The voluntary compliance of social and ecological responsibility of companies is called corporate social responsibility (CSR). It is basically a concept whereby companies decide voluntarily to contribute to a better society and a cleaner environment. Corporate social responsibility is represented by the contributions undertaken by companies to society through its business activities and its social investment. This is also to connect the Concept of sustainable development to the company’s level.
Over the last few years, an increasing number of companies worldwide started promoting their corporate social responsibility strategies because the customers, the public and the investors expect them to act on sustainable as well as responsible ways. In most cases CSR is a result of a variety of social, environmental and economic pressures.
The term corporate social responsibility is imprecise and its application differs. CSR can not only refer to the compliance of human right standards, labour and social security arrangements, but also to the fight against climate change, sustainable management of natural resources and consumer protection.
The concept of CSR was first mentioned in1953 in the publication ‘Social Responsibilities of the Businessman’ by William J Bowen. However, the term CSR became popular in the 1990s, when the German Betapharm, a generic pharmaceutical company decided to implement CSR. The generic market is characterised by an interchangeability of products. In 1997 a halt in sales growth led the company’s realisation that in the generic drugs market companies could not differentiate on price or quality. This was the prelude for the company to adopt CSR as an expression of the company’s values and as a part of its corporate strategies. By using strategic and social commitment for families with chronically ill children, Betapharm took a strategic advantage.
How a company perceives its societal responsibility, depends on various factors such as the markets in which it operates its business line and its size. In recent years CSR has become a fundamental business practice and has gained much attention from the management of large international companies. They understand that a strong CSR programme is an essential element in achieving good business practices and effective leadership. Companies have explored that their impact on the economic, social and environmental sector directly affects their relationships with investors, employees and customers. Whilst so far CSR was mainly promoted by a number of large or multinational companies, it is now also becoming important to small national companies.
Shell was one of the first companies which made the experience, that early responsible action is better than later crisis management. Shell was taken by complete surprise when the Greenpeace campaign against sinking the former drill platform Brent Spar achieved its goals. There was a widespread boycott of Shell service stations. The Brent Spar affair has brought some qualitative change of attitude to Shell.
As companies face themselves in the context of globalisation, they are increasingly aware that CSR can be of direct economic value. Although the prime goal of a company is to generate profits, companies can at the same time contribute to social and environmental objectives by integrating CSR as a strategic investment into their business strategy. A number of companies with good social and environmental records indicate that CSR activities can result in a better performance and can generate more profits and growth. Research has shown that company CSR programmes influence to an extensive degree, consumer purchase decisions, with many investors ,employees are influenced in their choice of companies.
A major challenge for companies today is attracting and retaining skilled workers. There is not only an image gain for the companies using CSR, but it is also important for the employees. Within the company, socially responsible practices primarily involve employees and relate to issues such as investing in human capital, health and safety and managing change.
In India, there are an existent but small number of companies which practice CSR. This engagement of the Indian economy concentrates mainly on a few old family owned companies, and corporate giants such as the Tata and Birla groups of companies which have led the way in making corporate social responsibility an intrinsic part of their business plans. These companies have been deeply involved with social development initiatives in the communities surrounding their facilities. Jamshedpur, one of the prominent cities in the northeastern state of Bihar in India, is also known as Tata Nagar and stands out at a beacon for other companies to follow. Jamshedpur was carved out from the jungle a century ago. TATA’s CSR activities in Jamshedpur include the provision of full health and education expenses for all employees and the management of schools and hospitals. In spite of having such life size successful examples, CSR in India is in a very nascent stage.
In the informal sector of the Indian economy, which contributes to almost the half of the GNP and where approximately 93 per cent of the Indian workforce is employed, the application of CSR is rare. On the contrary, the fight against poverty, the development of education, as well as the conservation of the environment are not existent in most of the Indian enterprises.
India has an advantage as far as labour is concerned. To some extent, business and capital go to those places where costs are less or standards are lower like the ones in India. But also in India, the demand for responsible and ethical goods is constantly increasing. To guarantee the supply of responsible and ethical goods, it is especially important to implement a nationwide system of CSR standards.
Methodology of Corporate Social Responsibility
CSR is the procedure of assessing an organisation’s impact on society and evaluating their responsibilities. It begins with an assessment of the following aspects of
Triumphant CSR plans take organisations ahead of compliance with legislation and lead them to respect moral values and respect people, communities and the natural environment. Corporate social responsibility is sustainable – involving activities that an organisation can uphold without negatively affecting the business goals. CSR is not only about ecological accountability or having a recycling policy. It is about considering the whole representation of the company, from internal processes to your clients, taking in every step that a business takes during day-to-day operations. Rising economies such as India have also observed a number of companies enthusiastically engaged in CSR activities.
Organisations in India have been quite sensible in taking up CSR initiatives and integrating them in their business processes. It has become progressively projected in the Indian corporate setting because organisations have recognised that besides growing their businesses, it is also important to shape responsible and supportable relationships with the community at large. Companies now have specific departments and teams that develop specific policies, strategies and goals for their CSR programs and set separate budgets to support them. Most of the time, these programs are based on well-defined social beliefs or are carefully aligned with the companies’ business domain.
THE FRENCH WAY
France was the first nation to make public company reporting compulsory. The rules require public companies to comprise information on a series of topics in their yearly report, such as:
â– tStatus of employees
â– tMobility of staff
â– tWork hours
â– tSocial relations
â– tHealth and safety
â– tHealth policy
â– tProfits distribution
They must also illustrate their manners when it comes to communities who are concerned by their activities in the countries where they have offices. They must explain the ways in which their sub-contractors respect International Labour Organisation agreements. They must also report on ecological issues such as the measure of progress in terms of energy effectiveness and dipping environmental impacts; conditions on use of land, air and water; and documentation obtained in the area of environmental safety.
CSR IN INDIA
India may become the world’s first country to make corporate social responsibility mandatory. Paths have been cleared for reintroduction of the Companies Bill, in the winter session of the Parliament. If the Bill is passed after endorsing all the propositions made by the Parliamentary Standing Committee on Finance, corporate social responsibility (CSR) would become mandatory for the first time in the world in any country.
The statement advocates that those companies with net worth above Rs. 500 Crore, or an annual turnover of over Rs 1,000 Crore, shall earmark 2 percent of average net profits of three years towards CSR. In the draft Companies Bill, 2009, the CSR clause was voluntary, though it was mandatory for companies to disclose their CSR spending to shareholders. It also suggested that company boards should have at least one female member.
In India also a large number of companies have accorded a place of importance to social action programs. Corporate social responsibility is seen as relevant constraints to business and a large percentage of managers assign a high place for social responsibilities with that of profit. However, the process of social commitment in India is somewhat different like starting social trusts, anti-pollution measurers, adopting villages or all round progress and development, starting family planning clinics for the benefit of workers and residents allocation of a fixed percentage of profit to train unemployed engineers, technicians and community development activities like provision of drinking water facilities, conducting social audit on a voluntary basis, providing medical, recreational facilities, conducting tournaments to promote sports, talent, undertaking consumer education campaigns, avoiding unethical deceptive advertising and so on.
The big question is how ‘socially responsible’ are companies in reality? Due to the lack of international CSR guidelines, the practical application of CSR differs and CSR Strategies within most companies still show major deficiencies. There are still complaints about multinational companies wasting the environment and NGOs still denouncing human rights abuses in companies. Some critics believe that CSR programs are undertaken especially by multinational companies to distract the public from ethical questions posed by their core operations.
Meanwhile, companies seem to increasingly recognise their social responsibility, many of them are yet to adopt management practices that reflect it, company employees and managers need training in order to acquire the necessary skills and competence. Pioneering companies can help to implement socially responsible practices by guiding the processes. The Copenhagen Centre and CSR Europe have recently launched a program to bring the business and academic community together with the aim to identify and address the training needs of the business sector on Corporate Social Responsibility. While corporate social responsibility can only be taken on by the companies themselves, employees, consumers and investors can also play a decisive role in areas such as working conditions, environment or human rights, in the purchasing of products from companies which already adopted CSR or in prompting companies to adopt socially responsible practices.
Critics suggest that better governmental and international regulation and enforcement, rather than voluntary measures are necessary to ensure that companies behave in a socially responsible manner. Corporate social responsibility should therefore not be seen as a substitute to regulation concerning social rights or environmental standards. In countries where such regulations do not exist, efforts should focus on putting the proper regulatory framework in place on the basis of which socially responsible practices can be developed.