The values and vision of

promoters and top management is one of the very important factors which

influence the corporate social responsibility.

2. Board of directors — As it is the Board of Directors which decides the major

polices and resource allocation of company, the attitude of the members of

the Board is an important influence of the social orientation

3. Stakeholders and internal power relationship- The attitude of various

stakeholders like shareholders, creditors, employees, etc. and the internal

power relationship also affect the social orientation of a company. As

suggested by the Halal’s model, a firm can only attempt to unite the diverse

interests of various social groups to form a workable coalition engaged

increasing value for distribution among members of the coalition. Beyond a

certain level of economic activity, the social issues at stake may become

conflicting.

4. Societal factors — The social orientation of company is also influenced by

certain characteristics of the society and general attitude and expectation of

the society regarding he social responsibility of business. For example, a

resourceful firm located in a poor community may be expected to contribute

to the development of education and health facilities, etc. of the locality where

as such

involvement may not be required of a firm in a well developed

community. The orientations or approaches may vary in accordance with the

environment. The behavior or social orientation expected of business may vary

between different societies.

5. Industry and trade associations — Industry and trade associations also

influence the behavior of the firms by establishing professional and ethical

codes and norms, education and collective decision.

6. Government and laws — Laws are society’s codification of right and wrong.

Business shall play the rules of the game. Antitrust legislations, legislations to

curb corruption, unfair practice, etc. vary between nations. What is right or not

anti-law in one county may not be so in some other county. Further, what is

legally controlled in some countries have no legal control in some other

counties. Beside legislation, there are other methods of government influence

like guidelines, persuasion, incentives (like tax exemptions) and pressurizing.

The social orientation would also depend on the government’s view of

social responsibility and the power and earnestness of government/agencies

(like SEBI, for example) in dealing with defaulting companies.

7. Political influences — Political influences include pressure exerted by special

interest groups in society and media to control business practices. These

include a variety of non-government organizations (NGOs) like consumer

interest groups, environmentalist, etc, They use a variety of methods like

lobbying to persuade government and public agencies to adopt regulatory

measures, conducting public awareness campaigns, and even direct

confrontation with the business in some cases.

8. Competitors- Social orientation of company is also influenced by competitive

forces. Two types of competitive behavior are often noted. When one or some

companies become socially involved, others may be encouraged or provoked

to do something. Sometimes, there may be competition between companies

to out-perform others. The other way by which the society benefit by

competitive behavior is the actions of suing competitors for unfair practices or

publicly exposing the misbehavior of competitors.

9. Resources — Social involvement of companies is also affected by the

financial position and other resources of the company. It may be noted that

the Tisco has been constrained to cap, albeit at fairly high level, its social

responsibility expenditure.

10 Ethical influence — another factor influencing the social orientation is the

ethical decision — making and self-regulation of business conduct. Some

companies have well laid down codes and norms of ethical behavior. Five

ethical standards that are in vague are summarized by Gene Laczniak as

follows.

1. The golden rule Act in the way you would expect others to act towards you.

2. The utilitarian principle Act in a way that result in the greatest good for the

greatest number.

3. Kant’s categorical imperative Act in such a way that the action you take

could be a universal law or rule of behavior under the circumstances.

4. The professional ethic Take actions that a disinterested panel of

professional colleague would view as proper.

5. The TV test Ask, “Would I feel comfortable explaining to a

national TV audience why I took this action.

1.10 RESPONSIBILITIES TOWARDS DIFFERENT SECTIONS OF SOCIETY

This is no unanimity as to what constitutes social responsibility of

business. The important generally accepted responsibilities of business to

society are described below. The pity is that some multinationals which

appreciate their social responsibility in respect of the developed countries do

not have the same approach in respect of the developing countries they

operate in. It is at the same time equally true that some MNCs fair much better

in social responsibility than many domestic firms.

Responsibility to Shareholders

The responsibility of a company to its shareholders, who are the owners,

is indeed a primary one. The fact that the shareholders have taken a great risk

in making investment in the business should be adequately recognized.

To protect the interests of the shareholders and employees, “#the

primary business of a business is to stay in business”. To safeguard the capital

of the shareholders and to provide a reasonable dividend, the company has to

strengthen and consolidate its position. Hence, it should develop and improve

its business and build up its financial independence.

Needless to say, to provide dividend, the company should earn sufficient

profit. Adequate reserves should be built up so that it will be able to declare a

reasonable dividend during a lean period as well.

If a company fails to cope with changes in a changing and dynamic

world, its position will be shaken, and the shareholders’ interests will be

affected. By innovation and growth the company should consolidate and

improve its position and help strengthen the share prices.

The shareholders are interested not only in the protection of their

investment and the return on it but also in the image of the company. It shall,

therefore, be the endeavour of the company to ensure that its public image is

such that the shareholders can feel proud of their company.

It may be mentioned here that the shareholders also have certain

responsibility which they have to discharge to protect their own interests. They

shall not only offer whole-hearted support and co-operation in the positive

efforts of the company but shall also guide and control properly its policies and

activities. At the same time, they shall appreciate the responsibility of the

business to other sections of society-to the workers, consumers and the

community

Responsibility to the Employees

The success of an organization depends to a very large extent on the morale of

the employees and their whole-hearted co-operation. Employee morale

depends to a large extent on the discharge of the company’s responsibilities to

them and the employer-employee relationship. The responsibility of the

organization to the workers include:

1. The payment of fair wages.

2. The provision of the best possible working conditions.

3. The establishment of fair work standards and norms.

Responsibility to Consumers

According to Peter Drucker, “there is only one valid definition of

business purpose; to create a customer.” Drucker observes. “The customer is

the foundation of a business and keeps it in existence. He alone vies

employment.

To supply the wants and needs of a consumer, society entrusts wealth-

producing resources to the business enterprises.”

It has been widely recognized that customer satisfaction shall be the key to

satisfying the organizational goals, important responsibility of the business to

the customers are:

1. To improve the efficiency of the functioning of the business so as to (a)

increases productivity and reduce prices, (b) improve quality, and (c) smoothen

the distribution system to make goods easily available.

2. To do research and development, to improve quality and introduce better

and new products.

3. To take appropriate steps to remove the imperfection in the distribution

system, including black-marketing or profiteering by middlemen or anti-social

elements.

4. To supply goods at reasonable prices even when there is a seller’s market.

5. To provide the required after-sales services.

6. To ensure that the product supplied has no advice effect on the consumer.

7. To provide sufficient information about the products, including their adverse

effects, risks, and care to be taken while using the products.

8. To avoid misleading the customers by improper advertisements or

otherwise.

9. To provide an opportunity for being heard and to redress genuine

grievances.

10. To understand customer needs and to take necessary measures to satisfy

these needs.

Despite the popularity of the Marketing Concept and the growing

awareness of consumer rights, consumers all over the world are, by and large,

dissatisfied. Consumerism, which is an organized Endeavour of the consumer

to protects their rights. [s a manifestation of this fact? In shortage economies

like India many businessmen pay scant attention to their responsibilities to

consumers. To protect consumer rights and to make business discharge its

responsibilities to them, the consumer should give up their indifferent attitude

and build up a strong consumer movement.

Responsibility to the Community

A business has a lot of responsibility to the community around its location and

to the society at large. These responsibilities include:

1. Taking appropriate steps to prevent environmental pollution and to

preserve the ecological balance.

2. Rehabilitating the population displaced by the operation of the business, if

any.

3. Assisting in the overall development of the locality.

4. Taking steps to conserve scarce resources and developing alternatives,

wherever possible.

5. Improving the efficiency of the business operation.

6. Contributing to research and development.

7. Development of backward areas.

8. Promotion of ancillarisation and small-scale industries.

9. Making possible contribution to furthering social causes like the promotion

of education and population control.

10. Contributing to the national effort to build up a better society.

1.11 CORPORATE SOCIAL RESPONSIBILITY IN INDIA

In India, corporate, as anywhere else in the world are striving to improve the

public image of business. It is not ‘dirty business’ any more. Most companies

believe in being and becoming good corporate citizen. They see the value or

giving back to the community which contributed to their success. Corporate

social responsibility is no longer mere philanthropy. Though still largely

voluntary, it is seen as imperative for sustainable business. And, there is

growing evidence that socially responsible investment by ethical companies

brings in higher returns on a long term basis.

Large public sector companies are investing up to 5 percent of profits

towards social uplift and community development. Companies in the Energy

sector especially ONGC — have committed resources by adopting a few

villages to implement President Abdul Kalam’s idea of PURA (Provision of

Urban Amentities in Rural Areas), National Thermal Power Corporation has

established a trust to work for the cause of the physically challenged people. In

the private sector the Tata Steel has been a pioneer. Their contribution to

social and community development in the tribal belt of Jharkand is so

legendary that at one time the company used to say that ‘we also make

steel’They were the first in the country to have got a social audit done.

In 1999 Kofi Annan of the United Nations invited corporate leaders for

Global Compact to promote nine principles covering three areas: human rights,

labour rights and sustainable development. Today, India can be legitimately

proud to have had the second largest number of companies from any county

sub-scribing to Global Company. Several public sector companies have joined

together to form Global Compact Society of India. In 2001, European Union-

India Network for CSR was launched to bring together European and India

Companies and Stakeholders to look at selected issues of CSR. The Indian

partner in this venture is the Business and community Fàundation (BCF), a non-

profit body set up in New Delhi for Indian and international companies, in

association with the International Business Leaders Forum. In 2004-5 UNDP

and the Confederation of Indian Industry (CII) have networked with academics

and brought out 18 case studies on CSR covering as many companies — BILT,

Excel, Hindustan Lever, IFF-CO, NTPC, Times of India and Titan among others —

in a book edited by CV Baxi of MDI and Ajit Prasad of IMI. Rajeshree Biria,

Chaiperson, Centre for Community Initiatives and Rural Development

Initiatives and Rural Development at Birla Group makes a business case for

corporate in India to shoulder CSR, “For us in corporate world to expect that

the government alone should address welfare issues is both unfair and

unrealistic India’s needs are huge and the resources of the state are limited’.

Chairman Y C Deveshwar asserted in ITC’s Sustainable Development Report,

2005, the contribution of companies should be measured by the triple bottom

line: economic, environmental and social. The message is loud and clear:

Societal well being is a prerequisite for business prosperity. Companies which

put people before profits and which care for sustainable development are the

ones who will survive the competitive pressures.

1.12 ARGUMENTS AGAINST CSR

If the arguments against a socially responsible approach were widely accepted

no body would even be talking CSR. But those of us who spend out time

hearing the case for would do well to spend a little time hearing the case

against, and considering what should be the response. The following are some

of the arguments advance against corporate social responsibility.

1. Business are owned by their shareholders any money they spend on so-

called social responsibility is effectively theft from those shareholders-who can,

after all, decide for themselves if they want to give to charity. This is the voice

of the laisser-faire in the 1 980s still being given powerful voice by advocates as

Elaine Strenberg. in US Sternberg argues that there is a human rights case

against CSR, which is that a stakeholder approach to management deprives

shareholders of their property rights. She states that the objectives sought by

conventional views of Social responsibility are absurd. Not all aspects of CSR

are guilty of this however, Sternberg statçs that ordinary decency, honesty and

fairness should be expected of any corporation.

In the first instance, this case strongly depends on the model of social

responsibility adopated by the business being a philanthropic one. The starting

point assumption is that through CSR, corporations simply get to “give away”

money which rightfully belongs to other people. If CSR is seen as a process by

which the business manages its relationships with a variety of influential

stakeholders who can have a real influence on its license to operate, the

business case becomes immediately apparent. CSR is about building

relationship with customers, about attracting and retaining talented staff,

about

managing risk, and about assuring reputation. The market capitalization of a

company often far exceeds the “property” value of the company. For instance,

in many knowledge based industries “intangibles” — account for a large

percentage of Capitalization — a major part of which rests on the reputation of

the company. No company would like to or should risk the reputation of the

company.

In any case, if shareholders are to be accorded full property right one

would expect to see the balancing feature of responsibility for the actiohs

taken by the enterprises the often fleetingly own. Since most shareholders

remain completely unaware of any such responsibility, it can only fall to the

management — the “controlling mind” of the company, to take that

responsibility on.

2. The second argument being advanced is that the leading companies who

report on their social responsibility are basket cases-the most effective

business leaders don’t waste time with this stuff. Look at the recent “Most

Respected Companies” survey by the Financial Times. Who are the most

respected companies and business leaders at the current timer? Rather

predictably, they are lack Welch and General Electric, and Bill Gates and

Microsoft. Neither has achieved their world class status through playing nice.

Welch is still remembered for the brutal downsizing that he led his business

through, and for the environmental population incidents and prosecutions.

Microsoft has had one of the highest profile cases of bullying market

dominance of recent times and Gates has been able to achieve the financial

status where he can choose to give lots of money away by being ruthless in

business.

Here again the argument is against short termism (profit maximization) and

“building to last”. Sustainability of enterprise over a long period pre-supposes,

co-option of stakeholders on the agenda.

3. The third argument against CSR, runs some what like this — Our company is

too busy surviving hard times to do this. We can’t afford to take our eye off the

ball-we have to focus on core business. It’s all very well for the very big

companies with lots of resources at their disposil. For those fighting for

survival, it’s a very different picture. You can’t go spending money on

unnecessary frills when you’re laying people off and morale is rock bottom.

And the odd bit of employee volunteering won’t make any difference to our

people when they feel cynical and negative about how the company operates.

Corporate social responsibility is often presented as an extra cost, an

added burden born by the corporation already struggling to be profitable in a

difficult economic phase. But in some situations, the opportunity to improve its

business ethics also offers the company extra ordinary marketing and branding

possibilities.

It is argued that high values are a luxury, which only wealthy and

successful companies can afford. We need to pint out that companies known

for their ethics adopted these values not when they had become big and

prosperous, but when they were small outfits. And it is precisely their values

that gave them the backing of the public in difficult times, which enabled them

to grow to their present giant size.

4. 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. We expect governments to provide the legal frame work that

says what society will put up with. There’s no point, for

instance, allowing smoking to remain legal even making large tax receipt

from it — and then acting as though tobacco companies are all immediately

beyond the pale. If you think it’s to dreadful, you should make it illegal. If not

then let us on with the job of meeting the demand out there of adults who can

choose for themselves.

Whether or not business should undertake CSR and the forms that

responsibility should take depends upon the economic perspective of the firm

that is adopted. Those who adopt No classical. View of the firm would believe

that the only social responsibility of business is provision of employment and

payment of taxes. An alternative view of the firm following the behavioral

theorists might view CSR activities from a standpoint that examines political

and non-economical influences on managerial behavior

Friday conference at the American Enterprises Institute will try to

answer the question. “Is Corporate Social Responsibility (CSR) Serious

Business?”And not a moment too soon. Though CSR was labeled by free-

market icon Milton Friedman as a “subversive doctrine much of the business

community has embraced it, arguing that it is simply “good for our business.”

Opponents of CSR have naturally argued the contrary. Emphasizing the

economic costs of following such a “misguide virtue” as CSR. But little attention

has been paid to the actual arguments made by advocates of CSR within the

business community. This is a shame, because a closer analysis of the

“business case for CSR” shows that it is, indeed, based on a set of assumptions

that undermine the legitimacy of the free- enterprise system.

But before examination the larger question, let us first consider the

extent of support that CSR enjoys among the business community. In a 2005

survey of its membership, the U.S. Chamber of Commerce found that 81

percent of respondents agreed that “corporate citizenship needs to be a

priority for companies.” Similarly. KPMG’s 2005 International Survey on CSR

found that of the top 250 companies in the Fortune 500. 52 percent now

publish separate CSR reports, alongside their annual financial reports. And

claiming it “wants to be ‘one’ with the consumer.” McDonald’s has even

started a biog devoted to CSR issues. (Issac Post — a Regulatory Policy Analyst

at the Competitive Enterprises Institute, Washingont DC)

Today, there are many references to corporate social responsibility

(CSR), sometimes referred to as corporate citizenship, in our workplaces, in the

media, in the government, in our communities. While there is no agreed- upon

definition, the World Business Council for Sustainable Development defines

CSR as the business commitment and contribution to the quality of life of

employees, their families and the local community and society overall to

support sustainable economic development. Simply put, the business case for

CSR establishing a positive company reputation and brand in the public eye

through good work that yields a competitive edge while at the same time

contributing to others-demands that organizations shift from solely focusing on

making a profit to including financial, environmental and social responsibility in

their core business strategies. Despite what the phrase corporate social

responsibility suggests, the concept is not restricted to corporations but rather

is intended for most types of organization, such as associations, labour unions,

organizations that serve the community for scientific, educational, artistic,

public health or charitable purposes, and governmental agencies.

In the late l990s, CSR began gain momentum as pressure from

consumers, the media, activists and various public organization demanded that

companies contribute to society. In large part, the increasing focus on CSR has

been fueled by a number of events in recent years, such as the highly

publicized financial scandals of Enron and WorldCom, alleged sweatshop labor

by retail clothing and sports shoe manufacturers and the alleged “under-the-

table” deals that companies such as Halliburton have received. Now,

reputation, brand, integrity and trust are increasingly considered important

measures of corporate social responsibility.

CSR in the Business Community

Worldwide, companies and their HR leadership are coming to grips with

what exactly CSR means in their organizations and how to strategically include

CSR within business goals and objectives. There is growing evidence pointing to

the validity of and the demand for CSR. For example, 82% of companies noted

that good corporate citizenship helps the bottom line and 74% said the public

has the right to expect good corporate citizenship. However, as Niall

FirzGerald, chairman of Unilever, explained in his presentation at the London

Business School, “the reality of corporate social responsibility is there are no

precedents to fall back on, and decisions must be based on judgment rather

than tried and tested formulae.”

As the concept of CSR becomes more widely accepted and integrated in

business, it is helpful in this discussion to understand that the development of

CSR in organizations is in transition. There are basically three “generations” of

CSR in varying stages of sophistication. The first generation has demonstrated

that companies can contribute to society without risking commercial success.

Today, the second generation is developing more fully as CSR gradually

becomes an integral part of companies’ long-term business strategies. Finally,

the third generation addresses significant social issues, such as poverty and

cleanup of the environment. Evidence of the transition of CSR will be discussed

throughout this article, with suggestions of how HR professionals can take on

leadership roles that can contribute to CSR initiatives in their organizations.

The article will also highlight some examples of the impact of CSR and how it

may link to the bottom line.

Making the business Case for CSR

In recent years, intangible assets-company values, human and

intellectual capital, reputation and brand equity-have become increasingly

important to organizations. Companies that exhibit good corporate citizenship

are likely to gain a competitive edge. Below are just a few examples of today’s

CSR success factors that are fast becoming the primary measures of an

organization’s credibility.

Reputation and Brand Enhancement

Company reputation and brand are greatly influenced by public

perception. For example, in the largest global survey of the public’s

expectations, the Millennium Poll on Corporate Social Responsibility

documented that over 25,000 individuals across 23 countries on six continents

revealed they form their impressions of companies by focusing on corporate

citizenship and two out of three people want companies to go beyond making

money and contribute to broader society goals. Increasingly, there are success

stories that show companies are listening to the public. A recent example is

that of Ecolab of St. Paul, Minnesota, that quickly developed new products to

address unexpected hazards with an antimicrobial disinfectant product in

response to foot and mouth disease in livestock and another new product to

combat SARS at the Toronto airport.

Today, companies are also seeking avenues of public acknowledgement

of their employer brand. For example, Business Ethics Corporate Social

Responsibility Report publishes a list of the 100 best corporate citizens.

Companies are ranked by social scores regarding environment, community and

customer relations, employee relationships, and diversity. One of the 2004

winners was Proctor & Gamble, which donated funds to help disadvantaged

youth in Vietnam, combat childhood malnutrition in India and provide

earthquake relief in Turkey.

Another critical aspect of reputation and brand, as a CSR success factor,

is the impact on a company’s sustainability-that is, the conditions or

characteristics that support an organization to continue its business, including

environmental, social and economic aspects of the company. Ultimately, the

environmental, social and economic health of a company transfers into dollars

that either directly or indirectly affect reputation and brand, and thus the

bottom line. For example, a company whose product contributes tO the safety

of the environment will likely be favorably viewed by the public. Or, a company

that supports community events may generate public approval. Both examples

may yield additional applications for employment or employee referrals, thus

potentially lowering the time and cost per hire. The final CSR report card is

directly linked to the company’s sustainability and consequently influences

critical success factors such as reputation and brand.

Accountability and Transparency

Open, reliable and regular reporting of a company’s performance-

known as accountability and transparency in CSR terminology-is quickly

becoming a public issue and one that FIR leaders will need to keep in the

forefront, As a sign of the times, large companies are beginning to publish

company information, once deemed at too sensitive to release, with

expectations for their suppliers and their internal human resources practices.

However, few companies give robust performance measures, with fewer yet

being independently verified. The clothing industry, fir example, has been

criticized for how workers are treated in factories in their supply chain.

Setting an example, Gap, Inc. released its first Social Responsibility

Report, emphasizing the organization’s commitment to working with key

players to create industry-wide change. It also took a proactive stance on

employee treatment by prohibiting child labor, forced labor and discrimination

and protecting freedom of association for workers.

Risk Management

Managing investor confidence is another factor supporting the business

cake for CSR, Today, the financial community is examining organizations CSR

report cards and their risk profile. The rapid rise of socially responsible

investment illustrates that corporate citizenship is becoming a key measure

that investors consider when aligning ethical concerns with publicly held

corporations. For example, the Dow Jones Sustainability Indexes track the

financial performance of the leading sustainability-driven companies

worldwide, and the Domini Social Investments screen companies for corporate

citizenship, diversity, employee relations, non-U.S. impact, environmental

responsibility and safe and useful products. In view of the increasing

importance placed on socially responsible investment, this is an opportunity

for HR leaders to consider programs, such as community events, that may

generate investor confidence linkirg CSR initiatives to the bottom line.

The Talent War

With the anticipated labor shortage in the next 10 to 25 years,

attracting, developing, motivating and retaining talent is, and will continue to

be, very important. Correspondingly, CSR influences a company’s competitive

advantage today through two key value drivers: 1) company reputation and

brand; and 2) human capital, HR leaders have begun to assume leadership

roles to address both areas. For example, a positive CSR initiative was

documented by an employee survey that illustrated the pride of employees

regarding their company’s contribution to a local AIDS organization

In addition, the talent war is evidenced by an influx of “best places to

work” awards (e.g. Fortune magazine’s “100 Best Companies to Work For.”)

There are many such programs, located in communities and business

organizations that highlight the company andJor the HR professional. By

applying for and winning these awards, HR leaders can gain invaluable

exposure for their organizations and use the award as a key feature in

recruiting campaigns. Thus, a strong argument for CSR is talent management in

both the short and the long term.

Challen2es to the Business Case for CSR

The business case for CSR is not necessarily a simple one. Among the

challenges is that social andlor environmental impact differs across industries,

complicated by the fact that the term CSR has different meaning to different

industry sectors in different parts of the globe. Also, some may question if the

message CEOs communicate about CSR is an add-on or part of company core

business activities-or is it merely an insincere effort to boost public relations?

In some organizations, CSR is still considered to mean compliance and

philanthropy, although some large companies are now placing CSR in a more

strategic framework.

Further, there is the question of how to measure CSR. For example, a

survey of 539 CEOs in 40 countries examined the strategic importance of

communication regarding corporate citizenship to investors. One of the largest

obstacles noted was the lack of a rigorous, credible business case backed up by

performance indicators and metrics that can be quantified and benchmarked.

Further, investment in CSR is not yet being taken seriously by some

organizations. Only 30% of executive said their company increased overall

business investments in corporate citizenship in the last year. The same report

indicates resources and resistance as barriers to practicing corporate

citizenship and CSR.

Not all organizations may have the resources (e.g., funds, time, staff) to

fund. Into CSR initiatives. However, CSR programs may not be expensive or

require a significant time commitment. Organizations that are interested in

CSR may choose to start with small projects that showcase their commitment

to their workforce and the community. HR leaders can help address this

challenge by considering different options and developing creative approaches

to CSR to present to their company. Below are recommendations to consider:

Network with other HR professional to learn about their organization, CSR

initiatives (ideas and information about programs; what worked and lessons

learned)

o Explore partnering with other organization (e.g., co-sponsor a community

event).

o Contact local business organization, such as the Chamber of Commerce, to

learn what events they sponsor and how the company may contribute.

o Solicit employee suggestions regarding CSR initiatives.

Thus, it is at this point that FIR leadership, as the eyes and ears of the

organization, is key to the CSR equation. As discussed in the next section, HR

has the opportunity, through well-managed programs, policies and practices,

to engage the organization and its stakeholders (e.g., owners, employees,

management, customers, creditors, the government and other public

organization) in the value of CSR by focusing on communications, employee

relations, health, safety and community relations to provide their organizations

with a competitive advantage.

HR’s Leadership Role

With company reputation, viability and sometimes survival at stake, one

of the critical roles of HR leadership today is to spearhead the development

and strategic implementation of CSR throughout the organization and promote

sound corporate citizenship. Attracting and retaining competent people is one

of the primary business reasons for CSR. While strategically including CSR in

the organization can begin from different points (e.g., product safety, the

board of directors, business development), it makes good business sense for

FIR to head the process and partner with strategic leaders in the firm because

human capital is arguably the number one intangible value driver.

Many HR leaders are already looking ahead to the future. According to

the SHRM® 2004-2005 Workplace Forecast, key HR trends are 1)

demonstrating HR’s return on investment; 2) HR’s role in promoting corporate

ethics; and 3) building people management and human capital components

into key business transactions. As this report documents, some HR leaders are

taking action now:

o 63% are increasing spending on learning and training initiatives.

o 40% are changing company policy as a response to environmental issues.

o 36% are changing company policy as a response to grassroots pressure to

change specific business practices.

o 32% are increasing involvement in social programs. The Status of CSR in the

Organization

FIR leaders can influence three primary standards of CSR-ethics,

employment practices and community involvement-that relate either directly

or indirectly: to employees, customers and the local community, as outlined

below. By considering these three CSR standards, HR leaders can then identify

the CSR stage or their organization before making decision to develop and

implement CSR initiatives.

o Ethics — Ethical standards and practices are developed and implemented in

dealings with all company stakeholders. Commitment to ethical behavior is

widely communicated in an explicit statement and is rigorously upheld.

o Employment Practices- Human resource management practices promote

personal and professional employed development, diversity at all levels and

empowerment. Employees are valued partners, with the right to fair labor

practices, competitive wages and benefits and a safe, harassment-free, family-

friendly work environment.

o Community Involvement - The Company fosters an open relationship that is

sensitive to community culture and needs and plays a proactive, cooperative

and collaborative role to make the community a better place to live and

conduct business.

Next, prior to launching and/or evaluating CSR initiatives in the organization,

consideration of principles, implementation and employer brand will assist HR

leaders in determining how and/or why to include CSR initiatives in their

company. First, question of principle provide the broad view of CSR-moving

from philanthropy and donations to contributing solutions to help solve the

large issues such as poverty. Second questions of implementation address

practical issues such as incorporating CSR into the performance appraisal

process and the softer issues of creating an organizational culture that

supports CSR initiatives. And third, question regarding employer brand provide

an opportunity for HR leaders to look closely at how their current polices and

programs can more positively affect recruitment, retention and talent

management.

HR’s CSR Checklist

Taking the long-range view, HR leaders can use a checklist to track

the FIR scorecard on CSR as initiatives are developed and implemented over

time. As appropriate, changes in direction can be made to correspond with

the organization’s overall strategy.

o Create a strong organizational culture around core company values.

o Scan the environment to identif\j potential threats (e.g., competition for

talent within the organization’s industry sector).

o Build personal and professional capability of the workforce (e.g., expand

intellectual capital within the organization and in collaboration with other

organizations).

o Include ethical concerns in staff performance measures.

o Support participated decision-making.

Ensure highest standards in work place health and safety.

o Encourage active engagement in community activities.

Moving Forward with CSR-HR as a Change Agent

Focusing on company values, HR leaders set the tone for an organizational

culture that is open to and understands CSR, 1-IR’s role as a change agent-

grounded in mutual respect, and open and honest communication-is essential

to educate management and employees about including CSR when setting

business goals and objectives. Three practical steps to promote change

regarding CSR are to 1) establish a workable stakeholder cbnsultation process;

2) use the process to understand the local culture (e.g,. internal-the workforce-

or external-the community) at all stages of implementation CSR; and 3) create

a sense of ownership between staff who set up a project and those who

implement it.

Beyond including CSR in the HR management system, HR’s role as a

change agent continues through keeping the CEO and other members of the

senior management team informed of human capital initiatives, the status of

community relations, measurements of employment activities and

development of partnerships and for CSR program, both inside and outside the

organization.

HR and Community Relations

One of the most visible CSR initiatives is community relations. Strong

community relations can have a positive impact on company reputation and

brand. Through community programs that highlight the company doing good

work, HR can link critical issues-decreasing turnover, savings on cost per hire

and attracting talented individuals-to CSR and the bottom line. There are many

other possibilities that HR leaders could explore to match both company and

community needs (e.g., cultural facilities for the community,recreational

lacilities br employees and their families, an educational project to help

prepare tomorrow’s work force). For example, employees from high-tech

companies could work with students on science projects that require technical

skills. Further, programs that affect both short-and long- term goals are also

strategically advantageous as CSR initiatives, an illustration of such a program

is the literacy initiative developed by Time Warner when the company saw that

the reading public could have an impact on their short- and long-term goals of

product sales.

CSR is the Global Arena

Internationally, CSR has a strong human rights dimension. This is

evidenced, for example, by the United Nations’ Global Compact the addresses

10 principles in the areas of human rights, labor and the environment with the

goal to have the private sector help realize United Nations’ vision of a more

sustainable and inclusive global economy. Global companies are increasingly

placing a stronger emphasis on corporate citizenship activities. The top four

citizenship priorities are 1) employee health and safety; 2) sustainability; 3)

equal opportunities/global diversity; and 4) globalization of contributions.

Further, companies worldwide are beginning to emphasize the importance of

citizenship activities beyond philanthropy. For example, a recent study

documents that about 60% of global managers polled indicated these activities

result in an enhanced reputation with customers and goodwill that opens

doors in local communities.

The global CSR agenda is associated with multilateral processes and

guidelines. In recent years, there has been a significant growth of “codes of

conduct” worldwide, sometimes referred to as global regime of “soft law”.

These voluntary business conduct principles cover a wide range of

corporate citizenship topics from corporate social and environmental

responsibility to transparency and fair business practices. Following these

international codes of conduct has been shown to yield similar outcomes as

domestic C.SR initiatives, such as enhancement of company reputation,

increased stakeholder confidence and higher standards of business

accountability. For example, companies are increasingly publicly strengthening

their global partnerships by joining organizations such as Social Accountability

Internationa1’s Corporate Involvement Program, the Ethical Trading Initiative

and the United Nations’ Global Compact’ Therefore, as organizations continue

to expand globally, HR leaders must be cognizant of, promote and

demonstrate public support of these codes.

Globally, CSR has s significant impact on HR management. For example,

HR must be aware that effective CSR means respect for cultural and

development differences and sensitivity to imposing values, ideas and beliefs

when establishing global HR policies and programs. Externally, global

organizations are publishing mission statements, such as the one below by

Shell, to publicly announce their intentions of corporate citizenship. using

terms such as “respect” and “cultural differences”, and focusing on CSR

priorities of diversity, health, safety and equal opportunity.

“We aim to treat everyone with respect. We strive to protect people from

harm. from our products and operations. We aim to respect and value

personal and cultural differences and try to help people realise their potential

“.

Internally, HR leaders are beginning to take steps regarding CSR by

developing and implementing incentives and appraisal systems that reflect

citizenship vision and purpose as well as hiring personnel that reflect

these traits. For example, research by the Conference Board reveals that 50%

of global mangers report their companies do, or plan to, include citizenship as

a performance evaluation category. Additionally, 68% of respondents cite the

link between citizenship and performance appraisal as “increasingly

important.”

What Does the Future Hold?

The impact of CSR is under close scrutiny. There are four primary areas

of concern: 1) product responsibility; 2) strategies for sustainability; 3) the

quality of CSR management; and 4) the future of CSR overall. Importantly,

indications are that organizations will increasingly be held accountable for their

actions. According to PricewaterhouseCoopers, within the next 10 years

evaluation methods used by Wall Street analyst will include new metrics- social

performance and intellectual capital-to more accurately assess the net worth

of a company, and within the next five years, 70% of North American and

European companies will assign board responsibility for reputation and social

responsibility.

Over the next five to 10 years, one of the primary test of how society will

judge companies will be based on where corporations place their facilities,

how they source goods and services and what economic impact they have on

poor and disadvantaged communities. Companies will increasingly adopt a

comprehensive view of corporate citizenship that includes the environment

and community engagement. A proactive and perhaps controversial

recommendation regarding human capital and emerging markets is that global

corporations consider putting the world’s five billion or so poorest people at

the heart of their profit-making strategies-.

Not surprisingly, evidence suggests that companies have a long way to

go to clearly demonstrate substantive CSR performance For example, a global

ranking report notes that the world’s 100 largest companies have a poor

record of accounting for their impact on society and the environment. A range

of measures that include strategy, governance and stakeholder involvement

show these companies scoring an average of 24 out of 100 points with only

five companies scoring more than 50% and only one U.S. Company, Hewlett-

Packard, placing among the 10 highest scorers. Further, the level of effort that

the worldwide community is putting into the achievement of the United

Nations Millennium Declaration goals is less than half the effort necessary to

meet any of the goals. Consequently, since the CSR initiatives of most

organizations tend to be peripheral and isolated from their core businesses

and the initial momentum gained in the past few years appears too disjointed

to make a significant impact in the world, the CSR movement must significantly

shift gears in orders to reach its full potential.

In conclusion, with the growing importance of human capital as a

success factor for today’s organizations, the role of HR leadership will become

evermore critical in leading and educating organization on the value of CSR and

how best to strategically implement CSR policies and programs domestically

and abroad. (Nancy R. Lockwood, SPHR, GPNR, HR Content expert, December

2004)

CSR and Public Relations

With the growing popularity of CSR in the last few years, especially in

Europe and more recently in the US a number of major PR firms have

responded by establishing specialist CSR practice groups within their

companies.

In a review of the role of PR firms in corporate social responsibility programs.

Lisa Roner wrote in Ethical Corporation that “many early efforts to

communicate on corporate responsibility have been high on production value

and low on substance.”

Citing examples such as Hill & Knowition’ s role in the first Gulf War and the

more recent over billing controversy that engulfed Fieishman Hillard over its

contracts with a Los Angeles government agency Roner argues, “It appears PR

firms may have to clean up their own ethics since many corporat&buyers seem

to believe that a messenger with internal issues of its own may not be best

placed to deliver a credible message.

When British American Tobacco was contemplating producing its first

corporate social responsibility report their Corporate and Regulatory Affairs

director, Michael Prideaux, sketched some of the benefits of the process as

being to build “credibility” and establish a “robust platform on which to build

at reputation communication campaign”

“The process will not only help BAT achieve a position of recognized

responsibility but also provide air cover from criticism while improvements are

being made. Essentially it provides a degree of publicity endoresed amnesty.”

he wrote.

CSR and Regulations

CSR is often used to promote voluntary corporate initiative as an

alternative to additional or existing mandatory regulation. The International

Chamber of Commerce has aggressively promoted a standards-free concept of

“corporate responsibility that enables companies to proclaim their

“responsibility” without necessitating companies to meet minimum standard.

Accordingly many non-governmental organization are suspicious of the CSR

“movement” as corporate PR or regulation-dodging “The burgeoning industry

known as CSR is now seen as a vital tool in promoting and improving the public

image of some of the world’s largest companies and corporations. Christian Aid

state in its report scrutinizing the record of several major companies. “The

image of multinational companies working hard to make the world a better

place is often just that an image. What’s needed are new laws to make

business responsible for protecting human rights, and the environment

whatever they work. Christain Aid argued.

CSR & Sales

Peoples consumptions patterns are influenced by CSR efforts, according

to 2004 survey of more than 400 opinion elites # members of the top 10

percent of society, with regard to media consumption, civic engagement, and

interests in public policy issues) in 10 countries, by APCO World wide. “Positive

CSR information has 72% of the respondents to purchases a company’s

product or services and 61% of recommend the company to others.

Consersely, negative CSR news led 60% to a boycott a company’s products and

services”. Reported PR week

Based its survey, APCO suggested that companies “Shape the opinion

environment” by touching their own CSR efforts, although 91 percent of

respondents found CSR more credible when verified by a third-party such as

non-governmental organization or local government.

The UN’s Global Compact

The meaning and practical effect of one international CSR program, The

Global Compapt of the United Nations, has been debated. “Some companies

are using it for public relations,” admitted consultant Scott Great head, but it

fosters “dialogue between companies and their civil society critics” and “lends

the stature of the Secretary General to the concept of corporate

responsibility.” Consultant John Elkigton contends, “More attention should be

paid to the extent to which corporate lobbying by Global Compact members

align — or don’t align — with their state commitment.” Also, the lack of

enforcement “raises real concerns about the longer-term risk to the UN’s

reputation.” he warns according to Business.

Business and Conservative Opposition to CSR

‘The Business Council of Australia has come out against Government

plans to create legislation forcing directors to meet certain levels of corporate

social responsibility (CSR)”.

“Mandating CSR through legislative intervention runs the risk of stifling

the innovation and creative approaches to CSR that are being adopted by

Australian companies,” claims the lobby group, in a submission to a

Parliamentary inquiry. The submission stresses, “ The greatest social

contribution made by corporation is through employment, the goods and

services they create and the wealth these produce”. It also highlights the

existing CSR efforts of Council members. The chair of Morgan Stanley Australia

says government mandates would result in less meaningful CSR, “People would

invent a bit of jargon, for example societaly appropriate value maximization, as

a way of asserting that they were doing whatever Canberra thought is was

causing them to do.”

In March 2006 Competitive Enterprise Institute analyst Isasc Post wrote,

“Though CSR was labeled by free-market icon Milton Friedman as s ‘subversive

doctrine’ much of the business community has embraced it, arguing that it is

simply “good for our business’ Opponents of CSR have naturally argued the

contrary, emphasizing the economic costs of following such ‘misguided virtue’

as CSR, But little attention has been paid to the actual arguments made by

advocates of CSR within the business community this is a shame, because a

closer analysis of the ‘business case for CSR’ shows that it is indeed, based on a

set of assumptions that undermine the legitimacy of the free-enterprise

system.”

Competitive Enterprise Institute Editorial Director Ivan Osorio wrote,

“Clive Crook of the Atlantic Monthly, whose article in The Economist, ‘The

Good Corporation,’ sparked considerable debate on CSR, adds another

important consideration: “Profit seeking serves the social purpose’ To that I-

would add the corollary: By doing anything to reduce their bottom line,

companies make the world poorer-and there’s nothing responsible in that”.

On March 3, 2006, the American Enterprise Instittute hosted a

conference on CSR titled, “Is Corporate Social Responsibility Good Business?”

The event was part of their joint project with the Federalist Society called NGO

Watch. The conference description asked, “Is CSR really a win-win situation-as

its promoters claim-for both corporations and the public? Corporate leaders

struggle with determining to whom their social responsibilities extend: to

shareholders, employees, local communities, the environment humanity as a

whole, future generations?” The conference promised to “examine the

complex global CSR phenomenon and take an indepth look at Wal-mart. which

has been under fire for some of its corporate, social, and environmental

practices.”

Playing FTSE With Social Responsibility

“Nearly a fifth of the UK’s top public companies are still failing to deliver

comprehensive reports detailing the economic, environmental and social

impact of their business,” reports Andy Favell for the Independent Analyses

have found corporate social responsibility (CSR) reports form 18 of the British

companies on the FTSE 100 Index to be inadequate. Nine of the “poor

performers” are also listed on FTSE-4 Good, which is geared towards socially

responsible investment, Favell explains. “FTSE-4 Good initially set fhe bar

relatively low and listing requirements are lifted each year,” He concludes. “It

is common to hear both investors and (non-governmental organization)

leveling criticism at the standard of CSR reporting as a whole... With a

significant number of the FTSE 100 still failing to satisfy on CSR reporting, and

green wash accusations against many others, are we really getting the

information we deserve?” (Source watch, a Project of the centre for Media &

Democracy)

A survey conducted by Business Community Foundation for TERIEurope

during the year 200 1-02. This was a follow- up of an earlier opinion poii

conducted by the same foundation during 2000-01. The preliminary

conclusions of the earlier poii had noted that high expectations from

companies are not yet matched by judgments about corporate responsibility.

More trust is placed in the media and NGOs than in business. Multinational

Corporations are being viewed with suspicion. Gender discrimination is a real

issue in the workplace. Workers and management have sharply diverging

perceptions of working conditions.

While the first poll sought to explore the perception of workers, company

executives and the general public about social, economic and environmental

responsibilities of companies in India; the second poi was structured to

facilitate documentation of corporate responsibility practices from the

perspective of the three stakeholder groups-companies, Non- Government

Organizations (NGOs) and trade unions.

Serious and committed approach to corporate responsibility practices is

increasing its reach, but there is a vast ground yet to be covered. Corporate

sector is slowly realizing the positive aspects of corporate responsibility

practices (goof for business is good business). There is growing collaborative

work between NGOs and companies. All stakeholders are increasingly

becoming aware of the diverse facets of corporate responsibility practices. Due

various internal and external pressures, the climate is conducive for the growth

of corporate responsibility practices in India.

Although many companies, NGOs and trade were aware of corporate

responsibility practices, the study findings suggest that the concepts has yet to

become part of core business strategy in most companies in India. Almost all

companies, irrespective of size and sector had some awareness of corporate

responsibility and its potential benefits. While most companies also had polices

in place related to labor issues, community relations and environmental

practices, they were for the most part not backed up by comprehensive

implementation and monitoring system. Community programmes or social

development initiatives, in most cases, were philanthropic and/or ad hoc in

nature and not integrated into core business activities such as marketing and

brand management

Most companies have labour and environmental policy guidelines in

place. This is not surprising given that Indian State Law require that companies

meet minimum standards. Policies on working conditions include minimum

wage requirements, health and safety, equal opportunities, nonemployment of

child labour, and employee welfare in general. In the area ofenvironmental

policy, most companies, especially those industries with a direct impact on the

natural environment — extractive industries, chemical, manufacturing

industries — have policies and management system in place. However, there is

a wide discrepancy between the perceptions of workers and management

about company compliance with labour regulations.

Monitoring and reporting on social and environmental issues is found to

be limited. Whereas environmental assessments and audits are undertaken in

some cases, there is almost no evidence of social audits taking place.

The sul4ey observes that they are visible differences by company sector

ad size Bigger company, with numerous employees and a large turnover, have

more corporate responsibility practices and guidelines in place. However,

these tend to be more philanthropic in nature than strategic. There are also

some differences with respect to sectors, with the IT industry appearing to

have an edge over other (Business Community Founded for TERI Europe)

A survey was jointly conducted by Confederation of Indian Industry (CII),

United Nations Development Programme (UNDP), British Council (BC) and

Price Water. Coopers (PWC). Labeled as the most ambitious attempt to capture

the entire gamut of issue pertaining to Corporate Social Responsibility (CSR) in

India, the survey was carried out in September — October 2002.

The only limitation of the survey was that of the 1,000 companies—

small, medium and large — that were sent the questionnaire, only 102

companies responded. Those companies, that see themselves as leaders or

early movers appears to represent a high portion of the respondents, says the

survey report. The most striking features of the responses to the survey is that

the respondents are in near unanimity that CRS is very much a part of United

Nations Development Programme (IJNDP), British Council (BC) and Price wates

coopers (PWC)j.

The first International Conference on ‘Business-Social Partnership:

Beyond Philanthropy’ at the Indian Institute of Management (TIM) —

Calcutta, assumes special significance. The four day conference (December 4-

7.2002) at TIM-C has brought together the policy makers, corporate heads,

trade union leaders, social workers and academicians on a forum to analyze

the organizational practices that govern business today. The focus of the

conference was to understand the global partnership process between

businesses, government add NGOs. (Indian Institute of Management Calcutta,

December 4-7, 2002) Corporate Social Responsibility (CSR) has permeated

management practice and theory

up to a point where CSR can be referred to as the latest management fad

(Guthey, Langer, & Morsing, 2006). However, so far CSR integration into

business processes has been very uneven. Hockerts (2008), for example, finds

that most firms conceptualize CSR primarily as a tool to reduce risks and

operational cost. Only a minority of firms is actually using CSR as a means to

drive innovation. In their study of 150 German and British pharmaceutical

companies Blum-Kusterer and Hussain (2001) similarly find that regulation and

technological progress are the two main drivers for sustainability innovations.

They observed that the lure of emerging market niches was no important

motivator for the firms studied. This is unfortunate since bringing stakeholders

into the innovation process offers important opportunities to increase both the

social and financial performance of firms.

This report is part of the Nordic Centre on Corporate Responsibility

(NCCR) a collaborative research effort, bringing together CSR scholars from

Denmark, Sweden, Norway, Finland, and Iceland under the sponsorship of the

Danish Commerce and Companies Agency (DCCA) with the goal of studying

CSR-driven innovation in the Nordic region.

With this literature review Copenhagen Business School (CBS) aims to

provide the theoretical grounding of the empirical work to be undertaken by

the NCCR. The report falls into five parts: a brief review of key concepts in the

CSR debate (i.e. organizational legitimacy, moral choices, stakeholder

interaction, and sustainable development) a short discussion of the state of the

art of innovation literature (i.e. incremental vs. radical innovations; sustaining

vs. disruptive innovation; user-driven innovation, the entrepreneurial process,

the role of the entrepreneur, institutional entrepreneurship) an analysis of

extant publications on CSR and innovation (corporate social innovation, base of

the pyramid (BOP), social entrepreneurship, and eco-innovations) an analysis

of social innovation on all four levels discussed in the first part. we close by

providing a list of global examples of social innovation brands.

PART I: CSR BETWEEN LEGITIMACY, ETHICS, STAKEHOLDER DIALOGUE, AND

SUSTAINABILE DEVELOPMENT

In recent years the business strategy field has experienced the renaissance of

corporate social responsibility (CSR) as a major topic of interest. The concept

has not surfaced for the first time. CSR had already known considerable

interest in the 1960s and 70s, spawning a broad range of scholarly

contributions (Cheit, 1964; Heald, 1970; Ackermann & Bauer, 1976; Carroll,

1979), and a veritable industry of social auditors and consultants.

However, the topic all but vanished from most managers' minds in the

1980s (Dierkes & Antal, 1986; Vogel, 1986). Having blossomed in the 1970s CSR

all but vanished and only re-emerged in recent years.

CSR resurfaced forcefully over the past ten years in response to

mounting public concern about globalization. Firms find themselves held

responsible for human rights abuses by their suppliers in developing countries;

interest groups demand corporate governance to be transparent and

accountable; rioters from Seattle to Genoa protest violently against the cost of

free trade and other perceived negative consequences of globalization.

However, nearly two decades of neglect have helped to undo much of the past

achievements of corporate social responsibility. It is thus no surprise that both

practitioners and scholars are

struggling once again to answer the question what the strategic implications of

CSR are. The literature on CSR and innovation draws on a number of different

theoretical traditions, which often are in contradiction to each other. Wood

(1991) describes three levels of analysis: institutional, individual, and

organizational. We add to this analysis a fourth level which we will characterize

as global.

Institutional Level: CSR as Organizational Legitimacy

Davis (1973) describes the iron law of responsibility, as the fact that firms

exercising power will eventually be held accountable by society. At this level

CSR can be best understood as a quest for organizational legitimacy. Firms are

under the obligation not to abuse the power invested on them by society or

they risk losing society’s implicit A Literature Review on Corporate Social

Responsibility in the Innovation Process

endorsement. More recently this view point has resurfaced as a firm’s need to

retain it’s “license to operate” (Post, Preston, & Sachs, 2002: 21).

Individual Level: CSR as Moral Choices of Managers

At the individual level, CSR has been constructed by Ackermann (1975) as

managerial discretion. According to this view managerial actions are not fully

defined by corporate policies and procedures. So although managers are

constrained by their work environment they nonetheless have to weigh the

moral consequences of the choices they make.

The view of CSR is strongly anchored in the business ethics literature (Jones,

1991; Donaldson & Dunfee, 1994; Crane & Matten, 2003).

Organizational Level: CSR as Stakeholder Management

With Freeman’s (1984) seminal book the focus moved from legitimacy and

morals

towards a new theory of the firm. Social considerations are thus no longer

outside an organization but are part of its purpose of being. CSR thus becomes

a question of stakeholder identification, involvement, and communication

(Mitchell, Agle, & Wood, 1997; Morsing & Beckmann, 2006; Morsing & Schultz,

2006).

“The purpose of stakeholder management was to devise a framework to

manage

strategically the myriad groups that influenced, directly and indirectly, the

ability of a firm to achieve its objectives.” (Freeman & Velamuri, 2006) The aim

of stakeholder management is thus to analyze how a company can serve its

customers and be lucrative while also serving its other stakeholders such as

suppliers, employees, and communities. Recently the stakeholder perspective

has dominated the reinterpretation of CSR pushing the question of the

legitimacy of corporate power as well as the moral dimension of managerial

decisions more into the background.

Global Level: CSR as Sustainable Development

The latest literature tradition to have impacted our understanding of corporate

social responsibility is that of sustainable development. It was the Brundtland

Commission (1987) that for the first time systematically emphasized the link

between poverty, environmental degradation, and economic development. Its

definition of sustainable development, as meeting the needs of the present,

without compromising the ability of future generations to meet theirs, extends

the responsibility of firms both inter- and intra generationally.

Thus firms are expected to also consider traditionally unrepresented

Stakeholders such as the environment and as well as future generations.

Although many CSR authors have taken up the notion of a “triple bottom line”

(Elkington, 1997) there remain important tensions between the CSR and the

sustainable development debate (i.e.Dyllick & Hockerts, 2002).

PART II: ORGANIZATIONS AND INNOVATION

Definitions for innovation abound. From an economic perspective the

following

definition can be a useful point of departure:

"Innovation is the process through which productive resources are developed

and utilized to generate higher quality and/or lower cost products than had

been previously available.

[Innovation] requires the visualization of a range of potentialities that were

Previously hidden and that are now believed to be accessible. Thus, innovation

strategy is in its essence, interpretative and therefore subjective, rather than

'rational' and objective." (O'Sullivan, 2000: 393, 409)

It is important to note, as do Nelson and Winter (1977: 66), that market

environments are only one possible social system within which innovations can

occur. As will be discussed later innovation can also happen in non-market

environments such as the public or voluntary sector.

In this part we will focus on three schools of innovation (Incremental and

Radical

Innovation, Sustaining and Disruptive Innovation, User-driven Innovation) and

three focus areas of entrepreneurship (Exploiting Entrepreneurial

Opportunities, The Role of the Entrepreneur, Institutional Entrepreneurship).

Incremental and Radical Innovation

Radical improvements "represent technical advance so significant that no

increase in scale, efficiency, or design can make older technologies competitive

with the new technology." (Tushman & Anderson, 1986: 441) Lazonick (2001),

therefore, differentiates innovating enterprises from merely optimizing

enterprises by characterizing innovative enterprises as transforming

technological and/or market conditions, so as to differentiate themselves from

other forms in an industry to gain sustained competitive advantage. It is an

important goal of innovation research to identify, analyze, and select possible

innovations and then to implement them internally or through the foundation

of new ventures (Servatius, 1994; Van de Ven, Polley, Garud, & Venkataraman,

1999).

American aircraft manufacturer Boeing came up with a virtual team combining

people from very diverse backgrounds in order to spark radical innovation.

Creativity was enhanced by people collaborating across different disciplines,

product groups and industries. This became a huge success in the case of the

Boeing-Rocketdyne, fundamentally changing the engine structure and thereby

the market mechanisms. On the other hand, incremental innovation is non-

radical improvements and restructuring of processes occurring within the

organization. Consumer goods manufacturer Gillette use incremental

innovation to improve the way business is done by every employee at every

level and every function within the organization. This came to a restructuring

of the collection of receivables by upgrading training and incentives

programmes and removing the collection team from the sales department.

This generated about $700 million of excess cash.

Sustaining and Disruptive Innovation

Innovation can also be characterized by its ability to either strengthen a firm's

existing capabilities and market position or to disrupt them by rendering

competencies obsolete or reaching out to new customers and so-far unserved

markets (Abernathy & Clark, 1985).

Christensen (1997) points out that established firms often find it difficult to

react properly to new technologies if they happen outside their current

markets. He differentiates between sustaining and disruptive technologies

(Bower & Christensen, 1995; Christensen, 1997; Christensen & Overdorf,

2000). Sustaining innovations happen in the core market of a firm and result in

a product delivering better quality at a lower price.

Disruptive innovations occur at the margins of established markets. Providing

at first worse quality than existing products, these innovations are ignored by

the mass market and consequently by the leading producers. Usually there is

only a small group of dedicated customers who buy these products because

they like a distinctive feature of the disruptive innovation and otherwise do not

care too much about bad quality or high prices. By serving these niche markets

innovative firms can build new capabilities that will allow them to extend the

niche. Once the disruptive innovation has improved on the

Traditional quality and cost dimensions, innovative firms are then well

positioned to attack the mass market. A great industrial example of disruptive

innovation is the health care industry, where the so-called Minute Clinics have

become an alternative for some people to the hospital emergency room. These

walk-in offices provide offerings limited to relatively simple treatments and

diagnoses. The treatments are affordable and convenient to a client base

otherwise excluded from the specialist treatments. Thereby, the disruptive

innovation is established at the rim of the market, eventually positioning itself

within the niche to

attack the mass market.

Large corporations are many times accused of focusing too much on cost

efficiency and defending established market shares on behalf of innovation

strategies. Ford Motor Company has seen a decrease in performance due to a

corporate culture that prioritized efficiency over innovation. The Toyota story

on the other hand offers plenty of sustaining innovation examples that turned

the company into a market leader, among these the “lean” management

system.

Kim and Mauborgne (1997; 1999; 2005) talk of disruptive innovations as “value

innovations” or “blue ocean strategies”. Value innovators do not take as given

the structures and dynamics in their market, but rather see the possibility of

creating new market space. Schumpeter has been the first to describe the

creation of competitive space through disruptive innovation. He calls this the

quintessential entrepreneurial act (Schumpeter, 1962 [1934]: 132).

User-driven Innovation

Eric von Hippel (1979; 1986; 2001) has introduced the notion of (lead) user-

driven innovation to describe the ability of user communities to initiate and

develop exceedingly complex products sometimes even without any specific

manufacturer involvement. He speculates that the power and pervasiveness of

such communities could become enormously amplified by the Internet’s

capacity to support collaboration and distribution. While incremental user

innovation has been known for many years it is the question

whether users can also drive radical innovations that is most debated

(Lettl & Gemünden, 2005; Lettl, Herstatt, & Gemuenden, 2006). Empirical

research has studied user innovation in so disparate sectors as the medical

sector (Shaw, 1985), the sports industry (Shah, 2000; Lüthje, 2002; Franke &

Shah, 2003; Hienerth, 2004, 2006), and software development (von Hippel,

2001; Franke & Hippel, 2003; von Krogh, Spaeth, & Lakhani, 2003).

Recent research has focused on what commercial firms can do to

motivate and capture such innovations and their related benefits. Learning and

innovation efforts from which a firm may benefit need not necessarily be

located within the organization, but may well reside in the consumer

environment (Franke & Shah, 2003). These learning processes can, however,

be structured, motivated, and partly organized by a commercial firm by

organizing the infrastructure for consumers' interactive learning activities

(Jeppesen & Molin, 2003; Jeppesen, 2005; Baldwin, Hienerth, & von Hippel,

2006; Hienerth, 2006).

But user-driven innovation does not only benefit firms. It also creates

public goods as well as specific benefits for the involved users (Harhoff, Henkel,

& von Hippel, 2003; Henkel & Hippel, 2004). Since 2005 the Danish

Government has made support of “userdriven innovation” a national priority,

launching a particular program to build the abilities of Danish companies to

change on user generated knowledge.

IT company Intel provides an example of user-driven innovation in the

1990’s with the launch of two in-house departments implementing concrete

product innovations and long-term strategic implications directly derived from

user-obtained knowledge.

Exploiting Entrepreneurial Opportunities

For a long time research of entrepreneurship has been part of either

economic research or business strategy research. It is only over the past two

decades that entrepreneurship has emerged as its own field of research. It is

thus not very surprising that the exact definition and focus of this field is still

debated among its members (Bruyat & Julien, 2000; Shane & Venkataraman,

2000; Low, 2001; Ucbasaran, Westhead, & Wright, 2001).

For this report entrepreneurship shall be defined as the discovery and

profitable exploitation of (so-far unrealised) opportunities to create new

competitive space by generating market disequilibria (Stevenson & Gumpert,

1985; Drucker, 1986; Shane & Venkataraman, 2000). An entrepreneurial

opportunity allows the generation of entrepreneurial profits. However, as

Schumpeter (1962 [1934]: 133) explains, this profit is only temporary. Once an

entrepreneurial venture has been successful, other market players are likely to

follow the example, thereby competing away the entrepreneurial profit.

At this point most entrepreneurial enterprises become just another

optimizing firm, unless they can identify a new entrepreneurial opportunity

and exploit it. Within this view it is the entrepreneurial opportunity (its

identification, selection, and implementation) that is at the heart of

entrepreneurship research. It is true that small businesses or start-ups are well

placed to realize entrepreneurial opportunities; however, this is no

constitutive condition. On the contrary, multinational corporations (MNC) are

as capable of identifying entrepreneurial opportunities as are small businesses.

If entrepreneurial opportunities are realized within an existing organization

one often speaks of internal corporate venturing or of intrapreneurship

(Burgelman, 1983; Kuratko, Montagno, & Hornsby, 1990; Antoncic & Hisrich,

2001).

The Role of the Entrepreneur

Another research focus is on the enterprising individual, the entrepreneur,

who is responsible for the discovery and exploitation of profitable

opportunities. Penrose describes entrepreneurs as having "a psychological

predisposition on the part of the individuals to take a chance in the hope of

gain, and, in particular, to commit effort and resources to speculative activity"

(Penrose, 1959: 33). However, the belief of conventional wisdom that it is

usually one entrepreneur who can single-handedly identify, implement and

exploit a valuable opportunity is probably as far-fetched as the assumption

that the CEO alone can make or break a corporation. There are undoubtedly

examples of strong personalities for whom this has been the case; however, in

many circumstances entrepreneurial accomplishments are much more likely to

be the result of A Literature Review on Corporate Social Responsibility in the

Innovation Process teamwork rather than the action of one individual (Kamm

& Shuman, 1990; Ucbasaran, Westhead, & Wright, 2001: 60). Although it is

safe to assume that profits are a strong motivation for most entrepreneurs,

research indicates that other motives such as independence, control of one’s

own destiny, the need for admiration (Kets de Vries, 1985, 1996, 1997), and

issues such as psychic benefits or the availability of alternative employment

opportunities (Gimeno, Folta, Cooper, & Woo, 1997) are also present. As shall

be discussed in this report, the pursuit of social goals can also be a strong

motivation.

A final aspect of entrepreneurship research concerns the question of

organizational form and the access to capital. Some scholars identify gaps in

financing as an important reason for closure, accounting for the fact that the

vast majority of start-up firms actually fail (Amit, Brander, & Zott, 2000).

Institutional Entrepreneurship

The term “institutional entrepreneurship” was introduced by DiMaggio

(1988) as means to describe how actors can shape institutions even within the

constraints they face.

Institutional entrepreneurs initially are in conflict with established

institutions but through their actions contribute towards changing them

eventually (Lawrence, 1999; Garud, Jain, & Kumaraswamy, 2002; Dorado,

2005). In their literature review Leca, Battilana and Boxenbaum (2005) identify

four key research questions about institutional entrepreneurs addressed in

prior publications: What motivates them? Do they act intentionally? What type

of change do they implement? How do they succeed in the face of institutional

constraints?

Examples of entrepreneurial start-ups are plenty. The following examples

provide a basis to separate entrepreneurs and intrapreneurs. Well-known

examples include Starbucks, where entrepreneur Howard Schulz identified an

opportunity to take over and extend three coffee shops to a global scale

operation. An intrapreneurial example is provided by 3M launching the Post-it

product after one employee past on the concept idea to another employee

who developed the actual product features. Every step of the innovation A

Literature Review on Corporate Social Responsibility in the Innovation Process

process happened within 3M, which eventually benefited from the global

success of the product.

PART III: CSR AND INNOVATION – WHAT IS IT?

Literature bringing together CSR and innovation has emerged gradually over

the past decade. One interpretation of “social innovation” can refer to

improvements in the CSR process. Examples could be improved social

reporting tools or CSR management systems. In this review we do, however,

not consider these kinds of improvements and instead focus mainly on product

related social innovation. In the following we will discuss some of the main

themes standing out from literature. Broadly speaking there are two schools of

thought: The first line of publications deals with innovations aiming at social

improvements (i.e. health, education, community development). Here the

term social innovation can refer to product innovations with a social purpose.

A subgroup of these types of innovations concerns “Base of the Pyramid”

thinking. Social innovation is also used to refer to the process of starting and

improving social enterprises. A second group of authors put environmental

innovation at the heart of their work. These literature contributions have

coalesced around the theme of eco-innovation, which more recently has

spawned the discipline of clean-technology venturing.

Corporate Social Innovation

The term “corporate social innovation” was first introduced by Rosabeth Moss

Kanter (1999: 125) who argues that firms should use social issues as a learning

laboratory for identifying unmet needs and for developing solutions that

create new markets. She describes, for example, BankBoston’s effort in setting

up a Community Bank, which has eventually evolved into a new market for the

bank. Similarly Bell Atlantic has equipped schools with HDSL computers, in the

processing learning a lot about how to use and A Literature Review on

Corporate Social Responsibility in the Innovation Process market this new

technology. The term corporate social innovation is increasingly taken up by

practitioners. Patrick Cescau CEO of Unilever for example defines corporate

social innovation as a way of "finding new products and services that meet not

only the functional needs of consumers for tasty food or clean clothes but also

their wider aspirations as citizens."(cited in Webb, 2007) However, as pointed

out by Hackers (2008), most firms remain focused on CSR as a tool to reduce

risks and operational cost.

In his study of twelve multinationals he finds that only firms with very

high social performance rankings think about CSR as a means to drive product

innovation. He proposes that corporate social innovation requires the creation

of knowledge structures that result from investments in corporate social

performance. Examples for such scripts could be CSR management and

communication tools (i.e. Kuhndt, Tunçer, & Liedtke, 2003; Seuring, 2004;

Beske, Koplin, & Seuring, 2006; Burritt & Saka, 2006; Morsing, 2006; Perrini,

2006b; Von Hauff & Kleine, 2006; Vallentin, 2007) that in turn can initiate

corporate learning processes (Müller & Siebenhüner, 2005).

Base of the Pyramid (BOP)

An important subtheme of corporate social innovation is the focus on

low-income markets. Prahalad and Hart (1999) talk in this context of the

potential of the bottom or base of the pyramid (BOP). The BOP premise is that

by focusing on the unmet needs of low-income populations firms can create

profitable markets while also helping the poor address some of their most

urgent needs (Christensen, Craig, & Hart, 2001; Prahalad &Hammond, 2002;

Prahalad & Hart, 2002). Prahalad’s most notable assumption is that BOP

markets have to pay a “poverty premium”(Prahalad & Hammond, 2002: 8).

This means that many poor have to pay more for products and services such as

food, water, medication, credit, or telecommunication, than their middle or

upper class compatriots.

By using BOP thinking MNCs are believed to better target their design as

well as improve the distribution so as to bring down the poverty premium. The

Mexican cement manufacturer Cemex launched an initative that enable low-

income rural Mexican households to by the cement to build a house. The

purchase includes low-weekly payments and consultation and inspections from

Cemex architects. The initiative allows a Literature Review on Corporate Social

Responsibility in the Innovation Process great deal of flexibility and assistance

to the poor, who would not have been able to construct a house at

traditionally fluctuating market prices.

Social Entrepreneurship

The concept of social entrepreneurship has emerged in the late 1990s in

the U.S. (Boschee, 1995; Henton, Melville, & Walesh, 1997; Bornstein, 1998;

Dees, 1998b, a; Brinckerhoff, 2000; Dees, Emerson, & Economy, 2001a, b;

Drayton, 2002), and the UK (Leadbeater, 1997; Warwick, 1997; Zadek & Thake,

1997; SSE, 2002). However, it has only recently reached the acacedmic debate

(Haugh, 2006; Light, 2006; Mair & Marti, 2006; Mair, Robinson, & Hockerts,

2006; Perrini, 2006a; Hockerts, 2007; Robinson, Blockson, & Robinson, 2007).

According to Hockerts it describes “the discovery and sustainable

exploitation of opportunities to create public goods” (Hockerts, 2007: 422).

This is usually done through the generation of disequilibria in market and non-

market environments. Social Entrepreneurship can in some cases lead to the

creation of social enterprises. These social ventures are hybrid organizations

exhibiting characteristics of both the for-profit and notfor profit sector.

Successful examples of social innovation often originate from social enterprises

and firms thus can learn a lot from the NGO or voluntary sector (Hockerts,

2003). SustainAbility is an example of a value-driven for-profit organization

specializing in sustainable business models. The company consults MNCs like

Coca Cola, Ford, Nestlé and Nike in implementing sustainable business

strategies.

Eco-Innovation

The notion that sustainable development drives disruptive innovations

has come quite naturally to the sustainability debate (Hockerts, 1999, 2003).

Sustainability innovations(also called eco-innovations, eco-design, eco-

preneurship, or cleantechnology venturing) have been proposed as a source

for "environmentally benign growth" (Dyllick, 1994: 60), as a "breakthrough

discipline for innovation" (Fussler, 1996), as a "source of creative destruction"

(Hart & Milstein, 1999: 23), as well as the beginning of the "next industrial A

Literature Review on Corporate Social Responsibility in the Innovation Process

revolution" (Braungart & McDonough, 1998: 82; Lovins, Lovins, & Hawken,

1999: 1; Senge & Carstedt, 2001: 24), or a source for "the great leap

downward" (Christensen, Craig, & Hart, 2001: 92). From this has emerged a

large number of publications advancing management tools for furthering the

creation of new markets through environmental innovation (Fussler, 1996;

McDonough & Braungart, 2002b, a; Randelovic, O'Rourke, & Orsato, 2003;

Wüstenhagen, 2003; Kolk & Pinkse, 2004; Cohen, Smith, & Mitchell, 2008).

In his seminal book on Eco-Innovation Fussler (1996) states that a

majority of today's firms is not actively pursuing eco-innovations as a strategy

to create market share.

However, he does not believe that this "innovation lethargy" (Fussler,

1996: 9) will persist in the years to come. Using a number of anecdotal case

studies he shows that innovative firms can succeed in driving ecological

innovation profitably, not by following current customer demand but by

creating future market space. This notion that firms can actively transform

market structures so that they better support ecological innovations is also

proposed by Dyllick (1994: 66; 1999) and particularly by Schneidewind (1998).

Ecological innovation will happen both in large corporations, the ecological

"Goliaths", and small start-ups, the ecological "Davids" (Wüstenhagen, 2003).

A Literature Review on Corporate Social Responsibility in the Innovation

Process

PART IV: CSR AND INNOVATION – HOW DOES IT HAPPEN?

In the following, the four levels of analysis introduced in part one will

serve as foundation for further analysis of how CSR and innovation interlink

and come together.

Institutional Level: Innovation and Legitimacy

At the institutional level, literature on innovation and CSR has mainly

focused on standards-driven institutional entrepreneurship. Examples, include

research work on the creation of the Global Compact, an institutional

innovation aiming at creating a framework for reporting the social,

environmental, and economic performance of firms (Etzion & Ferraro, 2006;

Brown, de Jong, & Lessidrenska, 2007). As such the Global Compact aims to

help firms attain and maintain legitimacy with society. Another empirical study

is Boxenbaum’s research of diversity management in Denmark in which she

chronicles the evolution of this emerging institution (Boxenbaum, 2004).

Typically such innovations can be qualified as sustaining since they aim at

strengthening a firm's existing capabilities and market position.

Individual Level: The Social Entrepreneur

At the individual level social entrepreneurship focuses on persons

driving social change and innovation. These social or civic entrepreneurs can be

individual citizens, community activists (Swamy, 1990; Henton, Melville, &

Walesh, 1997; Leadbeater, 1997; Thompson, Alvy, & Lees, 2000) or civil

servants (Leadbeater, 2000; James, 2001) who use entrepreneurial spirit in

order to reach social objectives. Bornstein defines a social entrepreneur as "a

path-breaker with a powerful new idea, who combines visionary and real-

world problem-solving creativity, who has a strong ethical fibre and who is

'totally possessed' by his or her vision for change." (Bornstein, 1998: 36) Mair

and Noboa (2006) identify empathy, moral judgement, self-efficacy, and social

support as the key aspects that distinguish social entrepreneurs. Although the

motivation to build a viable business can be part of social entrepreneurship,

many authors do not think this to be a necessary A Literature Review on

Corporate Social Responsibility in the Innovation Process condition. A real-life

example of a social entrepreneur is Florence Nightingale, who was the founder

of modern nursing. She established the first school for nurses and fought to

improve hospital conditions balancing an innovative drive and a passion for

social improvements.

Organizational level: Stakeholder-driven Innovation

While there is a growing literature stream on user-driven innovation

there exists so far very little research on how innovation can be driven by other

stakeholders besides users and consumers. Empirical examples, for

stakeholder-driven innovation include the role of Greenpeace in developing

and marketing the Greenfreeze technology (Stafford & Hartman, 2001;

Matsumoto, 2002; Stafford, Hartman, & Liang, 2003) and in launching the fuel

efficient SmILE vehicle (Plante, 1999), which Neuner calls a case of “collective

prototyping” (Neuner, 2000).

Another example of activist-driven innovation concerns the fair trade

movement which as initiated and launched by activist NGOs (Tallontire, 2000;

Hockerts, 2006). Drawing on church groups, developmental charities, and

activist networks fair trade has matured from a non-profit start-up idea into a

profitable business proposition.

The Danish start-up company MyC4, a provider of online peer-to-peer

microfinance lending in Africa is another example, for stakeholder driven

innovation. Rather than basing its innovation process on in house development

the firm is sharing the innovation process with all types of stakeholders. It thus

includes both investors and lenders in the process of developing its business

processes. More important MyC4 offers the possibilities so called providers to

suggest micro-entrepreneurs leaving the setting of interest rates and

transaction costs to the providers.

Global level: Sustainability Innovation

At the global level much attention has been paid to the role venture

capital (VC) plays in promoting sustainability innovation. The term clean

technology venture capital has been introduced in order to delimit this new

type of innovation from earlier environmental technology or "green tech"

investments popularized in the 1970's and 80's. The latter were mainly end-of-

pipe solutions that strongly relied on particular legislation support.

Cleantech on the other hand is meant to denote new technology and

related business models offering competitive returns for investors and

customers while providing solutions to global challenges through breakthrough

product innovation. Cleantech venturing is thus driven by two main forces:

technology and competitiveness which both are superimposed on certain

environmental or social problems in order to generate new ideas. Whereas,

stakeholder-driven innovation is very outwards oriented, cleantech or

sustainability innovation uses technology and traditional innovation

mechanisms.

PART V: INTERNATIONAL SOCIAL INNOVATION BRANDS

Social innovation takes many forms especially in a global context. In

order to grasp the different levels and forms of social innovation the following

examples will serve as inspiration.

ABN AMRO

ABN AMRO is a Dutch corporation working in the financial service

industry. It was acquired in 2007 by a consortium of three European banks,

Royal Bank of Scotland Group, Fortis, and Banco Santander. Before this take

over, ABN AMRO had initiated a large scale acquisition scheme in Brazil in

1998. The take over of several major Brazilian banks resulted in the

establishment of Banco ABN AMRO Real. This new consortium took some

pioneering initiatives like the establishment of a new social-environmental

policy when making decisions on loans, the creation of the Real MicroCrédito,

which provided financing for small business and entrepreneurs, and the

implementation of the Ethical Fund, which was the first Social Responsible

Investment fund in Brazil. These initiatives were primarily led as a first mover

within the Brazilian market, and introduced in a market context with little

previous experience in social banking practices.

Electricité de France

The French electricity company focuses on electricity access in

developing parts of the world. The initiative, Energy Access Programme

through Rural Electricity and Services Companies, has helped bringing

electricity to rural areas of Mali, Morocco and South Africa, which would have

been otherwise ‘off the grid.’ EDF has brought electricity to 800,000 people

and the 2010 goal is one million people. EDF considers this ‘a drop in the

ocean’ but emphasizes the difference they make in these specific countries.

Around 8-10 per cent of electricity is provided through this initiative, affecting

a lot of people and businesses within the region. One of the projects in

Morocco is called Temasol and has A Literature Review on Corporate Social

Responsibility in the Innovation Process provided solar energy for more than

20,000 households in rural areas. Temasol has

undertaken a pilot project of delivering drinking water to the same

households, while at the same time extending operations to other parts of the

country. The initiatives are innovating both in terms of social capacity building,

while at the same time having a low environmental impact. It is an important

first step, and a basis for other people to further develop infrastructure in

these communities. The presence in these markets has allowed the company

to innovate social schemes further in areas of housing, employment and

education.

Essilor International

Social innovation in the French company is realized through value-led

innovation systems and Base of the pyramid activities. Essilor International has

developed both manufacturing and distribution systems in rural India for

optical lenses. The initiative was undertaken in the absence of adequate eye

care facilities, which resulted in very low usage of spectacles. Uncorrected

refractive error is one of the major causes of blindness, which if detected and

corrected, would give a fresh lease of life to individuals. In 2004, Essilor India

established a Rural Marketing Division. Access was even more important than

costs so innovation within both manufacturing and distribution was urgent.

After an initial study of the situation, Essilor realized that the lack of

consumption of spectacles was connected to a lack of product access. Essilor

has now developed a system of mobile low cost testing in rural areas as a

means to reach the remote, rural population of India and manufacture cheap,

affordable products through a steep learning curve and immense scale in

production.

Novo Nordisk

Stakeholder-driven innovation is at the core of social innovation in Novo

Nordisk. Several programmes have been initiated during the past decade, all

with global perspectives and growth potential. Novo Nordisk has undertaken a

shift from an internal focus to a reflective view through a corporate history and

culture that lays the foundation for its values-based and holistic approach to

doing business. By establishing the link between healths as a driver of wealth,

it has been possible to pursue Triple Bottom Line strategies in a way that

increasingly gets at the heart of core business processes – in the markets, as

well as in the corporate functions and governance mechanisms. The approach

is shaped through extensive stakeholder engagement embedded in

organizational behaviour and business operations. An example of these

stakeholder-driven initiatives is the DAWN programme, the largest-ever, global

survey to uncover diabetes attitudes, wishes and needs. The study focuses on

the person behind the disease and is aimed to uncover the psychosocial

aspects of diabetes. The DAWN programme taught all parties involved, that

the patients also need mental encouragement and positive guidance

empowering them to take charge of their own health. Such innovation in

public health promotion activities help effectively reduce the burden of

diseases such as diabetes.

Furthermore, Novo Nordisk is driving National Diabetes Programmes to

educate stakeholders as well as actively supporting the growing international

advocacy platform to put chronic disease prevention on the political agenda.

One such initiative is the Oxford Health Alliance.

Philips

1The Green Flagships project at Philips is a gathering and quantitative

measuring of the best lighting products. To be considered a Green Flagship, a

product must first undergo a divisional EcoDesign procedure. Next, the product

or product family is investigated in at least three of the six Green Focal Areas.

These Green Focal Areas consist of Energy Efficiency, Recyclability, Lifetime

Reliability, Packaging, Hazardous Substances and Weight. Based on this

analysis, the product or product family must be proven to offer at least 10%

improved environmental performance in at least one Green Focal Area

compared to a predecessor or competitive product, and the overall lifecycle

score must be equal or better. So while many products may be “green”, only

the top Eco-designed products achieve Green Flagship status. A Philips Green

Flagship product is a best environmental choice and a product that either has

the best environmental performance in the market, is the most innovative

environmental friendly product in its portfolio, or is the best environmental

solution in its application area. The development of Green Energy has

experienced a major boom within the last decade. The labelling of green

energy “cleantech” is increasingly attracting finance from both venture capital

and MNCs. The Green Flagship label is an example of this environmental

progress.

CORPORATE SOCIAL RESPONSIBILITY : :

Today we define Corporate Social Responsibility as the way a company balances its economic, social and environmental objectives while addressing stakeholder expectations and enhancing shareholder value.

But ACC has undertaken social volunteering practices almost from its

off

inception, – long before the term corporate social responsibility was coined. The company’s earliest initiatives in community development date back to the 1940's in a village on the outskirts of Mumbai while the first formal Village Welfare Scheme was launched in 1952. The community living around many of our factories comprises the weakest sections of rural and tribal India with no access to basic amenities.

Corporate Social Responsibility Policy “The Company shall continue to have among its objectives the promotion and growth of the national economy through increased productivity, effective utilization of material and manpower resources and continued application of modern scientific and managerial techniques, in keeping with the national aspiration; and the Company shall continue to be mindful of its social and moral responsibilities to consumers, employees, shareholders, society and the local community.

In pursuance of the above objective, ACC acknowledges the importance of the concept of inter-dependence of all sections of society. In particular, its focus revolves around the community residing in the immediate vicinity of its Cement Plants and Mines where it seeks to actively assist in improving the quality of life and making this community self-reliant. In line with its abiding concern for preservation of the ecological balance and safeguarding the health of the community, ACC has always actively demonstrated its firm resolve to protect the environment

Mindful of its great tradition, ACC is deeply committed to enhancing its reputation and respect built over the years in industry and society for its professional style of management based on philosophy of the best in business ethics.”

Community & Rural Welfare Our community development activities revolve around the under-privileged community that lives in the immediate vicinity of our cement plants and is thus more dependent on us. The range of our activities begins with extending educational and medical facilities and goes on to cover vocational guidance and supporting employment-oriented and income-generation projects like

agriculture, animal husbandry, cottage industries by developing local skills, using local raw materials and helping create marketing outlets.

At all our cement factories we share our amenities and facilities with members of the local community. This includes sharing education and medical facilities, sports and recreation. Wherever possible we share access to Bore Wells, drinking water and the usage of colony roads.

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Education Education is imparted not only to children of ACC employees but also more importantly to children from rural areas who do not have access to any medium of information or education. ACC schools maintain high standards and are open to other children of the vicinity. Often these schools are the most preferred centers of learning in the district and adjoining areas. Wherever possible, ACC provides funds and infrastructure to help set up local schools, colleges and centers for learning and education.

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Healthcare ACC takes pride in providing various forms of medical assistance to the

families of our employees and also to all those living in surrounding villages. Each factory has a medical center with full-fledged doctors and the latest of basic equipment. Mobile medical services are provided in the vicinity and regular medical camps are held to eradicate diseases, offer medical help, treatment and preventive care.

ACC has come out to provide support to state and national health initiatives such as the eradication of malaria, dengue fever and the dreaded HIV.

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HIV/AIDS - Workplace Policy

ACC is desirous of playing a meaningful role in the nationwide effort to eradicate HIV/AIDS and has pledged to support the Confederation of Indian Industry in their initiative. ACC recognizes that a fundamental step in this respect involves a clear statement of the company’s internal policy to deal with employees affected by HIV/AIDS. CII has framed a Code of Practice for Industry to guarantee and safeguard the rights of employees infected and affected by HIV/AIDS. We adopt this as ACC’s internal workplace policy for HIV/AIDS. The policy states that::

1. The company will provide a safe and healthy work environment for employees.

2. The company will educate its employees and the family on prevention, care and counseling of HIV/AIDS.

3. The company will educate its employees on safe blood donation and transfusion.

4. If an employee has been infected, information about the illness would be kept confidential by the company. Only the immediate superior would be kept advised to prevent any medical eventuality.

5. A HIV positive employee will be allowed to continue to work in his or her job unless medical conditions interfere with the specific job he or

she is doing. On account of health conditions the employee may be shifted to another comfortable position.

6. The employer should ensure that the co–employees cannot or should not shun their HIV positive peer or refuse to work alongside them. In fact, the company will assure his or her comfort level in the work place.

7. The company will, as a policy, not discriminate against any employee infected by HIV/AIDS with regard to promotions, training and any other privileges, applicable to all employees of the organisation.

8. While the company may ask a person who is being offered a job to undergo general medical tests before the issue of the appointment letter, the test will not cover HIV/AIDS, without an informed consent and pre test counseling of the candidate. |

9. The company will educate its employees and encourage them to participate in voluntary counseling and testing. However, HIV/AIDS tests will not be a part of any annual or regular health check ups, without the employee’s informed consent and pre test counseling.

10.The company will ensure that proper treatment is available to employees infected with HIV/AIDS. The company will assist the employee in meeting the cost of antiretroviral (ARV) drugs within the prescribed limits as fixed by the Company. The arrangements for treatment will be made at hospitals pre-identified by the company and payment will be made directly to the service provider. All other (non-ARV) HIV/AIDS related costs will be covered as per the company’s prevailing scheme for Health and Medical treatment.

It is hoped that this policy will help build positive and supportive attitudes towards those infected as well as promote health and safety amongst the employees.

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HIV/AIDS treatment - Anti Retroviral Treatment Centres

Disaster Relief

ACC and its employees make timely contribution to help in any national disaster. This is done both at the corporate level, by local units and employees. Apart from the Kargil cause, collective contributions by way of cash, food and clothing has been sent to help victims of calamities such as the Latur earthquake, Himachal Pradesh floods, Orissa cyclone, Gujarat

earthquake, Tsunami and floods in Maharashtra.

| TOP | CLOSE |

Gujarat Masons’ Training

ACC’s contribution to the rebuilding effort after the 2001 earthquake in Gujarat was unique. Anticipating a scarcity of skilled masons and trained supervisors for the reconstruction work - especially in Kutch, Rajkot and Surendranagar districts, the company evolved a scheme to provide construction related training to over 2500 unemployed persons (mostly youth) in earthquake affected villages. Our best civil engineers were deputed to impart training on basic skills needed to work as masons and construction site supervisors and to make earthquake resistant structures, using local materials. This was perhaps the country’s first formal training programme of this magnitude for masons and site supervisors, organised by ACC.

| TOP | CLOSE |

Conservation of heritage structures

The services of ACC’s Concrete experts have often been utilized in the restoration of several national heritage buildings across the country - such as sections of the Chhatrapati Shivaji Terminus (formerly Victoria Terminus) at Mumbai, the J N Petit and David Sassoon Libraries in Mumbai, churches in Goa, palaces and royal mansions in Mysore and Hyderabad and other old structures in the country.

The historic Vijayraghavgarh fort in Madhya Pradesh was recently restored under ACC’s patronage. This is not a core business of the company but an act of corporate volunteering by way of sharing knowledge and expertise.

| TOP | CLOSE |

Global Compact

ACC Limited is a signatory to the United Nations Global Compact. We are committed to the ten principles of the Compact which foster better corporate responsibility in the areas of human rights, labour, environment and anti-corruption. Established in 1936, this company has from its very inception been conscious of its obligations to the community and has always kept in view its social responsibilities. ACC’s Vision vividly declares the company’s commitment to its corporate social responsibility and sustainable development issues making these an essential part of the business goals for the company. This communication on Progress provides an insight into our recent activities in support of the Global Compact’s Objective and our efforts towards continuous improvement.

Communication on Progress 2009

Communication on Progress 2008

Communication on Progress 2007

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Support to national Sport

ACC has had an old and close association with the game of cricket. From the 1950’s to the 70’s, many cricket legends were employees of ACC during their active cricket careers. This was in the days before cricketers became like the superstars they are today. ACC was then among the few companies which went out of its way to employ young cricketers, including budding young Ranji Trophy hopefuls. ACC joined hands with the Confederation of Indian Industry to sponsor India’s National Boxing team at the Athens Olympics in 2004 and the Commonwealth Games. ACC also sponsors and supports other sports at National, regional and local levels such as inter-regional Badminton championships, youth soccer and Rural Sports Meets.

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Awards & Accolades

ACC was the first recipient of ASSOCHAM’s first ever National Award for outstanding performance in promoting rural and agricultural development activities in 1976. Decades later, PHD Chamber of Commerce and Industry selected ACC as winner of its Good Corporate Citizen Award for the year 2002. Over the years, there have been many awards and felicitations for achievements in Rural and community development, Safety, Health, Tree plantation, afforestation, Clean mining, Environment awareness and protection. In 2006, we were selected to receive the Good Corporate Citizen Award of the Bombay Chamber of Commerce and Industry.

Awards & Accolades

National Award for outstanding performance in promoting rural and agricultural development – by ASSOCHAM

Sword of Honour - by British Safety Council, United Kingdom for excellence in safety performance.

Indira Priyadarshini Vrikshamitra Award --- by The Ministry of Environment and Forests for "extraordinary work" carried out in the area of afforestation.

FICCI Award --- for innovative measures for control of pollution, waste management & conservation of mineral resources in mines and plant.

Subh Karan Sarawagi Environment Award - by The Federation of Indian Mineral Industries for environment protection measures.

Drona Trophy - By Indian Bureau Of Mines for extra ordinary efforts in protection of Environment and mineral conservation in the large mechanized mines sector.

Indo German Greentech Environment Excellence Award

Golden Peacock Environment Management Special Award - for outstanding efforts in Environment Management in the large manufacturing sector.

Indira Gandhi Memorial National Award - for excellent performance in prevention of pollution and ecological development

Excellence in Management of Health, Safety and Environment : Certificate of Merit by Indian Chemical Manufacturers Association

Vishwakarma Rashtriya Puraskar trophy for outstanding performance in safety and mine working

Good Corporate Citizen Award - by PHD Chamber of Commerce and Industry

Jamnalal Bajaj Uchit Vyavahar Puraskar - Certificate of Merit by Council for Fair Business Practices

Greentech Safety Gold and Silver Awards - for outstanding performance in Safety management systems by Greentech Foundation

FIMI National Award - for valuable contribution in Mining activities from the Federation of Indian Mineral Industry under the Ministry of Coal.

Rajya Sthariya Paryavaran Puraskar - for outstanding work in Environmental Protection and Environment Performance by the Madhya

Pradesh Pollution. Control Board.

National Award for Fly Ash Utilisation - by Ministry of Power, Ministry of Environment & Forests and Dept of Science & Technology, Govt of India - for manufacture of Portland Pozzolana Cement.

Good Corporate Citizen Award - by Bombay Chamber of Commerce and Industry for working towards an environmentally sustainable industry while pursuing the objective of creation of a better society.

National Award for Excellence in Water Management - by the Confederation of Indian Industry (CII)

Golden Peacock Eco-Innovation Award 2008 won by AFR Business for efficient disposal of industrial wastes

"Vanvasi Sant Gahira Guruji Maharaj - Chhattisgarh Paryavaran Puraskar" 2008, in the Industrial Category for best efforts in Environment Conservation in Chhattisgarh State .

Safety Innovation Award by the Institution of Engineers, New Delhi

Greentech Environment Excellence Award by Greentech Foundation

Good Green Governance Award by Srishti Publications, Delhi

The Federation of Indian Mineral Industries, (FIMI) New Delhi has selected ACC, one of the four companies in India, to be Members of the "Sustainable Miners Club" for outstanding contribution to the national goal of sustainable development through excellence in environmental conservation' scientific research and social development in harnessing natural resources.

Tikaria wins IMC Ramkrishna Bajaj Certificate of Merit 2008

Gagal wins IMC Ramkrishna Bajaj National Quality Performance Excellence Trophy 2008

CNBC-TV18's India Business Leaders Award in the category India Corporate Citizen of the Year 2008

Greentech Safety Gold Awards 2009 - for outstanding performance in Safety management systems by Greentech Foundation

International Safety Award 2008 by British Safety Council

ACC tops cement industry in Karmayog CSR rating

Council for Fair Business Practices, Jamnalal Bajaj UCHIT VYAVAHAR PURASKAR 2008 - in the category Manufacturing Enterprises – Large – for exemplary record of practicing and promoting fair business practices.

Srishti Good Green Governance Award 2008 by Srishti Publications

State Safety Award for 2007 by Government of Orissa – for best performance in accident prevention, safety management and communication systems among industries in Orissa

CORPORATE SOCIAL RESPONSIBILITY : :

Today we define Corporate Social Responsibility as the way a company balances its economic, social and environmental objectives while addressing stakeholder expectations and enhancing shareholder value.

But ACC has undertaken social volunteering practices almost from its inception, – long before the term corporate social responsibility was coined. The company’s earliest initiatives in community development date back to the 1940's in a village on the outskirts of Mumbai while the first formal Village Welfare Scheme was launched in 1952. The community living around many of our factories comprises the weakest sections of rural and tribal India with no access to basic amenities.

Corporate Social Responsibility Policy “The Company shall continue to have among its objectives the promotion and growth of the national economy through increased productivity, effective utilization of material and manpower resources and continued application of modern scientific and managerial techniques, in keeping with the national aspiration; and the Company shall continue to be mindful of its

off

social and moral responsibilities to consumers, employees, shareholders, society and the local community.

In pursuance of the above objective, ACC acknowledges the importance of the concept of inter-dependence of all sections of society. In particular, its focus revolves around the community residing in the immediate vicinity of its Cement Plants and Mines where it seeks to actively assist in improving the quality of life and making this community self-reliant. In line with its abiding concern for preservation of the ecological balance and safeguarding the health of the community, ACC has always actively demonstrated its firm resolve to protect the environment

Mindful of its great tradition, ACC is deeply committed to enhancing its reputation and respect built over the years in industry and society for its professional style of management based on philosophy of the best in business ethics.”

Community & Rural Welfare Our community development activities revolve around the under-privileged community that lives in the immediate vicinity of our cement plants and is thus more dependent on us. The range of our activities begins with extending educational and medical facilities and goes on to cover vocational guidance and supporting employment-oriented and income-generation projects like agriculture, animal husbandry, cottage industries by developing local skills, using local raw materials and helping create marketing outlets.

At all our cement factories we share our amenities and facilities with members of the local community. This includes sharing education and medical facilities, sports and recreation. Wherever possible we share access to Bore Wells,

drinking water and the usage of colony roads.

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Education Education is imparted not only to children of ACC employees but also more importantly to children from rural areas who do not have access to any medium of information or education. ACC schools maintain high standards and are open to other children of the vicinity. Often these schools are the most preferred centers of learning in the district and adjoining areas. Wherever possible, ACC provides funds and infrastructure to help set up local schools, colleges and centers for learning and education.

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Healthcare ACC takes pride in providing various forms of medical assistance to the families of our employees and also to all those living in surrounding villages. Each factory has a medical center with full-fledged doctors and the latest of basic equipment. Mobile medical services are provided in the vicinity and regular medical camps are held to eradicate diseases, offer medical help, treatment and preventive care.

ACC has come out to provide support to state and national health initiatives

such as the eradication of malaria, dengue fever and the dreaded HIV.

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HIV/AIDS - Workplace Policy

ACC is desirous of playing a meaningful role in the nationwide effort to eradicate HIV/AIDS and has pledged to support the Confederation of Indian Industry in their initiative. ACC recognizes that a fundamental step in this respect involves a clear statement of the company’s internal policy to deal with employees affected by HIV/AIDS. CII has framed a Code of Practice for Industry to guarantee and safeguard the rights of employees infected and affected by HIV/AIDS. We adopt this as ACC’s internal workplace policy for HIV/AIDS. The policy states that::

11.The company will provide a safe and healthy work environment for employees.

12.The company will educate its employees and the family on prevention, care and counseling of HIV/AIDS.

13.The company will educate its employees on safe blood donation and transfusion.

14.If an employee has been infected, information about the illness would be kept confidential by the company. Only the immediate superior would be kept advised to prevent any medical eventuality.

15.A HIV positive employee will be allowed to continue to work in his or her job unless medical conditions interfere with the specific job he or she is doing. On account of health conditions the employee may be shifted to another comfortable position.

16.The employer should ensure that the co–employees cannot or should not shun their HIV positive peer or refuse to work alongside them. In fact, the company will assure his or her comfort level in the work place.

17.The company will, as a policy, not discriminate against any employee infected by HIV/AIDS with regard to promotions, training and any other privileges, applicable to all employees of the organisation.

18.While the company may ask a person who is being offered a job to undergo general medical tests before the issue of the appointment letter, the test will not cover HIV/AIDS, without an informed consent and pre test counseling of the candidate. |

19.The company will educate its employees and encourage them to

participate in voluntary counseling and testing. However, HIV/AIDS tests will not be a part of any annual or regular health check ups, without the employee’s informed consent and pre test counseling.

20.The company will ensure that proper treatment is available to employees infected with HIV/AIDS. The company will assist the employee in meeting the cost of antiretroviral (ARV) drugs within the prescribed limits as fixed by the Company. The arrangements for treatment will be made at hospitals pre-identified by the company and payment will be made directly to the service provider. All other (non-ARV) HIV/AIDS related costs will be covered as per the company’s prevailing scheme for Health and Medical treatment.

It is hoped that this policy will help build positive and supportive attitudes towards those infected as well as promote health and safety amongst the employees.

| TOP | CLOSE |

HIV/AIDS treatment - Anti Retroviral Treatment Centres

Disaster Relief

ACC and its employees make timely contribution to help in any national disaster. This is done both at the corporate level, by local units and employees. Apart from the Kargil cause, collective contributions by way of cash, food and clothing has been sent to help victims of calamities such as the Latur earthquake, Himachal Pradesh floods, Orissa cyclone, Gujarat earthquake, Tsunami and floods in Maharashtra.

| TOP | CLOSE |

Gujarat Masons’ Training

ACC’s contribution to the rebuilding effort after the 2001 earthquake in Gujarat was unique. Anticipating a scarcity of skilled masons and trained supervisors for the reconstruction work - especially in Kutch, Rajkot and Surendranagar districts, the company evolved a scheme to provide construction related training to over 2500 unemployed persons (mostly youth) in earthquake affected villages. Our best civil engineers were deputed to impart training on basic skills needed to work as masons and construction site supervisors and to make earthquake resistant structures, using local materials. This was perhaps the country’s first formal training programme of this magnitude for masons and site supervisors, organised by ACC.

| TOP | CLOSE |

Conservation of heritage structures

The services of ACC’s Concrete experts have often been utilized in the restoration of several national heritage buildings across the country - such as sections of the Chhatrapati Shivaji Terminus (formerly Victoria Terminus) at Mumbai, the J N Petit and David Sassoon Libraries in Mumbai, churches in Goa, palaces and royal mansions in Mysore and Hyderabad and other old structures in the country.

The historic Vijayraghavgarh fort in Madhya Pradesh was recently restored under ACC’s patronage. This is not a core business of the company but an act of corporate volunteering by way of sharing knowledge and expertise.

| TOP | CLOSE |

Global Compact

ACC Limited is a signatory to the United Nations Global Compact. We are committed to the ten principles of the Compact which foster better corporate responsibility in the areas of human rights, labour, environment and anti-corruption. Established in 1936, this company has from its very inception been conscious of its obligations to the community and has always kept in view its social responsibilities. ACC’s Vision vividly declares the company’s commitment to its corporate social responsibility and sustainable development issues making these an essential part of the business goals for the company. This communication on Progress provides an insight into our recent activities in support of the Global Compact’s Objective and our efforts towards continuous improvement.

Communication on Progress 2009

Communication on Progress 2008

Communication on Progress 2007

| TOP | CLOSE |

Support to national Sport

ACC has had an old and close association with the game of cricket. From the 1950’s to the 70’s, many cricket legends were employees of ACC during their active cricket careers. This was in the days before cricketers became like the superstars they are today. ACC was then among the few companies which went out of its way to employ young cricketers, including budding young Ranji Trophy hopefuls. ACC joined hands with the Confederation of Indian Industry to sponsor India’s National Boxing team at the Athens Olympics in 2004 and the Commonwealth Games. ACC also sponsors and supports other sports at National, regional and local levels such as inter-regional Badminton championships, youth soccer and Rural Sports Meets.

| TOP | CLOSE |

Awards & Accolades

ACC was the first recipient of ASSOCHAM’s first ever National Award for outstanding performance in promoting rural and agricultural development activities in 1976. Decades later, PHD Chamber of Commerce and Industry selected ACC as winner of its Good Corporate Citizen Award for the year 2002. Over the years, there have been many awards and felicitations for achievements in Rural and community development, Safety, Health, Tree plantation, afforestation, Clean mining, Environment awareness and protection. In 2006, we were selected to receive the Good Corporate Citizen Award of the Bombay Chamber of Commerce and Industry.

Awards & Accolades

National Award for outstanding performance in promoting rural and agricultural development – by ASSOCHAM

Sword of Honour - by British Safety Council, United Kingdom for excellence in safety performance.

Indira Priyadarshini Vrikshamitra Award --- by The Ministry of Environment and Forests for "extraordinary work" carried out in the area of afforestation.

FICCI Award --- for innovative measures for control of pollution, waste management & conservation of mineral resources in mines and plant.

Subh Karan Sarawagi Environment Award - by The Federation of Indian Mineral Industries for environment protection measures.

Drona Trophy - By Indian Bureau Of Mines for extra ordinary efforts in protection of Environment and mineral conservation in the large mechanized mines sector.

Indo German Greentech Environment Excellence Award

Golden Peacock Environment Management Special Award - for

outstanding efforts in Environment Management in the large manufacturing sector.

Indira Gandhi Memorial National Award - for excellent performance in prevention of pollution and ecological development

Excellence in Management of Health, Safety and Environment : Certificate of Merit by Indian Chemical Manufacturers Association

Vishwakarma Rashtriya Puraskar trophy for outstanding performance in safety and mine working

Good Corporate Citizen Award - by PHD Chamber of Commerce and Industry

Jamnalal Bajaj Uchit Vyavahar Puraskar - Certificate of Merit by Council for Fair Business Practices

Greentech Safety Gold and Silver Awards - for outstanding performance in Safety management systems by Greentech Foundation

FIMI National Award - for valuable contribution in Mining activities from the Federation of Indian Mineral Industry under the Ministry of Coal.

Rajya Sthariya Paryavaran Puraskar - for outstanding work in Environmental Protection and Environment Performance by the Madhya Pradesh Pollution. Control Board.

National Award for Fly Ash Utilisation - by Ministry of Power, Ministry of Environment & Forests and Dept of Science & Technology, Govt of India - for manufacture of Portland Pozzolana Cement.

Good Corporate Citizen Award - by Bombay Chamber of Commerce and Industry for working towards an environmentally sustainable industry while pursuing the objective of creation of a better society.

National Award for Excellence in Water Management - by the Confederation of Indian Industry (CII)

Golden Peacock Eco-Innovation Award 2008 won by AFR Business for efficient disposal of industrial wastes

"Vanvasi Sant Gahira Guruji Maharaj - Chhattisgarh Paryavaran Puraskar" 2008, in the Industrial Category for best efforts in Environment

Conservation in Chhattisgarh State .

Safety Innovation Award by the Institution of Engineers, New Delhi

Greentech Environment Excellence Award by Greentech Foundation

Good Green Governance Award by Srishti Publications, Delhi

The Federation of Indian Mineral Industries, (FIMI) New Delhi has selected ACC, one of the four companies in India, to be Members of the "Sustainable Miners Club" for outstanding contribution to the national goal of sustainable development through excellence in environmental conservation' scientific research and social development in harnessing natural resources.

Tikaria wins IMC Ramkrishna Bajaj Certificate of Merit 2008

Gagal wins IMC Ramkrishna Bajaj National Quality Performance Excellence Trophy 2008

CNBC-TV18's India Business Leaders Award in the category India Corporate Citizen of the Year 2008

Greentech Safety Gold Awards 2009 - for outstanding performance in Safety management systems by Greentech Foundation

International Safety Award 2008 by British Safety Council

ACC tops cement industry in Karmayog CSR rating

Council for Fair Business Practices, Jamnalal Bajaj UCHIT VYAVAHAR PURASKAR 2008 - in the category Manufacturing Enterprises – Large – for exemplary record of practicing and promoting fair business practices.

Srishti Good Green Governance Award 2008 by Srishti Publications

State Safety Award for 2007 by Government of Orissa – for best performance in accident prevention, safety management and communication systems among industries in Orissa

Q-1 Does your company have a formalized CSR policy.

Responses Respondents%1. Yes %2. No %

INTERPRETATION-

Q- 2 Do CSR policies are of your company include policy on business ethics.

yes no

Responses Respondents%1. Yes %2. No %

INTERPRETATION-

Q-3 Does your company produce an annual sustainable CSR Report

yes no

Responses Respondents%1. Yes %2. No %

INTERPRETATION-

Q-4 Does your company have separate department / cell CSR.

Responses Respondents%1. Yes %2. No %

yes no

INTERPRETATION-

Q-5 ACC gives compensation to pollution affected people.

Responses Respondents%1. Strongly agree %2. Agree %3. Uncertain %4. Disagree %

yes no

INTERPRETATION-

Q-6 Health check up by medical facility is going routinely and in proper manner

.

Responses Respondents%1. Strongly agree %

strongly agree agree neutral disagree

2. Agree %3. Uncertain %4. Disagree %

INTERPRETATION-

Q- 7 Malaria control operation is going properly.

Responses Respondents%

strongly agree agree neutral disagree

1. Strongly agree %2. Agree %3. Neutral %4. Disagree %

INTERPRETATION-

Q-8 There is available necessary machine and equipment in ACC hospital.

Responses Respondents%1. Strongly agree %2. Agree %3. Uncertain %4. Disagree %

strongly agree agree neutral disagree

INTERPRETATION-

Q-9 There is given concession in fees to student those belong from poor class family

Responses Respondents%1. Strongly agree %2. Agree %3. Uncertain %4. Disagree %

strongly agree agree neutral disagree

INTERPRETATION-

Q-10There is proper setting arrangement and furniture in school those run by ACC

Responses Respondents%1. Strongly agree %2. Agree %3. Uncertain %4. Disagree %

INTERPRETATION-

strongly agree agree neutral disagreestrongly agree agree neutral disagree

Q-10There is proper setting arrangement and furniture in school those run by ACC.

Responses Respondents%1. Strongly agree %2. Agree %3. Uncertain %4. Disagree %

INTERPRETATION-

strongly agree agree neutral disagree

Q-12 Road are repaired after certain period.

Responses Respondents%1. Strongly agree %2. Agree %3. Uncertain %4. Disagree %

INTERPRETATION-

strongly agree agree neutral disagree

Q-13 There is problem of drinking water.

Responses Respondents%1. Strongly agree %2. Agree %3. Uncertain %4. Disagree %

INTERPRETATION-

strongly agree agree neutral disagree

Q-14 Hand pumps are repaired.

Responses Respondents%1. Strongly agree %2. Agree %3. Uncertain %4. Disagree %

INTERPRETATION-

strongly agree agree neutral disagree

Q-15 Cleanliness of sulabh toilets is done neighbouring villages.

Responses Respondents%1. Strongly agree %2. Agree %3. Uncertain %4. Disagree %

INTERPRETATION-

strongly agree agree neutral disagree

Q-16 Dirking water is supplied during the summer through water tanker.

Responses Respondents%1. Strongly agree %2. Agree %3. Uncertain %4. Disagree %

INTERPRETATION-

strongly agree agree neutral disagree

Q-17- ACC pays attention toward making neighbouring villages hygienic.

Responses Respondents%1. Strongly agree %2. Agree %3. Uncertain %4. Disagree %

INTERPRETATION-

strongly agree agree neutral disagree

Q.1-

Responses Respondents%1. Strongly agree %2. Agree %3. Uncertain %4. Disagree %

INTERPRETATION-

strongly agree agree neutral disagree

Q.1-

Responses Respondents%1. Strongly agree %2. Agree %3. Uncertain %4. Disagree %

INTERPRETATION-

strongly agree agree neutral disagree

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Business Ethics (1996)

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