What is CSR?

CSR can be well understood under the "3 waves of CSR".

a. Community engagement
b. socially responsible production process
c. socially responsible employee relations

It could be clearly analyzed under the "3 waves of CSR" that the corporate world
need to shell out a part of their profit initially to tap the long run economies of
scale be it internal or external. Beyond good intentions some of the benefits that
the corporate world reaps are:

Powerfully aligning the firms operations and social environmental "Foot

print" with managements values,

Understanding and transforming public perception of the company and

industry,

Attracting investment in the firm, sector and overall economy,

Increased market share and new market penetration,

Mobilizing and energizing the company's own human capital,

Reducing risk.

"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". Corporate Social Responsibility (CSR) is becoming an
increasingly important activity to businesses. It has become a public relation tool
of global corporations to convince consumers it is OK to keep buying. As
globalization accelerates, large corporations have progressively recognized the
benefits of providing CSR programs in their various locations. CSR activities are
now being undertaken throughout the globe. Everyone judges companies. Whether
you invest in them, buy from them, work for them, or just live near them, it is
difficult not to form an opinion. The most visceral of all judgments pertain to the
firm's moral actions. Had a company placed greater emphasis on its treatment of
employees, it would have likely seen larger gains in its CSR ratings. The
movement towards SCR has not been without criticism. Many people have
criticized companies for using CSR as a gimmick to attract employees or media
attention. Some companies have been criticized for claiming to be committed to
sustainable development whilst simultaneously engaging in harmful business
practices. Also, corporations have been criticized for damaging the environment
and using child labor. This means that corporations have to deal with many ethical
issues. Today more and more of the global corporations issue corporate
responsibility reports, and the public expects visible CSR initiatives from
businesses of all sizes. Many companies use CSR as a way to burnish their image,
generate brand equity, increase employee loyalty, promote wide-ranging policies,
and labor rights. But is CSR really a win win situation - as its promoters claim - for
both corporations and the public? Serbian managers struggle with determining to
whom their social responsibilities extend: to shareholders, employees, local
communities, the environment, humanity as whole, future generations?

The key drivers for CSR are:

Ethical consumerism - over the last two decades can be linked to the rise of CSR.
Industrialization in many developing countries is booming as a result of technology
and globalization. Consumers are becoming more aware of the environ mental and
social implications of their day-to-day consumer decisions and are beginning to
make purchasing decisions related to their environmental and ethical concerns.

Transparency and trust - business has low ratings of trust in public perception.
There is increasing expectation that companies will be more open, more
accountable and be prepared to report publicly on their performance in social and
environmental arenas.

Increased public expectations of business - globally companies are expected to

do more than merely provide jobs and contribute to the economy through taxes and
employment. As corporations pursue growth through globalization, they have
encountered new challenges that impose limits to their growth and potential
profits. Global competition forces multinational corporations to examine not only
their own labour practices, but those of their entire supply chain, from a CSR
perspective.

Employee motivation. A KPMG survey of 1600 of the world's largest companies

across 16 industrialized countries, including Australia, examined why they are
committed to corporate responsibility and what influenced the content of the
reports. By the survey almost half of the world's largest companies believe
employee motivation is a key driver when it comes to corporate social
responsibility [15].

Laws and regulation - independent mediators, particularly the government,

ensuring that corporations are prevented from harming the broader social good,
including people and the environment. Governments should set the agenda for
social responsibility by the way of laws and regulation that will allow a business to
conduct themselves responsibly.

Crises and their consequences. Often it takes a crisis to precipitate attention to

CSR. One of the most active stands against environmental management is the
CERES Principles that resulted after the Exxon Valdez incident in Alaska in 1989
Other examples include the lead poisoning paint used by toy giant Mattel, which
required a recall of millions of toys globally and caused the company to initiate
new risk management.

Stakeholder priorities. Increasingly, corporations are motivated to become

more socially responsible because their key stakeholders expect them to
understand and address the social and community issues that are important to them.
Companies have their own ideas about corporate social responsibility - and how
much of a commitment they make to it. It can range from "going green" to
supporting local charities. But one thing is increasingly clear. It is not a choice any
longer. CSR extends to the bottom line. Corporate Social Responsibility is no
longer optional

Why is Corporate Social Responsibility becoming so important?

Globalisation and the associated growth in competition;

Increased size and influence of companies;

Retrenchment or repositioning of government and its roles;

War for talent;companies competing for expertise

Growth of global civil society activism

Increased importance of intangible assets

The Rise And Development of Corporate Social Responsibility

The last twenty years have seen a radical change in the private sectors relationship
both with the state and civil society. Globalisation, deregulation, privatisation and a
redrawing of the lines between state and market have changed the basis on which
private enterprise is expected to contribute to the public good. Meanwhile, the
relationship between companies and civil society has moved on from paternalistic
philanthropy to a re-examination of the roles, rights and responsibilities of business
in society.

These dynamics combined with the macro changes outlined 1 have led to the
emergence of a new approach to Corporate Social Responsibility (CSR), with
companies recognizing that improving their own impacts and addressing wider
social and environmental problems will be crucial in securing their long-term
success. Increasingly, high profile companies are implementing CSR processes
such as public commitment to standards, community investment, continuous
improvement, stakeholder engagement and corporate reporting on social and
environmental performance.

CSR is now being discussed and debated in the public policy sphere the UK has
a Minister for Corporate Social Responsibility (in the Department for Trade and
Industry), the EU has recently published a Green Paper on the subject, 2005 has
been designated the European year of CSR, and the UN Global Compact is
bringing together companies and UN agencies to address Corporate Social
Responsibility.

Emerging Global Standards

The increase in prominence of corporate social responsibility globally has
given rise to a proliferation in standards. This has been driven by a perceived
need to institutionalize an area of corporate performance historically not
included in more traditional accounting processes.

Before adopting any single or multiple standards on offer, companies need to

consider the following criteria: the ability of the standard to improve a companys
relationship with stakeholders who can have a real influence on licence to operate;
its ability to be integrated into existing management and accounting processes; and
the extent to which it will add value to a companys bottom line (both tangibly and
intangibly).

The emergence of standards is of particular concern to developing country

suppliers as highlighted throughout this study. The following is a list of some of
the main global standards currently being implemented and developed.

These are generally based on the underlying principles embodied in the Universal
Declaration of Human Rights and the ILO Tripartite Declaration on TNCs:

The Global Reporting Initiative:

The (GRI) is a long-term multi-stakeholder, international undertaking whose

mission is to develop and disseminate globally applicable sustainability reporting
guidelines for voluntary use by organizations reporting on the economic,
environmental, and social dimensions of their activities, products and services. 67
The GRI originated out of the Coalition for Environmentally Responsible
Economies (CERES) in partnership with the United Nations Environment
Programme.

SA8000: Social Accountability International developed a standard for workplace

conditions and a system for independently verifying factories compliance. The
standard, Social Accountability 8000 (SA8000), and its verification system draw
from established business strategies for ensuring quality) and add several elements
that international human rights experts have identified as essential to social
auditing.

Ethical Trading Initiative (ETI) : The ETI Base Code is a global standard on
employment and working conditions, linked directly to ILO Conventions and the
UN Declaration of Human Rights and Rights of the Child. The Code is a
partnership consisting of three types of members: companies, unions & NGOs
according to specific membership criteria. Members of the ETI are expected to
sign up to the Code. Member companies may stipulate the scope of application of
the code provided that that scope is clearly indicated in the preamble of their code
and that company publicity concerning the code also indicates the scope of
application.

AA1000: AA1000 is an accountability standard developed by the Institute of

Social and Ethical AccountAbility, focused on securing the quality of social and
ethical accounting, auditing and reporting. It is a foundation standard, and as such
can be used in two ways: a) as a common currency to underpin the quality of
specialized accountability standards, existing and emergent; b) as a stand alone
system and process for managing and communicating social and ethical
accountability performance.

ISO (esp 14000 & 9000): The International Organisation for Standardization
(ISO) is a world-wide federation of national standards bodies from 130 countries.
ISO administers over 11,000 standards covering 97 categories (one of which
covers management). The ISO standards mainly focus on customers, staff and
suppliers in the delivery of quality systems for product (ISO9000) and
environmental (ISO14000) management.

The OECD Guidelines for Multinational Enterprises: The Guidelines are

recommendations addressed by governments to multinational enterprises. They
provide voluntary principles and standards for responsible business conduct
consistent with applicable laws.

Corporate Social Responsibility and the TNC/SME Interface Small and

Medium Enterprises

Although it is beyond the scope of this report to cover the myriad of mechanisms
for private sector and SME development as a means of addressing issues of
poverty and environmental degradation, nearly all of the literature acknowledges
the importance of the SMEs and their role in development.
 From the UN, through to small non-governmental organisations, the message is
clear: unless SMEs are able to access markets (be they local, national or
international), developing countries will find it nigh on impossible to find a path
out of poverty

, CSR developments by TNCs have direct and indirect influences on SMEs in the
South and on the communities in which they operate bringing both benefits to
SMEs as well as new demands. Figure 7: CSR Impacts on SMEs

The following sections address how each of these key elements of the TNC/SME
interface, have developed.

Corporate Social Responsibility as a Condition of Business with TNCs

Over the past decade, global brand name companies have been held responsible
not just for their own operations but also for the standards in other parts of the
global CSR as part of terms of business with TNCs Business links for SME
development Community economic investment by TNCs TNC influence on public
policy Market shifting SMEs 38 value chains supplying them. Part of the reason
for this is that companies have now shifted from being producers to buyers and
governors, thereby outsourcing much of their production processes to companies
in the South. For SMEs in developing countries, relevant business relationships
with TNCs include sub-contracting, licensing and joint ventures. The brand owners
have always given priority to price, quality and service standards in these business
relationships, but increasingly, they are including social and environmental criteria
alongside these more traditional considerations. Much of the focus of concern in
recent years has been on supply chain standards or codes of conduct that relate to
sub-contractors. These codes of conduct, particularly concerning environmental
and labour standards have been one of the most visible aspects of CSR for SMEs in
recent years. In response there has been a flurry of initiatives, which move beyond
the individual relationship between the retail brand company and its suppliers.

Most notably:

Multi-stakeholder partnership approaches in which industry sectors adopt a

common code of conduct and work with civil society organisations and
governments to develop an acceptable monitoring system. Examples include the
Fair Labour Association in the US, the Ethical Trading Initiative and the Sialkot
partnership

Certification systems in which independent organizations set up a standard to

which manufacturers are certified. These initiatives do not depend on individual
supply chain relationships but provide a basis by which suppliers can demonstrate
their social and environmental credentials. Examples include SA8000, IS014000
and goodcorporation.com.

Business association and cluster approaches by export-oriented companies.

Some national level business associations, e.g. the Kenya Flower Council, have
developed their own codes of conduct and certification systems in order to help
their members meet the social and environmental demands of the international
market.

RECENT DEVELOPMENTS IN CSR AS AN INTEGRAL PART OF

BUSINESS MANAGEMENT

The CSR community has focused more on the implementation o CSR initiatives,
while the refinement of the CSR concept has received less attention. As businesses
face intensified challenges, including rapid globalization, increasing environmental
concerns and mounting pro-poor needs, there has been a growing need for the
adoption of result-based CSR management and stringent evaluation of CSR
performance .

These trends suggest that businesses integrate CSR into their core operations
throughout the value chains they are part of at both national and global levels.
However, such integration requires strong corporate motivation as well as adequate
reporting systems.

Within this context, this subsection covers the most recent developments in CSR,
particularly relating to CSRs ongoing integration in various managerial aspects,
including global value chains, sustainability and inclusiveness, core business
activities, entrepreneurship, investment decision, international standards, business
motives and monitoring and evaluation (M&E).
 When companies operate in or procure from other countries, such as developing
countries where laws and regulations are different and standards are not compatible
with those in the home country, managing CSR throughout the value chain
becomes more challenging in terms of governance, assessment and information
management. The difficulty in tracing back entire production processes and
distribution networks reveals a number of risk factors critical to CSR management.

Although there is a wide array of unique managerial issues in global value chains,
CSR issues such as environmental impacts, child labour and forced labour, fair
trade, corruption, suppliers business practices and human rights have received
increased attention from business. Similarly, the contribution of CSR to sustainable
development has recently attracted more attention.

Sustainable development is defined as development that meets the needs of the

present without compromising the ability of the future generations to meet their
own needs.

CSR activities in the context of sustainable development could reverse or mitigate

the adverse impacts of business . The concept of inclusive business or pro-poor
business has also been gaining attention.

CSR initiatives can make a larger contribution by reinforcing state-led pro-poor

policies in addition to their direct contribution. Inclusive businesses typically
encourage local employees, suppliers, producers and growers to participate in their
production and other activities in the value chain so that they can not only achieve
commercial objectives but also improve local competitiveness and productivity.

Need focused CSR initiatives with a long-term commitment to the development of

the poor and require close partnerships with government to ensure the successful
implementation of such initiatives.

Policy Implications of CSR

Introduction
The understanding about concept of CSR by corporate world has been examined in
previous chapters. Also, the relation between CSR, Trusteeship and peace has been
elaborated upon. To understand policy implications, it is necessary to state that
CSR is not philanthropy and instead it should be looked upon as Business Ethics
and enhancement of high spiritual quotient among employees. This chapter deals
with policy implications of Corporate Social Responsibility based on Trusteeship
Principle on promotion of peace and harmony in the society. Prerequisites of CSR
Model (based on principle of Trusteeship and conducive to promotion of peace)

CSR is not philanthropy: The comprehensiveness of CSR is not yet properly

understood. CSR should not be construed as charity or philanthropic act by the
corporate citizens. By doing CSR, corporate world is not doing any favour to the
society. In fact, they are paying their dues which they owe to the society. Gandhiji
was against the philanthropic concept of CSR. He wanted principle of Trusteeship
to be driving force behind CSR.

CSR is Business Ethics: CSR should be inbuilt into the functioning of various
activities of corporate sector. It should be a way of life for them. In more revealing
words, CSR does not mean earning money by hook or crook and diverting portion
of it as tax saving measures

CSR means company with high SQ: All employees of corporate body should be
trained and re-trained on on-going basis to enhance their spiritual quotient.
Enhancement of Spiritual Quotient (SQ) is the need of hour.

The actions of an organization/a corporate body with low SQ will not bring lasting
advguiding principles for good CSR practices would be to ensure the following

: Only right persons are put to the right job.

Right methods and procedures are deployed for accomplishment of various

activities such as design, planning, commercial, production, Inspection etc.

People are fearless. They do their jobs as they are their duties. None should carry
out the job out of fear. Fear should be considered the worst enemy of mankind
under good CSR practices. If any one fears, he/she should fear from untruth
(wrong doing). There is no need to fear otherwise
. There must be regular programmes to enhance both Intelligent Quotient
(knowledge upgradation) as well as Spiritual Quotient or Emotional Quotient of
the people working in the organization. SQ should be given more weightage.

Earning Money alone must not be driving force for carrying out business by a
corporate body. Happiness and peace for the mankind should be the motto of final
outcome of all their business activities.

Therefore, there is need for efforts on continuing basis for enhancing spiritual
quotient of those directly or indirectly associated with CSR activities. antage to
itself as well as the society at large.

Policy Implications of CSR

Good CSR practices need framing of code of conduct: Framing Code for good
CSR practices requires extensive deliberations among various stakeholders. The
key stakeholders are management of corporate entity/body, employees of corporate
body, government regulatory authority, members of community and Non-
Governmental organizations. A professional consultancy organization, too, may be
involved in the exercise. Spiritual leader/organization, too, may be involved in the
process to ensure that ethical considerations are given due weightage in framing
of good CRS code.

The process for development of Code for good CSR practices may commence
with a discussion session on CSR during regular training /orientation/on-job
training programmes taken by the corporate body/company. So, it is better that the
reputed corporate houses like:

TATA which have impressive track record on CSR activities take the initiative in
developing code for good CRS practices. Since their employees are aware of
various CRS practices of the company, they would play very important role in
defining the code. Such discussion on CSR code would bring desired awareness
among the companies and their employees, too.

Subsequently, workshops may be organized at regional levels by Chambers of

Commerce. During workshop, the CSR practices followed by few select
companies may be discussed in details. It would be better if a survey/impact
evaluation study, too, is carried out by a third party agency to evaluate the impact
of various CSR programmes launched/implemented by the companies in the region
and the key findings of the survey are presented during workshop. Finally, a
national level seminar/workshop may be organized for discussing the findings of
regional workshops and finalizing the code for good CSR practices.

CSR practice need legal back up, apart from voluntary philanthropy:

Although the forced changes do not bring lasting solution, there is need for
consensus on basic objectives and purposes of CSR and common strategy for the
same. Once this consensus is achieved, law makers can work for necessary
amendment in Companies Act and CSR may be made compulsory for all corporate
citizens (provided they have profit). Such legal sanctity may boost CSR activities
in the country. The suitable provisions may be made in the Companies Act, 1956.

CSR should be synergy of government -private social organizations: Government,

Business Associations (CII, FICCI etc.), Spiritual organizations, Gandhian
Institutions and other social organizations may come together to form the lasting
strategy for effective CSR and decide modus operandi for the same.

Only backward areas should be earmarked for CSR activities. Such area villages/
taluka/district should be adopted by reputed corporate body or a cluster of
corporate bodies. However, they must be supported by Government Agency, too. It
would be ideal if government fund is supplemented by fund provided for CSR
activities by corporate bodies. It will have synergy effect. Such an approach
would be in line with Gandhian Principle of Trusteeship.

However, the association should be voluntary. Non- Governmental Organizations

(NGOs), too, may be made party to such association. All three agencies
Government or their Agencies, NGOs and Corporate bodies, will work together to
make the society prosper.