Corporate social responsibility

Corporate social responsibility (CSR) is another name for activities done by corporates. It includes activities such as corporate sustainability, corporate conscience, corporate citizenship, sustainable business or responsible business. It is self-regulated within the rules of law of the land. CSR was also described as part of internal organizational policy or a business strategy, but with changing times and various international laws, various organizations have used pushed it beyond individual or even industry-wide initiatives. While it was considered as form of corporate self-regulation, over the last decade or so it has moved considerably from voluntary decisions at organization level, to mandatory schemes at regional, national and international levels.
At the organizational level, CSR is an organizational and administrative policy. It must be aligned and integrated into a business model to be successful. With some models, a firm’s implementation of CSR goes beyond compliance with regulatory requirements. It engages in activities that seem to further some community good, beyond the interests of the corporation. The choosing of complying with the law, failing to observe, and going afar are three distinct strategic organizational choices.
In many areas such as environmental or labor regulations, some employers choose to comply with the law, while other organizations choose to defy the law. These organizations are taking legal and other risks which may not be known initially. The nature of the legal risk, however, changes when attention is paid to soft law. Soft law may incur legal liability particularly when businesses make misleading claims about their sustainability or other ethical credentials and practices.
Businesses normally engage in CSR for tactical or moral purposes. From a tactical perspective, the aim is to increase long-term profits and shareholder trust through positive public relations and high moral standards to reduce business and legal risk by taking responsibility for corporate actions. CSR policies encourage the corporation to make a positive impact on the environment and stakeholders including suppliers, consumers, employees, communities, investors, etc. From moral perspective, some businesses adopt CSR policies and practices because of moral beliefs of senior management.
It is said that corporations increase long-term profits by operating with a CSR perspective, while opponents argue that CSR diverts from businesses’ financial role. A study compared existing econometric studies of the relationship between social and financial performance. It concluded that the contradictory results of studies reporting positive, negative, and neutral financial impact were due to flawed experimental analysis. It claimed that when the study is properly specified, CSR has a neutral impact on financial outcomes.
Critics questioned the “supercilious” and “impractical expectations” in CSR and held that CSR is merely window-dressing, or an attempt to pre-empt the role of governments as a watchdog over powerful multinational corporations. In line with this critical perspective, political and sociological institutionalists became interested in CSR in the context of theories of globalization, neoliberalism and late capitalism. Some institutionalists viewed CSR as a form of consumerist legitimacy and in particular point out that what began as a social movement against wanton corporate power was transformed by corporations into a ‘business model’ and a ‘risk management’ device, with dubious results. CSR is supposed to aid an establishment’s mission and serve as a guide to what the corporation represents for its customers.
Business ethics is the part of applied ethics that examines ethical principles and moral problems that can arise in a business environment. Public sector organizations adhere to the triple bottom line. It is known that CSR adheres to same principles, but without formal act of legislation.
Post world war two, corporate social responsibility has appealed attention from a range of businesses and stakeholders. As per business person, CSR is a business strategy, whereas for NGO, it is ‘greenwash’.
For a government official, it may be voluntary regulation. Disagreement about the definition arise from the disciplinary approach i.e. while an economist considers the director’s decision necessary for CSR to be implemented a risk of agency costs, a law academic may consider that decision to be an appropriate communication of what the law demands from directors.
In India, several companies are involved in CSR activities and it is regularly taken up by the employees of the companies. IT is mandatory as per government to take up CSR activities and companies to get tax rebate based on CSR activities.
Business Ethics
Business ethics are ethical principles that guide the way a business behaves. The same principles that determine an individual’s actions also apply to business. Acting in an ethical way involves distinguishing between “correct” and “incorrect” and then making the “correct” choice. It is very easy to identify unethical business practices.
For instance, companies should not use forced labour. They should not unlawfully use pirated materials and processes and not engage in corruption. However, it is not always easy to create similar hard-and-fast definitions of good ethical practice. A corporation must make a competitive return for its shareholders and treat its employees fairly but has broader accountabilities. It should reduce any damage to the environment and work in ways that do not damage the societies in which it functions. This is known as corporate social responsibility.
Status of the problem: Local and National ; International
Local and National
As per United Nations and the European Commission, Corporate Social Responsibility (CSR) leads to triple bottom-line: profits, protection of environment and fight for community justice. It is expected that All – Civil society, activist groups, government and corporate sectors – should work together to create suitable means and opportunities for the ostracised and bring them to the society. CSR success lies in practicing it as a core part of a corporation’s development policy. It is important for the industries to identify, promote and implement successful strategies and practices that achieve triple bottom-line results.
Companies reason that corporate social responsibility is a marginal issue for their business and customer satisfaction is more important for them. They envision that customer satisfaction is now only about price and service, but they fail to understand that changes that are taking place worldwide could ruin their business. The change is corporate social responsibility which is a prospect for the corporate. The practical implementation of CSR is faced with a lot of issues and challenges as mentioned in below points.
1. In the past, governments have relied on legislation and regulation to deliver social and environmental objectives in the business sector. Shrinking government resources, coupled with a distrust of regulations, have led to the exploration of voluntary and non-regulatory initiatives instead.
2. There is a lack of agreement amongst native agencies regarding CSR projects. This lack of agreement often results in repetition of activities by corporate houses in areas of their intervention. This results in a competitive spirit between local implementing agencies rather than building collaborative approaches on issues. This factor limits corporation’s abilities to undertake impact assessment of their initiatives from time to time.
3. There is little interest shown by local community in participating and contributing to CSR activities of companies. This is largely because there exists little or no knowledge about CSR within the local communities. This is because no serious efforts have been made to spread awareness about CSR and install confidence in the local communities about such initiatives by companies. The situation is further heightened by little or no communication between the corporation and the community.
4. It is reported that there is little or no availability of well-organized nongovernmental organizations in backward areas that can assess and identify actual needs of the community and labour along with companies to guarantee positive execution of CSR activities. Thus, this also constructs the case for participating in local communities by way of constructing their capabilities to undertake development projects at local levels.
5. There are no proper legal guidelines or policy orders to give definitive direction to CSR initiatives of companies. The scale of CSR initiatives of companies normally depends upon their business size and profile. Thus, the bigger the corporation, the bigger should be its CSR program and vice versa unless otherwise planned and decided.
6. The role of media in highlighting good cases of successful CSR initiatives is applauded as it spreads information and sensitizes the people about various CSR initiatives of industries. This ostensible influence of gaining visibility and branding exercise often leads many nongovernmental organizations to involve themselves in event-based programs and thus miss out on meaningful grassroots activities.
7. There is indication that the moral conduct of companies wields a growing impact on the purchasing decisions of customers. In a survey, more than one in five consumers reported having either rewarded or punished companies based on their perceived social performance.
For future of CSR in India and to take time bound steps to mainstream it, the recommendations of the survey are indications of the existing state of affairs in the CSR domain. They call for suitable steps to be commenced to put CSR on strong ground. Taking view of the extensive results of the survey, some recommendations can be listed for thoughtful deliberation by all concerned stakeholders. Thus, for the effective operationalization and to deepen CSR in the corporation’s central business and to build co-operative relationships and effective systems, all concerned need to be involved.
A significant concern in the area of Corporate Social Responsibility at international level is whether the actions of some companies are really responsible or helpful to the natural environment and societies. Internationally, energy companies have won awards for their CSR activities but still engaged in other unethical behaviours and actions that hurt the community or the environment. In such cases, CSR is merely for public relations purposes and little thought or resources is put into implementing practices. Thus, it is difficult to find out whether there was a positive impact on the environment or society. This has led to the development of the term “greenwashing” that means organization that try to look “green” or “responsible” but are in fact not really having much positive impact with their behaviours. So greenwashing companies “look good” but aren’t really “doing good.”
Scientists have proposed that certain companies can act in government similar to roles in developing countries, such as protecting individual rights and creating infrastructure, but often such companies are working for corporate interest over societal good. There can also be significant difference on what CSR behaviours should be done and the correct balance between the triple bottom line of firm. Known scientists agree that people agree on the good of helping all three but in reality organizations need to make trade-offs of where and how they use their resources. Different sponsors will have different views on what adjustments should be made.
Similarly, many NGO’s, as part of different international government’s, take CSR activities on behalf of the corporations but at the same time are involved in certain subversive activities which create tensions. These activities such as encouraging locals to revolt against new mining company etc. needs to be documented and approved before any activities to avoid any problems later on. All issues need to be as per the law and dealt accordingly.