Article CSR

Corporate Social Responsibility: An Elixir for Business or a Compulsive Concept

In recent times, business at the corporate level has seen a substantial tilt towards the
societal responsibilities and the urge and necessity of being perceived as a good corporate citizen
involved in sustainable, responsible business practices. This article endeavors to understand the
wide spectrum of the still evolving concept and approaches towards Corporate Social
Responsibility (CSR). At the same time, it also tries to analyze the new thinking, which believes
that what Milton Friedman thought about its non-relevance is not relevant in the present times of
global economy and that CSR and the core economic profit-oriented goals are not contradictory;
they more or less compliment each other. It is established that CSR programs are not reckless
and illogical but are implicit business models, which minimize risk and maximize opportunities
leading to long-term rewards and benefits.
I think that today, more so than ever corporate responsibility is the best strategic as well as
financial path that most businesses can follow. For most businesses there are both compelling
reasons to be responsible and compelling statistics that validate that responsible businesses do
better according to traditional financial merits. Of course how you define `responsible' is
somewhat of a conundrum.
– Jeffrey Hollender
Executive Chairperson,
SEVENTH GENERATIONS INC.
It is very interesting to note as to how Corporate Social Responsibility (CSR) has, in recent
times, generated so much debate and interest with the rise in the popularity of ethical
consumerism. What Jeffrey Hollender, the eminent Management Consultant, has expressed in the
above quote, very correctly explains the path most of the global corporations have begun to
deliberately embrace as part of a smart business strategy.
Though CSR may look intriguing to traditional business minds, as even the famous Noble
Laureate in Economics, Milton Friedman, once stated that the sole aim of a business is and
should be the maximization of shareholder's value. Social missions, according to him, are the
responsibility of individuals, social organizations and governments.
While it remains a fact that the aim of business is to maximize the shareholders' value but the rest
of what Friedman says, has been turned on its head in these times, with CSR becoming a catalyst
for the growth of a corporation.
To understand the so-called intrigue, lets first understand in simple terms, as to what CSR means.
CSR, commonly also known as Corporate Citizenship, Corporate Responsibility or Corporate
Responsible Business is a form of self-regulation and social commitment being imbibed into the
Corporate Business Model.
CSR sets a method or approach of systemic development through alliances and partnership,
wherein the core of the solution, lays an intrinsic coming together of all the stakeholders in
charting out a course for an equitable and justified businesses social order, without
compromising on the corporations' objectives of maximizing the shareholders' value.
To elaborate further it would mean a policy, where businesses take the responsibility for the
effect their activities have on communities, consumers, environment and the public sphere as a
whole. Moreover, it would also mean voluntarily contributing towards public interest by
indulging in community development and growth along with the inclusion of this approach in the
corporate decision-making strategy. CSR earlier regarded as the responsibility and concern of
philanthropic companies and NGOs, etc., has lately become an important strategic model for
many organizations bordering on risk management initiatives.
Relevance and Justification of Corporate Social Responsibility
With diminishing business boundaries across the world and the concept of globalization and
universal expansion on the forefront, the consideration of image and reputation has grown among
the organizations. Consumers and other social organizations across the world have become aware
and more demanding in terms of information regarding the conditions in which the products or
services are generated, coupled with the sustainability impact thereof. Responsible companies
are beginning to enjoy the advantage and rewards of being sensitive to CSR.
An organization's image and reputation that takes several years of hard work to cultivate can be
ruined in days through unregulated, untoward accidents and scandals. Managing such risk
remains a core issue for many companies. A genuine effort in playing straight and having a good
CSR track record with the right check and balances more or less insulates the companies from
such risk factors.
Companies have started to realize that they need to operate in a way which enhances their
economic growth, increases their competence, and, at the same time, ensures environmental
protection and promotion of social responsibility, including consumer interest.
Realizing the importance of CSR in a proactive step, the European Commission kick started the
launch of European Sustainable and Responsible Investment Forum (EUROSIF) in the year
2001. The basic aim was to act as the unifying authority for the various forums in countries like
Switzerland, France, Italy, Luxembourg, Netherlands, Germany and UK. EUROSIF encourages
the shareholders for socially responsible investment and guides them in the CSR policies.
It is very clear that gradually the concept of CSR will play even a bigger role in the world of
business. Data shows that in the last decade those organizations which have adhered to and have
an ever-evolving philosophy of CSR are the ones who have grown and expanded their business
in an impressive manner with an ever-increasing clout and influence. Those institutions and
organizations which have tended to ignore CSR as a whole are finding it increasingly difficult to
mold and shape themselves to the requirements and demands of the modern times.
In the last few years, many institutions have started to generate and develop their own corporate
policies and code of conduct, which they have applied in their business operations all over the
world. They also tend to take into account the culture and situation of the places they operate in
and mold their CSR principles accordingly.
As a KPMG-CSR survey has revealed, there is a balanced range of motivating factors and
drivers for CSR, led by economic considerations and followed by ethical considerations,
innovation and learning, employee motivation, risk management, access to capital, reputation,
market position, supplier relations, cost saving, relations with government authorities, etc. (Table
1). In India, it has been found that the most important driver for CSR is the keenness and urge
exhibited by corporates to be good corporate citizens. It is anybody's case that an immaculate
CSR projection is directly linked to enjoying excellent brand equity in the market. It becomes a
clear unsaid benchmark looked upon by possible investors, shareholders, customers, and
legislators, leading to enhanced corporate reputation and a kind of risk shield.

Corporate managements have started to realize that accountability and responsibility go together.
They are accountable to all the stakeholders, of which society as a whole is a very important part.
As such, accountability towards stakeholders automatically means commitment towards the
CSR. With large business expansions and the concept of global citizens coming into vogue, it
became very important to see that in economic terms some of the organizations became bigger
and larger than even some nations. In a survey in 1998 by Fortune magazine, it was found that
out of the 100 top and largest economies, 51 were corporations and not nations. Interestingly,
General Motor's (GM) economy was larger than Denmark and Toyota of Japan was bigger than
that of South Africa. It is obvious that with greater size and expansion comes greater
responsibilities and social obligations. Companies, like GM and Toyota, were quick to
understand this and have been doing a splendid job of CSR in their areas of operation across the
world.
Over the years, several theories have been formulated justifying the importance of corporates
being involved in the promotion of social welfare of society as a whole.
In Trusteeship Model, there is a realistic and natural perspective with the corporation as a social
institution having a corporate personality. In this, the fiduciary duty of the trustees is to sustain
the assets of the corporation. This includes the shareholders' wealth as well as the stakeholders
value such as the skills of the constituents, the expectations of the customers, clients, suppliers,
and most important of all, the reputation in the international community. In an effort to establish
the trusteeship model, it is imperative that statutory changes like ensuring the power of
independent directors to nominate directors and select and appoint the CEO for a fixed term, etc.,
be made in governance.
In the Pluralistic Model, it is emphasized that stakeholder's management increases the growth,
profitability and stability of the company. It recommends that corporate governance may not
completely move away from ownership rights but that such rights cannot be only claimed by
shareholders. Ownership rights can also be claimed by other stakeholders like employees and
society representatives. Stakeholders can participate in decision making of the company and
contribute towards its growth and efficiency.
The Social Entity Theory views the corporation as a social institution in society, based on the
grounds of fundamental value and moral order of the community. It regards the company, not as
a private association having individual rights, but as a public association formed through political
and legal processes and as a social entity for pursuing collective goals with community
objectives.
In response to recent and ongoing corporate scandals, environmental disasters, child labor
violations, and dangerous work environments, the International Organization for Standardization
(ISO) launched the development of its first standard on social responsibility. Known as ISO
26000, the standard will provide guiding principles and offer direction for organizations that
recognize the strong connection between results and responsibilities. With its history of
involvement in standards development activities, the American Society for Quality (ASQ) was
selected to create and administer the Technical Advisory Group (TAG) serving as the US
contingent in developing the international standard for CSR.
Corporate Social Responsibility in Relation to Indian Corporates
CSR, speaking purely inn technical terms, is still in its infancy in India, but the concept as such
and its core thinking is not new to the country. Companies, like the Tata and Birla, for the last
many decades, have been promoting similar causes at their own initiative. They have made the
approaches of CSR an integral part of their business model. Long before the concept of CSR
gained prominence in corporate circles, these companies have been intensely involved in social
development activities and movement in the places where they have their presence.
It has been perhaps from 1990 onwards that, technically speaking, CSR gained prominence in
India. The profound and far-reaching changes on corporate India, with the opening up of the
economy less red tapism and central controls, led to lot of restructuring in strategic business
models complying with world standards. CSR started to become an important part of the
universal strategy of the Indian corporate wanting to take their businesses to new heights at the
global level.
Earlier, the approach involved was limited to financial donations for social causes dear to their
heart. Now, the approach is more organized in reaching out to the community. Apart from
individual efforts, the companies, as part of the strategy, are coordinating with social
organizations to take up projects like specialized medical care, blood banks, labs, slum
development programs, education endeavors, environment-friendly projects, etc.
Some of the pioneering works being done as part of the CSR exercise in Indian companies is
really of the highest standards (Table 2). In spite of being a vast country, such programs may fall
short of what might be required in India and all the organizations, as such might not be spending
even a minor proportion of their turnover on these activities. But, at the same time, at least some
genuine efforts need to be appreciated as the following examples illustrate:

ITC Ltd. has been very actively involved in the rural sector, apart from its contribution in
pollution control, agriculture, etc. ITC Chaupals have played a big role in connecting the rural
farmers with the latest farming technology and spreading awareness about the latest
developments.
Birla Group runs as many as 15 hospitals in India; includes adult education and schools
conducting as many as 78 schools all over India; rehabilitates handicapped persons having
touched more than 5,000 physically challenged individuals. More than 1,00,000 patients have
been examined under the Group's medical programs. Over 15,000 children, along with 2,000
pregnant women, have been immunized, over 500 cataract patients operated upon, 2,000 TB
patients provided medical care and 100 leprosy-afflicted attended to, free of cost, etc.
Tata Group has been the torch bearers in the field of CSR. Nearly 7,000 villages around
Jamshedpur and Orissa benefit from development programs run by the Tata Steel Rural
Development Society (TSRDS). Programs of TSRDS cover issues, like education, irrigation,
afforestation, adult literacy, vocational training, handicrafts and rehabilitation of the handicapped
persons. The Community Development and Social Welfare Department (CDSW) at Tata steel
carries out medical and health programs, blood donation drives, mass screening of tuberculosis
patients immunization camps and drug de-addiction.
 Infosys Technologies, the company which had put India on the road map of being a super
power in the field of software development, has shown the same commitment through its Infosys
Foundation. Narayan Murthy has been very vocal in his dreams of wanting to make India a
power to reckon with in advances in sciences and India becoming an education hub.
Public sector companies have also done their bit in the field of community developments and
related fields though they tend to keep a low profile. Engineering giants, like BHEL, have been
very proactive in making their contributions in adult education and family welfare programs.
In India, CSR initiatives have a lot to do with the corporatist belief in our culture where trust and
respect play a very important part in our lives. Respect being a total sum of two parts of
companies deliverables: Quantitative, (i.e., profitability) and Qualitative, (i.e., different areas of
social commitments).
It is very important to note that it is not a very recent phenomenon, where CSR has started to fit
into the realm of their things. Even as back as in the 1980s, Indian companies had shown the
inclination and initiative towards the nascent concept of CSR.
The leading business magazine Business World conducted a very interesting survey on The Most
Respected Companies of India in 1983. The magazine, in its report and cover feature stated that
they were surprised to see the great deal of commitments and interest amongst the corporates for
good reputation and being good corporate citizens.
The laid down parameters for corporate respect in this exercise were: ethics, talent depth, top
management leadership, belief in transparency, overall quality and CSR issues (Table 3).

The findings clearly revealed that only good financials of the company were not enough to earn
respect and trust. Respect was there not because of the company's size or image but because it
had genuine transparency, good relationship with employees, fair HR policies, stakeholders' trust
in the practices and policies, and good ethics, along with a positive contribution to society, as
part of the business model.
Conclusion
(Because) corporations must have physically impossible `endless growth' in order to survive,
Corporate Social Responsibility is a myth. The only socially responsible act that corporations
can take is to dissolve.
This quote of Adam D Sacks (He is the Director of CCC, Centre for Democracy and
Constitution. He is an authority on corporate rights, corporate responsibilities and climate
activism, but seems to be out of place in these modern times. The substantial effort and the zest
being shown by the corporates towards CSR initiatives in the recent years no doubt proves that
CSR is no more a myth.
The huge importance, of CSR is ably demonstrated by the scale, size and the frequency with
which the companies are involving themselves with the process. Though it remains a fact that
CSR still provokes skepticism in some quarters, it can be said for sure that those corporations
which have imbibed CSR as an important part of their business model have come to be
associated with accountability, value creation, transparency, and care for stakeholders coupled
with the image of caring for social values also. This has automatically given them an advantage
over their competitors and is like an investment for their future profitability.
As such, it has come to be firmly established that smart corporates can do wonders in their field
of business with correct absorption of social welfare. The realization is there that social
responsibility and the core economic profit-oriented goals are not contradictory and more or less
compliment each other.
Yes, CSR is an elixir for corporate entities and is here to stay and evolve further.
Reference # 12M-2010-03-06-01.