CORPORATE SOCIAL RESPONSIBILITY AND THE SOCIETY

By: saheli chakraborty  

Introduction      Corporate social responsibility (CSR), also known as  sustainable responsible business (SRB), or corporate social performance, is a form of corporate self-regulation integrated into a business model. Ideally, CSR policy would function as a built-in, self-regulating mechanism whereby business would monitor and ensure their adherence to law, ethical standards, and internati onal norms. Business would embrace responsibility for the impact of their activities on the environment, consumers, employees, communities, stockholders and all other members of the public sphere Corporate Social Responsibility is a very well known concept in the present day world. Infact the corporate giants are very conversant with corporate social responsibility or corporate sustainability –in today's parlance.. The responsibility they have towards the society and the community as a whole cannot be denied. A tremendous surge and then a sustained consistency in the progress of the concept  of CSR has been witnessed over a span of quite a number of years, elevating it to the highest pedestal of importance in all aspects of business and production, be it private or public. In the modern times the concept CSR incorporates and strives to explain and clarify numerous co related and uncorrelated issues peculiarly, particularly or especially pertinent to SOCIAL and environmental interests and welfare, keeping in full view the financial interests and benefits of the shareholders. Responsibility has more or less taken the shape of accountability and obligation. Business ethics has also been brought into the arena of corporate social responsibility. Infact an ethical business performance acts as a positive catalyst in hastening the process of corporate success via motivating the employees and the underlying system. Corporate Social Responsibility (CSR) is a commitment to improve community well-being through discretionary business practices and contributions of corporate resources. However it is not charity but it is a core business strategy of an organization. It is not a common term,infact many Indian companies talked about responsible business or triple P(People, Planet and Profit).Some others of corporate citizenship or stewardship, responsible entrepreneurship and triple bottom line. Responsible competitiveness is nothing other than CSR.Towards developing a rationale for Corporate Social Responsibility-CSR goes by many names, which include: corporate citizenship, corporate philanthropy, corporate giving, corporate community involvement, community relations, community affairs, community development, corporate responsibility, global citizenship, and corporate societal marketing. It makes no difference what this social commitment of companies is called. It is a NEW way of doing business to cater to the needs of the market and its stakeholders. Social responsibility is the responsibility of an organization for the impacts of its decisions and activities on society and the environment, through transparent and ethical behavior that is consistent with sustainable development and the welfare of the society; takes into account the expectations of stakeholders ; is in compliance with applicable law and consistent with international norms of behavior and is integrated throughout the organization.This is a working definition by ISO 26000 working group on social responsibility (Sydney, February 2007) CSR is the way in which an organization strikes a balance between economic, social and environmental imperatives on the one hand and the expectations and welfare of the shareholders on the other. This implies that social responsibility or rather its execution involves a well planned strategy. Assessment of the social environment, formulation of objectives, devising operational plans and programmes, monitoring social progress, assessment of social and economic impact and

summary of outcomes and performances are of utmost importance.In other words CSR implies that the profits of corporate houses should be diverted to socially responsible activities for the benefit of the society. Companies can exert an emphatic influence over the quality and credibility of its products in the market through its CSR activities, which has a great impact on society and also provides better synergy returns to their business. Infact CSR is the impact of organizational activity on society. CSR is becoming an increasingly important activity to businesses nationally and internationally. As globalization accelerates and large corporations serve as global providers, these corporations have progressively recognized the benefits of providing CSR programs in their various locations. CSR activities are now being undertaken throughout the globe. The rationale for CSR has been articulated in a number of ways. In essence it is about building sustainable businesses, which need healthy economies, markets and communities, which again necessitate all business houses whether private or public to carry out CSR activities. The government has declared it compulsory for industries to be socially responsible. They cannot ignore the society while carrying out production and amassing profit. A vibrant association or a high degree of correlation can be revealed between CSR and good public governance. Earlier this was neither specified nor executed, as the industrial policy resolutions failed to point out the real role of industries in society. Infact the real costs that the society incur, are primarily due to the presence and operation of the industrial houses. Public sector units may have to shell out 2-5% of profit in CSR. CSR for a PSU may no more be a photo opportunity for its chairman but would involve people-centric projects to be funded by 2-5% of the company's net profit.J.R.D TATA, the founder of TATA STEEL, stated, ‘Every company has a special continuing responsibility towards the people of the area in which it is located and in which its employees and their families live.' The aspect of social responsibility of a company is mainly concerned with the role of the company in addressing issues of societal benefit and of reduction in social costs. There have been different instances where businesses originate in social awareness and welfare. Corporate Social Responsibility is a growing movement and to sustain it, it is necessary to improve and promote the interest in investment and the competence of both the society in general and of the governments in the individual countries to adjust to the CSR programme.As for example the Grameen Bank which started by providing loans to the low income groups has now been able to provide financial returns which are reasonable in nature and helped improve lives of many people. The Grameen Bank and Grameen Foundation USA (GFUSA) have coordinated with big companies or corporate houses to expand their activities. Always there is interdependence between the society and the organization in question or rather a cycle of relationship exists between the two in which the society supports and sustains the organization while the latter is totally committed to the sustenance and development of the former. A one sided picture distorts the entire concept of CSR- which is conceptually a one way process of social accountability. One must not forget that a flow in one direction cannot last long until and unless backed by other reciprocating flows. This implies that the role played by society is not a passive one or a neutral one. The growing responsibility of the society and the community in general cannot be denied at all. The awareness level of the society, which in turn is correlated with the literacy level, the standard of living, the preference pattern is a major determinant in this area- which helps individuals to voice their demands and grievances in a systematic manner ensuring that organizations in that locality practice CSR in a way that truly benefits society. The aim of every organization is to produce and distribute goods and services in such a way that income exceeds cost. Society expects the organization to be socially responsible as the economic environment of the society is dependant on the business environment. Socially responsible

business is a common term today as business and societies are unthinkable without each other.     Cisco takes an entrepreneurial or venture-capital approach to social investing. They address important social issues through multiyear initiatives that can have an immediate impact, but that also can scale in size and scope, be replicated in other environments, and support a mechanism for achieving sustainability over time. These initiatives generally take the form of public-private partnerships that respond to a broad range of stakeholder perspectives and make the most of Cisco's core competencies, including their technologies, expertise, and collaborative approach.They apply a four-stage "Cycle of Innovation" model to each of their social investments, remaining engaged through some or all of these cycles:1. Identify innovative opportunities that address issues in their areas of focus.2. Develop a framework for action, then test or pilot a solution and assess the results.3. Scale the successful implementation and replicate it to fit similar situations.4. Operate and maintain the initiative to the point where it can sustain itself, then adjust our engagement and look for another promising opportunity.They believe that in the long run, education provides the strongest foundation for lasting social and economic progress. By applying effective 21st century educational techniques in schools and other institutions, communities worldwide can prepare students to enter the local talent pool and provide the skills needed to bolster economic growth. Cisco's education initiatives, including what may be the largest e-learning program in the world, help fill our own talent pipeline and those of our business partners, while also helping to close the technical skills gap that exists in many areas of the world.But beyond that, Cisco's many education-oriented engagements create trusted relationships and seed the workforces of many types of organizations with knowledgeable people who are capable of building and maintaining the infrastructures upon which societies everywhere depend. In this way, we are contributing to a sustainable economic environment that will reward our corporate stakeholders and our fellow citizens alike.

     Conclusion   Thus Corporate Social Responsibility (CSR) is about how companies manage the business processes to produce an overall positive impact on society. Thus companies consider the interests of society by taking responsibility for the impact of their activities on customers, suppliers, employeesshareholders, communities and other stakeholders, as well as the environment. This is seen to extend beyond the statutory obligation to comply with legislation as organizations are voluntarily taking further steps to improve the quality of life for employees and their families as well as for the local community and society at large. If a company chooses to follow the way of CSR, it will integrate ethical concerns in its activities and in its interaction with all the. stakeholders. This implies that the corporate units function in such a way that their CSR activités in all lits likelihood actually reach out to the beneficiaries –the society in general. The  ethical considérations are aimed at preparing the groundwork for expecting the correct réaction or response of their CSR generated  activités .It would be useless to even try to initiate action where the response generated would be negative. This is why  prior to corporate social responsibility lies the work of preparing the society for the same, which  should be the joint efforts of corporates, non-governmental organisations and definitely the monitoring authority, that is the government. Such concerted efforts can expectedly produce the desired results.The groundwork is essential ,since an unresponsive,obstructive ,unwilling,suspicious recipient ,in this case the

society,will actually deter all efforts directed towards development and cause unnecessary delay and confusion.Providing employment andspreading literacy will actually see the commencement of CSR.Yes,the question willdefinitely arise that if transport and communication is grossly undeveloped ,how is it possible to spread literacy ?The obvious solution would be the involve ment of the residents in the construction of roads and other communication networks,which would therefore guarantee them employment.The monitoring authority or the government has a very important role to execute here.Of course organisations like TSRDS (TATA  STEEL'S CSR) are laying their own  groundwork for successful implementation of their  corporate social responsibility, and in this sphere they are the forerunners and the pathfinders.With its headquarters in Jamshedpur TSRDS has been able to establish its credibility inthe society it operates,actually transforming a resistant  tribal undeveloped social set up to a group of faithful recipients and respondents who rely wholeheartedly on the csr development drives of the organisation,and it did take time .Therefore a valid conclusion would always be directed at a functional relationship between the corporates and the society ,where a third entity ,the government plays the monitoring role.

Reference1.B.Wenther Williams, Chandler David-Strategic Corporate Social Responsbility:Stakeholders In A Global Environment2.Blake .D.H. ,The Management Of Corporate Social Policy3Chatterjee N.N ,Social Responsibility Of Business: Some Indian Myths & Realities Decision vol 8, sep 19764.Chris C Ganotis,Managerial Attitudes Towards Corporate Social Responsibility, Paper presented at University of California.at Berkley (Nov 9-11, 1972)Different theories concerning the purpose of corporations define the relations and responsibilities a company has with participants in its economic activities and with regulator. The CR theoretical backround can be subdivided into early theoteical views, CR models, the societal dimension of strategic management and an overview of the different perspectives.

Early theoretical viewsAs early as 1916, J. M. Clark emphasised the importance of transparency in business dealings, writing in the Journal of Political Economy :"if men are responsible for the known results of their actions, business responsibilities must include the known results of business dealings, whether these have been recognised by law or not".In the early 1930s, Professor Theodore Kreps introduced the subject of Business and Social Welfare to Stanford and used the term “social audit” for the first time in relation to companies reporting on their social responsibilities.Peter Drucker argued in 1942 that companies have a social dimension as well as an economic purpose in his second book “The Future of Industrial Man” which addressed primarily responsibility and preservation of freedom.  Corporate social responsibilities were defined in 1953 by Bowen [1] as "the obligations of businessmen to pursue those policies, to make those decisions, or to follow those lines of action which are desirable in terms of the objectives and values of our society." At the time, corporate social obligation was linked to the power that business holds in society. This point was stressed by K Davis who in 1960[2] described business social responsibilities as "the businessman's decisions and actions taken for reasons at least partially beyond the firm's direct economic or technical interest… which need to be commensurate with the company’s social power." The earliest reference addressing specifically social auditing was around the early 1960s in a book by G Goyder called "The Responsible Company". Goyder referred to various activities in the mid and late 1950s and suggested that social audit could provide a management tool and could offer stakeholders a platform for challenging and influencing companies. Opposition to the notion that companies have social responsibilities has been prevalent on the grounds that it will divert attention form the primary economic objectives. In 1962 Milton Friedman stated that “Few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible”[3]. A balanced view of CSR is expressed by D Voge in “The Market for Virtue: The Potential and Limits of Corporate Social Responsibility”[4] suggesting that CSR is not a precondition for business success but a dimension of corporate strategy: "Just as firms that spend more on marketing are not necessarily more profitable than those that spend less, there is no reason to expect more responsible firms to outperform less responsible ones. In other words, the risks associated with CSR are not different from those associated with any other business strategy; sometimes investments in CSR make business sense and sometimes they do not." Voge also highlights that “Surveys of the world's top brands rarely cite

CSR as an issue associated with a given brand. And companies that make most-admired lists do so by virtue of other factors--financial performance, customer satisfaction, innovation, and so on.”

Early social responsibility modelsEarly theoretical work specifically addressing corporate social responsibilities is represented by Sethi (1975)[5]  who developed a three tier model for classifying corporate behaviour which he labelled "corporate social performance". The three states of corporate behaviour are based on:

a)     social obligation ( response to legal and market constraints);b)     social responsibility (addressing  societal norms, values and expectations of performance);c)      social responsiveness (anticipatory and preventive adaptation to social needs).

 Sethi's second tier requires that a company moves beyond compliance and recognises and addresses societal expectations. The third tier requires that a company develops the competence to engage effectively with stakeholders and take proactive measures on their issues and concerns. Sethi also emphasised the cultural and temporal dependencies of corporate responsibilities and the importance of stable management systems and standard classifications to facilitate measurement of progress and comparative analysis. Building on Sethi’s model Carroll (1979) [6]  proposed a model that contains the following four categories of corporate responsibility in decreasing order of importance:a)       Economic -be profitable;b)       Legal - obey the law;c)        Ethical- do what is right and fair and avoid harm;d)       Discretional / philanthropic- be a good corporate citizen.

 The four classes of responsibility are seen to reflect the evolution of business and society interaction in the United States. According to Carroll “the history of business suggests an early emphasis on the economic and then legal aspects and a later concern for the ethical and discretionary aspects”. Economic obligations are therefore seen to be tempered by ethical responsibilities or social expectations and norms. Discretionary responsibilities go beyond ethical responsibilities and include philanthropic measures such as corporate sponsored programs for disadvantaged workers. In 1991, Carroll presented his CSR model as a pyramid and suggested that, although the components are not mutually exclusive, it “helps the manager to see that the different types of obligations are in constant tension with one another”.

The model has been validated[7] by a number of studies . Aupperle, Hatfield & Carroll (1985; 1983) performed the first empirical test of the four tier CSR model by surveying 241 Forbes 500 listed CEOs using 171 statements about CSR. The statistical analysis confirmed that there are four empirically interrelated but conceptually independent components of CSR and provided tentative support to the relative weightings assigned by Carroll to each of the four components.  Pinkston & Carroll (1994) performed a similar survey among top managers in 591 U.S. subsidiaries of multinational chemical companies with headquarters in England, France, Germany, Japan, Sweden, Switzerland and the U.S. Aggregate findings once again confirmed Carroll’s four tier weighted model but interestingly showed Germany and Sweden to be exceptions, where legal responsibilities were ranked the highest priority followed by economic, ethical, and philanthropic aspects respectively. Comparison with the Aupperle, Hatfield & Carroll’s (1985) findings also showed that in the intervening ten years the gap in the relative importance between economic and legal responsibilities had decreased, while the importance of ethical responsibilities appeared to be increasing and that of philanthropic responsibilities to be decreasing (Pinkston & Carroll, 1996). The societal dimension of strategic managementAround the time Carroll published his CSR model in 1979, the societal dimension of strategic management was explored by Igor Ansoff in “The Changing Shape of the Strategic Problem”[8]. He proposed that an “enterprise strategy”, describing the interaction of a firm with its environment, should be added to the corporate, business and functional levels of strategic management. According to Ansoff, enterprise strategy was needed in order to enhance a company’s societal legitimacy and to address new variables in strategic management such as “new consumer attitudes, new dimensions of social control and above all, a questioning of the firm’s role in society”. These ideas are today at the heart of stakeholder approaches to strategic management.  The stakeholder theory, emphasising a broad set of social responsibilities for business was established by R Freeman in 1984 through the ground breaking work published in his book “Strategic management: A stakeholder approach”[9] which effectively established the field of Business & Society. Freeman defined stakeholders as “any group or individual who is affected by or can affect the achievement of an organisation’s objectives”. According to Freeman, the use of the term stakeholder grew out of the pioneering ideas at Stanford Research Institute (now SRI International) in the 1960’s which were further developed through the work of Igor Ansoff and others. The basic SRI concept was that “managers needed to understand the concerns of shareholders, employees, customers, suppliers, lenders and society, in order to develop objectives that stakeholders would support. This support was necessary for long term success. Therefore, management should actively explore its relationships with all stakeholders in order to develop business strategies.” Stakeholder management approaches can be very different in practice, spanning from instrumental approaches which use stakeholder relationships strictly as an instrument to maximise profit to intrinsic approaches where fundamental principles guide how a company does business particularly with respect to how stakeholders are treated[10].  Overview of theoretical perspectivesA summary of the theoretical streams described above is presented in the following diagram.

The two main streams represent the CSR perspective emphasising ethical issues and social audit and the stakeholder approach representing the social dimension of strategic management. It should be noted that sustainability did not feature in corporate responsibilities issues but is related to environmental economics established to address environment a scarce resource and to ensure that the costs and the benefits of environmental measures are well balanced.

[1] Bowen, Howard. Social Responsibilities of the Businessman. New York: Harper and Row,      1953

[2] Davis, Keith, "Can Business Afford to Ignore Social Responsibilities?" California       Management Review, Spring 1960[3] Milton Friedman, 1962. Capitalism and Freedom, Chicago: University of Chicago Press.[4] David Vogel, Sept 2005, The Market for Virtue: The Potential and Limits of Corporate      Social Responsibility, Brookings Institution Press[5] Sethi, S.P. (1975). Dimensions of corporate social performance: An analytic framework,

   California management Review 17.[6] Carroll, A.B. 1979. A three-dimensional conceptual model of corporate social

    performance; Academy of Management Review 4.[7] Pinkston, T. S., & Carroll, A. B. 1996. A Retrospective Examination of CSR Orientations:

   Have They Changed? Journal of Business Ethics, 15(2).[8] H. Igor Ansoff, "The Changing Shape of the Strategic Problem." in Schendel and Hofer,      Strategic Management.[9] Freeman, E. R., 1984, Strategic management: A stakeholder approach, Pitman, Boston.[10] Donaldson, T., & Preston, L. E., 1995, The stakeholder theory of the corporation:        Concepts, evidence, and implication, Academy of Management Review, 20.

A multi dimensional view of corporate responsibility

Corporate responsibility concepts and principles In market economies, the primary purpose of companies is to maximise shareholder value (e.g. economic profit, share price and dividends) bound by legal/regulatory obligations which address specific social and environmental issues. For this, companies pursue competitive strategies which rely upon and develop relationships between the corporation and its stakeholders.

Since the early 1990’s, corporate responsibility issues including the social obligations of corporations have attained prominence in political and

business debate. This is mainly in response to corporate scandals but also due to the realisation that development centred only on economic

growth paradigms is unsustainable and therefore there is a need for a more pro-active role by states, companies and communities in a

development process aimed at balancing economic growth with environmental sustainability and social cohesion.

This debate has motivated the following three interlinked movements in the corporate world:

CSR (Corporate Social Responsibility);

Corporate sustainability;

World wide reforms on corporate governance.

CSR and corporate sustainability represent the way companies achieve enhanced ethical standards and

a balance of economic, environmental and social imperatives addressing the concerns and expectations of their

stakeholders. Corporate governance reflects the way companies address legal responsibilities and therefore provides the foundations upon

which CSR and corporate sustainability practices can be built to enhance responsible business operations.

We distinguish between two interrelated dimensions for CSR and corporate sustainability: corporate responsibility and sustainability as part of a new vision for the world based on a global partnership for sustainable development; corporate responsibility and sustainability as a business management approach that should provide in the long run better value for shareholders as well as for other stakeholders.

Early roots of corporate social responsibility can be found in the actual business practices of successful companies and early theoretical views in the 1950s and 60s linked corporate social obligation to the power that business holds in society. Theoretical developments are currently broadly subdivided into the ethical and accountability issues and the stakeholder approaches to strategic management.  The corporate responsibility movement is backed by UN initiatives such as the Global Compact and the Millennium Goals which have defined

the goal and principles for responsible corporate behaviour in the following areas:

Human Rights

Labour Standards

Environment

Health

Anti-Corruption

Economic responsibility

Key driving forces include investor and consumer demands and governmental and public pressure.

Particularly important is the support from Socially Responsible Investing (SRI). The corporate

responsibility movement is now entering a mainstreaming phase aided by standardisation activities such

as the GRI, the AA1000 series and the ISO2600 guide.

Key driving forces include investor and consumer demands and governmental and public pressure. Particularly important is the support from

The corporate responsibility movement is now entering a mainstreaming phase aided by standardisation activities such as the GRI, the AA1000

series and the ISO2600 guide.

CSR, corporate sustainability and corporate governance collectively are shaping the identity of

organisations and are therefore increasingly integrated into the business strategy of successful

corporations. Consequently, the field of responsible business strategy and practice is becoming

one of the most dynamic and challenging subjects corporate leaders are facing today and possibly one of

the most important ones for shaping the future of our world.

The 4CR taxonomy described in the following table highlights four corporate responsibility areas:

Corporate Competitiveness (CC) Corporate Governance (CG)

CSR

Corporate Sustainability (CS)

Corporate Competitiveness addressed by strategic management is a subject rarely discussed in the context of corporate responsibility.

However, unless all strands of corporate responsibility are brought together under a common management framework, CSR and

sustainability will remain peripheral activities and their impact is likely to remain well below required levels to achieve the Millennium

and related goals.

Corporate Governance sets the legal framework to protect a company’s shareholders and stakeholders; the relative emphasis being

dependent on national approaches.

CSR is aimed at extending the legal requirements promoting ethics, philanthropy and social reporting to satisfy stakeholder concerns.

Corporate sustainability focuses on long term economic and social stakeholder expectations both by optimising their sustainability

performance and by participating in networks with governments, NGOs and other stakeholders that can provide the capacity for the

world’s sustainable development.

 

Corporate Responsibility and Sustainability Management Corporate responsibility and sustainability management

Corporate responsibility practice

The CSR and corporate sustainability movements are building an impressive momentum with the support from governments and the

investment community through Socially Responsible Investing (SRI) and associated corporate sustainability indexes.

There is no doubt that businesses are doing far more than ever before to tackle the sustainability challenge by recognising their social

responsibilities, reducing their environmental impacts, guarding against ethical compromises, creating governance transparency and becoming

more accountable to their stakeholders.

However, despite the progress achieved, CSR and corporate sustainability as business practiced approaches are at the infancy stage with

relatively few real adopters and questionable impact.

On the positive side, success stories from responsible companies, for example the leading companies in SRI indexes, confirm that outstanding

financial performance is not incompatible with good sustainability performance.

The motivations of companies to address corporate responsibly and sustainability varies widely from instrumental approaches using

responsible practices as a means of maximising profits to intrinsic approaches committing the company to upholding its values and principles

irrespective of the impact on financial performance. The key business drivers are:

a) strong brand and reputation;

b) employer of choice;

c) market position;

d) trust of the financial markets and increased shareholder value;

e) new ‘green’ products / services and new markets.

It is becoming clear that leading companies of the future will have missions and strategies to constantly increase shareholder value but as an integral part of those strategies will also recognise and act upon the potential for:       addressing the interests of a broad range of stakeholders;       building societal value;      contributing to coalitions aimed at increasing the capacity for sustainable       development .

Corporate responsibility and sustainability management frameworkAs the business case for Corporate Responsibility and Sustainability is becoming clearer it is also becoming evident that it could take some time before Corporate Responsibility and Sustainability becomes part of mainstream business practice.

It is widely recognised that implementation of Corporate Responsibility and Sustainability requires time to reach maturity and the speed of

achieving mainstreaming is dependant on leadership, training and organisational capabilities to integrate CSR and sustainability policies in the

overall business strategy and in core operational processes.

Socially and environmentally responsible behaviour is multisided and is related to all functions, decisions and processes in a company. The

width and complexity of the Corporate Responsibility and Sustainability scope makes mainstreaming a change management challenge

necessitating carefully planning and possibly long term commitment to developing appropriate capabilities.

Key challenges in Corporate Responsibility and Sustainability management include:

managing in an integrated manner the full lifecycle of CRS strategy formulation, implementation, evaluation and evolution

incorporating stakeholder participation;

aligning responsibility strategy to corporate strategy focusing on:

rationalising and harmonising the economic, compliance, ethical, and sustainability dimensions of corporate responsibility and

sustainability in the context of stakeholder requirements;

managing non-financial risk, particularly to brand, reputation, local licence to operate and to performance instability as an

integral part of corporate sustainability management;

integrating eco-design and other sustainability requirements into product and service offerings;

managing the sustainability performance optimisation process to continually increase stakeholder satisfaction;

developing strategic responsibility and sustainability capabilities;

We define Corporate Responsibility and Sustainability as a company's verifiable commitment to operating in an economically, socially and environmentally sustainable manner that is transparent and increasingly satisfying to its stakeholders. Stakeholders include investors, customers, employees, business partners, local communities, the environment and society. The emphasis is on transparent and verifiable stakeholder driven  business operation delivering optimised sustainability performance and associated competitive advantage.

Sustainable business operation means addressing the needs of present stakeholders while seeking to protect, support and enhance the human and natural resources that will be needed by future stakeholders.

Barriers and Benefits of Globalization

As you'll remember, last month we began our investigation into the impediments to globalization in light of the recent Summit of the Americas in Quebec City. This month we will continue our series with an examination of the challenges both technological and social facing the planet's progress toward this objective.

While last month's article started out as a bit of a rant (I have kind of built a little reputation for this I suppose) as a result of recent communications frustrations on a trip to Asia, the time since has permitted me the space to broaden my perspective. As a result, I thought that I'd begin by looking at what globalization actually entails.

So, globalization is the ability for me as a business person to access global markets in a manner which transcends political barriers and sell my goods and services within in them, right? That should be good for everybody, correct? So what's the problem? We just have to get the IT infrastructure in place and we're off to the races, right? Well not exactly. While IT is definitely a chief enabler of the push toward globalization, it in of itself is insufficient to bring it into existence. This has to do with the fact that globalization as defined above is inaccurate. So what is it then?

Well, in order to understand what globalization truly is, we have to look at its potential effects and those advocating change vs. they who desire maintenance of the status quo. If we step back just a little we will see that once a conduit for trade is established, electronic or otherwise, goods and services may flow both ways � not only do I have access to foreign markets, I have just opened  the door to foreign competition. So globalization levels the playing field permitting all world citizens access to the same potential client base � a good thing right? Well, how as a small business owner in Canada do I compete with my counterpart in Bangladesh given respective labour costs? Barrier.

Let's step back a little further... Who are the main actors in the thrust toward globalization? � western nations, in particular, the United States. Why is that? Certainly everyone desires access to global markets and resource pools but it has been proven time and again that once corporations invest in third world countries to capitalize on cheap labour markets, they soon prosper and eventually become your competitors. Take a look at Japan, Korea, Hong Kong and Taiwan as examples. So what interest should the west have in that? In truth, globalization is as much about the export of ideology as it is about commerce � because the two are inexorably linked, particularly from an American perspective.

At no other time in history has one culture so completely dominated the global cultural and economic landscape. America has, in part, approached and achieved this position of leadership in the post WWII era by way of efforts to homogenize global ideology to that which embraces basic human desire (greed) vs. those which run contrary to instinct including communism, theocracy and dictatorships. As these later forms of government often inspire zealotry, conflict is inevitable with they who espouse differing philosophy. Conflict is bad for business (unless you're an arms dealer). The difficulty is that as a result of this policy and accompanying superior attitudes, Americans and their notions are almost universally despised by those within these nations and commonly regarded in an unfavourable light even by allied states which understandably fear the loss of their own culture. Big barrier.

Let's take a step way back. Let's prognosticate that it's 2100 A.D., globalization was inevitable and has indeed taken place - with all its ramifications. Every citizen of the planet has access to the same economic opportunity and competes on a level playing field in the new knowledge based economy. We have elevated poorer nations to equal status resulting in drastic reductions in

hunger and disease, permitting their citizens to embark on pursuits loftier than mere subsistence. Obviously regional jealousies and covetous designs on property will additionally be reduced commensurate with improvements in economic station, leading to a far more tolerant and conflict free planet. Great! It's Star Trek! But what will have to occur in advance of this seeming Utopia? Once again we're back to standardisation... the problem being what must be standardised.

At the outset, a common currency must be established � the American dollar being the prime candidate. The recent Mexican peso crisis underscores the potential for economic turbulence in major emerging markets to wreak havoc on global financial stability. In a true global economy such an event may have initiated a disastrous cascade effect. The ubiquity of the greenback and the advent of the euro clearly point toward future currency convergence. Obviously, a level playing field requires a common set of health and environmental standards. Models of governance must be in large standardised in order that all might gain equal opportunity to the benefits to be realised by participation in the global economy. As a result, corruption on a grand scale as is seen for example in many Latin American and former Soviet states cannot survive true globalization. All enormous barriers.

Clearly elimination of trade barriers is a very small component of true globalization. So what does all this have to do with technology? Well, it all comes back to the �net. The Internet is not merely a medium  whereby one obtains one's horoscope, weather reports and stock quotes. It isn't a just handy tool for shopping or even selling goods. The Internet is primary agent for global change, being both a conduit for dissemination of packaged and productised ideology as well as an enabler of global commerce,  international collaboration and collusion. It is where future wars will be waged and perhaps, if we're very lucky, where ultimately peace may be won.

A.Globalization of Markets:

It refers to the merging of national markets into one huge global marketplace. Now selling internationally is easier due to falling barriers to cross-border trade. A company doesn’t have to be the size of these multinational giants to facilitate and benefit from the globalization of markets. It is important to offer a standard product to the worldwide. But very significant differences still exist between national markets like consumer tastes, preferences, legal regulations, cultural systems.

These differences require that marketing strategies in order to match the conditions in a country. To illustrate, Wal-Mart may still need to vary their product from country depending on local tastes and preferences.

B.Globalization of Production:

It refers to the sourcing of goods and services from locations around the world to take advantage of national differences in the cost and quality of factors of production. The idea is to compete more effectively offering a product with good quality and low cost. For example, Nike is considerated one of the leading marketers of athletic shoes and apparel on the world. The company has some overseas factories where has achieved a super production with low cost.

Unfortunately Nike has been a target of protest and persistent accusations that its products are made in sweatshops with poor working conditions. The company has signaled a commitment to improving working conditions, but in spite of the fact, the attacks continue.

C.Falling Barriers to Trade and Investment:

The falling of barriers to international trade enables firms to view the world as their market. The lowering of barrier to trade and investments also allows firms to base production at the optimal location for that activity. Thus, a firm might design a product in one country, produce a component parts in two other countries, assemble the product in another country and then export the finished product around the world. The lowering of trade barriers has facilitated the globalization of production. The evidence also suggests that foreign direct investment is playing an increasing role in the global economy

D.Technological Innovation:

Technological changes have achieved advances in communication, information processing, and transportation technology, including the Internet and the World Wide Web (www). The most important innovation has been development in the microprocessors after that global communications have been revolutionized by developments in satellite, optical fiber, and wireless technologies, and now the Internet and the www. The rapid growth of the internet and the associated www is the latest expression of this development. Besides, innovations have occurred in the field of the transportation technology. The development of commercial jet aircraft has reduced the time needed to get from one location to another. Now New York is closer to Tokyo than ever.

Three Barriers To International Trade

When we talk about international trade we mean the exchange of goods and/or services. This exchange usually takes place between two parties from different countries or between two countries located anywhere on the globe.

 

  If the international trade takes place between two parties, it is known as bilateral trade and if the trade takes place between more than two parties, it is known as multi-lateral trade.

There are basically three barriers to international trade that are used by countries, and they are as follows:

1. Non-tariff Barrier

Usually this type of barrier is imposed by a country on imports so that the quantity of imported items is restricted. Due to this, the availability of the imported item or items is restricted

in the domestic market and the price too is very high.

2. Tariff Barrier

This is barrier is in the form of duties, taxes, quotas etc. Because of this barrier, imports decrease and price of imported products increase which results in the fall in the demand giving boost to domestic products.

3. Voluntary Constraint

This is a type of international trade barrier wherein a country voluntarily restricts or stops imports from coming in. This is usually used to limit the competition that domestic industries will face with the coming in of imported goods.

Whenever a country starts international trade with another country, these three barriers to international trade are always taken into account. It has been seen that lower developed countries and developing countries tend to favor these three barriers to international trade as the countries can earn foreign exchange by introducing tariff and non-tariff barrier, the local industries are protected from competition by foreign companies and industries and as less imported goods are available in the country, consumers tend to buy local products giving the local industries a boost.