Corporate Social Responsibility in India

Introduction- define CSR

CSR and Business Ethics

Why CSR

Historical Backdrop of CSR - World and India

Present Status of CSR in India

CSR and Corporate Financial Performance

Indian legal Backdrop - Companies Act 2013

Future of CSR in India

Examples

Conclusion

PREVIEW

INTRODUCTION

What is CSR?

World Business Council for

Sustainable Development:

“We define CSR as business'

commitment to contribute to

sustainable economic development,

working with employees, their

families, the local community, and

society at large to improve their

quality of life.”

What is CSR?

The Kennedy School of Government (Harvard University), CSR Initiative:

“The term [CSR] is often used interchangeably with others, including corporate responsibility, corporate citizenship, social enterprise, sustainability, sustainable development, triple-bottom line, corporate ethics, and in some cases corporate governance. Though these terms are different, they all point in the same direction: throughout the industrialized world and in many developing countries there has been a sharp escalation in the social roles corporations are expected to play.”

What is CSR?

What do these definitions tell us about CSR?

What are some of the common understandings

that emerge?

How does CSR relate to other concepts?

What other issues arise?

What is CSR?

Common Understanding One:

CSR is an idea whereby companies

integrate economic, social and

environmental concerns in their

business operations

Common Understanding Two:

Stakeholders

Common Understanding Two: CSR relates to the idea whereby a business addresses and balances the needs of stakeholders.

Who/what are stakeholders? “Individuals and groups who may affect or be affected by the actions, decisions, policies, practices or goals of an enterprise.”

Examples:

• Shareholders and other investors

• Employees

• Customers

• Governments

• Local communities

• NGOs

• Environment

CSR and Related Concepts: Sustainable

Development

Many definitions describe CSR as the business pursuit of sustainable development.

Sustainable development: “development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” (1987 Brundtland Report).

Like CSR, sustainable development is also recognised as having three fundamental pillars: economic development, social development and environmental protection.

CSR and Sustainable Development

2002 World Summit on Sustainable Development (Johannesburg)

confirmed link with CSR.

Paragraph 49 of the Johannesburg Plan of Implementation calls for action

at all levels to:

“Actively promote corporate responsibility and accountability, based on the

Rio principles, including through the full development and effective

implementation of intergovernmental agreements and measures,

international initiatives and public-private partnerships and appropriate

national regulations, and support continuous improvement in corporate

practices in all countries.”

CSR and Related Concepts:

Corporate Governance

Many definitions highlight the link between CSR and corporate

governance.

Is CSR a subset of corporate governance or is corporate

governance a subset of CSR?

In my view this is a pointless question. Both concepts are closely

related which ever way you look at it.

CSR and Corporate Governance

Related in definition:

1994 Report of the Toronto Stock Exchange Committee on Corporate Governance in Canada:

“Corporate Governance means the process and structure used to direct and manage the business and affairs of the corporation with the objective of enhancing shareholder value…. The direction and management of the business should take account the impact on other stakeholders such as employees, customers, suppliers and communities.”

Principle 4 of The OECD Principles of Corporate Governance (2004) underscores the need of a corporate governance framework to“encourage active co-operation between corporations and stakeholders in creating wealth, jobs, and the sustainability of financially sound enterprises.

CSR and Corporate Governance

Related in Management:

Many companies are now using company codes of conduct to address conduct issues that relate to both corporate governance issues (conflict of interest, market disclosure, whistleblowing, corruption, fraud & accounting) and CSR issues (human rights, environment & labour standards)

Related in Investment:

Mainstream investors now consider environmental, social and governance issues (known collectively as ESG issues) in their investment decisions.

Example: United Nations Principles for Responsible InvestmentLaunched in April 2006, now has support of investors with combined worth of $4 Trillion.

CSR and Other Related Concepts

The term CSR is often used interchangeably with the terms corporate responsibility, corporate citizenship and triple bottom line.

In my opinion, these terms describe the same concept to that of CSR.

Companies choose the terminology they feel comfortable with.

IS CSR a Voluntary Concept?

Some definitions (e.g. European Union) describe CSR as a voluntary concept.

Given the multitude of initiatives that promote CSR (e.g. Global Compact, Global Reporting Initiative, OECD Guidelines) in a voluntary fashion- not surprising CSR is perceived in this way

However, recent legal developments suggest CSR is no longer a voluntary concept.

Two major areas of development: Reporting and Directors’ Duties

CSR & BUSINESS ETHICS

Definitions and Relationships

Corporate social responsibility (CSR) is

the process by which businesses negotiate

their role in society

In the business world, ethics is the study of

morally appropriate behaviors and

decisions, examining what "should be done”

Although the two are linked in most firms,

CSR activities are no guarantee of ethical

behavior

Recent Evidence of CSR InterestAn Internet search turns up 15,000 plus response to “corporate citizenship”

Journals increasingly “rate” businesses (and NGOs) on socially responsive criteria:◦ Best place to work

◦ Most admired

◦ Best (and worst) corporate reputation.

◦ www.csrhub.com

◦ www.karmayog.org

Reasons for CSR Activities

CSR activities are important to and

even expected by the public

◦ And they are easily monitored worldwide

CSR activities help organizations hire

and retain the people they want

CSR activities contribute to business

performance

Maximize

firm’s profits

to the

exclusion of

all else

Balance

profits and

social

objectives

Do what it

takes to

make a

profit; skirt

the law; fly

below

social

radar

Fight social

responsibility

initiatives

Comply;

do what

is legally

required

Integrate

social

objectives and

business goals

Lead the

industry

and other

businesses

with best

practices

Do more than

required; e.g.

engage in

philanthropic

giving

Articulate

social value

objectives

Corporate Social Responsibility Continuum

Business CSR ActivitiesPhilanthropy

◦ give money or time or in kind to charity

◦ Integrative philanthropy—select beneficiaries

aligned with company interests

Philanthropy will not enhance corporate

reputation of a company

◦ fails to live up to its philanthropic image or

◦ if consumers perceive philanthropy to be

manipulative

Integrate CSR Globally

Incorporate values to make it part of an articulated belief system

Act worldwide on those values◦ Cause-related marketing

◦ Cause-based cross sector partnerships

Engage with stakeholders◦ Primary stakeholders

◦ Secondary stakeholders

Business Ethics Development The cultural context influences

organizational ethics

Top managers also influence ethics

The combined influence of culture and

top management influence

organizational ethics and ethical

behaviors

The Evolving Context for

EthicsFrom domestic where ethics are shared

To international where ethics are not shared when companies:◦ Make assumptions that ethics are the

same

◦ Ethical absolutism—they adapt to us

◦ Ethical relativism—we adapt to them

To global which requires an integrative approach to ethics

Emergence of a Global Business

Ethic

Growing sense that responsibility for righting social wrongs belongs to all organizations

Growing business’ need for integrative mechanisms such as ethics

◦ Ethics reduce operating uncertainties

◦ Voluntary guidelines avoid government impositions

Ethical conduct is needed in an increasingly interdependent world—everyone in the same game

Companies wish to avoid problems and/or be good public citizens

Ways Companies Integrate Ethics

Top management commitment in word

and deed

Company codes of ethics

Supply chain codes

Develop, monitor, enforce ethical

behavior

Seek external assistance

External Assistance with Ethics

Industry or professional codes

Certification programs, e.g., ISO 9000

Adopt/follow global codes

◦ Caux Round Table Principles

Reasons for Businesses to Engage in

Development of a Global Code of

Business Ethics

Create the same opportunity for all

businesses if there are common rules

Level the playing field

They are needed in an interconnected world

They reduce operating uncertainties

If businesses don’t collaborate, they may not

like what others develop

Four Challenges to a Global Ethic

◦ Global rules emerge from negotiations and

will reflect values of the strong

◦ Global rules may be viewed as an end

rather than a beginning

◦ Rules can depress innovation and creativity

◦ Rules are static but globalization is dynamic

WHY CSR

Historical Backdrop of CSR -

World and India

Present Status of CSR in India

CSR and Corporate Financial

Performance

Social—and Financial—Performance

Good Corporate

Social Performance

Perspective 1: CSP Drives the Relationship

Good Corporate

Financial

Performance

Good Corporate

Reputation

Good Corporate

Financial

Performance

Perspective 2: CFP Drives the Relationship

Good Corporate

Social

Performance

Good Corporate

Reputation

Good Corporate

Social Performance

Perspective 3: Interactive Relationship Among CSP, CFP, and CR

Good Corporate

Financial

Performance

Good Corporate

Reputation

Indian legal Backdrop - Companies

Act 2013

Future of CSR in India

Definition of Corporate Social

Responsibility

“CSR is about how companies manage

the business processes to produce an

overall positive impact on society.”

Definition

“Achieving commercial success in

ways that honour ethical values and

respect people, communities, and the

natural environment”

Definitions: Practice

WBCSD (World Business Council for

Sustainable Development)

“The continuing commitment by business to

behave ethically and contribute to

sustainable economic development while

improving the quality of life of the workforce

and their families as well as of the local

community and society.”

Definitions: Concept

Philip Kotler & Nancy Lee (2005)

“a commitment to improve community

well-being through discretionary

business

practices and contributions of corporate

resources”.

Corporate Social Responsibility

(CSR)

CSR in Equation Form Is the

Sum of:

Economic Responsibilities (Make a

profit)

Legal Responsibilities (Obey the law)

Ethical Responsibilities (Be ethical)

Philanthropic Responsibilities (Good

corporate citizen)

CSR

Historical Perspective

From the 1950’s to the present the

concept of CSR has gained

considerable acceptance and the

meaning has been broadened to

include additional components

Corporate Social Responsibility

(CSR)

Evolving Viewpoints

CSR considers the impact of the

company’s actions on society (Bauer)

CSR requires decision makers to take

actions that protect and improve the

welfare of society as a whole along

with their own interests (Davis and

Blomstrom

Phases of Corporate Social

Responsibility

Frederick provides expanded framework for

understanding the evolution of CSR concept

Divided into 4 phases:

Corporate social stewardship, 1950s –1960s

Corporate social responsiveness, 1960s – 1970s

Corporate/business ethics, 1980s –1990s

Corporate/global citizenship, 1990s –2000s

Drivers of CSR

The shrinking role of government

Demands for greater disclosure

Growing investor pressure

Competitive markets

Benefits of CSR…

Strengthened brand positioning.

Enhanced corporate image.

Increased ability to attract, motivate, and retain

employees.

Increased sales and market share.

Increased appeal to investors and financial

analysts.

CSR also known as

Sustainable Development

Corporate Citizenship

Triple Bottom Line

Business Ethics

Sustainable Business Practices

Examples

CSR EXAMPLES

IBM UK - Reinventing Education Partnership programme Interactions and sharing of knowledge through a web-based technology - the “Learning Village” software. Culture of openness and sharing of good practice

AVON - a partnership with Breakthrough Breast Cancer, and its Breast Cancer Crusade has raised over 10 million pounds since its launch 12 years ago

TOI’s Lead India campaign, campaign for contribution towards educating the poor

Companies in trouble

Dasani mineral water (part of Coca-Cola).

Coke’s sale was banned as the result of tests, including those by the Indian government, which found high concentrations of pesticides.

Communities in India , around Coca-Cola's bottling operations are facing severe shortages of water as a result of the cola major sucking huge amounts of water from the common groundwater source.

Issues at NIKENike Inc producer of footwear, clothing, equipment and accessory products for the sports and athletic market.

Selling to approximately 19,000 retail accounts in the US, and approximately 140 countries around the world.

Manufactures in China, Taiwan, Korea, Indonesia , Mexico as well as in the US and in Italy.

People working - 58% young adults between 20 and 24 years old, 83% - women.

Few have work-related skills when they arrive at the factory.

Issue- unhealthy work environment – debates heated arguments, verbal abuse , 7.8% of workers reported receiving unwelcome sexual comments, and 3.3% reported being physically abused. In addition, sexual trade practices in recruitment and promotion were reported

Private Sector Perspective

“Corporate Social Responsibility is not a

cosmetic; it must be rooted in our

values. It must make a difference to

the way we do our business.”

CSR – A New Paradigm

To think comprehensively and systematically about

The role of business in development

The manner in which the business is conducted

Corporate Governance

Poverty alleviation

Corporate contribution to peace and war against terror

Business, government and civil society partnership- common ground and collective action

Conclusion