Corporate Social Responsibility

Q. 1 Evolution of Corporate Social Responsibility

The history of CSR in India has its four phases which run parallel to India's historical development and has resulted in different approaches towards CSR. However the phases are not static and the features of each phase may overlap other phases. In the first phase charity and philanthropy were the main drivers of CSR. Culture, religion, family values and tradition and industrialization had an influential effect on CSR. In the pre-industrialization period, which lasted till 1850, wealthy merchants shared a part of their wealth with the wider society by way of setting up temples for a religious cause.

        In the second phase, during the independence movement, there was increased stress on Indian Industrialists to demonstrate their dedication towards the progress of the society. This was when Mahatma Gandhi introduced the notion of "trusteeship", according to which the industry leaders had to manage their wealth so as to benefit the common man. "I desire to end capitalism almost, if not quite, as much as the most advanced socialist. But our methods differ. My theory of trusteeship is no make-shift, certainly no camouflage. I am confident that it will survive all other theories.

       The third phase of CSR (1960–80) had its relation to the element of "mixed economy", emergence of Public Sector Undertakings (PSUs) and laws relating labour and environmental standards. During this period the private sector was forced to take a backseat. Over the past 20 years, multinational companies (MNCs) have made important changes to their corporate social responsibility (CSR) policy. There has been a marked shift from the past,  when CSR activities were unrelated to the company’s core business  and largely reactive, attempting to stem or prevent criticism rather than promote real development. 

        In the fourth phase (1980 until the present) Indian companies started abandoning their traditional engagement with CSR and integrated it into a sustainable business strategy. In 1990s the first initiation towards globalization and economic liberalization were undertaken. Controls and licensing system were partly done away with which gave a boost to the economy the signs of which are very evident today. Increased growth momentum of the economy helped Indian companies grow rapidly and this made them more willing and able to contribute towards social cause.

           

            

 Companies have begun approaching CSR in a more strategic way, recognizing that aligning these projects with their business model and goals can effectively improve a company’s competitive advantage.  In doing so, MNCs have increasingly leveraged their core assets including their supply chains, sourcing, human resources, technology and innovation, access to markets, and the global reach of their companies. There has been an accompanying shift in the perception of CSR.  In the past, there were many critics who argued that a company’s sole responsibility was to provide value to its shareholders. They argued that CSR ran contrary to the interest of the company and by extension to the shareholders.   However, there has been a growing consensus, especially among U.S. companies, that CSR is necessary and beneficial—both to the communities it benefits and to the companies.

Although companies have taken on greater responsibility, there is a need for even greater commitment and engagement.  As result of the global financial crisis, the rise of non-state actors in the global economy, and shifting demographics in the form of urbanization and rising inequality, the free market system is in flux.  In this turbulent environment, populist and protectionist pressures are challenging the open market system. The private sector has incredible assets to counter these backward forces and promote an open, global economy.

         Neville Isdell, former chairman and CEO of the Coca-Cola Company, has proposed one approach for how companies can connect with society and contribute to the resolution of social problems while at the same time ensuring sustainable and profitable growth in the twenty-first century.  Mr. Isdell’s concept of MNC engagement, what he calls “Connected Capitalism,” goes beyond the new, engaged CSR to a new level of connectedness between the private sector, governments, NGOs, and civil society across three main platforms: communities, institutions, and their core business strategies.

                                    CSR In India

India may become the world’s first country to make corporate social responsibility mandatory

" Corporate Social Responsibility Practices in India sets a realistic agenda of grassroots development through alliances and partnerships with sustainable development approaches. At the heart of solution lies intrinsic coming together of all stakeholders in shaping up a distinct route for an equitable and just social order...."

CSR is not new to India, companies like TATA and BIRLA have been imbibing the case for social good in their operations for decades long before CSR become a popular cause. Inspite of having such life size successful examples, CSR in India is in a very nascent stage. It is still one of the least understood initiatives in the Indian development sector. It is followed by a handful of public companies as dictated by the very basis of their existence, and by a few private companies, with international shareholding as this is the practice followed by them in their respective foreign country. Thus the situation is far from perfect as the emphasis is not on social good but rather on a policy that needs to be implemented. 

A lack of understanding, inadequately trained personnel, non availability of authentic data and specific information on the kinds of CSR activities, coverage, policy etc. further adds to the reach and effectiveness of CSR programmes. But the situation is changing. And CSR is coming out of the purview of 'doing social good' and is fast becoming a 'business necessity'. The 'business case' for CSR is gaining ground and corporate houses are realising that 'what is good for workers - their community, health, and environment is also good for the business'. 

Corporate Social Responsibility Practices - the survey on CSR is timely and apt. The survey is expected to facilitate formation of an alliance of CSR initiatives so that such initiatives can be further stream lined, focused and converged to a powerful force of intervention. One of the major objectives of the survey is to bring out in open the current status of CSR thereby giving both the NGOs and the common man an understanding of the various initiatives undertaken by corporates and the role that is played by the government in the field. 

The survey underlines the various issues - current CSR policies, major stakeholders - their current and future plans, geographical areas covered, role of civil society and government, challenges, recommendations etc. 

Examples of Corporate Social Responsibility in India

Tata Group
Tata Group in India has a range of CSR projects, most of which are community improvement programs. For example, it is a leading provider of maternal and child health services, family planning, and has provided 98 percent immunization in Jamshedpur. The company also endorses sports as a way of life. It has established a football academy, archery academy, and promotes sports among employees. It offers healthcare services all over the country with programs like rural health development.

Tata Group also has an organized relief program in case of natural disasters, including long-term treatment and rebuilding efforts. It did laudable work during the Gujarat earthquakes and Orissa floods. It also supports education, with over 500 schools, and also is a benefactor of the arts and culture. It has done abundant work in improving the environment and local populations around its industries.

Mahindra & Mahindra
At Mahindra & Mahindra, The K. C. Mahindra Education Trust was established in 1953 with the purpose of promoting education. Its vision is to renovate the lives of people in India through education and financial assistance across age groups and across income strata. The K. C. Mahindra Education Trust undertakes a number of education plans, which make a difference to the lives of worthy students. The Trust has provided more than Rs. 7.5 crore in the form of grants, scholarships and loans. It promotes education mostly by the way of scholarships. The Nanhi Kali (children) project has over 3,300 children under it and the company aims to increase the number to 10,000 in the next two years by reaching out to the underprivileged children, especially in rural areas.

Q. 2 Role of CSR in business

Corporate social responsibility (CSR, also called corporate conscience, corporate citizenship, social performance, or sustainable responsible business/ Responsible Business) is a form of corporate self-regulation integrated into a business model. CSR policy functions as a built-in, self-regulating mechanism whereby a business monitors and ensures its active compliance with the spirit of the law, ethical standards, and international norms. CSR is a process with the aim to embrace responsibility for the company's actions and encourage a positive impact through its activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere who may also be considered as stakeholders.

The common roles of CSR in CD are discussed as follows:

1.   To share the negative consequences as a result of industrialization.

2. Closer ties between corporations and community. Through CSR the existence of corporations in

the social system is felt beyond a perception that corporation is a place just to get employment and producers of goods and services. By doing so, corporations and community would stay in peace

and harmony. This becomes a social capital that is essential in community development.

3. Helping to get talents. Organizations with a reputation for CSR can take advantage of their status and strengthen their appeal as an attractive employer by making their commitment part of their value proposition for potential candidates. It is also found that when employees view their organization's commitment to socially responsible behavior more favorably, they also tend to have more positive attitudes in other areas that correlate with better performance. They believe their organizations recognize and reward great customer service, act quickly to address and resolve customer concerns, and are led by people in senior management who act in the best interest of customers.

Confidence in senior management is higher in other areas, too, when employees give their company high marks for being socially responsible. For example, if a large number of employees perceive that their organization's senior management supports new ideas and new ways of doing things, this would result on better perception of employees to the organization, hence their trust and loyalty to the organization. There is a correlation between a company's success in the marketplace is often influenced by its capacity for innovation, the perception of the employees to the organization. It is also a factor in attracting and retaining talents. In relating to CD, good employees’ perceptions on a corporation would lead to the community that treats the corporation as an important economic asset in the community.

4. Role in transfer of technology (TOT). Closer ties help in TOT between MNCs that give concerns on CSR and communities in the host countries. MNC is a corporation that has its facilities and other assets in at least one country other than its home country. Such companies have offices and/or factories in different countries and usually have a centralized head office where they coordinate global management. Very large multinationals have budgets that exceed those of many small countries. Barton (2007) focuses on three mechanisms of international technology transfer: the flow of human resources; the flow of public-sector technology support; and the flow of private technology from MNCs to developing countries. He argues for greater mobility within, and globalization of, the world’s scientific enterprise and reasserts an economic rationale for investing in public-sector research in the developing countries. Through TOT coupled with CSR processes, the targeted community would gain in the various aspects of product development and marketing, such as better price and quality, as well as concern for people’s wellbeing.

5. CSR helps to protect environment. Some of the world's largest companies have made a highly visible commitment to CSR, for example, with initiatives aimed at reducing their environmental footprint. These companies take the view that financial and environmental performance can work together to drive company growth and social reputation. This attitude can only serve to enhance the employment value proposition such as interest in "going green" gains traction (Towers Perrin,

2009). “We green the earth” slogan made by some MNCs in Malaysia who own large golf areas within the vicinity of residential areas is another CSR initiative seems to protect environment.

Many non-profit organizations have been involved in learning and advocacy of environmental protection of CSR such as those reported by the United Nations. They are for example a) “Friends of the Earth” who highlights the environmental impact of some MNCs and campaign for stronger laws on environmental responsibility; b) “Green Peace mission” is another example of CSR initiative that gives benefit to society and community in preserving the latter’s rights towards reaping healthy environment (Wikipedia, 2009).

Green Peace is an independent global campaigning organization that acts to change attitudes and behavior, to protect and conserve the environment and to promote peace by many ways, one of which is campaigning for sustainable agriculture and environment by encouraging socially and ecologically responsible farming practices. Green Peace utilizes direct action, lobbying and research to achieve its goals.