CORPORATE SOCIAL RESPONSIBILITY: FROM PHILANTHROPY TO

STRATEGIC MANAGEMENT A COMPARISON OF TWO

MULTINATIONAL COMPANIES CSR STRATEGY IN INDIA

1. Background
Over the last 20 years, the pressure corporations have faced to engage in
Corporate Social Responsibility (CSR) activities has increased tremendously. In
recent years, researchers have investigated the concept of CSR and framed a
plethora of definitions but have failed to provide a mutually accepted definition
(Jackson and Hawker (2001), Quazi and O'Brien (2000), Maderson and Pinney,
(2001), Dahlsrud (2008). This lack of consensus notwithstanding, , the essence of
CSR is clear: it refers to the way corporations integrate social, economic and
environmental concerns into their strategy, decision-making, operations, values and
culture and thereby establishing better corporate practices and contributing to
sustainable development. Despite the divergence in CSR definitions, researchers
have been able to classify CSR into primarily two broad types: philanthropic and
strategic (Tschopp, 2005; Dobers, 2009 Zhang, 2008).
The idea of CSR first emerged during the 1960s, particularly in western
countries. However, CSR had been practiced by businesses globally, well before it
was acknowledged as a facet of business (Caroll and Shabana, 2010). The
globalization effect and the emergence of multi-national corporations (MNCs) have
played a critical role in spreading CSR concerns, best practices and awareness
around the world. However, the same MNCs have been consistently scrutinized for
their poor corporate social performance (CSP), especially in the developing countries
like India (Pavelin et al., 2009; Bondy et al., 2013). Particularly in the case of India,

where MNCs are consistantly criticised for maintaining poor operational practices
and labour standards, contributing to pollution, and exploiting renewable and nonrenewable resources that are putting the environment as well as businesses into a
potentially very dangerous situation (Windsor D, 2006; Schrempf J, 2012; Zhang F,
2008; Karnani and Aneel. 2007). Further, corporations can not succeed in isolation
and societal progress is mandatory for their sustainable growth. This is particularly
the case in India, where their exists a wide gap between the living standards of the
rich and the poor , both in terms of income and socio-economic status.

The concept of CSR has evolved over the years. As far as we can gather, in India
CSR is a relatively new pradigm. The current state of CSR practised in India is more
philanthropic compared to Western countries. Most corporations in India align
themselves with the charity-based model, donating money on specific occasions,
and claiming this to be CSR-oriented. Many researchers advocate that donating
money to non-profit organisations for social causes constitutes a misallocation of
corporate funds as they are not being used to fulfil business interests (CII,2013;
Puranik R, Arora B, 2004; McWilliams et al, 2006). In addition, it has been argued
that CSR should not be philanthropic in nature, since this provides only short-term
reputation gains in the form of tax return advantages while strategic CSR renders
long-term sustainable advantages to corporations, which will prove vital to their
existence (Gege, 2004; Heilbroner, 2002; Hanlon et al,. 2009; McWilliams A, Siegel
D, 2000). This begs the question as to whether CSR activities need to have positive
economic implications, like other parts of business, like marketing or operations.

McElhaney (2009) argued that in recent years, CSR has been shifted from
philanthropic charitable giveaways to an integrated business strategy providing
positive economic returns to the company, while fulfilling its responsibilities to the
society. Comparatively little has been written on the subject focused on strategic
CSR from a functional point of view from an Indian perspective (Baumgartner and
Ebner, 2010; Marrewijk, 2003). Existing works on strategic CSR argue that
corporations can gain first mover advantage by aligning their CSR practices, process
innovation and business strategies with societal issues, thereby enhancing their
economic value (Porter and Kramer, 2002; Van Marrewijk 2003) and possibly helping
them to gain competitive advantage in the long term. One question that needs to be
asked is what kind of problems corporations face in integrating CSR practices into
their day to day business strategy (Ledwidge, 2007).
Prahalad and Doz (1987) argued that MNCs CSR strategy is not different
from their organizational strategy, where MNCs adopt a trans-national, multidomestic or global approach to management while operating internationally. It is
argued that the role of cultural factors, stakeholders influence, organizational values,
also play a significant role in choosing a particular CSR approach and making it
successful (Eastben et al, 2007; Ferrell and Gresham,1985; Barrels,1967). This has,
however, been done primarily for the western world.
It is very important to study cultural factors of India, which is well known for its
rich and diverse culture and home of more than 3000 MNCs (World Investment
Report 2009). Despite this, until today, there does not appear to have been any
cross-cultural research surveying the effect and influence of various cultural factors
like religion, customs and values on MNCs CSR policy in India. CSR policy
formulation and implementation require a thorough knowledge of cultural nuances

and local needs. Thus, it is important to study CSR practices through a cultural lens
to understand the relationship between cultural components and CSR decision
making.
There is also a great need to study CSR in the Indian context, as India has
become the first country to introduce a law (The Companies Act, 2013, Section 135)
on CSR, making it mandatory for profitable corporations to spend 2% of their
average net profit on CSR activites. Around 8000 companies in India will come under
the purview of this law. It has been estimated that companies will spend US$2 billion
annually on CSR. New CSR policy formulation and implementation will be governed
by a CSR Committee, monitoring policy to avoid abuse of funds, enforcing strategic
corporate spending rather than taking a philanthropic approach (The Companies Act,
2013, Section 135). The impact of this law from companies as well as other
stakeholders point of view needs to be examined. This is particularly relevant in a
context where it is expected that the new law will lead companies to focus much
more heavily on strategic CSR rather than philanthropic. This may also lead to a
paradigm shift in CSR, with MNCs CSR practices setting the standards that other
small companies need to follow in order to maintain their competitiveness (Bondy, K
et al, 2013).
This law has already triggered a preliminary debate on the feasibility or
necessity of making CSR a legal obligation. Critics of the new CSR law such as
Karnani (2013) point out that CSR is a philanthropic and voluntary facet of big
business, which governments have no right to legislate. The actual effectiveness of
this law will become visible in coming years and this proposed research will be an
academic contribution to this debate that will also be relevant for other countries.

On the whole, until recently CSR in India was a voluntary activity but with the
adoption of the new Companies Act, 2013, it has become a legal obligation, which
will force corporations to strengthen their CSR practices. Further research regarding
the role of the new CSR law will be of great help in examining how new regulatory
and institutional mechanisms will affect CSR practices of MNCs working in India. In
addition, one of the main goals of this study will be to examine and determine the
role of different factors, such as cultural norms and values, ethical factors, societal
pressure, pursuit of profit, role of competitors, industry standards on the
development and implementation of CSR strategy (Eastben et al, 2007; Rodriguez et
al., 2006).
.
2. Research Topic
This research will do a comparative analysis of two MNCs working in India.
This study will explore different factors that influence their CSR practices at different
levels, such as the role of stakeholders, legislation, societal pressure, and cultural
factors, on CSR decision-making and implementation. This study also seeks to fill
the gap in academic research on the effect of cultural factors on deciding CSR
strategy in India.
This project will examine CSR concentrating on India. This research will
explore the concept of corporate social responsibility of MNCs working in India, both
national and multinational. In this broad field, I will take two case studies to help
focus my arguments. At this preliminary stage, I have identified two MNCs with their
headquarters in Europe; Vodafone and Nestl. I have obtained formal permission

from Nestl to conduct my study on CSR in India, as well as two Indian MNCs, Bharti
Airtel and Reliance Telecom.
This work will contribute to the existing knowledge on MNCs CSR practices in
India by answering following questions.

2:1 Research Questions

What is the current state of CSR practices followed by MNCs in India?

How differently is CSR perceived, planned and implemented by

corporations?

To what extent is the existing mechanism within MNCs effective in

evaluating CSR strategies?

What are the roles of different factors, such as legislation, culture and industry
standards on the development and implementation of CSR policies and
strategies?

How can corporations successfully integrate CSR with their main

business interests?

2:2 Research Objectives

Understand the CSR strategies of MNCs operating in India, both

local and international.

Analyze the differences and links between business and CSR

strategy practices in both types of MNCs and the drivers of change in such
practices.

Analyze the impact of cultural aspects in CSR policy formulation

and implementation.

Examine the role of government agencies, stakeholders, in

shaping CSR policy in India.

3. Methodology
The aim of the study is to explore the role of different factors like culture,
regulation, industry standards in MNCs CSR policy formulation, planning,
implementation and evaluation. This proposal is built around the comparison
of the CSR activities of two companies. However, one of the biggest
drawbacks of comparative research is whether the concepts studied have the
same meaning in the different companies being compared. To avoid this
obstacle while examining the companies closely, a case study methodology
will be applied since this is considered as being most suitable for studies
demanding in-depth investigation (Tellis, 1997; King and Kraemer 1985;
Feagin, Orum, & Sjoberg, 1991; Levy, 1988).
The case study of MNCs will follow four stages: Designing phase; Conducting
phase; Analysis phase; and Conclusion phase. This will involve an overview
of the case study project, case study questions, the outline of the case study
report, extensive literature reviewing, relying on both English and in Hindi
sources. In-depth, semi-structured interviews, surveys, observations will be
used, allowing the researcher to deduce peoples opinions and attitudes more
closely. In the analysis phase, this study will use explanation-building (Yin,
1994) and pattern matching (Trochim, 1989) strategies in order to establish
an explanation of the case. The final aspect of the case study will present a
clear explanation and implications of the data collected during the research.
4.References

Aguilera et al, 2006. Corporate governance and social responsibility: a comparative

analysis of the UK and the US. Corporate Governance, 14 (3): 14758.
Bondy K, Matten D, & Moon J, 2008. Multinational corporation codes of conduct:
governance tools for Corporate Social Responsibility? Corporate Governance: An
international Review, 16(4): 294-311.
Carroll AB, 1999. Corporate social responsibility evolution of a definitional
construction. Business and Society 38(3): 268295.
Carroll AB, 1991. The pyramid of corporate social responsibility: toward the moral
management of organizational stakeholders'. Business Horizons, 34, 3948.
Chapple W, Moon J, 2005. CSR in Asia, A Seven-Country Study of CSR Web Site
reporting, Business Society 2005 44: 415.
Cheng et al., 2014. Corporate Social Responsibility and Access to Finance, Strat.
mgmt. J., 35: 123 (2014).
Commission of the European Communities, 2001. Promoting a European framework
for Corporate Social Responsibilities, COM (2001) 366 final, Brussels.
Dahlsrud A, 2008. How Corporate Social Responsibility is Defined: an Analysis of 37
definitions, Corp. Soc. Responsib. Environ. Mgmt. 15, 113 (2008)
Daniel J. Tschopp. Daemen College, Amherst, USA. Corporate Social Responsibility
and Environmental Management ,2005; 12(1):55 - 59.
Dobers P, et al, 2009. Corporate Social Responsibility and Developing Countries,
corp. Soc. Responsib. Environ. Mgmt. 16, 237249.

Dobers P, 2009. Corporate Social Responsibility: Management and Methods, Corp.

soc. Responsib. Environ. Mgmt. 16, 185-191.
Elenkov et al, 2005. Strategic Leadership And Executive Innovation Influence: An
international Multi-Cluster Comparative Study, Strat. Mgmt. J. 26: 665-682.
Friedman M, 1970. The social responsibility of business is to increase its profits. The
new York Times Magazine 13 September, p 3233, p 122126.
Hanlon G, Fleming P, (2009). Updating the Critical Perspective on Corporate Social
responsibility, Sociology Compass, 3: 937948.
Karnani, Aneel. 2007. Doing Well By Doing Good - Case Study: 'Fair and Lovely'
whitening Cream. Strategic Management Journal 28:1351-7.
Lu J, Castka P, 2009. Corporate Social Responsibility in Malaysia Corp. Soc.
responsib. Environ. Mgmt. 16, 146154.
McElhaney K, 2009. A strategic apporach to coroporate social responsibility,
Executive Form, 30-37.
McWilliams A, Siegel D, 2001. Corporate social responsibility: a theory of the firm
perspective. The Academy of Management Review 26(1): 117127.
McWilliams A, Siegel D, 2000. Corporate social responsibility and financial
performance: correlation or misspecification?'. Strategic Management Journal, 21,
6039.
McWilliams et al, 2006. Corporate Social Responsibility: Strategic Implications,
journal of Management Studies 43:1, 2006

Michael B, 2003. Corporate Social Responsibility in International Development: An

overview and Critique, Corp. Soc. Responsib. Environ. Mgmt 10, 115128 (2003).
Ministry of Statistics and Programme Implementation India, 2009. Available at
http://www.mospi.nic.in/Mospi_New/site/home.aspx.
Miles, M., & Huberman, M., 1984. Qualitative data analysis: A source book for new
methods. Beverly Hills, CA: Sage Publications.
Naeem M, Welford R, 2009. A comparative case study of Corporate Social
responsibility in Bangladesh and Pakistan, Corp. Soc. Responsib. Environ. Mgmt.
16, p 108-122.
OECD. 2008. The OECD Guidelines for Multinational Enterprises. In The Corporate
social Responsibility Reader, Burchell J (ed.). Routledge: London; 126135.
ONICRA plus, 2013, ONICRA Credit Rating Agency of India Ltd, available at
http://onicra.com/intranet/2013/Onicra-Pulse-Sep-2013/Onicra-Pulse-2013performance-Rating-of-NGOs-for-CSR-Activities.html.
Pitta, D et al, 2008. The quest for the fortune at the bottom of the pyramid: potential
and challenges, Journal of consumer marketing, 393-401
Puranik R, Arora B, 2004. A Review of Corporate Social Responsibility in India, 2004,
47(3), (93100).
Reynolds, H. 1977. The analysis of cross-classifications. New York: The Free Press.
Sikka, P. 2013. Smoke and mirrors: Corporate social responsibility and taxavoidance
A reply to Hasseldine and Morris, Accounting Forum 37,15-28, 2013.

Sikka, P. 2013. Without curbing corporate power the G8 have no chance of

combating tax avoidance, The Conversation,12 June 2013, available at
https://theconversation.com/without-curbing-corporate-power-the-g8-have-nochanceof-combating-tax-avoidance-15153.
Schrempf J, 2012.The Delimitation of Corporate Social Responsibility: Upstream,
downstream, and Historic CSR, Business Society 2012 51: 690.
Singh, P 2009. PNGO accountability in Indian context, Guide start India, 1-7,2009.
The Companies Act, 2013 (India). The Gazette of India, Extraodinary, Part II, Section
1 [Accessed, 30 August 2013)
The Guardian, More NGOs finding fruitful collaborations with the private sector, 7
August 2012, available athttp://www.theguardian.com/sustainable-business/ngoscollaboration-private-sector.
Trochim, W. (1989). Outcome pattern matching and program theory. Evaluation and
Program Planning, 12(4), 355.013.
Welford R, Frost S, 2006. Corporate social responsibility in Asian supply chains.
Corporate Social Responsibility and Environmental Management 13(3): 166176.
Werhane, PH. 1998. Moral imagination and search for ethical decision-making in
management. Business Ethics Quarterly, 1: 75-98.
Wernerfel B, 1984. A Resource-Based View of the Firm, Strategic Management
Journal, Vol. 5, No. 2, 171-180

World Investment Report, 2009. Transnational corporation and Agricultural

production and Development, United nation publication.
http://unctad.org/en/docs/wir2009_en.pdf [Accessed Feb, 2014].
World Bank, 2013. India Development Update. Available at
http://www.worldbank.org/content/dam/Worldbank/document/SAR/india/in-reportindia-development-update-october-2013.pdf. [Accessed Jan, 2014].
Windsor D, 2006. Corporate Social Responsibility:Three Key Approaches, Journal of
Management Studies, 93-106.
Yin, R. 1994. Case study research: Design and methods (2nd ed.). Thousand Oaks,
CA: Sage Publishing.
Zhang F, 2008. CSR in Emerging Markets:The Role of Multinational Corporations,
Coco Cola, Great Britain, 1-12, 2008.