Corporate Social Responsibility

DEFINITIONS OF CSR

It is a set of obligations 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.

It is the overall relationship of the corporate with all of its stakeholders.

Elements of social responsibility include investment in community outreach, employee relations, creation and maintenance of employment, environmental stewardship and financial performance.

Corporate Social ResponsibilityA Growing AgendaExternal pressures for CSR

continue to grow

Numerous organizations monitor, rank, and report social performance

The legal, business and reputation risks are great for companies engaging in practices deemed unacceptable

Prevailing Justifications for CSR

Moral Obligation “Achieving commercial success in ways that honor

ethical values” Inadequate guidance to balance complex competing

social and economic interests Wide variability of personal values among managers

and stakeholders Sustainability "Meeting the needs of the present without

compromising future needs” Most effective on environmental issues where

improvements can yield immediate economic benefits In other areas, intangible long term consequences

provide a weak justification for short term costs

Prevailing Justifications for CSR(cont.) License to Operate “Building goodwill to secure the acquiescence of governments and

stakeholders” Licenses and approvals are necessary But this approach cedes control of CSR agenda to external players that do not

fully understand the company’s competitive positioning, capabilities, and operations Encourages short term, defensive, and disjointed responses to “the squeakiest

wheel” of the moment

Reputation “Enhancing reputation and brand with customers, investors, and employees” Little evidence of sustained competitive advantage Emphasizes the visible and popular rather than the social and business impact

of corporate activities

The prevailing justifications focus on the tension between business and society rather than the interdependence

Generic rationales for CSR provide little specific guidance or priorities for company actions

CSR in PracticeCompany practice on the social agenda leaves

much room for improvement– Reactive– Unfocused– Rankings oriented– PR / Corporate image drivenCSR and community issues are treated as

separate from the core business agenda

Limited measurable social impact or benefit to the business

With little business benefit, CSR initiatives are hard to sustain

Integrating Company and CommunityThere is an inevitable link between business

and society

A healthy business depends on a healthy community to create demand for its products and provide a supportive business environment

A healthy society depends on competitive companies that can create jobs, support high wages, build wealth, buy local goods, and pay taxes

There is a long-term synergy between economic and social objectives

The Concept of Shared Value Shared Value: Policies and practices that enhance

the competitiveness of a company while simultaneously advancing economic and social conditions in the communities in which it operates

Find the points of convergence between economic and social objectives, not assumed tradeoffs or the need for redistribution

– These points of convergence are growing

Achieving shared value requires new thinking, new technologies, and new approaches to management

Shared value opportunities are even greater in developing countries

Shared value applies equally to NGOs and governments

Competitive Advantage and the Value ChainCompeting in any business involv

es performing a set of discrete activities, in which competitive advantage resides

The Value Chain and Shared ValueMany activities in the value chain

touch social issues in the communities where a company operates. These social impacts can be positive or negative.

Competitiveness and the Business Environment

Creating Shared ValueWeaknesses in External Context

Every company operates in a competitive context that is inevitably affected by social and community conditions

Creating Shared ValuePrinciples Businesses cannot solve all of society’s problems,

nor bear the cost of doing so Businesses must approach the social agenda

proactively and strategically Business must address society and social issues where

they can add the most value Select the social issues that are most tightly

linked to a company’s business Reconfigure the value chain to create shared

value while reinforcing the company’s strategy Improve the economic and social context that

affects productivity and makes the business more sustainable

Build functioning clusters to create self-sustaining economic development

Creating Shared ValueNestléNestle’s approach to working with small

farmers exemplifies the symbiotic relationship between social progress and competitive advantage

In 1962, the company wanted to enter the India market, and it received government permission to build a dairy in the northern district of Moga

People were without electricity, transportation, telephone and medical care

Creating Shared ValueNestléA farmer typically owned less than five

acres of poorly irrigated and infertile soilMany kept a single buffalo cow that

produced just enough milk for their own consumption

Nestle came to Moga to build a business, not to engage in CSR

But Nestle’s value chain, derived from the company’s origins in Switzerland, depended on establishing local source of milk from a large, diversified base of small farmers

Creating Shared ValueNestléEstablishing that value chain in Moga

required Nestle to transform the competitive context in ways that created tremendous shared value for both the company and the region

Nestle built refrigerated dairies as collection points for milk in each town

Medicines and nutritional supplements were provided for sick animals, and monthly training sessions were held for local farmers

Creating Shared ValueNestléWith financing and technical

assistance from Nestle, farmers began to dig previously unaffordable deep-bore wells

When Nestle’s milk factory first opened, only 180 local farmers supplied milk

Today, Nestle buy milk from more than 75,000 farmers in the region

The death rates of calves has dropped by 75%

Creating Shared ValueNestléToday, Moga has a significantly higher

standard of living than other region in the vicinity

The increased purchasing power of local farmers has also greatly expanded the market for Nestle’s products

Nestle’s commitment to working with small farmers is central to its strategy

Its enables the company to obtain a stable supply of high quality commodities, without paying middle man

Creating Shared ValueNestléNestle’s experience in setting up

collection points, training farmers, and introducing better technology in Moga has been repeated in Brazil, Thailand, and a dozen other countries, including most recently in China

Coca Cola – a caseIn the rain-starved Wada taluk of Thane

district of Maharashtra were its bottling plant is located, Coca Cola has been harvesting rain water since 2003 to recharge ground water and has been supplying water to people in summer, in addition to instituting water supply schemes in some villages

All of these CSR efforts of the company have been integrated with its business strategy and have helped it to earn goodwill of village folks, apart from reducing absenteeism at the work place

Implementing Shared ValueTreat as a core business

functionPartnership modelCollaboration with cluster

institutionsExplicit goals and reporting

The Moral Purpose of Business The most important thing a corporation can do for society is

to contribute to a prosperous economy – Business has no need to be defensive about its role However, corporations depend on a healthy society to

sustain Competitiveness Companies have the tools, capabilities, and resources to

have a major impact on social issues Each company should identify the particular set of

societal problems that it is best equipped to help resolve, and from which will arise the greatest long term synergy with its business

Addressing these issues using the principles of shared value will lead to self-sustaining solutions

Businesses are invaluable strategic partners for NGO’s, government and other institutions to achieve society’s most cherished aims

There are several advantages to corporations when they exhibit a sense of CSR and implement it, such as:

1.Improved financial performance

2.Enhanced brand image and reputation

3.Increased sales and customer loyalty

4.Increased ability to attract and retain employees

5.Reduced regulatory oversight

6.Innovation and learning

7.Risk management

8.Easier access to capital

9.Reduced operating costs

Advantages of Corporate Social Responsibility

The International Chamber of Commerce recommends the following nine steps to attain Corporate Social Responsibility:

1. Confirm CEO/Board commitment to prioritize responsible business conduct

2. State company purpose and agree on company values

3. Identify key stakeholders

4. Define business principles and policies

Steps to Corporate Social Responsibility

5. Establish implementation procedures and management systems

6. Benchmark against selected external codes and standards

7. Set up internal monitoring

8. Use language that everyone can understand

9. Set pragmatic and realistic objectives.

Steps to Corporate Social Responsibility(Contd.)

CSR and strategy: corporate social responsiveness

Corporate social responsiveness refers to the capacity of a corporation to respond to social pressures (Frederick 1994)

4 ‘philosophies’ or strategies of social responsiveness (Carroll 1979)◦Reaction◦Defence◦Accommodation◦Proaction

• The Caux Round Table (CRT)

• Organization for Economic Cooperation and Development (OECD)

• United Nations Global Compact

• Asian-Pacific Economic Cooperation (APEC) Business Code of Conduct

• The Global Reporting Initiative (GRI)

EXTERNAL STANDARDS ON CSR

• AA1000 Accountability

• Social Accountability 8000

• Principles for Global Corporate Responsibility

• The Global Sullivan Principles

• The Keidanren Charter for Good Corporate Behaviour

EXTERNAL STANDARDS ON CSR

Indian corporations consider business ethics, compliance with regulatory requirements and consistency in value delivery as the three most important factors that impact their social reputation.

INDIA ON THE ETHICAL/CSR MATRIX

Many global survey has revealed that three of the most important factors that impact social reputation of corporation are : ◦Business ethics, ◦compliance with regulatory requirement and ◦consistency in value delivery

Only 12.4% of Indian companies pursue strategic philanthropy as compared to 48% of the multinational

Charity is pursued by 35% of India companies and 62% of multinationals

Wider adoption of CSR in Indian companies will be enabled by:

• Provision of tax, duties and custom benefits.

• Inclusion of CSR performance of promoters as a parameter in according fast track clearance to projects.

• Decreased government interventions.

• Development guidelines on estimation of socio-economic impacts.

INDIA ON THE ETHICAL/CSR MATRIX (Contd.)

There is a clear need for

Transition from the present compliance centric approach to the new paradigm

Creation of an enabling environment and an array of support measures.

Business schools teaching CSR to facilitate this process

Industry associations to share experiences and reward best practice

Need to incorporate public policies into the Indian CSR.

International agencies to share cross-country experience.

Future of Indian CSR

Survey: India’s Companies Partnering with NGOs for CSRSixty seven per cent of India's

domestic companies have chosen non-government organisations (NGOs) as partners to undertake their Corporate Social Responsibility (CSR) projects,

while 58 per cent prefer government departments for the spread of CSR obligations, ◦Results of a survey by the Associated

Chambers of Commerce and Industry of India (Assocham).

The study added 37 percent of the firms had a well-structured foundation for implementing their CSR,

while 58 percent domestic companies had formed a separate department to implement CSR.

Twenty one percent of companies have come up with a separate CSR report, the survey found,

while only 8 per cent reported their CSR activities in their annual report.  ◦ That's substantially lower than the

rate for most international firms, the report noted.

"Some companies chose to narrow their focus on a few thematic areas, other companies took a broader view and undertook a large scope of areas to focus on," said the report. 

"Of the 24 cases analysed, it was found that there were as many as 16 companies focusing on 3-5 thematic areas, whereas four companies catered to 1-2 thematic areas of work and remaining stuck four to six or more thematic areas."

Govt Mulls Making CSR tradeable(18th Feb. 2010)First Efforts should be to identify a method

to quantify CSR activities, and then should debate the possibility of establishing a CSR exchange to deal in CSR credits

Need to integrate CSR as an ethical way of doing business and making profits

CSR is about the way we conduct our business, and not about keeping something apart for community welfare….if there is a business that is inherently destructive and unwholesome, a way has to be found to offset the negativity of that business”

“India needs not just growth, but inclusive growth and the corporate sector is increasingly concerned with and supportive of inclusive growth as much an economic imperative as it is socially desirable” FICCI president Harsh Pati Singhania said

Trading of CSR would be an incentive for companies to actively look at such programmes (D S Rawat, secretary general of Assocham)

There was a need to move CSR activities from the backburner of “Cheque book philanthropy” to mainstream business (Rajashree Birla, chairperson of FICCI Aditya Birla CSR centre for excellence

Institute of Chartered Accountants of India is working on a new set of rules on CSR, making it must for companies to report on social, environment and economic initiative