Corporate Social Responsibility

Corporate Social Responsibility

“Business should consider the social implications of their decisions.”

Howard R Bowen

CSR, refers to the businessman’s decisions and actions taken for reasons, at least partially, beyond the firm’s direct economic and technical interest’ Keith Davis

Evolution of CSRTill the early 20th century- business objective is to earn profit. Business enterprise should play a constructive role in overall socio-economic system. This led to birth of CSR.Social Responsibilities of the Businessman by Howard R. Bowen – insisted on impact of their decision on society. 1960- increased public consciousness about natural environment.1970- debate on industrial democracy in the UK also spread the awareness about CSR

Approaches towards CSR1. The Classical View- maximise profit for

investors and owners. Investing in CSR leads to reduction of profit thus, harming the interest of the stockholder of the business

2. The Social Obligation View – meeting its economic and legal obligation of the land where it operates.

3. The Socio-economic View- it has relationship with society. They should go beyond the profit making.

Approaches towards CSR4. The Social Responsible View – the guiding

philosophy is that a business organisation should operate in a manner that makes society better and avoid those actions that could make it worse than it was.

5. The Social Responsiveness View- ability of corporation to relate its operation and policies to the social environment in the ways that are mutually beneficial to the corporation and to society.

Need for CSR1. Moral Responsibility2. Government Regulation – In July 2007, PM Dr.

Manmohan Singh, Presented a ten-point Social Charter

3. Addressing ecological concern to create clean environment

4. Employee satisfaction 5. Good public image6. Consumer Awareness7. Trust of consumer

Argument for Social Involvement1. It receive charter from society and is dependent

on society for its overall existence. 2. Better workforce and better customer for its

product3. Positive impact on Customer, employee and

govt.4. Increase power, prestige and influence5. Solve problem that afflict society at large.6. Ensure the long-term availability of non-

renewable resource 7. Provide employee satisfaction.

Argument against Social Involvement

1. It can reduce economic efficiency and reduce profit.

2. Rise in price could weaken the international competitiveness

3. No direct accountability towards society4. Lack of requisite social skill to undertake

projects.5. Marketing gimmick6. Lack of support from other agencies.

RESPONSIBILITIES- Different Interest Group

The Stockholders

The Employees

The Government

Business Organisation

The Consumers

The Community

The Inter-related

Business

Stage I: Owner and Investor/creditor

Towards Owner1. Optimum ROI through efficiency and

effectiveness 2. Proper utilization of capital and other

resources3. Ensuring growth and appreciation of the

owner’s capital4. Providing regular and fair return on the

owners’ capital

Stage I: Owner and Investor/creditor

Towards Investor/creditors1. Ensuring safety of the investment2. Regular payment of interest 3. Timely repayment of principal

Stage II: Employee

Towards Investor/creditors1. Fair compensation2. Timely and regular payment of wages and

salaries3. Proper working condition4. Fringe benefits5. Job security6. Social security7. Career planning 8. T & D9. Better living conditions

Stage III: Specific Business

Towards Customer1. Provide Right product, at Right time, Right

Price, and at Right Place with Right Quality and quantity as per their need.

2. After sale-service3. Information and education to customer4. Grievance handling5. Avoid unfair means

Stage III: Specific Business

Towards Supplier1. Regular order2. Fair term and condition3. Credit for reasonable period4. Timely payment5. Assistance in upgradation

Stage III: Specific Business

Towards competitors1. Unhealthy competition 2. Competition war3. Not to defame competitors.

Towards Government1. Follow guidelines2. Payment of taxes, duties, fee3. Conforming to norms4. Not to indulge in corruption 5. Adhering to law of land

Stage IV: Society

1. Generate employment2. Lead to sustainable development3. Protecting environment4. Helping weaker and backward section5. Involving in socially beneficial project6. Making contribution to NGOs7. Protection and preservation and promotion

of social and cultural values8. Promoting sports and other development

activities.

Corporate Governance

Corporate Governance represent systems, process, policies, laws, and institutions that ensures the direction, control and accountability of a business organization towards its different stakeholders. SEBI(2003) as the acceptance by management of the inalienable rights of stakeholders as the true owner of the corporation and of their role as trustees on behalf of the stakeholders. Developing code of conduct and whistle blowerInstituting independent directorsFocusing on sustainability of business modelGreater transparency and disclosure

Need for Corporate Governance

1. Clause 49 of the listing agreement with stock exchange

2. Recent corporate scams3. Globalization of the capital market has exposed

issuers, investors and intermediaries to the higher standard of disclosure

4. Financial sector reforms5. Tax reforms, deregulation an competitions6. Regulatory measures,

Constituents for Corporate Governance

1. Shareholder- who trust the corporation enough to invest time, effort, and money in it.

2. Management- that runs the company, and reports to the directors of the company.

3. Directors- who are responsible to shareholder.

Social Audit

It was proposed by Howard R. Bowen(1950) as a commitment to systematic assessment of and reporting on some meaningful definable domain of the company’s activities that have a social impact.

Types1.Audit required by Government- involving pollution control measures, product performance, equal employment2.Voluntary Social Audit

ITC is first Indian Co. 456 out of 500 fortune firms showed social responsibility disclosure

Social Audit- Challenges

1. Methodologies and standards are evolving2. Disagreement over area where social

responsiveness to be implemented3. Difficult to measure CSR

Trust Building Measure- product recall

Complete Product Life Cycle Management-

Clean Development Mechanism and Carbon Credit- GHGs is increasing. In 1997, 15 industrialized countries signed the Kyoto Protocol to reduce GHGs to 5.2 % by 2012.

• ITC has been ‘carbon positive’ since 2005.• 65000 hectares-social and farm forestry programme• Reduced 2000 Kilotonnes of CO2• Recycle over 90 % solid waste

1. Identification of project for CDM2. Project formulation and submission to Designated

national authority3. Securing national approval 4. Getting the project design document validated5. Register the project with CDM executive board6. Implementation7. Verification of the gain8. Issuance of certified emission reduction9. Trading of carbon credit 10. For Kyoto-compliant carbon credit $2 per tonne is

paid

Clean Development Mechanism- Certification Procedure