Corporate Social Responsibility: Meaning, Definitions,

CSR denotes the way the companies integrate the general, social, environmental and
economic concerns of the society into their own values, strategies and operations in a
transparent and accountable manner and thereby contribute to the creation of wealth and
improvement in the standard of living of the society at large.

What is CSR, or Corporate Social Responsibility? CSR encompasses all the practices put in
place by companies in order to uphold the principles of sustainable development. And what
does it mean to be a sustainable or responsible organization? It means that companies need to
be economically viable, have a positive impact on society, and respect and preserve the
environment.

According to Bowen (1953), CSR is defined as ‘the obligation of businessmen to pursue those
policies, to make those decisions or to follow those lines of action which are desirable in
terms of objectives and values of society’.

Scope of Corporate Social Responsibility:

1. Environment:
This area involves the environmental aspects of production,
covering pollution control in the conduct of business
operations, prevention or repair of damage to the
environment resulting from processing of natural resources
and the conservation of natural resources.
Corporate social objectives are to be found in the abatement
of the negative external social effects of industrial
production, and adopting more efficient technologies to
minimize the use of irreplaceable resources and the
production of waste.

2. Energy:
This area covers conservation of energy in the conduct of business
operations and increasing the energy efficiency of the company’s
products.
3. Fair Business Practices:
This area concerns the relationship of the company to special
interest groups.
In particular it deals with:
i. Employment of minorities
ii. Advancement of minorities
iii. Employment of women
iv. Employment of other special interest groups
v. Support for minority businesses
vi. Socially responsible practices abroad.
4. Human Resources:
This area concerns the impact of organizational activities on the
people who constitute the human resources of the organization.
These activities include:
i. Recruiting practices
ii. Training programs
iii. Experience building -job rotation
iv. Job enrichment
v. Wage and salary levels
vi. Fringe benefit plans
vii. Congruence of employee and organizational goals
viii. Mutual trust and confidence
ix. Job security, stability of workforce, layoff and recall practices
x. Transfer and promotion policies
xi. Occupational health
5. Community Development:
This area involves community activities, health-related activities,
education and the arts and other community activity disclosures.
6. Products:
This area concerns the qualitative aspects of the products, for
example their utility, life- durability, safety and serviceability, as
well as their effect on pollution. Moreover, it includes customer
satisfaction, truthfulness in advertising, completeness and clarity
of labelling and packaging. Many of these considerations are
important already from a marketing point of view. It is clear,
however, that the social responsibility aspect of the product
contribution extends beyond what is advantageous from a
marketing angle.
The evolution of CSR concept can be summarized as follows:
(a) The first approach originates in classical economic theory as expressed in the hypothesis
that the firm has one and only one objective, which is to maximize profit. By extension,
the objective of a corporation should be to maximize shareholders’ wealth. It is asserted
that in striving to attain this objective, within the constraint of the existing legal and
ethical framework, business corporations are acting in the best interests of the society at
large.

(b) The second approach developed in the 1970s, and recognizes the significance of social
objectives in relation to the maximization of profit. In this view, corporate managers
should make decisions which maintain an equitable balance between the claims of
shareholders, employees, customers, suppliers and the general public. The corporation
represents, a coalition of interests, and the proper consideration of the various interests of
this coalition is the only way to ensure that the corporation will attain its long-term profit
maximization objective.

(c) The third view regards profit as a means to an end and not as an end in itself. In this
view, ‘the chief executive of a large corporation has the problem of reconciling the
demands of employees for more wages and improved benefit plans, customers for lower
prices and greater values, shareholders for higher dividends and greater capital
appreciation; all within a frame work that will be constructive and acceptable to society’

Accordingly, organizational decisions should be concerned with the selection of socially

responsible alternatives. Instead of seeking to maximize profit generally, the end result
should be satisfactory level of profit which is compatible with the attainment of a range of
social goals. The change from the second to the third approach to social responsibility is
characterized as a move from a concept of the business corporation based on shareholders’
interest to one which extends the definition of ‘stakeholder’.
The former concept views the business enterprise as being concerned with making profits for
its shareholders and treats the claims of other interested groups, such as customers,
employees and community, as constraints on this objective. The latter concept acknowledges
that the business enterprise has responsibility to all stakeholders, that is, those who stand to
gain or lose as a result of the firm’s activities.

There are a number of common objectives which express the

expectations of a large company.
(a) Rebuilding of public trust and confidence by increased transparency in its financial as
well as non- financial reporting and thereby increasing the shareholder value.
(b) Establishing strong corporate governance practices to enhance the brand reputation of the
company.

(d) Giving adequate support to the health, safety and environment protection policies of the
company both within the manufacturing operations as well as while dealing with
outsiders.
(e) Making substantial improvement in its relationship with the labour force thereby showing
its concern for human rights and making it known as an ideal employer.
(f) Contributing to the development of the region and the society around its area of
operation.
(g) Addressing the concerns of its various stakeholders in a balanced way so as to
maintaining a strong market position.
The corporate sector will have to integrate the concepts of CSR and sustainability with their
business strategy.

Arguments for CSR: Moral Argument

CSR is an argument of moral reasoning that reflects the relationship between
a company and the society within which it operates. It assumes businesses
recognize that for-profit entities do not exist in a vacuum and that their ability
to operate and achieve ongoing success comes as much from societal
resources (e.g., infrastructure, rule of law) and consent (e.g., social contract)
as from factors that are internal to the firm. CSR emerges from the interaction
and interdependence between for-profits and society. It is shaped by
individual and societal standards of morality, ethics, and values that define
contemporary views of human rights and social justice. Thus, to what extent
does a business have an obligation to re-pay the debt it owes society for its
continued business success?

On the one hand, it can be argued that business success depends on the
society that provides the infrastructure, employees, consumers, and other
elements that are central to success. On the other hand, if a business must
fully reflect societal costs, it may not be able to compete—especially with firms
in other societies that may be able to externalize their costs (such as dumping
unfiltered pollution into local waterways).
Arguments for CSR: Rational
Argument
CSR is a rational argument that focuses on the benefits to performance of
avoiding external constraints. Adopting the path of least resistance with regard
to issues of concern makes common and business sense. In today’s
globalized world, where individuals and organizations are empowered to enact
change, CSR represents a means of anticipating and reflecting societal
concerns to minimize operational and financial sanctions.

The loss of moral legitimacy can lead to the countervailing power of social
activism, restrictive legislation, or other constraints on the firm’s freedom to
pursue its economic and other interests. Violations of ethical and discretionary
standards are not just inappropriate; they present a rational argument for
CSR. Because societal sanctions—such as laws, fines, prohibitions, boycotts,
or social activism—impact the firm’s strategic goals, efforts to comply with
societal expectations are rational, regardless of moral arguments. Where
compliance with moral expectations is based on highly subjective values, the
rational argument rests on sanction avoidance.

Ultimately, the Iron Law of Social Responsibility suggests that in a free society
discretionary abuse of societal responsibilities leads, eventually, to mandated
solutions. That is, in a democratic society, power is taken away from those
who abuse it.

Arguments for CSR: Economic

Argument
CSR is an argument of economic self-interest for businesses. CSR adds value
because it allows companies to reflect the needs and concerns of their various
stakeholder groups. By doing so, the firm is more likely to create greater value
and, as a result, retain the loyalty of those stakeholders. Simply put, CSR is a
way of matching corporate operations with stakeholder values and
expectations that are constantly evolving.

Summing the moral and rational arguments for CSR leads to an economic
argument. To incorporate CSR into operations offers a potential point of
differentiation and competitive market advantage upon which future success
can be built, besides avoiding moral, legal, and other sanctions. This
perspective argues that social contribution can be profitable and can increase
competitive advantage, supporting CSR. In summary, the economic argument
contains all the factors explaining why CSR is of strategic importance for
businesses today.

Carroll’s Model of CSR ((Pyramid of CSR)

THE PYRAMID OF CORPORATE SOCIAL RESPONSIBILITY

For CSR to be accepted by a conscientious business person, it should be framed in such a

way that the entire ranges of business responsibilities are embraced.

In this model Carroll suggests four layers of responsibilities are involved in CSR;
economic, legal, ethical & philanthropic

1. Economic
2. Legal
3. Ethical
4. Philanthropic.

Furthermore. these four categories or components of CSR might be depicted as a pyramid.

To be sure. ail of these kinds of responsibilities have always existed to some extent. but it
has only been in recent years that ethical and philanthropic functions have taken a
significant place. Each of these four categories deserves closer consideration.

1. Economic Responsibilities:
As a fundamental condition or requirement of existence, businesses have an economic
responsibility to the society that permitted them to be created and sustained. At first, it may
seem unusual to think about an economic expectation as a social responsibility, but this is
what it is because society expects, indeed requires, business organizations to be able to
sustain themselves and the only way this is possible is by being profitable and able to
incentivize owners or shareholders to invest and have enough resources to continue in
operation. In its origins, society views business organizations as institutions that will produce
and sell the goods and services it needs and desires. As an inducement, society allows
businesses to take profits. Businesses create profits when they add value, and in doing this
they benefit all the stakeholders of the business. Profits are necessary both to reward
investor/owners and also for business growth when profits are reinvested back into the
business. CEOs, managers, and entrepreneurs will attest to the vital foundational importance
of profitability and return on investment as motivators for business success. Virtually all
economic systems of the world recognize the vital importance to the societies of businesses
making profits. While thinking about its’ economic responsibilities, businesses employ many
business concepts that are directed towards financial effectiveness – attention to revenues,
cost-effectiveness, investments, marketing, strategies, operations, and a host of professional
concepts focused on augmenting the long-term financial success of the organization. In
today’s hypercompetitive global business environment, economic performance and
sustainability have become urgent topics. Those firms that are not successful in their
economic or financial sphere go out of business and any other responsibilities that may be
incumbent upon them become moot considerations. Therefore, the economic responsibility
is a baseline requirement that must be met in a competitive business world.
2. Legal Responsibilities:
Society has not only sanctioned businesses as economic entities, but it has also established
the minimal ground rules under which businesses are expected to operate and function.
These ground rules include laws and regulations and in effect reflect society’s view of
“codified ethics” in that they articulate fundamental notions of fair business practices as
established by lawmakers at federal, state and local levels.
Businesses are expected and required to comply with these laws and regulations as a
condition of operating. It is not an accident that compliance officers now occupy an
important and high level position in company organization charts. While meeting these legal
responsibilities, important expectations of business include their
 Performing in a manner consistent with expectations of government and law
 Complying with various federal, state, and local regulations
 Conducting themselves as law-abiding corporate citizens
 Fulfilling all their legal obligations to societal stakeholders
 Providing goods and services that at least meet minimal legal requirements
 Being good corporate citizens by doing what is expected morally or ethically
 Recognizing that business integrity and ethical behaviour go beyond mere
compliance with laws and regulations
3. Ethical Responsibilities:
The normative expectations of most societies hold that laws are essential but not sufficient.
In addition to what is required by laws and regulations, society expects businesses to
operate and conduct their affairs in an ethical fashion. Taking on ethical responsibilities
implies that organizations will embrace those activities, norms, standards and practices that
even though they are not codified into law, are expected nonetheless. Part of the ethical
expectation is that businesses will be responsive to the “spirit” of the law, not just the letter
of the law. Another aspect of the ethical expectation is that businesses will conduct their
affairs in a fair and objective fashion even in those cases when laws do not provide guidance
or dictate courses of action.
Thus, ethical responsibilities embrace those activities, standards, policies, and practices that
are expected or prohibited by society even though they are not codified into law. The goal of
these expectations is that businesses will be responsible for and responsive to the full range
of norms, standards, values, principles, and expectations that reflect and honor what
consumers, employees, owners and the community regard as consistent with respect to the
protection of stakeholders’ moral rights. The distinction between legal and ethical
expectations can often be tricky. Legal expectations certainly are based on ethical premises.
But, ethical expectations carry these further. In essence, then, both contain a strong ethical
dimension or character and the difference hinges upon the mandate society has given
business through legal codification.
While meeting these ethical responsibilities, important expectations of business include
their
 Performing in a manner consistent with expectations of societal mores and ethical
norms
 Recognizing and respecting new or evolving ethical/ moral norms adopted by
society
 Preventing ethical norms from being compromised in order to achieve business
goals
4. Philanthropic Responsibilities:
Corporate philanthropy includes all forms of business giving. Corporate philanthropy
embraces business’s voluntary or discretionary activities. Philanthropy or business giving
may not be a responsibility in a literal sense, but it is normally expected by businesses today
and is a part of the everyday expectations of the public. Certainly, the quantity and nature of
these activities are voluntary or discretionary. They are guided by business’s desire to
participate in social activities that are not mandated, not required by law, and not generally
expected of business in an ethical sense.
Having said that, some businesses do give partially out of an ethical motivation. That is, they
want to do what is right for society. The public does have a sense that businesses will “give
back,” and this constitutes the “expectation” aspect of the responsibility. When one
examines the social contract between business and society today, it typically is found that
the citizenry expects businesses to be good corporate citizens just as individuals are. To fulfill
its perceived philanthropic responsibilities, companies engage in a variety of giving forms –
gifts of monetary resources, product and service donations, volunteerism by employees and
management, community development and any other discretionary contribution to the
community or stakeholder groups that make up the community.

In summary, the four part CSR definition forms a conceptual framework that includes the
economic, legal, ethical, and philanthropic or discretionary expectations that society places
on businesses at a given point in time. And, in terms of understanding each type of
responsibility, it could be said that the economic responsibility is “required” of business by
society; the legal responsibility also is “required” of business by society; the ethical
responsibility is “expected” of business by society; and the philanthropic responsibility is
“expected/desired” of business by society (Carroll 1979, 1991). Also, as time passes what
exactly each of these four categories means may change or evolve as well.

Strategy for CSR

The CSR assessment generates a base of information the firm can use to develop a CSR
strategy. A CSR strategy is a road map for moving ahead on CSR issues. It sets the firm’s
direction and scope over the long term with regard to CSR, allowing the firm to be successful
by using its resources within its unique environment to meet market needs and fulfill
stakeholder expectations. A good CSR strategy identifies the following.....
• Overall direction for where the firm wants to take its CSR work;
• The stakeholders and their perspectives and interests;
• A basic approach for moving ahead;
• Specific priority areas;
• A time line for action, responsible staff, and immediate next steps; and
• A process for reviewing and assuring outcomes.

How to develop a CSR strategy the following six steps comprise a suggested way to develop
a CSR strategy:

1. Build support with the CEO, senior management and employees

2. Research what others (including competitors) are doing and assess the value of
recognized CSR instruments;
3. . Prepare a matrix of proposed CSR actions;
4. Develop options for proceeding and the business case for them; and
5. Decide on direction, approach, boundaries and focus areas.

Globalization and CSR