Corporate Social Responsibility

➤ 1. DEFINITION OF CORPORATE SOCIAL RESPONSIBILITY

Corporate Social Responsibility  is a commitment to improve community well being through discretionary business practices and contributions of corporate resources. 

➤ 2. ALSO KNOWN AS

        CSR is also referred to as:

          

          1. Corporate or business responsibility

          2. Corporate or business citizenship

          3. Community relations

          4. Social responsibility

➤ 3. MEANING OF CORPORATE SOCIAL RESPONSIBILITY (CSR)

Corporate  Social Responsibility is the sense of obligation on the part of companies to build certain social criteria and manage the business activities by taking strategic decision. Socially responsible companies should consider various issues, from the organization of the firm to building relationships with the community. The issue of corporate responsibility has come into focus through industrial revolution.

➤ 4. NATURE OF CORPORATE SOCIAL RESPONSIBILITY

Compliance  with laws, rules and regulations is not a part of CSR initiative.

CSR  is doing something voluntarily for social development. For, example, compliance with environmental laws or safety' norms is not  CSR initiative. But to do something more than what is required by law for environment protection is a CSR initiative.

There  is a time lag between when the society expresses a need for government regulation and when the law is promulgated. Therefore, what starts as voluntary initiatives by some companies turns into legal compliance when government through regulations makes it mandatory for all the companies to take such initiatives.
An  example is the law related to environment protection. Therefore, what should be labeled as a CSR initiative depends on the extent legal environment in which the company operates.

➤ 5. DIFFERENT LEVELS AT WHICH COMPANIES UNDERTAKE CORPORATE SOCIAL RESPONSIBILITIES

                                           

A. ECONOMIC RESPONSIBILITIES:

The  only concern is to be profitable so that other initiatives can be undertaken.

B. LEGAL RESPONSIBILITIES:

Corporate  entity should operate within the framework of stipulated rules and regulations that govern its operations.

C. VOLUNTARY RESPONSIBILITIES:

It  is there organizations that have a philosophy of business being good corporate citizen and therefore believes in contributing resources for the well_being of the community. Their concern is to improve quality of life for people around and humanity in broader perspective.

D. ETHICAL RESPONSIBILITIES:

At  this level, the organization emphasizes on being ethical and therefore a concept of welfare Peps into its operations. The values of the organization focus on having an obligation to what is right and fair.

➤ 6. SCOPE OF CORPORATE SOCIAL RESPONSIBILITY

Scope  of CSR can be described as follows:

A. The scope of social is wide and could be considered in terms of different factors. Some people consider social responsibility in terms of claimants or stakeholders, the insiders and outsiders. The insiders are the employees and share holders, while the outsiders include customers, supplies, creditors, the government, the unions, competitors and the general public.

B. Another way in which the scope of social responsibility could be defined is on their nature, size, and breadth of activity, could extend social responsiveness to the problems of the whole world, nation, local community, industry to itself.

C.  Business organizations could also classify social responsibility in terms of relation to own activities. In this way, social responsibility is discharged to secure advantages for itself,

E.g. the promotion of market related activities or product related activities could be termed as business related social responsibility. Examples of such cases are as follows:-

1. A tractor producer educating farmers on agricultural mechanization.

2. An electronics company sponsoring a technical institute for the supply of technology or trained personnel.

➤ 7. WAYS OF CONTRIBUTING TO CORPORATE SOCIAL RESPONSIBILITY

 1. Having well defined code of ethics

  2. Observe ethical  principles in business operations

  3. Creating work environment that adds values to the quality of life for employees

  4. Taking concrete steps to protect and enhance the environment

  5. Donations to charitable, social and service organizations

  6. Contributing to the education of the down trodden

  7. Establishing rural development and welfare foundations

 8. Contributing to the health programmed especially for HIV/ AIDS

 9. Initiating micro - credit and enterprise programmes

 10. Initiating co-operative banking.

➤ 8. MODELS OF CORPORATE SOCIAL RESPONSIBILITY

Several  models are proposed to understand the relation between the corporate world and the society. There are three models of explaining the relationship between the corporate world and society.

MODEL 1

It  is a tradition conflict model, which projects that in neoclassical model there is a trade - off between social goals and profits. Since the firm considers only private cost while making business decision, the social externalities are inevitable. Theoretically, in this model, there is no possibility for the corporation to be socially responsible.

MODEL 2

This  model is based on the documented evidence that corporate social responsibility brings in reward to the companies in the from of increased sales, better business, finding new opportunities etc.

MODEL 3

According  to this model, the decision of the companies about social responsibility is independent of any tangible gains. In this model, the CEOs take initiatives mainly because it makes them feel good about giving back to the community and they consider it as their responsibility.

➤ 9. OBSTACLES IN DEVELOPING CSR

There  are many obstacles to developing CSR, the main ones being the following :-

  1. Insufficient knowledge of the relationship between CSR and business performance.

  2. Insufficient knowledge of the CSR concept on the part of consumers and investors.

 3. The lack of a consensus concerning the general CSR concept arising from differences between Member States.

  4. Insufficient emphasis on CSR in university education.

  5. Lack of resources for actions to promote CSR in small and medium - sized enterprises (SMEs).

  6. A lack of instruments to communicate and administer CSR activities.

   7. A lack of coherent strategy by public authorities.

➤ 10. CORPORATE GOVERNANCE AND CSR

The  central theme of corporate governance is to develop a governance system that ensures that management takes decisions in the interest of shareholders. The stakeholder theory of corporate governance, which says that while taking decision, management should balance interests of all stakeholders, has not found wide acceptance.

However, the stakeholder theory could create the awareness to the interests of stakeholders (e.g. employees, customers, vendors and local community) cannot be ignored for long in the company's pursuit to create shareholder value.

This  awareness is one of the major drivers of CSR movement. Other drivers include Oneida pressure, campaign by voluntary organizations to create awareness about human rights and environment protection, social awareness about 'sustainable development' and government interventions.