You are on page 1of 24

CHAPTER 1 INTRODUCTION OF CORPORATE SOCIAL RESPONSIBILITY 1.

1 INTRODUCTION:

Corporate Social Responsibility is a form of business self-regulation to incorporate social and environmental concerns. It represents a business model that adheres to laws, ethical standards and international norms. Corporate social responsibility is todays trending topic in corporate world. Since business and society have been interdependent. This relationship between business and society is appreciated like: corporate should work like a honeybee, which take the nectar of a flower without the flower being losing its shape and fragrance and provides honey for the wellbeing of the society. The business history is replete with evidences to believe that business grows and develops only where society thrives. On the contrary, business dies when the society condemns rejects it. No business can survive without societal approval and sanction. As part of the business model, businesses have to take into account the impact of their activities on the environment, employees, communities, stakeholders and other members of the public. In general, CSR involves some kind of standardized reporting that allows the business to collect information on how it is making progress on various fronts.

CORPORATE SOCIAL RESPONSIBILITY: DEFINED


Social responsibility refers to the obligations of businessmen 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. In the words of Kenneth R Andrews, by social responsibility we mean the intelligent and objective concern for the welfare of society that restrains individual and corporate behavior from ultimately destructive activities, no matter how immediately profitable, and leads in the direction of positive contributions to human betterment, variously as the latter may defined. Corporate responsibility plays an important role to enhance the brand image and reputation of the business firm. It (CSR) helps to improve sales and customer loyalty. It also enables to attract and retain employees. The corporate social responsibility is deliberate to provide each business with a far greater ability to create sustainable development. Corporate social responsibility is linked with sustainability. The attraction towards corporate social responsibility for many businesses is that it can help to increase sustainability without creating any negative effects. In the present arena CSR has occupied vary important place in the plans and strategies of the business organizations.

DEFINITON OF CORPORATE SOCIAL RESPONSIBILITY:


Corporate social responsibility is not a new concept in India. However, what is new is the shift in focus from making profits to meeting societal challenges. Giving a universal definition of corporate social responsibility is bit difficult as there is no common definition as such. However, there are few common threads that connect all the perspectives of CSR with each other; the dedication to serve the society being most important of them. Most ideal definition of corporate social responsibility (CSR) has been given by world business council for Sustained Development which says, Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large. Thus, the meaning of CSR is twofold. On one hand, it exhibits the ethical behavior that an organization exhibits towards its internal and external stakeholders (customers as well as employees). On the other hand, it denotes the responsibility of an organization towards the environment and society in which it operates. CSR is also referred to as: corporate or business responsibility corporate or business responsibility community relations
3

1.2

CLASSIFICATION OF SOCIAL RESPONSIBILITY:

1. Responsibility towards itself: It is the responsibility of each corporate entity run business and to work towards growth, expansion and stability and thus earn profits. If the corporation is to achieve social and economic ends, organizational efficiency should be boosted up. 2. Responsibility towards Employees: Employees are the most important part of an organization. Following are some of the responsibilities which a business entity has towards its employeesTimely payment Hygienic environment Good and impartial behavior Health care through yoga Recreational activities Encouraging them to take part in managerial decisions 3. Responsibility towards shareholders: It is the responsibility of corporate entity to safeguard the shareholders investment and make efforts to provide a reasonable return on their investment. 4. Responsibility towards state: Out of the profit available, the state is entitled to a certain share as per the income tax laws. Utmost transparency has to be exerted regarding the profit &loss account and the balance sheet.
4

5. Responsibility towards consumers: The Company should maintain high quality standards at reasonable prices. It should not resort to malpractices such as hoarding and black marketing. 6. Responsibility towards environment: It is the responsibility of the organization to contribute to the protection of environment. It should produce eco -friendly products. Moreover, industrial waste management must be taken care of.

1.3

CORPORATE

SOCIAL

RESPONSIBILITY-

CONCEPTUAL AND THEORETICAL FRAMEWORK:


More recently CSR has become focused on corporate behavior and policies and values. CSR activities are influenced and based on different elements.

opening & sensitiveness to government

Community sense

Value creation

5 Basis of CSR

Innovation

Long - term consideration

Corporate social responsibility of any company is based on the five elements. From the above figure a company should be good in innovation means introducing new products and services from time to time in the
6

market to service the customer which leads to competitive advantage in market. Value creation is one of the primary targets for any company, because to create trust worthiness in the market and in the minds of the shareholders, customers and investors every company needs to generate the value from its operations. Today companies are not working for profit motive. To survive in the competitive market every company need to focus in service rather than profit. That is profit through service motive. Community sense is, a company should be liable to the community and respects the community needs and requirements and provides some good in terms of economic, societal and educational issues. Every company has to run on corporate governance, corporate governance is the frame work of all the set of principles and procedures to protect the company from frauds and other issues. For this the company needs to abide the rules, laws and regulations framed by the government. Business is a process, its not a contract, and if it wants to survive in the market it should consider the needs and wants of the various interest groups.

1.4

CSR PYRAMID:

Philanthropic Responsibility

Legal Responsibility

Ethical Responsibility

Economic Responsibility

1. Economic responsibilities: Business organizations are formed as economic entitys to provide quality goods and better services to societal members. The profit motive was established as primary incentives for entrepreneurship. Business organizations were treated as the basic economic unit in our society. Thus its major role was to produce goods and services that consumers needed and wanted and to make an acceptable profit in the process. At some point the motive of getting profits are transformed into a notion of
8

maximum profits and it has been an enduring value ever since. All other business responsibilities are predicted upon the economic responsibility of the firm, because without it the others become controversial considerations. 2. Legal responsibilities: Business should not be only for profit motive while serving the society. At the same time business is expected to comply and should abide with the laws and regulations promulgated by federal, state and local governments as the ground rules under which business must operate. As partial fulfillment of the social contract between business and society, firms are expected to pursue their economic missions with the framework of law. Legal responsibilities made businesses are having codified ethics and they co-exist with economic responsibilities as fundamental precepts of the free enterprise system. 3. Ethical responsibilities: Although the economic and legal responsibilities have ethical base about fair practice and justice, ethical responsibilities embrace those activities and practices that are prohibited by members by the society even though they are not codified in to law. Ethical responsibilities frames those standards, norms or expectations that reflect a concern for what consumers, employees, shareholders and the community regard as fair just or in keeping with the respect or protection of stakeholders moral rights. In other sense, ethical responsibilities rare viewed as newly emerging values and norms society expects business to meet, even

though such values and norms may reflect a higher standard of performance than that currently required by law. 4. Philanthropic responsibilities: Philanthropy encompasses those corporate actions that are in response to the society expectations that businesses to be good corporate citizens. That is actively engaged in various activities or programs to promote human welfare or goodwill. Examples of philanthropy include business contribution of financial resources or executive time, such as contribution to the arts, education or the community. Therefore philanthropy is more discretionary on the businesses part even though there is always the societal expectation that businesses provide it. The CSR of business entails the fulfillment of the firms economic, legal ethical and philanthropic responsibilities. The CSR firm should strive to make a profitable value, obey the law and be ethical and good corporate citizen.

10

1.5

NEED FOR CORPORATE SOCIAL RESPONSIBILITY:

There are many situations where social responsibility of a business becomes necessary. Few of these situations which show the need for Corporate Social Responsibility are below: 1) A societal approach to business is the contemporary business philosophy, which demands business organizations to be responsive to the social problems. 2) As a result of globalization of business, global companies and MNCs operate in a big way in their host countries. In order to establish a good corporate image, they include social responsibility as a corporate objective. Indigenous companies are forced to follow suit for maintaining their corporate identity. 3) In the terms and conditions of collaborations agreements, very often, social welfare terms are included which necessitates the collaborating company to take up social responsibility of business. 4) On the basis of legal provisions, companies have to concentrate on social problems. For example an industrial organization in India must obtain a certification from Pollution Control Board. 5) Corporate donations of social welfare projects of approved NGOs are exempted from income tax in India. 6) An organizations commitment to social responsibility creates a good corporate image and there by a better business environment. 7) Social responsibility of business enables the organization to improve its product positioning and thereby improve its market share.

11

CHAPTER 2 CORPORATE SOCIAL RESPONSIBILITY IN TODAYS WORLD 2.1 CSR IN TODAYS WORLD:

CSR as a strategy is becoming increasingly important for businesses today because of three identifiable trends: 1. Changing social expectations: Consumers and society in general expect more from the companies whose products they buy. This sense has increased in the light of recent corporate scandals, which reduced public trust of corporations and reduced public confidence in the ability of regulatory bodies and organization to control corporate excess. 2. Increasing affluence: This is true within developed nations, but also in comparison to developing nations. Affluent consumers can afford to pick and choose the products they buy. A society in need of work and inward investment is less likely to enforce strict regulations and penalize organizations that might take their business and money elsewhere. 3. Globalization: The growing influence of the media sees any mistakes by companies brought immediately to the attention of the public. In addition, the internet fuels communication among like-minded
12

groups

and

consumers-

empowering them to spread their message, while giving them the means to co-ordinate action (i.e. a product boycott). These three trends combine with the growing importance of brands and brand value to corporate success (particularly lifestyle brands) to produce a shift in the relationship between corporation and consumer, in particular and between corporation and all stakeholder groups, in general. The result of this mix is that consumers today are better informed and feel more empowered to put their beliefs into action. From the corporate point of view, the market parameters within which companies must operate are increasingly being shaped by bottom-up, grassroots campaigns. NGOs and consumers activities are feeding and often driving, this changing relationship between consumer and company. CSR is particularly important within a globalizing world because of the way brands are build-on perceptions, ideals and concepts that usually appeal to higher values. CSR is a means of matching corporate operations with stakeholders values and demands, at a time when these values and demands are constantly evolving. CSR cam therefore best is described as a total approach to business of the way brands are built- on perceptions, ideals and concepts that usually appeal to higher values. CSR is a means of matching corporate operations with stakeholder values and demands, at a time when these values and demands are constantly evolving. CSR can therefore best be described as a total approach to business. CSR creeps into all aspects of operations. Like quality, it is something that you know when you see it. It is something that businesses today should be
13

genuinely and wholeheartedly committed to. The dangers of ignoring CSR are too dangerous when it is remembered how important brands are to overall company value; how difficult it is to build brand strength; yet how easy it can be to lose brand dominance.

2.2

IMPLEMENTING CSR:

CSR is about common sense policies that represent a means of integrating a complete social perspective into all aspect of operations. The goal is to maximize true value and benefit for an organization, while protecting the huge investments corporations make toady in their brands. CSR asks companies to ensure their business operations are clean and equitable and contribute positively to the society in which they are based. Otherwise, they leave themselves open to too much danger from a potential consumer backlash. Many believe the issue of how corporations integrate CSR into everyday operations and long term strategic planning will define the business marketplace in the near future. It will become a key point of brand differentiation, both in terms of corporate entities and the products that carry their brands. Key steps on the road to integrating CSR within all aspects of operations include: Ensure the commitment of top management and particularly the CEO is communicated throughout the organization. Appoint a CSR position at the strategic decision- making level to manage the development of policy and its implementation.
14

Develop relationships with all stakeholder groups and interests. Incorporate a Social or CSR Audit within the companys annual report. Ensure the compensation system within the organization reinforces the CSR policies that have been created rather than merely the bottom line. Corporations today are best positioned when they reflect the values of the constantly shifting and sensitive market environment in which they operate. It is vital that they are capable of meeting the needs of an increasingly demanding and socially aware consumer market, especially as brands move front and center of a firms total value. Global firms with global lifestyle brands have the most to lose if the public perception of the brand fails to live up to the image created.

15

CHAPTER 3 TATA GROUP AND CSR

3.1

INTRODUCTION:

It encompasses seven business sectors: communications and information technology, engineering, materials, services, energy, consumer products and chemicals. Tata Group was founded in 1868 by Jamsetji Tata as a trading company ranging from steel, automobiles and software to consumer goods and telecommunications. The TATA Group operates more than 80 companies. It has around 2000000 employees across India and thus has the pride to be nations largest private employer. Mr. Ratan N. Tata has led the eminent Tata Group successfully. He was trained as an architect at New Yorks Cornell University but he chooses to enter the family business. The full form of TATA is T-Trust, A- Acceptability, T- Transparency, AAccountability. Approximately two third of the equity of the parent firm, Tata Sons Ltd., is held by philanthropic trusts endowed by Sir Dorabji Tata and Sir Ratan Tata, sons of Jamsetji Tata, the founder of todays Tata empire in the 1860s. Through these trusts, Tata Sons Ltd. utilizes on average between 8 to 14 percent of its net profit every year for various social causes. Even when economic conditions were adverse, as in the late 1990s, the financial commitment of the group towards social activities kept on increasing, from Rs 670 million in 1997-98 to Rs 1.36 billion in 1999-2000. In the fiscal year 2004 Tata Steel alone spent Rs 45 crore on social services.

16

Tata is accredited to initiate various labor welfare laws. For example- the establishment of Welfare Department was introduced in 1917 and enforced by law in 1948; Maternity Benefit was introduced in 1928 and enforced by law in 1946. A pioneer in several areas, the Tata group has got the credit of pioneering India's steel industry, civil aviation and starting the country's first power plant. It had the world's largest integrated tea operation. It is world's sixth largest manufacturer of watches (Titan). 3.2 RECOGNITION OF CSR:

In a free enterprise, the community is not just another stakeholder in business but is in fact the very purpose of its existence." - Jamsetji Nusserwanji , Tata Founder, Tata Group. Corporate Social Responsibility has always been taken care of by the Tata group. The founder Mr. Jamshedji Tata used to grant scholarships for further studies abroad in 1892 . He also supported Gandhijis campaign for racial equality in South Africa . Tata group has given country its first science center and atomic research center . "The wealth gathered by Jamsetji Tata and his sons in half a century of industrial pioneering formed but a minute fraction of the amount by which they enriched the nation. Jamshed Irani, Director, Tata Sons Ltd, says, "The Tata credo is that 'give back to the people what you have earned from them'. So from the very inception, Jamshetji Tata and his family have been following this principle." (a statement on the Tata group's website www.tata.com) . In July 2004, B. Muthuraman, Managing Director, Tata Steel Limited (TISCO) announced that in future TISCO would not deal with companies, which do not conform to the company's Corporate Social Responsibility
17

(CSR) standards. Speaking at the annual general meeting of the Madras Chamber of Commerce and Industry, He stated, "We will not either buy from or sell to companies that do not measure up to Tata Steel's social responsibility standards."

3.3

CSR ACTIVITIES OF TATA COMPANIES & SOCIETIES:

Through the following companies and societies Tata group keeps on heading towards the fulfillment of corporate social responsibility 1. TATA STEEL: Tata Steel has adopted the Corporate Citizenship Index, Tata Business Excellence Model and the Tata Index for Sustainable Development. Tata Steel spends 5-7 per cent of its profit after tax on several CSR initiatives. (a) Self-Help Groups (SHGs):

Over 500 self-help groups are currently operating under various poverty alleviation programs; out of which over 200 are engaged in activities of income generation thorough micro enterprises. Women empowerment programs through Self-Help Groups have been extended to 700 villages. From the year 2003 to 2006, the maternal and infant survival project had a coverage area of 42 villages in Gamharia block in Seraikela Kharsawa and a replication project was taken up in Rajnagar block. For providing portable water to rural
18

communities 2,600 tube wells have been installed for the benefit of over four Lakh people. (b) Supports Social Welfare Organizations Tata Steel supports various social welfare organizations. They include; Tata Steel Rural Development Society Tribal Cultural Society Tata Steel Foundation for Family Initiatives National Association for the Blind Shishu Niketan School of Hope Centre for Hearing Impaired Children Indian Red Cross Society, East Singhbhum (c) Healthcare Projects: In its 100th year, the Tata Steel Centenary Project has just been announced. The healthcare projects of Tata Steel include facilitation of child education, immunization and childcare, plantation activities, creation of awareness of AIDS and other healthcare projects. (d) Economic Empowerment: A program aiming at economic empowerment through improvised agriculture has been taken up in three backward tribal blocks in Jharkhand, Orissa and Chhattisgarh. An expenditure of Rs 100 crore has been estimated for the purpose and this program is expected to benefit 40,000 tribal living in over 400 villages in these three States.

19

2. TATA MOTORS: (a) Pollution Control:

Tata Motors is the first Indian Company to introduce vehicles with Euro norms. Tata Motors' joint venture with Cummins Engine Company, USA, in 1992, was a major effort to introduce emission control technology in India. To make environment friendly engines it has taken the help of world-renowned engine consultants like Ricardo and AVL. It has manufactured CNG version of buses and also launched a CNG version of its passenger car, the Indica. Over the years, Tata Motors has also made investments in the establishment of an advanced emission-testing laboratory. (b) Employment Generation: Relatives the employees at Pune have been encouraged to make various industrial co-operatives engaged in productive activities like re-cycling of scrap wood into furniture, welding, steel scrap baling, battery cable assembly etc. The Tata Motors Grihini Social Welfare Society assists employees' women dependents; they make a variety of products, ranging from pickles to electrical cable harnesses etc ; thereby making them financially secure. (c) Economic Capital: In Lucknow, two Societies - Samaj Vikas Kendra & Jan Parivar Kalyan Santhan have been formed for rural development & for providing healthcare to the rural areas. These societies have made great efforts for health, education and women empowerment in rural areas.
20

3. Tata Chemicals Ltd (TCL): Tata Chemicals is making an effort for sustainability. Sustainability for the group means honesty and transparency towards stakeholders, environmental protection , generating economic value, promoting human rights and creating social capital. Its main operations for environment protection include optimal use of resource, finding and/or generating alternative sources of fuel and raw materials, and maximizing reuse and recycling. All in all they have the policy of avoid, reduce and reuse. 4. Tata Tea: Its various programs provide education, training and rehabilitation of children and young adults with special needs. Tata Teas welfare officers help identify and encourage relatives or children of employees who are handicapped to join the Welfare Centre for special education and rehabilitation. 5. Titan: Corporate social responsibility is a basic element of TITAN Groups governing objective and one of its corporate values. In its corporate philosophy CSR is defined as doing less harm and more good by adopting the following practices : Respecting and supporting local communities Caring for the employees Being an active member of society Committed to sustainable development Putting safety(at work) first
21

6. TELCO: To create social awareness in all the employees and their families, to promote congenial mutual relations amongst them, to improve personal and environmental hygiene and health To help the families of employees develop better living standards by organizing extension education programs, training in various trades/skills and providing opportunities to earn additional income. 7. Tata Consultancy Services (TCS): TCS aims at the Tata groups philosophy of building strong sustainable businesses community .The elements that make for strong corporate sustainability at TCS include the following: A fair, transparent corporate governance, a strong strategy for long-term growth, Best-in-class HR processes, initiatives for community betterment and welfare.

22

CONCLUSION
For bringing back and maintaining the general balance in the economic and social arena it is evident to think deeply and act wisely about CSR. Every business house owes some responsibility towards the society, nation and world in general which provide it with all human, material and natural resources. Considering the long run growth and sustainable development following the norms of CSR , devising new policies and effective implementation is inevitable to bring and sustain a balance between corporate world and society, present generation and upcoming generation, man and nature . As far as the Tata group is concerned, it has gone a long way in fulfilling its duty and responsibility towards the society and the nation. It has reached the masses to elevate their lives, to nurture their dreams and to hone their skills justifying the statement of the founder We do not claim to be more unselfish, more generous and more philanthropic than other people. But we think we started on sound and straightforward business principles, considering the interests of the shareholder, our own, and the health and welfare of the employees, the sure foundation of our prosperity.

23

WEBLIOGRAPHY

Websites:
a) www.wikipedia.com b) iosrjournals.org c) www.tata.com

24