2. Why Social Responsibility of Business?
• Accountability to Society
In a democratic society any kind of enterprise exists for
the sake of society. Industries are allowed to exist because
they are perceived by the public to be useful in the
attainment of personal, social and material goals of
people. E.g. TISCO employees and general public
protested in 1977 when it was attempted to be
nationalized.
• Corporations’ Debt to Society
A corporation has to behave as a good citizen. The
corporation has to donate generously towards causes of
public welfare and must get itself directly involved in
social welfare programmes.
3. 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.
4. Definitions of CSR
The social responsibility of business will cover the
economic , legal, ethical and environmental
expectations society has placed on organizations at a
given time. This could be explained by the following
equation:
Total Corporate Social Responsibility = Economic
Responsibilities + Legal Responsibilities + Ethical
Responsibilities + Philanthropic Responsibilities
6. Definitions of CSR
The European Model: It is more focused on operating
the core business in socially responsible way,
complemented by investment in communities for
solid business case reasons.
• CSR becomes an integral part of the wealth creation
process- which if managed properly should enhance
the competitiveness of business and maximize the
value of wealth creation to society; and
• When times get hard there is an incentive to practice
CSR more and better.
7. Definitions of CSR
The classical economic model:
Adam Smith believed that public interest was served
best by individuals pursuing their own self-
interests.
8. Definitions of CSR
The socio-economic model: Business is seen as one
subsystem among many in a highly interdependent
society.
• It recognizes that companies have stakeholders other
than their stockholders.
• Business has an obligation to respond to the needs of
all stakeholders while pursuing its profit.
• A stakeholder audit allows companies to
systematically identify all the parties that could
possibly be impacted by the company’s performance.
9. Various definitions of CSR
It is an attempt made by companies to be voluntary responsible
to ethical and social considerations.
It is legal binding for companies in India.
It is a set of obligations to pursue those policies, to make those
decisions or to follow those actions which are desirable in terms
of the objectives and values of our society.
It is the overall relationship of the corporate with all its
stakeholders.
The social responsibility of business will cover the economic,
legal, ethical and environmental expectations society has placed
an organization at a given point of time.
The socially responsible firm should strive to make profit, obey
law, be ethical and be a good corporate citizen.
CSR of business differs from society to society and it changes
over time.
10. Driving forces of CSR
Some driving forces behind the evolution of CSR are:
Concern and expectations from citizens,
consumers, public authorities and investors;
Decisions made by individuals and institutions
influenced by social criteria;
Concerns about the impact of economic activity on
the environment;
Increased transparency of business activities
because of the developments in IT.
11. Trusteeship Model:
• Trusteeship Model adopts a realistic and descriptive perspective
in viewing the current governing situation of a publicly held
corporation, drawing from the continental European
conception of the corporation as a social institution with a
corporate personality.
• Managers are trustees of the corporations. The duties of the
trustees is to sustain the corporations’ assets, including not
only the shareholders wealth but also broad stakeholder’s
value such as the skills of the employees, the expectations of the
customers and suppliers, and the company’s reputation in the
community.
• Managers have to balance the conflicting interest of current and
future stakeholders and to develop company’s capacity in long
term perspective.
12. Social entity Theory
• The social entity conception of the corporation
regards the company not as a private association
united by individual property rights, but as a
public association constituted through
political and legal processes and as a social
entity for pursuing collective goals with public
objectives.
• The corporations identified executives are
representatives and guardians of all corporate
stakeholder’s interests.
13. The Pluralistic Model:
• This model supports the idea of multiple interests of
stakeholders, rather than shareholder interest alone.
• It argues that the corporation should serve and
accommodate wider stakeholder interests in order to
make the corporation more efficient and more
legitimate.
• Stakeholders who make firm specific investments and
contributions and bear risks in the corporation should
have residual claims and should participate in the
corporate decision making to enhance corporate
efficiency.
14. What are Corporations Expected to Do?
• Corporations need to erase the perception of the
public that they accumulate wealth for their own
cause;
• They should participate in social welfare projects,
which will improve their image in public esteem;
• They also have to make quality products and stick to
delivery schedules while importing and exporting
goods; and
• They should create employment opportunities for the
disadvantaged.
16. Models of CSR
Ethical model: examples of this model are found in the Tatas, Birla's,
Infosys, Dr.Reddy’s Labs, Reliance Industries who have cash for social
welfare projects, community investment trusts and schools.
Statist Model: The PSUs provide housing and schools to workers.
Examples are Bhilai and Bokaro steel plant. The inspiration has been
derived from Labour laws and management principles.
Liberal approach: A company’s responsibility lies in improving the
economic bottom-line and increasing the wealth of the shareholders. It
is sufficient for the corporate to obey law and generate wealth, which
can be directed towards social ends through fiscal policy and charitable
choices.
Stakeholder Model: Companies like Nike have been sourcing raw
material from the developing countries. CSR means ethical and
environmental friendly practices. Companies should stick to the triple
bottom line of economic, social and environmental
responsibility towards workers, shareholders and community.
17. Advantages of Corporate Social Responsibility
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
18. SCOPE OF CSR
Understanding social responsibility of business
Protecting and promoting stakeholders’ interests
To consumers and community
To employees
To owners and inter-business establishments
Promotion of common welfare programmesfor the
benefit of the poor and indigent public.
Philanthropy
Good corporate governance
19. SCOPE OF CSR
Render social service
Abiding by rules and regulations
Creation of wealth
Ensure ecological balance
Focus on human element
Improve productivity
Sponsor social and charitable causes
Supplement state efforts
20. CSR LAWS IN INDIA
The Companies Act, 2013, a successor to The Companies Act,
1956, made CSR a compulsory act. CSR is compulsory for all
companies- government or private or otherwise, provided they
meet any one or more of the following fiscal criterions[9]:
The net worth of the company should be Rupees 500 crores
or more
The annual turnover of the company should be Rupees 1000
crores or more
Annual net profits of the company should be at least Rupees
5 crores.
If the company meets any one of the three fiscal conditions as
stated above, they are required to create a committee to enforce
its CSR mandate, with at least 3 directors, one of whom should
be an independent director.
The aforementioned committee must regularly assess the net
profits earned by the company and ensure that atleast 2
percent of the same is spent on CSR related activities.
21.
22. Illustrations of CSR activities
Asian paints funded a large scale community development
project to enable farmers to use local resources.
BHEL has contributed to development of quality of life in
rural areas.
Britannia industries promote sports like tennis
Brook Bond works for animal welfare
Dr Reddy’s lab promotes education, livelihood and
community development
Escorts ltd has worked for farm mechanization, agriculture
development etc.
23. Illustrations of CSR activities
Ford India Ltd runs education and training
programmes in local schools near factory
Godrej group focuses on environment and
conservation.
Hindustan lever focuses on girl child education.
ICICI bank focuses on elementary education.
Infosys provides assistance to social development , art,
culture, school etc.
ITC Ltd is socially active in rural development.
24. Sustainable development
Sustainable development is development that meets the
needs of the present without compromising the ability of
future generations to meet their own needs.“
Sustainable Construction
Building homes, offices, and other structures that are energy
efficient and that incorporate renewable and recycled
resources is a way to incorporate sustainable
development into residential and commercial construction.
25. The 17 sustainable development goals (SDGs) to transform
our world:
GOAL 1: No Poverty
GOAL 2: Zero Hunger
GOAL 3: Good Health and Well-being
GOAL 4: Quality Education
GOAL 5: Gender Equality
GOAL 6: Clean Water and Sanitation
GOAL 7: Affordable and Clean Energy
GOAL 8: Decent Work and Economic Growth
GOAL 9: Industry, Innovation and Infrastructure
GOAL 10: Reduced Inequality
GOAL 11: Sustainable Cities and Communities
GOAL 12: Responsible Consumption and Production
GOAL 13: Climate Action
GOAL 14: Life Below Water
GOAL 15: Life on Land
GOAL 16: Peace and Justice Strong Institutions
GOAL 17: Partnerships to achieve the Goal
26. Triple bottom Approach
The triple bottom line (TBL) is a framework or theory that recommends that
companies commit to focus on social and environmental concerns just as they
do on profits. The TBL posits that instead of one bottom line, there should be
three: profit, people, and the planet.
A TBL seeks to gauge a corporation's level of commitment to corporate social
responsibility and its impact on the environment over time.
In 1994, John Elkington—the famed British management consultant
and sustainability guru—coined the phrase "triple bottom line" as his way of
measuring performance in corporate America.
The idea was that we can manage a company in a way that not only earns financial
profits but which also improves people’s lives and the planet.
27. 3 P’s of CSR
Profit: The traditional measure of corporate profit—the profit and loss
(P&L) account.
People: Measures how socially responsible an organization has been
throughout its operations.
The Planet: Measures how environmentally responsible a firm has
been.
By focusing on these three interrelated elements, triple-bottom-line
reporting can be an important tool to support a firm's sustainability
goals.
