Corporate Social Responsibility Towards Business-1

Corporate social responsibility towards business
INDEX
Chapter No Topic Page No.
1 Introduction 1
2 Objective 4
3 Philanthropy and community service 10
4 Approaches 12
5 Implementation 14
6 Ethics and training 16
7 Criticisms 19
8 Geography 23
9 Socially responsible investing 32
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10 Socially responsible marketing 38
11 Corporate sustainability 42
12 Internet corporate governance controls 54
13 Data anylisis 56
14 Conclusion 85
15 Bibliography 86
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CHAPTER NO. 1 : INTRODUCTION
Corporate social responsibility
CSR policy functions as a self-regulatory mechanism whereby a business monitors

and ensures its active compliance with the spirit of the law, ethical standards and
international norms. In some models, a firm's implementation of CSR goes beyond
compliance and engages in "actions that appear to further some social good,
beyond the interests of the firm and that which is required by law." CSR aims to
embrace responsibility for corporate actions and to encourage a positive impact on
the environment and stakeholders including consumers, employees, investors,
communities, and others.
The term "corporate social responsibility" became popular in the 1960s and has
remained a term used indiscriminately by many to cover legal and moral
responsibility more narrowly construed.
Proponents argue that corporations increase long term profits by operating with a
CSR perspective, while critics argue that CSR distracts from business' economic
role. A 2000 study compared existing econometric studies of the relationship
between social and financial performance, concluding that the contradictory results
of previous studies reporting positive, negative, and neutral financial impact, were
due to flawed empirical analysis and claimed when the study is properly specified,
CSR has a neutral impact on financial outcomes.
Critics questioned the "lofty" and sometimes "unrealistic expectations" in CSR. or

that CSR is merely window-dressing, or an attempt to pre-empt the role of
governments as a watchdog over powerful multinational corporations.
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Political sociologists became interested in CSR in the context of theories

of globalization, neoliberalism and late capitalism. Some sociologists viewed CSR
as a form of capitalist legitimacy and in particular point out that what began as a
social movement against uninhibited corporate power was transformed by
corporations into a 'business model' and a 'risk management' device, often with
questionable results
CSR is titled to aid an organization's mission as well as a guide to what the

company stands for to its consumers. Business ethics is the part of applied
ethics that examines ethical principles and moral or ethical problems that can arise
in a business environment. ISO 26000 is the recognized international standard for
CSR. Public sector organizations (the United Nations for example) adhere to
the triple bottom line (TBL). It is widely accepted that CSR adheres to similar
principles, but with no formal act of legislation.
Definition
Business dictionary defines CSR as "A companys sense of responsibility towards

the community and environment (both ecological and social) in which it operates.
Companies express this citizenship (1) through their waste and pollution reduction
processes, (2) by contributing educational and social programs and (3) by earning
adequate returns on the employed resources."
A broader definition expands from a focus on stakeholders to

include philanthropy and volunteering.
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Consumer perspectives
Most consumers agree that while achieving business targets, companies should do
CSR at the same time. However not all CSR activities are popular. Most
consumers believe companies doing charity will receive a positive
response. Somerville also found that consumers are loyal and willing to spend
more on retailers that support charity. Consumers also believe that retailers selling
local products will gain loyalty Smith (2013). shares the belief that marketing local
products will gain consumer trust. However, environmental efforts are receiving
negative views given the belief that this would affect customer service.Oppewal et
al. (2006) found that not all CSR activities are attractive to consumers. They
recommended that retailers focus on one activity. Becker-Olsen (2006) found that
if the social initiative done by the company is not aligned with other company
goals it will have a negative impact. Mohr et al.(2001) and Groza et al. (2011) also
emphasise the importance of reaching the consumer.
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CHAPTER 2 : OBJECTIVES.
The objectives of corporate social responsibility strategy
The objectives that we set out in the corporate social responsibility of business is to
support the company's strategic objectives, in particular the impact on society and
minimize the negative influence on the environment and JSW image as a credible
and reliable business partner for suppliers and customers.
I. We are a reliable business partner.

Customer care and satisfaction is our top priority, regardless of the type of product
or service offered. Our aim is to improve the quality of customer service,
partnerships, and ethical behavior in relationships with customers, adherence to
contract terms with our customers and suppliers (timeliness, quality), transparent
trade and complaint procedure and additional services offer.
II.We feel responsible for the environment.

As a mining company, we cannot avoid the harmful effects of our activity,
however, conscious of the responsibility for the negative environmental
consequences, we are taking steps to minimize the negative effects, and in many
cases we make a major contribution to reclaim of the land. We increase our
responsibility for the environment through the implementation of the assigned
tasks, including meeting the requirements of environmental protection under the
best available techniques (BAT). Our overriding goal is to protect waters against
salinity, sound management of waste (mining, hazardous, and others), greenhouse
gases reduction, minimizing the mining impact on surface area and environmental
education of employees.
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III. We ensure good and safe working conditions.

Our company's most important asset is its people. We make every effort to take
care of their development and safety. We feel responsible, as the largest employer
in the region, to attract qualified staff and provide them with a stable, good job and
the best conditions. Our aim is to increase the level of safety and health at work
through technical improvement of the mines, natural hazards monitoring, reducing
the impact of human factors on accidents and improving the quality of training.
Activities under this strategy will be focused on supporting the local community
employment, building the image of a good and stable employer, building an
organizational culture of commitment, focus on results and increasing productivity.
We also aim at identification of employees from particular companies with the
Group. Continuous improvement of the organizational culture and ways of
communication and interaction with employees is also within the range of our
interest.
According to the philosophy of JSW SA "Good and safe working conditions" is
not only to ensure the physical safety of employees at work, it is also taking care of
the proper management of their energy and create space for leisure and
development of their passions and interests.
IV. Active participation in community life.

We are not only a business entity, but also a member of the local communities in
which we operate. We strive to build good relations with representatives of these
communities. Through thoughtful activities that fit into the Vision and Mission of
our company we reach potential or current stakeholders. Through these activities
we also build the bond and a sense of solidarity with the environment and its
problems.
Our aim is to support local community initiatives, building the image of JSW as a
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patron of sports, to promote the development of scientific institutions, health

services and programs which support talented youth.
The triple bottom line refers to an extension of the criteria used to measure
organisational success. Traditionally, business success (or failure) is measured in
terms of its economic performance. A business is considered to be successful if it
has generated a sufficient financial return from its investments, financing activities
and operating activities. The triple bottom line takes into account three criteria for
assessing organisational performance; economic, social and environmental.
The financial or economic performance of an organisation is the easiest of the three
criteria to measure accurately. Traditional accounting methods take into account
the inflow and outflow of resources from the business, generally including cash
and finances, assets, liabilities and other easily definable business resources. The
economic criteria can then be used to determine how much an organisation
generates in monetary value. It can also be used to determine the net worth of the
business at a given point in time.
The social performance of an organisation is somewhat more difficult to define and
measure. The social criterion of the triple bottom line takes into account the impact
that a business has on people within the business (employees) and people outside
of the business (the community). A business applying the triple bottom line
principles will act in a way that benefits the community and will ensure that people
are not being exploited or endangered by the operation of the business. Social
factors that should be considered include labourutilisation and wages, working
conditions and contribution to community living standards.
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Environmental performance is concerned with a business' total impact on the

natural environment. Triple bottom line organisations aim to improve the
environment where feasible, or at the very least, reduce and limit their negative
impact on the environment. Organisations need to look at more than just obvious
environmental issues (like pollution) and should consider the total lifecycle impact
of their products and services.
Triple bottom line reporting is becoming more widespread amongst both large and
small organisations. Triple bottom line reporting makes business decisions and
actions more transparent and allows people to gain a thorough understanding of a
business' level of corporate social responsibility. The triple bottom line report also
helps manager to assess and compare their performance across all three criteria
against the business objectives and long term goals.
There is much debate and criticism surrounding the concept of corporate social
responsibility. Some people believe that the actual responsibility of a business is
only to its owners and shareholders. Others believe that a business should be held
accountable for all of its actions (past, present and future) that impact the
environment and community.
One of the common criticisms of corporate social responsibility is that there is a
conflict between the purpose of business and the concept of social responsibility. It
is argued by many businesspeople and economists that the true purpose of business
is to make a profit for the benefit of shareholders. Doing anything outside of this
purpose undermines this fundamental business principle.
If an organisation has a responsibility to its shareholders to make as much profit as
possible, how can it justify spending some of those profits on socially responsible
projects or making decisions that will negatively affect the bottom line?
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Essentially, this argument against social responsibility remains true until

consumers and shareholders begin to expect a business to act in a responsible way.
Another criticism of corporate social responsibility is that the actual benefit
received by the community is negligible or non-existent. Social responsibility
should result in positive outcomes for both the business and the community.
However, often the results fall heavily in favour of the business involved.
Businesses invest a comparatively small amount into community projects and then
use their efforts to promote their brand and gain access to markets all around the
world. The public relations and brand building they receive far outweighs their
investment in socially responsible projects.
One of the serious challenges that businesses face when becoming involved in
corporate social responsibility is growing consumer cynicism. Consumers now
recognise that for many organisations, social responsibility is simply a public
relations campaign in disguise. They are sceptical about the true motivation behind
corporate social responsibility and are not easily convinced that a business is acting
in the best interests of the community and environment.
Even businesses that are genuine in their commitment to social responsibility face
the challenge of winning over customers. Businesses need to be careful to not be
seen boasting about their socially responsible endeavours. Basically, consumers
view this as a marketing ploy and often disregard what is being said as you simply
trying to drum up good public relations. This is especially apparent when business
have made profits from irresponsible behaviour of many years and then expect
praise from consumers when they suddenly start to make small changes to their
practices.
Another significant challenge that results from socially responsible behaviour is
that it can negatively affect business profit margins. How can a business justify
spending on activities that provide no measurable returns for the business? Of
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course, the solution is to find socially responsible projects that do offer some
tangible benefits; however, many consider this to corrupt the motivation behind
responsible business practices. It is debatable as to how much a business should
sacrifice in its pursuit of social responsibility.
Corporate social responsibility also comes under criticism because it is disposable
or reversible. Many businesses get involved in sustainable projects when economic
conditions are excellent and they have plenty of disposable resources, however, as
soon as conditions worsen, their community projects are the first thing to go. This
can be detrimental to groups who were reliant on the assistance they were
receiving from the organisation.
Clearly, organisations that want to be socially responsible must face many
challenges and overcome a number of barriers and criticisms. You need to weigh
up all of the advantages and disadvantages that are associated with corporate social
responsibility and determine what is best for the sustainability of your business.
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Developing a Culture of Responsible Business
Many successful organisations believe that their sustainability is a result of having

a strong culture of responsibility and ethics ingrained in their business. Developing
a culture of responsible business can provide long term benefits to your business
and will help you to avoid the consequences associated with decisions that don't
take into account the triple bottom line.
Developing a mission statement that outlines your vision and reason for operating
your business will help to establish your standpoint concerning social
responsibility and sustainability. It should include information about what you aim
to achieve, your vision for the business going in the future and an outline your
commitment and values in regards to social responsibility.
You should consider developing a set of policies or guidelines that outline the
expectations of your business in regards to social responsibility. You should define
your standpoint on issues such as ethics and moral standards so that your team is
able to gain a clear understanding of how they are expected to behave when
working for the business. Part of this process is getting feedback from your team so
that you can work out which policies are feasible and identify any changes that
need to be made.
In order for your business to be socially responsible, you need to encourage you
employees, customers and associates to support the idea. When making purchases,
you should look for sustainable options and suppliers. In the long term, this will
encourage other businesses to become more sustainable in the hope of establishing
a business relationship with your organisation. You can also encourage your
employees to get involved in community projects and buy sustainable products and
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offer incentives for team members who demonstrate a commitment to social

responsibility.
To continue the development of a socially responsible culture in your business, you
should aim to empower your employees to make decisions and take responsibility
for their actions. If employees (particularly managers) are made accountable for
decisions made in the course of business, they are more likely to act in an ethical
and responsible way. Ensure that your employees are allowed to make decisions
that provide benefits to society and enable them to work towards long term,
sustainable objectives rather than worrying about short term gains.
When it comes to selling products and services to consumers, try to offer a
sustainable option whenever possible. For example, if you are selling food, you
could offer an organic option to your customers. This type of approach allows
people to make their own decisions about their involvement in environmental and
social responsibility.
Developing a culture of socially responsible decisions and actions in your business
can take time. The key to success is leading by example and growing with your
business. If you make yourself aware of current issues and align yourself with a
strong set of socially responsible principles, you encourage your employees,
customers and associates to do the same.
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CHAPTER NO. 3 : PHILANTHROPHY AND COMMUNITY

SERVICE.
Philanthropy and community service are considered to be important aspects of

corporate social responsibility in many organisations. Businesses use it as an
opportunity to help out those less fortunate or to support sustainable or charitable
causes. It can also be seen as a good way to build a positive relationship with
people and improve their public image.
Philanthropy is taking action directed at improving the overall well-being of
people. It is instigated by monetary donations, donations of equipment or
resources, or through the volunteer work of groups or individuals.
The common way for businesses to engage in philanthropy is by making monetary
donations to charitable organisations, which then use the money for projects that
help the community in different ways. By using the services of charitable
organisations, businesses can be assured that their money is going to a good cause
and will be used responsibly. As a further incentive to encourage philanthropy,
donations are tax deductable under most circumstances.
Businesses can also choose to donate equipment, resources or supplies to people or
countries that are facing hardship. For example, in an emergency situation such as
after an earthquake, many organisations donate supplies such as bottled water, food
and clothing to help in the relief effort. Humanitarian work such as this not only
helps the community in need of assistance, but also helpsbusinesses to gain respect
from consumers.
If making donations of money or resources is not practical for your business, you
could consider donating some of your time or skills to a local community project.
Volunteering and helping out at a local charity is a great way to get involved and
your efforts will be appreciated by the people that you help. There are often
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projects going on in local communities that you mightn't even be aware of, so get
in contact with a charitable organisation and see if there is any way you can help
out.
Not-for-profit organisations are organisations that don't distribute their surplus
funds to owners or shareholders. Instead, they divert all of their funds into
achieving their objectives and goals. For example, a large international charity
doesn't distribute its funds to shareholders, but uses the money it generates to
operate its community projects around the world.
One significant criticism of philanthropy in the business world is that it takes away
a person's opportunity to choose if or where they would like to contribute to the
community. If a company dips into its profits to make payments to a charity, it is
reducing the available funds that would otherwise be distributed to shareholders (or
possibly employees). The forced contribution takes away the opportunity for
shareholders to choose where their money goes.
Another issue is that many people are cynical of the philanthropic efforts of
business. Unfortunately, many see it as simply another public relations exercise
and that companies wouldn't get involved unless they stood to gain something in
return. Whilst this may be true to some extent in certain circumstances, it is
important to remember that businesses are under no obligation to make donations
or engage in socially responsible activities. It is considered by most that some
contribution is preferable to none at all.
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CHAPTER NO. 4 : APPROACHES
CSR Approaches
Some commentators have identified a difference between the Canadian (Montreal

school of CSR), the Continental European and the Anglo-Saxon approaches to
CSR. It is said that for Chinese consumers, a socially responsible company makes
safe, high-quality products; for Germans it provides secure employment; in South
Africa it makes a positive contribution to social needs such as health care and
education. And even within Europe the discussion about CSR is very
heterogeneous.
A more common approach to CSR is corporate philanthropy. This includes

monetary donations and aid given to nonprofit organizations and communities.
Donations are made in areas such as the arts, education, housing, health, social
welfare and the environment, among others, but excluding political contributions
and commercial event sponsorship.
Another approach to CSR is to incorporate the CSR strategy directly into

operations. For instance, procurement of Fair Trade tea and coffee.
Creating Shared Value, or CSV is based on the idea that corporate success and
social welfare are interdependent. A business needs a healthy, educated workforce,
sustainable resources and adept government to compete effectively. For society to
thrive, profitable and competitive businesses must be developed and supported to
create income, wealth, tax revenues and philanthropy. The Harvard Business
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Review article Strategy & Society: The Link between Competitive Advantage and
Corporate Social Responsibility provided examples of companies that have
developed deep linkages between their business strategies and CSR. CSV
acknowledges trade-offs between short-term profitability and social or
environmental goals, but emphasizes the opportunities for competitive advantage
from building a social value proposition into corporate strategy. CSV gives the
impression that only two stakeholders are important - shareholders and consumers.
Many companies employ benchmarking to assess their CSR policy,

implementation and effectiveness. Benchmarking involves reviewing competitor
initiatives, as well as measuring and evaluating the impact that those policies have
on society and the environment, and how others perceive competitor CSR strategy.
Cost-benefit analysis
In competitive markets cost-benefit analysis of CSR initiatives, can be examined

using a resource-based view (RBV). According to Barney (1990) "formulation of
the RBV, sustainable competitive advantage requires that resources be valuable
(V), rare (R), inimitable (I) and non-substitutable (S)." A firm introducing a CSR-
based strategy might only sustain high returns on their investment if their CSR-
based strategy could not be copied (I). However, should competitors imitate such a
strategy, that might increase overall social benefits. Firms that choose CSR for
strategic financial gain are also acting responsibly.
RBV presumes that firms are bundles of heterogeneous resources and capabilities
that are imperfectly mobile across firms. This imperfect mobility can produce
competitive advantages for firms that acquire immobile resources. McWilliams
and Siegel (2001) examined CSR activities and attributes as a differentiation
strategy. They concluded that managers can determine the appropriate level of
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investment in CSR by conducting cost benefit analysis in the same way that they
analyze other investments.
Reinhardt (1998) found that a firm engaging in a CSR-based strategy could only
sustain an abnormal return if it could prevent competitors from imitating its
strategy.
Scope
Initially, CSR emphasized the official behavior of individual firms. Later, it

expanded to include supplier behavior and the uses to which products were put and
how they were disposed of after they lost value.
Supply chain
Incidents like the 2013 Savar building collapse pushed companies to consider how
the behavior of their suppliers impacted their overall impact on society.
Irresponsible behavior reflected on both the misbehaving firm, but also on its
corporate customers. Supply chain management expanded to consider the CSR
context. Wieland and Hand field (2013) suggested that companies need to include
social responsibility in their reviews of component quality. They highlighted the
use of technology in improving visibility across the supply chain.
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CHAPTER NO. 5 : IMPLEMENTATION.
CSR may be based within the human resources, business development or public
relations departments of an organisation,or may be a separate unit reporting to
the CEO or the board of directors. Some companies approach CSR without a
clearly defined team or programme.
Engagement plan
An engagement plan can assist in reaching a desired audience. A corporate social

responsibility individual or team plans the goals and objectives of the organization.
As with any corporate activity, a defined budget demonstrates commitment and
scales the program's relative importance.
Accounting, auditing and reporting

Main article: Social accounting
Social accounting is the communication of social and environmental effects of a

company's economic actions to particular interest groups within society and to
society at large.
Social accounting emphasizes the notion of corporate accountability. Crowther

defines social accounting as "an approach to reporting a firms activities which
stresses the need for the identification of socially relevant behavior, the
determination of those to whom the company is accountable for its social
performance and the development of appropriate measures and reporting
techniques."Reporting guidelines and standards serve as frameworks for social
accounting, auditing and reporting:
AccountAbility's AA1000 standard, based on John Elkington's triple bottom

line (3BL) reporting
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The Prince's Accounting for Sustainability Project's Connected Reporting

Framework[34]
The Fair Labor Association conducts audits based on its Workplace Code of
Conduct and posts audit results on the FLA website.
The Fair Wear Foundation verifies labour conditions in companies' supply
chains, using interdisciplinary auditing teams.
Global Reporting Initiative's Sustainability Reporting Guidelines
Economy for the Common Good's Common Good Balance Sheet
GoodCorporation's standarddeveloped in association with the Institute of
Business Ethics
Synergy Codethic 26000 Social Responsibility and Sustainability Commitment
Management System (SRSCMS) Requirements Ethical Business Best
Practices of Organizations - the necessary management system elements to
obtain a certifiable ethical commitment management system. The standard
scheme has been build around ISO 26000 and UNCTAD Guidance on Good
Practices in Corporate Governance.The standard is applicable by any type of
organization.;
Earthcheck Certification / Standard
Social Accountability International's SA8000 standard
Standard Ethics Aei guidelines
The ISO 14000 environmental management standard
The United Nations Global Compact requires companies to communicate on
their progress(or to produce a Communication on Progress, COP), and to
describe the company's implementation of the Compact's ten universal
principles.
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The United Nations Intergovernmental Working Group of Experts on

International Standards of Accounting and Reporting (ISAR) provides
voluntary technical guidance on eco-efficiency indicators corporate
responsibility reporting, and corporate governance disclosure.
The FTSE Group publishes the FTSE4Good Index, an evaluation of CSR
performance of companies.
In nations such as France, legal requirements for social accounting, auditing and
reporting exist, though international or national agreement on meaningful
measurements of social and environmental performance has not been achieved.
Many companies produce externally audited annual reports that cover Sustainable
Development and CSR issues ("Triple Bottom Line Reports"), but the reports vary
widely in format, style, and evaluation methodology (even within the same
industry). Critics dismiss these reports as lip service, citing examples such
as Enron's yearly "Corporate Responsibility Annual Report" and tobacco
companies' social reports.
In South Africa, as of June 2010, all companies listed on the Johannesburg Stock
Exchange (JSE) were required to produce an integrated report in place of an annual
financial report and sustainability report. An integrated report reviews
environmental, social and economic performance alongside financial performance.
This requirement was implemented in the absence of formal or legal standards. An
Integrated Reporting Committee (IRC) was established to issue guidelines for good
practice.
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CHAPTER NO. 6 : ETHICS AND TRAINING.
The rise of ethics training inside corporations, some of it required by government

regulation, has helped CSR to spread. The aim of such training is to help
employees make ethical decisions when the answers are unclear.The most direct
benefit is reducing the likelihood of "dirty hands",] fines and damaged reputations
for breaching laws or moral norms. Organizations see increased employee loyalty
and pride in the organization.
Common actions
Common CSR actions include:
Environmental sustainability: recycling, waste management, water

management, renewable energy, reusable materials, 'greener' supply chains,
reducing paper use and adopting Leadership in Energy and Environmental
Design (LEED) buildind standards.
Community involvement: This can include raising money for local charities,
providing volunteers, sponsoring local events, employing local workers,
supporting local economic growth, engaging in fair trade practices, etc.
Ethical marketing: Companies that ethically market to consumers are placing a

higher value on their customers and respecting them as people who are ends in
themselves. They do not try to manipulate or falsely advertise to potential
consumers. This is important for companies that want to be viewed as ethical.
Social license
Social license refers to a local communitys acceptance or approval of a

company. Social license exists outside formal regulatory processes. Social license
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can nevertheless be acquired through timely and effective communication,

meaningful dialogue and ethical and responsible behavior.
Displaying commitment to CSR is one way to achieve social license, by enhancing

a companys reputation.
Potential business benefits
A large body of literature exhorts business to adopt measures non-financial

measures of success (e.g., Deming's Fourteen Points, balanced scorecards). While
CSR benefits are hard to quantify, Orlitzky, Schmidt and Rynes found a correlation
between social/environmental performance and financial performance.
The business case for CSR within a company employs one or more of these
arguments:
Triple bottom line
"People, planet and profit", also known as the triple bottom line form one way to
evaluate CSR. "People" refers to fair labour practices, the community and region
where the business operates. "Planet" refers to sustainable environmental
practices. Profit is the economic value created by the organization after deducting
the cost of all inputs, including the cost of the capital (unlike accounting
definitions of profit).
This measure was claimed to help some companies be more conscious of their
social and moral responsibilities.However, critics claim that it is selective and
substitutes a company's perspective for that of the community. Another criticism is
about the absence of a standard auditing procedure.
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Human resources
A CSR program can be an aid to recruitment and retention, particularly within the
competitive graduate student market. Potential recruits often consider a firm's CSR
policy. CSR can also help improve the perception of a company among its staff,
particularly when staff can become involved through payroll
giving, fundraising activities or community volunteering. CSR has been credited
with encouraging customer orientation among customer-facing employees.
Risk management
Managing risk is an important executive responsibility. Reputations that take

decades to build up can be ruined in hours through corruption scandals or
environmental accidents. These draw unwanted attention from regulators, courts,
governments and media. CSR can limit these risks.
Brand differentiation
CSR can help build customer loyalty based on distinctive ethical values.Some
companies use their commitment to CSR as their primary positioning tool,
e.g., The Co-operative Group, The Body Shop and American Apparel
Some companies use CSR methodologies as a strategic tactic to gain public

support for their presence in global markets, helping them sustain a competitive
advantage by using their social contributions as another form of advertising.
Reduced scrutiny
Corporations are keen to avoid interference in their business

through taxation and/or regulations. A CSR program can persuade governments
and the public that a company takes health and safety, diversity and the
environment seriously, reducing the likelihood that company practices will be
closely monitored.
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Supplier relations
Appropriate CSR programs can increase the attractiveness of supplier firms to

potential customer corporations. E.g., a fashion merchandiser may find value in an
overseas manufacturer that uses CSR to establish a positive imageand to reduce
the risks of bad publicity from uncovered misbehavior.
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CHAPTER NO. 7 : CRITICISMS AND CULTURE.
CSR concerns include its relationship to the purpose of business and the motives
for engaging in it.
Nature of business
Milton Friedman and others argued that a corporation's purpose is to maximize

returns to its shareholders and that obeying the laws of the jurisdictions within
which it operates constitutes socially responsible behavior.
While some CSR supporters claim that companies practicing CSR, especially in
developing countries, are less likely to exploit workers and communities, critics
claim that CSR itself imposes outside values on local communities with
unpredictable outcomes.
Better governmental regulation and enforcement, rather than voluntary measures,

are an alternative to CSR that moves decision-making and resource allocation from
public to private bodies. However, critics claim that effective CSR must be
voluntary as mandatory social responsibility programs regulated by the
government interferes with peoples own plans and preferences, distorts the
allocation of resources, and increases the likelihood of irresponsible decisions.
Motives
A story of CSR promoted by AzimPremji Foundation in India
Some critics believe that CSR programs are undertaken by companies to distract
the public from ethical questions posed by their core operations. They argue that
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the reputational benefits that CSR companies receive (cited above as a benefit to
the corporation) demonstrate the hypocrisy of the approach.
Misdirection
Another concern is that sometimes companies use CSR to direct public attention
away from other, harmful business practices. For example, McDonald's
Corporation positioned its association with Ronald McDonald House as CSR while
its meals have been accused of promoting poor eating habits.
Controversial industries
Industries such as tobacco, alcohol or munitions firms make products that damage
their consumers and/or the environment. Such firms may engage in the same
philanthropic activities as those in other industries. This duality complicates
assessments of such firms with respect to CSR.
Stakeholder influence
One motivation for corporations to adopt CSR is to satisfy stakeholders.
Branco and Rodrigues (2007) describe the stakeholder perspective of CSR as the
set of views of corporate responsibility held by all groups or constituents with a
relationship to the firm.In their normative model the company accepts these views
as long as they do not hinder the organization. The stakeholder perspective fails to
acknowledge the complexity of network interactions that can occur in cross-sector
partnerships. It relegates communication to a maintenance function, similar to the
exchange perspective.
Ethical consumerism
The rise in popularity of ethical consumerism over the last two decades can be
linked to the rise of CSR.Consumers are becoming more aware of the
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environmental and social implications of their day-to-day consumption decisions

and in some cases make purchasing decisions related to their environmental and
ethical concerns.
Socially responsible investing
Shareholders and investors, through socially responsible investing are using their
capital to encourage behavior they consider responsible. However, definitions of
what constitutes ethical behavior vary. For example, some religious investors in the
US have withdrawn investment from companies that violate their religious views,
while secular investors divest from companies that they see as imposing religious
views on workers or customers.
Creating shared value
Non-governmental organizations are also taking an increasing role, leveraging the

media and the Internet to increase the visibility of corporate behavior. Through
education and dialogue, the development of community awareness in pushing
businesses to change their behavior is growing.
Creating Shared Value
(CSV) claims to be more community aware than CSR. Several companies are
refining their collaboration with stakeholders accordingly.
Public policies
Some national governments promote socially and environmentally responsible

corporate practices. The heightened role of government in CSR has facilitated the
development of numerous CSR programs and policies. Various European
governments have pushed companies to develop sustainable corporate
28
practices.[ CSR critics such as Robert Reich argued that governments should set
the agenda for social responsibility with laws and regulation that describe how to
conduct business responsibly.
Regulation
Fifteen European Union countries actively engaged in CSR regulation and public
policy development.CSR efforts and policies are different among countries,
responding to the complexity and diversity of governmental, corporate and societal
roles. Studies claimed that the role and effectiveness of these actors were case-
specific.
The variety among companies complicates regulatory processes. [85] Self-regulation

allows each corporate actor to balance profits and social responsibility without
cumbersome governmental involvement. Studies suggest that mandated CSR
distorts the allocation of resources and increases the likelihood of irresponsible
decisions.
Bulkeley cited the Australian government's actions to avoid compliance with

the Kyoto Protocol in 1997, over concerns of economic loss and national interest.
The Australian government claimed that the pact would damage Australia more
than any other OECD nation.In November 2007, the new Prime Minister Kevin
Rudd ratified the protocol.
Canada adopted CSR in 2007. Prime Minister Harper encouraged Canadian mining
companies to meet Canadas newly developed CSR standards.
Laws
In the 1800s,the US government could take away a firm's license if it acted

irresponsibly. Corporations were viewed as "creatures of the state" under the law.
In 1819, the United States Supreme Court in Dartmouth College vs.
29
Woodward established a corporation as a legal person in specific contexts. This

ruling allowed corporations to be protected under the Constitution and prevented
states from regulating firms.Recently countries included CSR policies in
governtment agendas.
On 16 December 2008, the Danish parliament adopted a bill making it mandatory

for the 1100 largest Danish companies, investors and state-owned companies to
include CSR information in their financial reports. The reporting requirements
became effective on 1 January 2009. The required information included:
CSR/SRI policies
How such policies are implemented in practice
Results and management expectations
CSR/SRI is voluntary in Denmark, but if a company has no policy on this it must

state its positioning on CSR in financial reports.
In 2014, India became the world's first country to enact a mandatory minimum
CSR spending law. Under Companies Act, 2013, any company having a net worth
of 500 crore or more or a turnover of 1,000 crore or a net profit of 5 crore must
spend 2% of their net profits on CSR activities. The rules came into effect from 1
April 2014.
Crises and their consequences
Crises have encouraged the adoption of CSR. The CERES principles were adopted
following the 1989 Exxon Valdez incident.Other examples include the lead
paint used by toy maker Mattel, which required the recall of millions of toys and
caused the company to initiate new risk management and quality control
processes. Magellan Metals was found responsible for lead contamination killing
thousands of birds in Australia. The company ceased business immediately and
30
had to work with independent regulatory bodies to execute a

cleanup. Odwalla experienced a crisis with sales dropping 90% and its stock price
dropping 34% due to cases of E. coli. The company recalled all apple
or carrot juice products and introduced a new process called "flash pasteurization"
as well as maintaining lines of communication constantly open with customers.
31
CHAPTER NO. 8: GEOGRAPHY.
Corporations that employ CSR behaviors do not always behave consistently in all
parts of the world.[94] Conversely, a single behavior may not be considered ethical
in all jurisdictions. E.g., some jurisdictions forbid women from driving, while
others require women to be treated equally in employment decisions.
UK retail sector
A 2006 study found that the UK retail sector showed the greatest rate of CSR
involvement. Many of the big retail companies in the UK joined the Ethical
Trading Initiative,an association established to improving working conditions and
worker health.
Tesco (2013)[ reported that their essentials are Trading responsibility,

Reducing our Impact on the Environment, Being a Great Employer and
Supporting Local Communities. J Sainsburyemploys the headings Best for food
and health, Sourcing with integrity, Respect for our environment, Making a
difference to our community, and A great place to work, etc. The four main
issues to which UK retail these companies committed are environment, social
welfare, ethical trading and becoming an attractive workplace.
Anselmsson and Johansson (2007) assessed three areas of CSR performance:

human responsibility, product responsibility and environmental responsibility.
Martinuzzi et al. described the terms, writing that human responsibility is the
company deals with suppliers who adhere to principles of natural and good
breeding and farming of animals, and also maintains fair and positive working
conditions and work-place environments for their own employees. Product
responsibility means that all products come with a full and complete list of content,
that country of origin is stated, that the company will uphold its declarations of
32
intent and assume liability for its products. Environmental responsibility means
that a company is perceived to produce environmental-friendly, ecological, and
non-harmful products. Jones et al. (2005) found that environmental issues are the
most commonly reported CSR programs among top retailers.
Business ethics
Business ethics (also corporate ethics) is a form of applied ethics or professional

ethics that examines ethical principles and moral or ethical problems that arise in a
business environment. It applies to all aspects of business conduct and is relevant
to the conduct of individuals and entire organizations.
Business ethics has normative and descriptive dimensions. As a corporate practice

and a career specialization, the field is primarily normative. Academics attempting
to understand business behavior employ descriptive methods. The range and
quantity of business ethical issues reflects the interaction of profit-maximizing
behavior with non-economic concerns. Interest in business ethics accelerated
dramatically during the 1980s and 1990s, both within major corporations and
within academia. For example, most major corporations today promote their
commitment to non-economic values under headings such as ethics codes and
social responsibility charters. Adam Smith said, "People of the same trade seldom
meet together, even for merriment and diversion, but the conversation ends in a
conspiracy against the public, or in some contrivance to raise prices.Governments
use laws and regulations to point business behavior in what they perceive to be
33
beneficial directions. Ethics implicitly regulates areas and details of behavior that
lie beyond governmental control. The emergence of large corporations with limited
relationships and sensitivity to the communities in which they operate accelerated
the development of formal ethics regimes.
Functional business areas
Finance
Fundamentally finance is a social science discipline.The discipline

borders behavioral economics, sociology, economics, accounting and management.
It concerns technical issues such as the mix of debt and equity, dividend policy, the
evaluation of alternative investment projects, options, futures, swaps, and
other derivatives, portfolio diversificationand many others. It is often mistaken by
the people to be a discipline free from ethical burdens.[31] The 2008 financial
crisis caused critics to challenge the ethics of the executives in charge of U.S. and
European financial institutions and financial regulatory bodies.[33] Finance ethics is
overlooked for another reasonissues in finance are often addressed as matters of
law rather than ethics.
Finance paradigm
Aristotle said, "the end and purpose of the polis is the good life".Adam
Smith characterized the good life in terms of material goods and intellectual and
moral excellences of character.Smith in his The Wealth of Nations commented,
"All for ourselves, and nothing for other people, seems, in every age of the world,
to have been the vile maxim of the masters of mankind.
However, a section of economists influenced by the ideology of neoliberalism,

interpreted the objective of economics to be maximization of economic
34
growth through accelerated consumption and production of goods and services.

Neoliberal ideology promoted finance from its position as a component of
economics to its core.Proponents of the ideology hold that unrestricted financial
flows, if redeemed from the shackles of "financial repressions", best help
impoverished nations to growThe theory holds that open financial systems
accelerate economic growth by encouraging foreign capital inows, thereby
enabling higher levels of savings, investment, employment, productivity and
"welfare", along with containing corruption. Neoliberals recommended that
governments open their financial systems to the global market with minimal
regulation over capital flows. The recommendations however, met with criticisms
from various schools of ethical philosophy. Some pragmatic ethicists, found these
claims to unfalsifiable and a priori, although neither of these makes the
recommendations false or unethical per se.[45][46][47] Raising economic growth to the
highest value necessarily means that welfare is subordinate, although advocates
dispute this saying that economic growth provides more welfare than known
alternatives. Since history shows that neither regulated nor unregulated firms
always behave ethically, neither regime offers an ethical panacea.
Neoliberal recommendations to developing countries to unconditionally open up

their economies to transnational finance corporations was fiercely contested by
some ethicists. The claim that deregulation and the opening up of economies would
reduce corruption was also contested.
Dobson observes, "a rational agent is simply one who pursues personal material
advantage ad infinitum. In essence, to be rational in finance is to be individualistic,
materialistic, and competitive. Business is a game played by individuals, as with all
games the object is to win, and winning is measured in terms solely of material
wealth. Within the discipline this rationality concept is never questioned, and has
35
indeed become the theory-of-the-firm's sine qua non".Financial ethics is in this

view a mathematical function of shareholder wealth. Such simplifying assumptions
were once necessary for the construction of mathematically robust models.
However signalling theory and agency theoryextended the paradigm to greater
realism.
Other issues
Fairness in trading practices, trading conditions, financial contracting, sales

practices, consultancy services, tax payments, internal audit, external audit
and executive compensation also fall under the umbrella of finance and
accounting.[34][63] Particular corporate ethical/legal abuses include: creative
accounting, earnings management, misleading financial analysis, insider
trading, securities fraud, bribery/kickbacks and facilitation payments. Outside of
corporations, bucket shops and forex scams are criminal manipulations of financial
markets. Cases include accounting scandals, Enron, WorldCom and Satyam
Human resource management
Human resource management occupies the sphere of activity

of recruitment selection, orientation, performance appraisal, training and
development, industrial relations andhealth and safety issues.[64] Business Ethicists
differ in their orientation towards labour ethics. Some assess human resource
policies according to whether they support an egalitarian workplace and the dignity
of labor.
Issues including employment itself, privacy, compensation in accord

with comparable worth, collective bargaining (and/or its opposite) can be seen
either as inalienable rights or as negotiable.Discrimination by age (preferring
the young or the old), gender/sexual harassment, race, religion, disability, weight
36
and attractiveness. A common approach to remedying discrimination is affirmative

action.
Once hired, employees have the right to occasional cost of living increases, as well
as raises based on merit. Promotions, however, are not a right, and there are often
fewer openings than qualified applicants. It may seem unfair if an employee who
has been with a company longer is passed over for a promotion, but it is not
unethical. It is only unethical if the employer did not give the employee proper
consideration or used improper criteria for the promotion.
Potential employees have ethical obligations to employers, involving intellectual

property protection and whistle-blowing.
Employers must consider workplace safety, which may involve modifying the
workplace, or providing appropriate training or hazard disclosure.
Larger economic issues such as immigration, trade policy, globalization and trade
unionism affect workplaces and have an ethical dimension, but are often beyond
the purview of individual companies.
International issues
While business ethics emerged as a field in the 1970s, international business ethics
did not emerge until the late 1990s, looking back on the international developments
of that decade.Many new practical issues arose out of the international context of
business. Theoretical issues such as cultural relativity of ethical values receive
more emphasis in this field. Other, older issues can be grouped here as well. Issues
and subfields include:
The search for universal values as a basis for international commercial

behaviour.
37
Comparison of business ethical traditions in different countries. Also on the

basis of their respective GDP and [Corruption rankings].
Comparison of business ethical traditions from various religious perspectives.
Ethical issues arising out of international business transactions;
e.g., bioprospecting and biopiracy in the pharmaceutical industry; the fair
trade movement; transfer pricing.
Issues such as globalization and cultural imperialism.
Varying global standardse.g., the use of child labor.
The way in which multinationals take advantage of international differences,
such as outsourcing production (e.g. clothes) and services (e.g. call centres) to
low-wage countries.
The permissibility of international commerce with pariah states.
The success of any business depends on its financial performance. Financial

accounting helps the management to report and also control the business
performance.
The information regarding the financial performance of the company plays an

important role in enabling people to take right decision about the company.
Therefore, it becomes necessary to understand how to record based on accounting
conventions and concepts ensure unambling and accurate records.
Foreign countries often use dumping as a competitive threat, selling products at

prices lower than their normal value. This can lead to problems in domestic
markets. It becomes difficult for these markets to compete with the pricing set by
foreign markets. In 2009, the International Trade Commission has been
researching anti-dumping laws. Dumping is often seen as an ethical issue, as larger
companies are taking advantage of other less economically advanced companies.
38
Implementation
Corporate policies
As part of more comprehensive compliance and ethics programs, many companies

have formulated internal policies pertaining to the ethical conduct of employees.
These policies can be simple exhortations in broad, highly generalized language
(typically called a corporate ethics statement), or they can be more detailed
policies, containing specific behavioural requirements (typically called corporate
ethics codes). They are generally meant to identify the company's expectations of
workers and to offer guidance on handling some of the more common ethical
problems that might arise in the course of doing business. It is hoped that having
such a policy will lead to greater ethical awareness, consistency in application, and
the avoidance of ethical disasters.
An increasing number of companies also require employees to attend seminars

regarding business conduct, which often include discussion of the company's
policies, specific case studies, and legal requirements. Some companies even
require their employees to sign agreements stating that they will abide by the
company's rules of conduct.
Many companies are assessing the environmental factors that can lead employees
to engage in unethical conduct. A competitive business environment may call for
unethical behaviour. Lying has become expected in fields such as trading. An
example of this are the issues surrounding the unethical actions of the Saloman
Brothers.
Not everyone supports corporate policies that govern ethical conduct. Some claim
that ethical problems are better dealt with by depending upon employees to use
their own judgment.
39
Others believe that corporate ethics policies are primarily rooted in utilitarian
concerns, and that they are mainly to limit the company's legal liability, or to curry
public favour by giving the appearance of being a good corporate citizen. Ideally,
the company will avoid a lawsuit because its employees will follow the rules.
Should a lawsuit occur, the company can claim that the problem would not have
arisen if the employee had only followed the code properly.
Sometimes there is disconnection between the company's code of ethics and the
company's actual practices. Thus, whether or not such conduct is explicitly
sanctioned by management, at worst, this makes the policy duplicitous, and, at
best, it is merely a marketing tool.
Jones and Parker write, "Most of what we read under the name business ethics is
either sentimental common sense, or a set of excuses for being unpleasant."Many
manuals are procedural form filling exercises unconcerned about the real ethical
dilemmas. For instance, US Department of Commerce ethics program treats
business ethics as a set of instructions and procedures to be followed by 'ethics
officers'., some others claim being ethical is just for the sake of being
ethical.Business ethicists may trivialize the subject, offering standard answers that
do not reflect the situation's complexity.
Author of 'Business Ethics,' Richard DeGeorge writes in regard to the importance

of maintaining a corporate code, "Corporate codes have a certain usefulness and
there are several advantages to developing them. First, the very exercise of doing
so in itself is worthwhile, especially if it forces a large number of people in the
firm to think through, in a fresh way, their mission and the important obligations
they as a group and as individuals have to the firm, to each other, to their clients
and customers, and to society as a whole. Second, once adopted a code can be used
to generate continuing discussion and possible modification to the code. Third, it
40
could help to inculcate in new employees at all levels the perspective of

responsibility, the need to think in moral terms about their actions, and the
importance of developing the virtues appropriate to their position.
Ethics officers
Ethics officers (sometimes called "compliance" or "business conduct officers")

have been appointed formally by organizations since the mid-1980s. One of the
catalysts for the creation of this new role was a series of fraud, corruption, and
abuse scandals that afflicted the U.S. defense industry at that time. This led to the
creation of the Defense Industry Initiative (DII), a pan-industry initiative to
promote and ensure ethical business practices. The DII set an early benchmark for
ethics management in corporations. In 1991, theEthics& Compliance Officer
Association (ECOA)originally the Ethics Officer Association (EOA)was
founded at the Center for Business Ethics (at Bentley College, Waltham, MA) as a
professional association for those responsible for managing organizations' efforts
to achieve ethical best practices. The membership grew rapidly (the ECOA now
has over 1,200 members) and was soon established as an independent organization.
Another critical factor in the decisions of companies to appoint ethics/compliance

officers was the passing of the Federal Sentencing Guidelines for Organizations in
1991, which set standards that organizations (large or small, commercial and non-
commercial) had to follow to obtain a reduction in sentence if they should be
convicted of a federal offense. Although intended to assist judges with sentencing,
the influence in helping to establish best practices has been far-reaching
41
In the wake of numerous corporate scandals between 2001 and 2004 (affecting
large corporations like Enron, WorldCom and Tyco), even small and medium-
sized companies have begun to appoint ethics officers. They often report to the
Chief Executive Officer and are responsible for assessing the ethical implications
of the company's activities, making recommendations regarding the company's
ethical policies, and disseminating information to employees. They are particularly
interested in uncovering or preventing unethical and illegal actions. This trend is
partly due to the SarbanesOxley Act in the United States, which was enacted in
reaction to the above scandals. A related trend is the introduction of risk
assessment officers that monitor how shareholders' investments might be affected
by the company's decisions.
The effectiveness of ethics officers is not clear. If the appointment is made

primarily as a reaction to legislative requirements, one might expect little impact,
at least over the short term. In part, this is because ethical business practices result
from a corporate culture that consistently places value on ethical behaviour, a
culture and climate that usually emanates from the top of the organization. The
mere establishment of a position to oversee ethics will most likely be insufficient
to inculcate ethical behaviour: a more systemic programme with consistent support
from general management will be necessary.
The foundation for ethical behaviour goes well beyond corporate culture and the
policies of any given company, for it also depends greatly upon an individual's
early moral training, the other institutions that affect an individual, the competitive
business environment the company is in and, indeed, society as a whole.
42
Social responsibility is an ethical framework which suggests that an entity, be it

an organization or individual, has an obligation to act for the benefit of society at
large. Social responsibility is a duty every individual has to perform so as to
maintain a balance between the economy and the ecosystems. A trade-off mayexist
between economic development, in the material sense, and the welfare of the
society and environment. Social responsibility means sustaining the equilibrium
between the two. It pertains not only to business organizations but also to everyone
whose any action impacts the environment.This responsibility can be passive, by
avoiding engaging in socially harmful acts, or active, by performing activities that
directly advance social goals.
Businesses can use ethical decision making to secure their businesses by making
decisions that allow for government agencies to minimize their involvement with
the corporation.For instance if a company follows the United States Environmental
Protection Agency (EPA) guidelines for emissions on dangerous pollutants and
even goes an extra step to get involved in the community and address those
concerns that the public might have; they would be less likely to have the EPA
investigate them for environmental concerns. A significant element of current
thinking about privacy, however, stresses "self-regulation" rather than market or
government mechanisms for protecting personal information.
According to some experts, most rules and regulations are formed due to public
outcry, which threatens profit maximization and therefore the well-being of the
shareholder, and that if there is not outcry there often will be limited regulation.
43
Critics argue that Corporate social responsibility (CSR) distracts from the
fundamental economic role of businesses; others argue that it is nothing more than
superficial window-dressing; others argue that it is an attempt to pre-empt the role
of governments as a watchdog over powerful corporations though there is no
systematic evidence to support these criticisms. A significant number of studies
have shown no negative influence on shareholder results from CSR but rather a
slightly negative correlation with improved shareholder returns.
Emerging normative status of social responsibility
Social responsibility as a non-binding, or soft law principle has received some

normative status in relation to private and public corporations in the United
Nations Educational, Scientific and Cultural Organization (UNESCO) Universal
Declaration on Bioethics and Human Rights developed by the
UNESCO International Bioethics Committee particularly in relation to child and
maternal welfare.Faunce and Nasu 2009) The International Organization for
Standardizationrd will "encourage voluntary commitment to social responsibility
and will lead to common guidance on concepts, definitions and methods of
evaluation."The standard describes itself as a guide for dialogue and language, not
a constraining or certifiable management standard.
44
CHAPTER NO. 9 : SOCIALLY RESPONSIBLE INVESTING.
Socially responsible investing (SRI), also known as sustainable, socially

conscious, "green" or ethical investing, is any investmentstrategy which seeks to
consider both financial return and social good.
In general, socially responsible investors encourage corporate practices that

promote environmental stewardship, consumer protection,human rights,
and diversity. Some avoid businesses involved
in alcohol, tobacco, gambling, pornography, weapons,contraception/abortifacients/
abortion, fossil fuel production, and/or the military. The areas of concern
recognized by the SRI industry are sometimes summarized as ESG issues:
environment, social justice, and corporate governance.
"Socially responsible investing" is one of several related concepts and approaches

that influence and, in some cases govern, how asset managers invest
portfolios.[1] The term "socially responsible investing" sometimes narrowly refers
to practices that seek to avoid harm by screening companies included in an
investment portfolio.[2] However, the term is also used more broadly to include
more proactive practices such as impact investing, shareholder advocacy and
community investing.[3] According to investor Amy Domini, shareholder advocacy
and community investing are pillars of socially responsible investing, while doing
only negative screening is inadequate
Modern applications
Socially responsible investing is a booming market in both the US and Europe. In

particular, it has become an important principle guiding the investment strategies
of various funds and accounts.Assets in socially screened portfolios climbed to
$3.74 trillion at the start of 2012, a 22% increase since 2010, according to the US
45
SIF's 2012 Report on Sustainable and Responsible Investing Trends in the United
States. As of 2012, nearly one of every nine dollars under professional
management in the US is involved in socially responsible investing11.3% of the
$33.3 trillion in total assets under management tracked by Thomson Reuters
Nelson.
Research estimates by financial consultancy Celent predict that the SRI market in
the US will reach $3 trillion by 2011. The European SRI market grew from 1
trillion in 2005 to 1.6 trillion in 2007.
Government-controlled funds
Government-controlled funds such as pension funds are often very large players in
the investment field, and are being pressured by the citizenry and by activist
groups to adopt investment policies which encourage ethical corporate behavior,
respect the rights of workers, consider environmental concerns, and avoid
violations of human rights. One outstanding endorsement of such policies is The
Government Pension Fund of Norway, which is mandated to avoid "investments
which constitute an unacceptable risk that the Fund may contribute to unethical
acts or omissions, such as violations of fundamental humanitarian principles,
serious violations of human rights, gross corruption or severe environmental
damages."
Many pension funds are currently under pressure to disinvest from the arms
company BAE Systems, partially due to a campaign run by the Campaign Against
Arms Trade (CAAT).[18] Liverpool City Council has passed a successful resolution
to disinvest from the company,[19] but a similar attempt by the Scottish Green
Party in Edinburgh City Council was blocked by the Liberal Democrats.
46
Mutual funds and ETFs
Socially responsible mutual funds counted by the 2012 Trends Report increased in
number to 333 in 2012, up from 250 in 2010, 173 in 2005 & 2007, 189 in 2003,
and 167 in 2001. The overall number of mutual funds incorporating environmental,
social and corporate governance (ESG) has increased 33% since 2010.
Additionally, 28 exchange-traded funds (ETFs) that incorporate ESG criteria were
identified with $4 billion in assets at the end of 2011, a 76% increase from the 26
ETFs with $2.25 billion in net assets identified at the end of 2009 [11]. Unlike the
Employee Retirement Income Security Act of 1974 (ERISA), which severely
limits the extent to which socially responsible goals can be considered in managing
corporate and Taft-Hartley pension assets (due to ERISA's overriding goal of
protecting employees' pensions),registered investment companies can take these
factors into account so long as the disclosure and other requirements of the
Investment Company Act of 1940 are met. US SIF maintains charts describing the
socially responsible mutual funds offered by its member firms
Investing strategies
Investing in capital markets
Social investors use several strategies to maximize financial return and attempt to
maximize social good. These strategies may satisfy the ethical principal of non-
harming, but with the exception of shareholder activism/engagement, they do not
necessarily create positive social impact.
47
Negative screening
Negative screening excludes certain securities from investment consideration

based on social and/or environmental criteria. For example, many socially
responsible investors screen out tobacco company investments.
The longest-running SRI index, the Domini 400now the MSCI KLD 400was
started in May 1990. It has continued to perform competitively with average
annualized total returns of 9.51% through December 2009 compared with 8.66%
for the S&P 500.
Despite this impressive growth, it has long been commonly perceived that SRI
brings smaller returns than unrestricted investing. So-called "sin stocks", including
purveyors of tobacco, alcohol, gambling and defense contractors, were banned
from portfolios on moral or ethical grounds. And shutting out entire industries
hurts performance, the critics said.However, in a comprehensive study, financial
economists Lobe, Roithmeier, and Walkshusl taking the position of
the advocatusdiaboli, answer the question whether to invest in a socially
responsible way or not? They create a set of global and domestic sin indexes
consisting of 755 publicly traded socially irresponsible stocks around the world
belonging to the Sextet of Sin: adult entertainment, alcohol, gambling, nuclear
power, tobacco, and weapons. They compare their stock market performance
directly with a set of virtue comparables consisting of the most important
international socially responsible investment indexes. They find no compelling
evidence that ethical and unethical screens lead to a significant difference in their
financial performance, which is in contrast with the results of prior studies on
sinful investing.
48
Divestment
Divesting is the act of removing stocks from a portfolio based on mainly ethical,
non-financial objections to certain business activities of a corporation. Recently,
CalSTRS (California State Teachers' Retirement System) announced the removal
of more than $237 million in tobacco holdings from its investment portfolio after 6
months of financial analysis and deliberations.
Shareholder activism
Shareholder activism efforts attempt to positively influence corporate behavior.

These efforts include initiating conversations with corporate management on issues
of concern, and submitting and voting proxy resolutions. These activities are
undertaken with the belief that social investors, working cooperatively, can steer
management on a course that will improve financial performance over time and
enhance the well being of the stockholders, customers, employees, vendors, and
communities. Recent movements have also been reported of "investor relations
activism", in which investor relations firms assist groups of shareholder activists in
an organized push for change within a corporation; this is done typically by
leveraging their enhanced knowledge of the corporation, its management (often via
direct relationships), and the securities laws as a whole. Hedge funds are also
major activist investors; while some pursue socially responsible investing goals,
many simply are seeking to maximize fund returns.Pension plans subject to ERISA
are somewhat more constrained in their ability to engage in shareholder activism or
the use of plan assets to promote public policy positions; any expenditure of plan
assets must be aimed at enhancing participants' retirement income.
49
Shareholder engagementA less vocal subtype of shareholder activism, shareholder

engagement requires extensive monitoring of the non-financial performance of all
portfolio companies. In shareholder engagement dialogues, investees receive
constructive feedback on how to improve ESG issues within their sphere of
influence.
Positive investing is the new generation of socially responsible investing.It

involves making investments in activities and companies believed to have a
positive social impact. Positive investing suggested a broad revamping of the
industry's methodology for driving change through investments. This investment
approach allows investors to positively express their values on corporate
behavior issues such as social justice and the environment through stock selection -
-- without sacrificing portfolio diversification or long-term
performance.[41] Positive screening pushes the idea of sustainability, not just in the
narrow environmental or humanitarian sense, but also in the sense of a company's
long-term potential to compete and succeed.
Community investment
By investing directly in an institution, rather than purchasing stock, an investor is

able to create a greater social impact: Money spent purchasing stock accrues to the
stock's previous owner and may not generate social good, while money invested in
a community institution is put to work. For example, money invested in
a Community Development Financial Institution may be used by that institution to
alleviate poverty or inequality, spread access to capital to under-served
communities, support economic development or green business, or create other
social good. In 1984, Trillium Asset Management's founder, Joan Bavaria,
invited Chuck Matthei of the Institute for Community Economics (ICE), an
50
organization that helps communities create and sustain land trusts, to a meeting of
US SIF (formerly the Social Investment Forum). It is likely that this was the first
time a nonprofit organization with a loan fund would meet directly with SRI
managers. Trillium clients began investing in ICE later that year.
Impact investing
In Impact investing, an investor will actively seek to place capital in businesses

and funds that combine financial and social returns. These businesses can thus
provide social or environmental impact at a scale that purely philanthropic
interventions usually cannot reach.[ This capital may be in a range of forms
including equity, debt, working capital lines of credit, and loan guarantees.
Examples in recent decades include many investments in microfinance, community
development finance, and clean technology. Impacting investing has its roots in
the venture capital community, and an investor will often take active role
mentoring or leading the growth of the company or start-up. Impact investing has
become prominent in international development, where funds and organizations
such as the Acumen Fund, AdvisorShares, Rockefeller Foundation, the Grassroots
Business Fund, the Skoll Foundation and Verde Ventures are using this approach.
51
CHAPTER NO. 10 : SOCIALLY RESPONSIBLE MARKETING.
Socially Responsible Marketing and Ethics
Social responsibility in marketing is often discussed with ethics. The difference

between the two is that whats considered ethical in terms of business, society and
individually may not be the same thingnor do all business actions necessarily
have to be socially responsible in order to be considered ethical. Some viewpoints
of socially responsible behavior espouse that the qualifying marketing actions not
simply meet the minimum ethical guidelines of business, but voluntarily exceed
them.
As a Response to Mainstream Marketing
Socially responsible marketing emerged as a response to questionable marketing

practices that have adverse effects on society. The major economic criticisms that
the conventional private marketing system receives from are as follows: 1)
Mainstream marketing strategies generally lead to high prices. Due to the size of
the chain of intermediaries in marketing, the distribution of commodities to
consumers costs a lot. As a result, individuals pay higher premiums for the goods
and services that they receive. 2) Contemporary marketing relies heavily on
aggressive advertising and promotion. In order to offset the costs, companies
charge higher prices through excessive markups. 3) Product differentiation is one
of the most commonly used marketing tools. But this not only creates an artificial
psychological value attached to higher-priced brands but also raises environmental
concerns about packaging. As such, socially responsible marketing rejects all
deceptive marketing practices in pricing, promotion and packaging, even if they
may seem technically legal.
52
In addition to the economic implications, marketing exerts a significant impact on

the values of the society. The advocates of socially responsible marketing argue
that the current system creates false wants, i.e. encourage people to buy more than
they actually need, injects constant desire for material possession, and leads to
excessive spending. Too much obsession with material goods in the long run may
cause damage to the society as a whole. Corporate profit should not eclipse the
collective benefit of the society. Thus, socially responsible marketing draws
attention to the social costs[1] that are embedded in the marketing, selling and
consumption of private commodities. It calls for a marketing system that
contributes to social and environmental sustainability, while producing profits for
businesses
Types
There are several related marketing concepts that fall under the umbrella of
socially responsible marketing, these include: social marketing, cause related
marketing, environmental or green marketing, enviropreneurial marketing, quality
of life, and socially responsible buying.
Enlightened Marketing
The philosophy of enlightened marketing is a concept that falls under the umbrella
of socially responsible marketing. Enlightened marketing states that a companys
marketing should support the best long-run performance of the marketing system.
This concept contains the five principles: consumer-oriented marketing, innovative
marketing, value marketing, sense-of-mission marketing and societal marketing.
In consumer-oriented marketing, the company organizes its marketing activities

from the consumer's point of view. Marketing activities focus on the needs of a
defined user set.
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Innovative marketing states that a company must continue to improve its

products and marketing efforts, recognizing that if it doesnt, it risks losing
business to a competitor that does.
The principle of value marketing contends that a company "should put most of its
resources into value-building marketing investments." One criticism of marketing
its short term focus in the sense of promotions and minor improvements. Value
marketing seeks to create long term customer loyalty by adding significant value to
the consumer offers.
Sense-of-mission marketing suggests a company mission be defined in "broad

social terms" as opposed to "narrow product terms." This technique frames the
business goal in a way that the organization can rally behind a deeper sense of
purpose.
The principle of societal marketing asks company's to consider the "consumers'

wants and long-run interests, the company's requirements and society's long-run
interests."
Benefits to Business
The practice of socially responsible marketing has many distinct advantages for
businesses who choose to embrace it.
In terms of financial advantages, the government has established a number of tax-

cuts and other benefits for companies in many industries as incentives to be more
socially responsible. For instance, companies that reduce their carbon emissions
and pollution levels are often offered tax exemptions and other assets for their
54
cooperation in the country's movement towards environmental awareness and

responsibility.
Even in cases where pre-determined benefits like this are not available as
incentives, it is still in a company's best interest in the long run to move towards
more socially responsible methods. By dealing proactively with potentially
harmful or socially detrimental marketing methods and deciding to promote the
public well-being with their products, a company can effectively eliminate the
need for legislative and regulative obstacles in the future. In other words, by
making a concerted effort to be socially responsible in the first place, a company
provides less of a reason for the government to develop any taxes or extra
restrictions on their business in the first place, which helps them in the long run.
Similarly, social responsibility in marketing helps to ensure that a company is, in

fact, following the rules and this not only instills faith among the customer base,
but also helps to keep the company out of any kind of trouble in terms of legal
problems and also in terms of public relations.
Customers also appreciate social responsibility and as a result, companies can gain
business and maintain it with more ease. For example, if a company can certify
their product as "green," they gain a certain degree of competitive advantage over
competition and many customers will be more willing to buy their product than
one that has not been certified as "green," because they perceive the value of the
product to be higher than others. Further, these types of things can instill a sense of
faith and goodwill in customers and cause the consumers not only to feel better
about buying the product in the first place, but also feel better about buying it
again. Socially responsible marketing makes sense as a business strategy because it
not only broadens and expands the customer base.
55
CHAPTER NO. 11 : CORPORATE SUSTAINIBILITY .
Corporate sustainability is a business approach that creates long-term consumer

and employee value by creating a "green" strategy aimed toward the natural
environment and taking into consideration every dimension of how a business
operates in the social, cultural, and economic environment. It also formulates
strategies to build a company that fosters longevity through transparency and
proper employee development.
Corporate sustainability is an evolution on more traditional phrases describing

ethical corporate practice. Phrases such as corporate social responsibility (CSR) or
corporate citizenship continue to be used but are increasingly superseded by the
broader term corporate sustainability. Unlike phrases that focus on "added-on"
policies, corporate sustainability describes business practices built around social
and environmental considerations.
The phrase is derived from two keys sources. The Brundtland Commission's
Report, Our Common Future, described sustainable development as, "development
that meets the needs of the present without compromising the ability of future
generations to meet their own needs". This desire to grow without damaging future
generations' prospects is becoming more and more central to business philosophies.
Within more academic management circles, Elkington (1999) developed the
concept of the Triple Bottom Line which proposed that business goals were
inseparable from the societies and environments within which they operate. Whilst
short-term economic gain could be chased, a failure to account for social and
environmental impacts would make those business practices unsustainable.
56
Strategy for corporate sustainability
Business case for sustainability
The challenge for many businesses in this new field is to quantify the positive
impacts of sustainability. Sustainability can increase revenue, reduce energy
expenses, reduce waste expenses, reduce materials and water expenses, increase
employee productivity, reduce hiring and attrition expenses, and reduce strategic
and operational risks.Furthermore, sustainable business practices may
attract talent and generate tax breaks.
Transparency
Transparency deals with the idea that by having an engaging and open
environment in the company as well as the community will improve performance
and increase profits. It is an open culture that promotes employee involvement in
the innovation and creative processes. Reaching out to the community creates a
much bigger team is extremely cheap and provides evaluation from all angles.
Companies are looking inward and realizing changes must be made to fulfill
environment needs such as energy efficiency, limiting product waste and toxicity,
and designing innovative products. One way for companies to accomplish this is
through open communications with stakeholders characterized by high levels of
information disclosure, clarity, and accuracy.
Stakeholder engagement
Sustainability requires a company to look internally and externally to understand

their environmental and social impacts. This requires the engagement of
stakeholders to understand impacts and concerns. A business can address
sustainability internally by educating employees and seeking to reduce impacts
57
through waste reduction, energy efficiency, etc. Employee engagement can be a

powerful motivator by having a philanthropy committee or a green team. As a
company looks externally, stakeholders include customers, suppliers, community,
and non-government organizations.
Thinking ahead
Companies have adapted by implementing new creative ideas related to

sustainability, such as preparing upgraded technology that can transform the
product rather than throwing away old materials. New solutions that improve
recycling and waste redirecting can ultimately reduce costs and increase profits.
For example, Wal-Mart has redirected more than 64 percent of the waste generated
by stores and Sams Club facilities. In 2009 alone, they recycled more than 1.3
million pounds of aluminum, 120 million pounds of plastics, 11.6 million pounds
of mixed paper and 4.6 billion pounds of cardboard. Annually, they expect to save
around $20 million and prevent 38 million pounds of waste being sent to landfills.
Professionals
Companies focused on sustainability are appointing chief sustainability

officers leading a department with a mandate to proactively develop and
implement a corporate sustainability strategy.
Corporate behaviour
58
Influential factors
PESTLE factors influence corporate behaviour in many ways. They cause

organisations to change the way they operate however the size and nature of
change is dependent upon which factor is causing the change; (political, economic,
social, technological, legal, or environmental).
Political
Examples of political factors could be changes in government legislation. This

could affect an organizations Corporate behaviour as they would have to change
the way they operate in order to implement these changes; some employees may
not like the new changes made.
Economic
Recession is an example of an economic factor. If the economy were to be in a

recession, businesses may find they have to reduce jobs. This would affect
Corporate behaviour as business teams would be short of skills and ideas in order
to operate effectively.
Social
Changes in trends and the market is a social factor which affects Corporate
behaviour. Organisations may have to change their products or services in order to
keep up to date with new trends. In order to do this, employees may be required to
learn new skills within a short amount of time to make these changes; relationships
between employees and management could be at risk due to these changes.
59
Technological
Implementing technology within organisations could mean more virtual meetings

and fewer face to face meetings. As a result, relationships between management
and employees could weaken as a result of less face to face conversations.
Legal
Legislative rules such as tax may increase which would increase an organisations
costs. Changes such as, changing the way the organisation operates may have to be
made in order to cover these extra costs.
Environmental
Environmental factors could be any factors which prevent damage to the

environment. For example, more employees may be required to telework to reduce
the number of employees physically travelling to offices thus reducing carbon
dioxide emissions. However this may lead to isolation as communication is
reduced, weakening Corporatebehaviour within firms.
60
Conscious business
Conscious businessenterprises and people (also called conscious capitalismare

those seeking awareness of the effects of their actions and implementing practices
that benefit both human beings and the environment. The conscious business
movement in the US, which emerged from the theory of corporate social
responsibility, pushes for "values-based" economic values where values represent
social and environmental concerns at both global and local scales. This effort is
related to not-just-for-profit business models, conscious consumerism, and socially
responsible investing.
There is an alternative way of thinking about Conscious Business emerging in the

UK, and perhaps other countries, which tries to avoid the reification of conscious
business, regarding it less as a thing which can be categorised, and more as a
process including awareness, self-awareness, awareness of purpose, practice
(social theory) and relationships.
Conscious business criteria
Doing no harm
It is generally agreed upon that the product or service of a conscious business

should not be intrinsically harmful to humans or the environment. However, it is
possible for such a business to be taking part in the conscious business movement
if it is taking conscious steps to be more aware of its social and environmental
affects, and to adopt more beneficial social or environmental practices.
Triple Bottom Line Model
Most conscious businesses subscribe to a Triple Bottom Line model of success.

They aim to provide positive value in the domains of people, planet, and profit.
61
Profit
This is what distinguishes the entity as a business from the general social
enterprise. The degree of understanding or "consciousness" of any conflict of
interest between the profit motive and social goods varies widely from the standard
sloganeering capital accumulating firm ("don't be evil") to those who seek nothing
more than break-even to pay for their operations, are completely employee owned,
etc..
People
A conscious business seeks to benefit both the external livelihood as well as the
internal lives of its shareholders and employees. Furthermore, the business seeks to
benefit all stakeholders including manufacturers, affected communities, and
humanity at large. Some trends in conscious business which have arisen out of
these efforts include:
The forming of wellness affirming workplace cultures

Improved employee benefit programs
Use of fair trade materials for manufacture or sale
Assistance to communities who supply raw materials
Assistance to communities who manufacture materials
Local community outreach programs
Planet
A conscious business will seek to minimize its impact on the environment, and
replenish the environment where it is able. Conscious businesses may choose to
benefit the environment in many different ways, some trends include:
Robust recycling programs
62
Building "green" or "zero-impact" workplace facilities

Using solar or wind energy in the workplace
Purchasing materials from organic or sustainable farmers
Purchasing renewable and sustainable materials
Working with environmentally conscious distributors
Urging manufacturers and distributors to adopt better environmental practices
Adopting sustainable product packaging
Above and beyond
Many conscious businesses choose to use their resources to benefit social and
environmental programs that are not directly related to the creation or distribution
of the product or service. Frequently, a conscious business will donate employee
paid time, money, or products towards various non-profit organizations.
Sometimes a conscious business will create a foundation, which works with one
particular cause. Also, some conscious businesses will become involved with
social or political campaigns to protect the environment, animals, or people.
Conscious businesses will sometimes use significant amounts of their profit
towards these causes. Furthermore, a conscious business will sometimes work
closely with suppliers in either a farming or manufacturing community in a
developing country, and help to develop the community economically and
replenish it environmentally.
Conscious businesses movement
Many believe that Anita Roddick pioneered the conscious business movement with
her company, The Body Shop in 1976. This company has been an environmental
leader, and worked to support various activist causes including putting an end to
animal testing, and defending human rights.
63
An overwhelming amount of conscious businesses can be found in the health food

industry as well as the LOHAS (lifestyles of health and sustainability) market.
However, today conscious businesses can be found emerging in almost all aspects
of the business world.
There are various agencies and companies that catalogue the social and
environmental practices of businesses for consumer use, as well as companies
which consult with businesses to increase their awareness and beneficial practices
in the world.
Conscious business is about people who are aware of the impact each of their
habits and actions has on their environment (people and planet). It is about people
who live their lives based on knowing that everything is interconnected. It is about
people, who know who they are:
who know about their strengths and weaknesses and

who desire to live and work with joy, creativity and ease instead of fear, power
and domination.
Conscious business versus sustainability
There's a huge trend towards more sustainable business practices. Environmental

sustainability, however, has little to do with conscious business. Organizations can
be highly sustainable, but still run in an unconscious way. A conscious business,
however, will not maintain unsustainable business practices.
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CHAPTER NO. 12 : INTERNET CORPORATE GOVERNMENT

CONTROLS.
Corporate governance broadly refers to the mechanisms, processes and relations

by which corporations are controlled and directed. Governance structures identify
the distribution of rights and responsibilities among different participants in the
corporation (such as the board of directors, managers, shareholders, creditors,
auditors, regulators, and other stakeholders) and includes the rules and procedures
for making decisions in corporate affairs. Corporate governance includes the
processes through which corporations' objectives are set and pursued in the context
of the social, regulatory and market environment. Governance mechanisms include
monitoring the actions, policies and decisions of corporations and their agents.
Corporate governance practices are affected by attempts to align the interests of
stakeholders.
There has been renewed interest in the corporate governance practices of modern
corporations, particularly in relation to accountability, since the high-profile
collapses of a number of large corporations during 20012002, most of which
involved accounting fraud; and then again after the recent financial crisis in
2008. Corporate scandals of various forms have maintained public and political
interest in the regulation of corporate governance. In the U.S., these
include Enron and MCI Inc. (formerly WorldCom). Their demise is associated
with the U.S. federal government passing the Sarbanes-Oxley Act in 2002,
intending to restore public confidence in corporate governance. Comparable
failures in Australia (HIH, One.Tel) are associated with the eventual passage of
the CLERP 9 reforms. Similar corporate failures in other countries stimulated
increased regulatory interest (e.g., Parmalat in Italy).
65
Conscious business versus sustainability
Contemporary discussions of corporate governance tend to refer to principles

raised in three documents released since 1990: The Cadbury Report (UK, 1992),
the Principles of Corporate Governance (OECD, 1998 and 2004), the Sarbanes-
Oxley Act of 2002 (US, 2002). The Cadbury and OECD reports present general
principles around which businesses are expected to operate to assure proper
governance. The Sarbanes-Oxley Act, informally referred to as Sarbox or Sox, is
an attempt by the federal government in the United States to legislate several of the
principles recommended in the Cadbury and OECD reports.
Rights and equitable treatment of shareholders: Organizations should

respect the rights of shareholders and help shareholders to exercise those rights.
They can help shareholders exercise their rights by openly and effectively
communicating information and by encouraging shareholders to participate in
general meetings.
Interests of other stakeholders:Organizations should recognize that they have
legal, contractual, social, and market driven obligations to non-shareholder
stakeholders, including employees, investors, creditors, suppliers, local
communities, customers, and policy makers.
Role and responsibilities of the board: The board needs sufficient relevant
skills and understanding to review and challenge management performance. It
also needs adequate size and appropriate levels of independence and
commitment.
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Integrity and ethical behavior:Integrity should be a fundamental requirement

in choosing corporate officers and board members. Organizations should
develop a code of conduct for their directors and executives that promotes
ethical and responsible decision making.
Disclosure and transparency:Organizations should clarify and make publicly
known the roles and responsibilities of board and management to provide
stakeholders with a level of accountability. They should also implement
procedures to independently verify and safeguard the integrity of the company's
financial reporting. Disclosure of material matters concerning the organization
should be timely and balanced to ensure that all investors have access to clear,
factual information.
Regulation
Legal environment General
Corporations are created as legal persons by the laws and regulations of a

particular jurisdiction. These may vary in many respects between countries, but a
corporation's legal person status is fundamental to all jurisdictions and is conferred
by statute. This allows the entity to hold property in its own right without reference
to any particular real person. It also results in the perpetual existence that
characterizes the modern corporation. The statutory granting of corporate existence
may arise from general purpose legislation (which is the general case) or from a
statute to create a specific corporation, which was the only method prior to the 19th
century.
In addition to the statutory laws of the relevant jurisdiction, corporations are

subject to common law in some countries, and various laws and regulations
affecting business practices. In most jurisdictions, corporations also have a
67
constitution that provides individual rules that govern the corporation and
authorize or constrain its decision-makers. This constitution is identified by a
variety of terms; in English-speaking jurisdictions, it is usually known as the
Corporate Charter or the [Memorandum] and Articles of Association. The capacity
of shareholders to modify the constitution of their corporation can vary
substantially.
The U.S. passed the Foreign Corrupt Practices Act (FCPA) in 1977, with
subsequent modifications. This law made it illegal to bribe government officials
and required corporations to maintain adequate accounting controls. It is enforced
by the U.S. Department of Justice and the Securities and Exchange Commission
(SEC). Substantial civil and criminal penalties have been levied on corporations
and executives convicted of bribery.
The UK passed the Bribery Act in 2010. This law made it illegal to bribe either
government or private citizens or make facilitating payments (i.e., payment to a
government official to perform their routine duties more quickly). It also required
corporations to establish controls to prevent bribery.
Sarbanes-Oxley Act of 2002

Main article: Sarbanes-Oxley Act
The Sarbanes-Oxley Act of 2002 was enacted in the wake of a series of high
profile corporate scandals. It established a series of requirements that affect
corporate governance in the U.S. and influenced similar laws in many other
countries. The law required, along with many other elements, that:
The Public Company Accounting Oversight Board (PCAOB) be established to

regulate the auditing profession, which had been self-regulated prior to the law.
68
Auditors are responsible for reviewing the financial statements of corporations

and issuing an opinion as to their reliability.
The Chief Executive Officer (CEO) and Chief Financial Officer (CFO) attest to
the financial statements. Prior to the law, CEO's had claimed in court they
hadn't reviewed the information as part of their defense.
Board audit committees have members that are independent and disclose
whether or not at least one is a financial expert, or reasons why no such expert
is on the audit committee.
External audit firms cannot provide certain types of consulting services and
must rotate their lead partner every 5 years. Further, an audit firm cannot audit
a company if those in specified senior management roles worked for the auditor
in the past year. Prior to the law, there was the real or perceived conflict of
interest between providing an independent opinion on the accuracy and
reliability of financial statements when the same firm was also providing
lucrative consulting services.
Internal corporate governance controls
Internal corporate governance controls monitor activities and then take corrective
action to accomplish organisational goals. Examples include:
Monitoring by the board of directors: The board of directors, with its legal
authority to hire, fire and compensate top management, safeguards invested
capital. Regular board meetings allow potential problems to be identified,
discussed and avoided. Whilst non-executive directors are thought to be more
69
independent, they may not always result in more effective corporate

governance and may not increase performance. Different board structures are
optimal for different firms. Moreover, the ability of the board to monitor the
firm's executives is a function of its access to information. Executive directors
possess superior knowledge of the decision-making process and therefore
evaluate top management on the basis of the quality of its decisions that lead to
financial performance outcomes, ex ante. It could be argued, therefore, that
executive directors look beyond the financial criteria.
Internal control procedures and internal auditors: Internal control
procedures are policies implemented by an entity's board of directors, audit
committee, management, and other personnel to provide reasonable assurance
of the entity achieving its objectives related to reliable financial reporting,
operating efficiency, and compliance with laws and regulations. Internal
auditors are personnel within an organization who test the design and
implementation of the entity's internal control procedures and the reliability of
its financial reporting
Balance of power: The simplest balance of power is very common; require that
the President be a different person from the Treasurer. This application of
separation of power is further developed in companies where separate divisions
check and balance each other's actions. One group may propose company-wide
administrative changes, another group review and can veto the changes, and a
third group check that the interests of people (customers, shareholders,
employees) outside the three groups are being met.[citation needed]
Remuneration: Performance-based remuneration is designed to relate some
proportion of salary to individual performance. It may be in the form of cash or
non-cash payments such as shares and share options, superannuation or other
benefits. Such incentive schemes, however, are reactive in the sense that they
70
provide no mechanism for preventing mistakes or opportunistic behavior, and

can elicit myopic behavior.Monitoring by large
shareholders and/or monitoring by banks and other large creditors: Given
their large investment in the firm, these stakeholders have the incentives,
combined with the right degree of control and power, to monitor the
management.
In publicly traded U.S. corporations, boards of directors are largely chosen by the
President/CEO and the President/CEO often takes the Chair of the Board position
for him/herself (which makes it much more difficult for the institutional owners to
"fire" him/her). The practice of the CEO also being the Chair of the Board is fairly
common in large American corporations.
While this practice is common in the U.S., it is relatively rare elsewhere. In the
U.K., successive codes of best practice have recommended against duality
External corporate governance controls
External corporate governance controls encompass the controls external

stakeholders exercise over the organization. Examples include:
competition
debt covenants
demand for and assessment of performance information (especially financial
statements)
government regulations
managerial labour market
media pressure
takeovers
71
Customer engagement
Customer engagement (CE) is the engagement of customers with one another,

with a company or a brand. The initiative for engagement can be either consumer-
or company-led and the medium of engagement can be on or offline.
Customer engagement has been discussed widely online; hundreds of pages have
been written, published, read and commented upon. Numerous high-profile
conferences, seminars and roundtables have either had CE as a primary theme or
included papers on the topic.
Customer engagement marketing places conversions into a longer term, more

strategic context and is premised on the understanding that a simple focus on
maximising conversions can, in some circumstances, decrease the likelihood of
repeat conversions (Customer engagement interview with Richard Sedley). CE
aims at long-term engagement, encouraging customer loyalty and advocacy
through word-of-mouth.
Online customer engagement is qualitatively different from offline engagement as

the nature of the customers interactions with a brand, company and other
customers differ on the internet. Discussion forums or blogs, for example, are
spaces where people can communicate and socialise in ways that cannot be
replicated by any offline interactive medium. Customer Engagement marketing
efforts that aim to create, stimulate or influence customer behaviour differ from the
offline, one-way, marketing communications that marketers are familiar with.
Although customer advocacy, for example, has always been a goal for marketers,
the rise of online user generated content can take advocacy to another level.
72
The concept and practice of online customer engagement enables organisations to

respond to the fundamental changes in customer behaviour that the internet has
brought about, as well as to the increasing ineffectiveness of the traditional
'interrupt and repeat', broadcast model of advertising. Due to the fragmentation and
specialisation of media and audiences, as well as the proliferation of community-
and user generated content, businesses are increasingly losing the power to dictate
the communications agenda. Simultaneously, lower switching costs, the
geographical widening of the market and the vast choice of content, services and
products available online have weakened customer loyalty. Enhancing customers'
firm- and market- related expertise has been shown to engage
customers, strengthen their loyaltyand emotionally tie them more closely to a firm.
So today, leveraging customer contributions is an important source of competitive

advantage whether through advertising, user generated product
reviews, customer serviceFAQs, forums where consumers can socialise with one
another or contribute to product development.
Amazon recently re-branded into 'serving the world's largest engaged online
community', the World Federation of Advertisers (WFA) has created a 'Blueprint
for Consumer-Centric Holistic Measurement' and the Association of National
Advertisers (ANA), American Association of Advertising Agencies (AAAA) and
the Advertising Research Foundation (ARF), have put together the 'Engagement
Steering Committee' to work on the customer engagement metric. Nielsen Media
Research, IAG Research and Simmons Research are also all in the process of
developing a CE definition and metric.
Online customer engagement refers to:
73
1. A social phenomenon enabled by the wide adoption of the internet in the

late 1990s and taking off with the technical developments in connection
speed (broadband) in the decade that followed. Online CE is qualitatively
different from the engagement of consumers offline.
2. The behaviour of customers that engage in online communities revolving,
directly or indirectly, around product categories (cycling, sailing) and other
consumption topics. It details the process that leads to a customers positive
engagement with the company or offering, as well as the behaviours
associated with different degrees of customer engagement.
3. Marketing practices that aim to create, stimulate or influence CE
behaviour. Although CE-marketing efforts must be consistent both online
and offline, the internet is the basis of CE-marketing.(Eisenberg &
Eisenberg 2006:72,81)
4. Metrics that measure the effectiveness of the marketing practices which
seek to create, stimulate or influence CE behaviour.
So today, leveraging customer contributions is an important source of competitive

advantage whether through advertising, user generated product
reviews, customer serviceFAQs, forums where consumers can socialise with one
another or contribute to product development.
Amazon recently re-branded into 'serving the world's largest engaged online
community', the World Federation of Advertisers (WFA) has created a 'Blueprint
for Consumer-Centric Holistic Measurement' and the Association of National
Advertisers (ANA), American Association of Advertising Agencies (AAAA) and
the Advertising Research Foundation (ARF), have put together the 'Engagement
Steering Committee' to work on the customer engagement metric. Nielsen Media
74
Research, IAG Research and Simmons Research are also all in the process of
developing a CE definition and metric.
Online customer engagement refers to:
1. A social phenomenon enabled by the wide adoption of the internet in the

late 1990s and taking off with the technical developments in connection
speed (broadband) in the decade that followed. Online CE is qualitatively
different from the engagement of consumers offline.
2. The behaviour of customers that engage in online communities revolving,
directly or indirectly, around product categories (cycling, sailing) and other
consumption topics. It details the process that leads to a customers positive
engagement with the company or offering, as well as the behaviours
associated with different degrees of customer engagement.
3. Marketing practices that aim to create, stimulate or influence CE
behaviour. Although CE-marketing efforts must be consistent both online
and offline, the internet is the basis of CE-marketing.(Eisenberg &
Eisenberg 2006:72,81)
4. Metrics that measure the effectiveness of the marketing practices which
seek to create, stimulate or influence CE behaviour.
75
Customer engagement as a metric
All marketing practices, including internet marketing, include measuring the

effectiveness of various media along the customer engagement cycle, as consumers
travel from awareness to purchase. Often the use of CVP Analysis factors into
strategy decisions, including budgets and media placement.
The CE metric is useful for:
a) Planning:
Identify where CE-marketing efforts should take place; which of the

communities that the target customers participate in are the most engaging?
Specify the way in which target customers engage, or want to engage, with the
company or offering.
76
b) Measuring Effectiveness: Measure how successful CE-marketing efforts have

been at engaging target customers.
The importance of CE as a marketing metric is reflected in ARF's statement:
"The industry is moving toward customer engagement with marketing

communications as the 21st century metric of marketing efficiency and
effectiveness."
ARF envisages CE exclusively as a metric of engagement with communication,

but it is not necessary to distinguish between engaging with the communication
and with the product since CE behaviour deals with, and is influenced by,
involvement with both.
Eric Peterson's definition[ also frames CE as a metric:
"Engagement is an estimate of the degree and depth of visitor interaction on the

site against a clearly defined set of goals."
In order to be operational, CE-metrics must be combined with

psychodemographics. It is not enough to know that a website has 500 highly
engaged members, for instance; it is imperative to know what percentage are
members of the company's target market.[35] As a metric for effectiveness, Scott
Karp[36] suggests, CE is the solution to the same intractable problems that have
long been a struggle for old media: how to prove value.
The CE-metric is synthetic and integrates a number of variables. The World

Federation of Advertisers calls it 'consumer-centric holistic measurement'.The
following items have all been proposed as components of a CE-metric:
Root metrics
Duration of visit
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Frequency of visit (returning to the site directly through a URL or bookmark -

or indirectly).
% repeat visits
Recency of visit
Depth of visit (% of site visited)
Click-through rate
Sales
Lifetime value
Action metrics
RSS feed subscriptions
Bookmarks, tags, ratings
Viewing of high-value or medium-value content (as valued from the

organisations point-of-view). 'Depth' of visit can be combined with this
variable.
Inquiries
Providing personal information
Downloads
Content resyndication
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Customer reviews
Comments: their quality is another indicator of the degree of engagement.
Ratio between posts and comments plus trackbacks.
In selecting the components of a CE-metric, the following issues must be resolved:
Flexible metric vs. Industry standard: According to some, CE "measurement

has never been one size fits-all" but should vary according to industry,
organisation, business goal etc. On the other hand, corporate clients and even
agencies also desire some type of solid index. Internal metrics could, perhaps,
be developed in addition to a comparative, industry-wide one.Other exponents
of a flexible CE-metric include Bill Gassman in his comments to How do you
calculate engagement? Part I. Eric Petersonshares Gassman's views.
Relative weighting: The relative weighting associated with each CE-

component in an algorithm. For instance, is subscribing to RSS more important
than contributing a comment? If yes how much more important exactly?
Relative weighting links up with the issue of flexible vs. standardised metrics:
Is the relative weighting going to be solid as will be required if the CE-metric
is to be standardised or is it going to differ depending on the industry,
organisation, business goals etc.?
Component measurability: Most of the components of a CE-metric face

problems of measurement. Duration of visit for example suffers from (a) failing
to capture the most engaged users who like to peruse RSS feeds; (b) inaccuracy
arising from leaving a tab open during breaks, stopping to converse with co-
workers, etc.
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Corporate social entrepreneurship
A corporate social entrepreneur (CSE) is defined as "an employee of the firm who
operates in a socially entrepreneurial manner; identifying opportunities for and/ or
championing socially responsible activity; in addition to helping the firm achieve
its business targets. The CSE operates regardless of an organisational context that
is pre-disposed towards corporate social responsibility (CSR). This is because the
CSE is driven by their dominant self-transcendent (concerned with the welfare of
others) as opposed to their self-enhancement personal values.[1] Consequently, the
CSE does not necessarily have a formal socially responsible job role, nor do they
necessarily have to be in a senior management position to progress their socially
responsible agenda." The notion of the CSE first emerged in 2002 from a
conceptual working paper which was published in the Hull University Business
School Research Memoranda Series.[3] In that paper, it was argued that CSR can
also be motivated by an altruistic impulse driven by managers personal values, in
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addition to the more obvious economic and macro political drivers for CSR. This
reflected the traditional philosophical and business ethics debate regarding moral
agency.This paper was followed by a U.K. conference paper which highlighted the
importance of managerial discretion in CSR and was published the next year in
the Journal of Business Ethics. In this latter paper, the concept of entrepreneurial
discretion as an overlooked antecedent of CSR was mooted.
Consequently, the term corporate social entrepreneur was first coined in a paper
that was presented at the 17th Annual European Business Ethics Network
Conference, in June 2004. Here, the term Corporate Social Entrepreneur was first
defined and differentiated from the different types of entrepreneurs: the regular
executive entrepreneur; theintrapreneur; the policy entrepreneur and the public
or social entrepreneur.(See also Austin et al., 2006a for a description of the
similarities and differences between commercial and social
entrepreneurship). Initially, the concept was discussed in relation to managers.
However, it was soon widened to include employees at any level of the firm,
regardless of their formally appointed status. To be a CSE you do not necessarily
have to be a manager. Seniority is not necessary, but, of course, it helps.
Hemingways concept of the CSE emerged as a result of her own personal

experience working as a marketing executive in the corporate world and it has also
been the subject of some exploratory empirical investigation. It was also inspired
by Wood, who had previously referred to Ethical training, cultural background,
preferencesand life experiencesthat motivate human behavior;thereby
supporting Trevinos conceptual Interactionist model of ethical decision making
in organizations.Trevino's model included both individual and situational
moderators, to combine with the individuals stage of cognitive moral
development,to produce either ethical or unethical behaviour. And whilst studies
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existed regarding the activities of environmental champions at work or other

change leaders, none of these studies specifically examined the role of employees'
personal values in entrepreneurial discretion with regard to corporate social
responsibility (CSR).
Thus, the connection between philosophical ideas of moral character as an

influence for corporate social responsibility (CSR) and linked to the psychological
notion of prosocial behavior, provides a different focus from the more commonly
discussed structural drivers for CSR, i.e., business strategy in the form of public
relations activity; encouragement from government or organisational context (see
also philanthropy).
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Business ethics perspective
Significantly, whilst the social entrepreneur and corporate social entrepreneur are
united in their quest to create social value: a business ethics perspective encourages
us to ask the question For what end? Here business ethics is useful, as it uses
intellectual frameworks to encourage us to think deeply about means and
ends.[19][20][21] For example, the idea of the CSE creating social value which benefits
both the corporation and society is known as enlightened self-interest.
Alternatively, a deontological viewpoint frames acts of socially responsible
behaviour as driven by the individual's sense of duty to society, which may be
viewed in terms of altruism.Altruism is of course very difficult to support
empirically, although there have been many studies of prosocialbehaviour and
support for the notion of self-transcendent (other-oriented) personal values
in social psychology.
Threat or opportunity?
All this leads us to the inherent complexity surrounding the subject of CSR,
regarding its connection to and its essentially contested nature.[29] So, whilst
some studies have shown a positive relationship between CSR and financial
performance- others are currently investigating the notion of non-market
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performance .Consequently, the notion of the Corporate Social Entrepreneur is

equally controversial: not solely due to the arguments about the role of business
and whether or not CSR helps financial performance; but also because the concept
of employee discretion has been identified as a key factor regarding a social
orientation at work, or, a moral character (in the ancient philosophical sense). And
whilst the possibility of unethical behaviour is also acknowledged as an outcome
of discretion and agency: corporate irresponsibility which has been the traditional
focus in the study of business ethics, is regarded as insufficient and only the
starting point, if the quest is for organisations to develop a socially responsible
organisational context. This is of particular relevance in the wake of the global
financial crisis caused by financial irregularities and lapses in corporate
governanceand personal integrity.
Ethical consumerism
Ethical consumerism (alternatively called ethical consumption, ethical

purchasing, moral purchasing, ethical sourcing, ethical shopping or green
consumerism) is a type of consumer activism that is based on the concept of dollar
voting. It is practiced through 'positive buying' in that ethical products are
favoured, or 'moral boycott', that is negative purchasing and company-based
purchasing.
The term "ethical consumer", now used generically, was first popularised by the
UK magazine the Ethical Consumer, first published in 1989. Ethical
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Consumer magazine's key innovation was to produce 'ratings tables', inspired by

the criteria-based approach of the then emerging ethical investment movement.
Ethical Consumer's ratings tables awarded companies negative marks (and from
2005 overall scores) across a range of ethical and environmental categories such as
'animal rights', 'human rights' and 'pollution and toxics', empowering consumers to
make ethically informed consumption choices and providing campaigners with
reliable information on corporate behaviour. Such criteria-based ethical and
environmental ratings have subsequently become commonplace both in providing
consumer information and in business-to-business corporate social
responsibilityand sustainability ratings such as those provided by Innovest, Calvert,
Domini, IRRC, TIAA-CREF and KLD Analytics.
Today, Bloomberg and Reuters even provide "environmental, social and
governance" ratings direct to the financial data screens of hundreds of thousands of
stock market traders.The not-for-profit Ethical Consumer Research Association
continues to publish Ethical Consumer magazine and its associated website, which
provides free access to ethical ratings tables.
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standards and labels
A number of standards and labels have been introduced for ethical

consumers, such as the following:
B corporation
Dolphin safe
EKOenergy for electricity agreements
Equal Exchange
Ethical Consumer Best Buy label
Fairtrade
Free-range poultry
FSC-certified sustainably sourced wood
Grass fed beef
Green America Seal of Approval
Halal (religious standard)
Kosher (religious standard)
Local food
Made in USA
MSC-certified sustainably sourced seafood
No Pork No Lard (semi-religious standard)
Organic food
Organic Trade Association
Product Red
Rainforest Alliance certified
Recycled/recyclable
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Shade-grown coffee
Social Accountability 8000
Union-made
Vegan
Along with disclosure of ingredients, some mandatory labelling of origins of

clothing or food is required in all developed nations. This practice has been
extended in somedeveloping nations, e.g., where every item carries the name,
phone number and fax number of the factory where it was made so a buyer can
inspect its conditions. And, more importantly, to prove that the item was not made
by "prison labor", use of which to produce export goods is banned in most
developed nations. Such labels have also been used for boycotts, as when
the merchandise mark Made in Germany was introduced in 1887.
These labels serve as tokens of some reliable validation process, some instructional
capital, much as does a brand name or a nation's flag. They also signal some social
capital, or trust, in some community of auditors that must follow those instructions
to validate those labels.
Some companies in the United States, though currently not required to reduce their
carbon footprint, are doing so voluntarily by changing their energy use practices,
as well as by directly funding (through carbon offsets), businesses that are already
sustainableor are developing or improving green technologies for the future.
In 2009, Atlanta's Virginia-Highland became the first Carbon-Neutral Zone in the

United States. Seventeen merchants of Atlanta's Virginia-Highland allowed their
carbon footprint to be audited. Now, they are partnered with the Valley Wood
Carbon Sequestration Projectthousands of acres of forest in rural Georgia
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through the Chicago Climate Exchange.[12][13] The businesses involved in the

partnership display the Verus Carbon Neutral seal in each storefront and posted a
sign prominently declaring the area's Carbon Neutral status.
Over time, some theorists suggest, the amount of social capital or trust invested in
nation-states (or "flags") will continue to decrease, and that placed in corporations
(or "brands") will increase. This can only be offset by retrenched national
sovereignty to reinforce shared national standards in tax, trade, and tariff laws, and
by placing the trust in civil society in such "moral labels". These arguments have
been a major focus of the anti-globalization movement, which includes many
broader arguments against the amoral nature of markets as such. However, the
economic school of Public Choice Theory pioneered by James M. Buchanan has
offered counter-arguments based on economic demonstration to this theory of
'amoral markets' versus 'moral governments'.
Related concepts
Conscientious consumption
The consumer rationalizes unnecessary and even unwanted consumption by saying

that "it's for a good cause".[23] As a result, the consumer buys pink
ribbons during National Breast Cancer Awareness Month, green products to
support the environment, candy and popcorn from school children, greeting cards
and gift wrap from charities, and many other, often unwanted objects. The
consumer avoids considering whether the price offered is fair, whether a small cash
donation would be more effective with far less work, or even whether selling the
item is consistent with the ostensible mission, such as when sports teams sell
candy.
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Some of these efforts are based on concept brands: the consumer is buying an
association with women's health or environmental concerns as much as he is
buying a tangible product.
Alternative giving
Main article: Alternative giving
In response to an increasing demand for ethical consumerism surrounding gift

giving occasions, charities have promoted an alternative gift market, in which
charitable contributions are made on behalf of the gift "recipient". The "recipient"
receives a card explaining the selected gift, while the actual gift item (frequently
agricultural supplies or domestic animals) is sent to a family in a poor community. [
Responsible mining
Responsible mining refers to advocacy to reform mining activity, as well a

marketing strategy used by mining companies to promote their operations as
environmentally or socially sound. Goals may vary by group.
Responsible mining first began to appear in an article entitled "Re-inhabitory

Mining" [1] and next as "Ecological Mining".[2] The term "Responsible Mining"
was formulated by RanilSenanayake of the International Analog Forestry
Network and Brian Hill of the Institute for Cultural Ecology
Groups
'Responsible mining' advocacy is carried out by several non-governmental

organizations (NGOs):
The Alliance for Responsible Miningis an independent, mission-driven initiative

that supports artisanal and small-scale (ASM) miners globally. Established in
2004, the organizations mission is to enhance social and economic wellbeing,
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strengthen environmental protection and establish fair governance in ASM

communities by formalizing the ASM sector. To achieve its mission, ARM has
created an exceptional set of social and environmental standards known as the
Fairmined certification. ARM offers extensive and continuous support and training
to ASM communities to help them reach the standards, achieve the Fairmined
certification and invest in community development. Furthermore, ARM serves as
an intermediary for ASM communities, which gives them the opportunity to
respond to international markets demanding ethical metals and jewelry. Since
2004, ARM has facilitated the positive transformation of multiple ASM
communities in Latin America and is currently expanding its efforts to Africa and
Asia.
BioVerde, S.A. provides consultancies to protect and advance the rights and
traditions of small and medium size mining communities, to provide responsible
mining plans of operation, appropriate technology, and to help market limited
quantities of precious metals and gems. Two of BioVerde directors were founders
of ARM.
Citizens for Responsible Mining is active in the Upper Peninsula of Michigan,

and is concerned with countering anti-mining sentiment,[5] especially
concerning sulfide mining.
The Framework for Responsible Mining is a project of the Center for Science in
Public Participation. They define their mission as "a joint effort" that "outlines
environmental, human rights, and social issues associated with mining and mined
products."
The Initiative for Responsible Mining Assurance is based in Vancouver, British

Columbia. They define their mission as "working towards a world where mining
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operations are consistent with healthy communities and environments, and they
leave positive legacies."
The Pew Campaign for Responsible Mining is a project of the Pew Environment
Group, focused mainly on reforming the General Mining Act of 1872 in the United
States
Organizational ethics
Basic Ethical Elements
There are at least four elements that aim to create an ethical culture and behavior of
employees within an organization. These elements are:
1) a written code of ethics and standards (ethical code)
2) ethics training for executives, managers, and employees
3) the availability of ethical situational advice (i.e. advice lines or offices)
4) confidential reporting systems
Organizations are constantly striving for a better ethical atmosphere within the
business climate and culture. Businesses must create an ethical business climate in
order to develop an ethical organization. Otherwise saying, companies must focus
on the ethics of employees in order to create an ethical business. Employees must
know the difference between what is acceptable and unacceptable in the
workplace. These standards are found within the written code of ethics or may be
referred to as the employee handbook. These standards are a written form of
employee conduct and performance expectations.
Employee handbooks also commonly include rules concerning expectations and

consequences that follow misconduct. Handbooks normally will clearly state the
rules, guidelines, and standards of an organization as well as possible rules,
regulations, and laws that they are bound by. Many company handbooks will
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include laws regarding sexual harassment, alcohol abuse, and drug/substance

abuse.
Ethical Theory and Leadership Empowerment
There are many theories and organizational studies that are related to
organizational ethics, but "organizations" and "ethics" are wide and varied in
application and scope. These theories and studies can range
from individual(s), team(s), stakeholder, management, leadership, human
resources, group(s) interaction(s), as well as the psychologicalframework behind
each area to include the distribution of job tasks within various types of
organizations. As among these areas, the influence of leadership in any
organization cannot go unexamined, because a clear understanding of
the organizations vision, goals (to include immediate and long-term strategic
plans), and values. Leadership sets the tone for organizational management
(strategic actions taken by an organization to create a positive image to both
internal and external publics). In turn, leadership directly influences the
organizational symbolism (which reflects the culture, the language of the members,
any meaningful objects, representations, and/or how someone may act or think
within an organization). The values and ideals within an organization generally
center upon values for business as the theoretical approach most leaders use to
present to their "co-members" (which in truth maybe subordinates).
In fact, an examination of business reveals that most leaders approach the X(?)
from the perspective of values for the business.[5][6] Alongside presenting the
vision, values, and goals of the organization, the leader should
infuse empowerment and motivation to its members. Leaders
using empowerment to motivate their subordinates, is based upon the view of:
Achieving organizational ownership of company values is a continuous process of
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communication, discussion, and debate throughout all areas of the

organization as.
For more information about organization theory, refer to "Organizational Theory."
Ethical System Implementation
The function of developing and implementing business ethics into an organization

is difficult. Due to each organization's culture and atmosphere being different,
there is no clear or specific way to implement a code of ethics to an existing
business. The implementation should be performed to the entirety of the business
including all areas of operations. If it is not implemented pragmatically and with
caution for the needs, desires, and personalities (consider the Big Five personality
traits) of the stakeholders, the culture, and the employees, then problems may arise.
Although a great deal of time may be required, stakeholder management should
consider the Rational Decision-Making Model for implementation of various
aspects, details, and standards of an ethical system to the stakeholders. If
implementation has been performed successfully, then all stakeholders have
accepted the newly designed ethics system for the organization.
Responsible Research and Innovation
Application and Implementation
The European Commission stated in 2013 that because Responsible Research and
Innovation was "a cross-cutting action that is implemented throughout Horizon
2020, 0.5% of the budgets for the 'Societal Challenges' and 'Industrial Leadership'
pillars of Horizon 2020 [was] earmarked for RRI/Science with and for Society
93
actions."Innovation and new technologies should meet the global challenges such
as climate change and global warming, the efficient use of natural resources,
demographic change, global health and development, social cohesion and the
maintenance of economic prosperity.
It has been suggested that "Grand Challenges"tightening supplies of energy,

water and food; pandemics; ageing societies; global warming; public health and
security]could be useful as a guiding force for RRI, in particular with regards to
the criterion of societal desirability. Another possible foundation for societal
desirability with democratic legitimacy could be constitutional
values.Constitutional values of the European Union are "respect for human dignity,
liberty, democracy, equality, the rule of law and respect for human rights,
including the rights of persons belonging to minorities. Moreover, the societies of
the Member States are characterised by pluralism, non-discrimination, tolerance,
justice, solidarity and equality between women and men." Other values that play an
important role in this context are the UN Global Compact's ten principles in the
areas of human rights, labour, the environment and anti-corruption. Some member
states of the European Union have the ambition to establish their own framework
for RRI, so that national criteria and approaches are being developed and
implemented. Here are some examples of these national initiatives and their
funding in 2008:
The Netherlands Responsible Innovation Program (MVI) 2008 is funded by six

Dutch government ministries and undertaken by the various departments of the
Netherlands Organisation for Scientific Research (NWO), WOTRO Science for
Global Development, the Technology Foundation STW, and the Netherlands
organisation for health research and development (ZonMw). Among its
distinctive features is that the projects it funds must all be interdisciplinary,
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involving collaboration between researchers in such diverse fields as ethics,

social science, law, economics, applied science, natural science and
engineering; projects have to be innovative, design-oriented and relevant to
policy goals; and social and ethical issues are considered as part of the research
and design process. What is also noteworthy about the program is that end user
engagement is built into the application process through a valorization panel,
which co-develops the proposal.
The German NanoKommission sought in 2008 to create a structured dialogue
between stakeholders, i.e. representatives of environmental and consumer
organisations, unions, the science sector, industry and the government, to
understand and evaluate the issues associated with the use of nanotechnologies
in various sectors.
In 2008 the UKs Engineering and Physical Sciences Research Council
(EPSRC) initiated a grand challenge to provide a focus for UK
nanotechnology research by considering its potential contribution to healthcare.
Grand challenges are defined through a scoping exercise to focus the topic onto
practical contributions and for the first time the EPSRC involved the general
public in this scoping exercise. EPSRC has established a Framework for
Responsible Innovation
Technology Assessment
Even though Responsible Research and Innovation draws on the body of

knowledge and experience provided by the history of Technology assessment over
decades and on the methodological toolbox, it extends the scope of consideration
to ethical issues of responsibility and to broader governance and science,
technology and society (STS) issues.
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Corporate Social Responsibility
The main difference between Corporate social responsibility (CSR) and RRI is that
the CSR approach tends to be industry-driven or rather "an expression of corporate
strategy, corporate identity, market power". CSR decisions are driven by the values
of stakeholders by asking "What do stakeholders care about?". In contrast to that
RRI establishes procedures to better integrate societal needs in the process of
research and innovation and its methodology is centered on the equal roles and
responsibility of societal actors and innovators.
Furthermore, CSR is mostly concerned with ethical acceptability (or legal

responsibilities of human rights instruments) and sustainability (e.g. reducing
pollution), not with societal desirability. This is illustrated by the United Nations
Global Compact, a strategic policy initiative for businesses that are committed to
aligning their operations and strategies with ten universally accepted principles,
which are concerning human rights, labour standards, the environment and anti-
corruption.
Creating Shared Value
The principle of Creating Shared Value (CSV) starts where the UN Global
Compact stops, namely how businesses can pursue social goals as part of their
licence to operate. As such there is an overlap with RRI and its focus on societal
desirability. However, the goal of CSV is to improve the competitiveness and
economic profit of a company by addressing societal issues, whereas RRI ensures
that science and innovation are ethically acceptable, sustainable and focused on
societal benefits for society as a whole.
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Corporate Sustainability
The term Corporate sustainability (also sustainability and sustainable

development) communicates a companys ambition to align its actions with the
major social, environmental and economic changes that face society at largeand
to prepare itself for the society of the future. However, it is about business in
general and not specifically about Research and Innovation, has unidirectional top-
down character and is not associated with collective responsibility, and civil
society's engagement.
Creating shared value (CSV) is a business concept first introduced in Harvard

Business Review article Strategy & Society: The Link between Competitive
Advantage and Corporate Social Responsibility.[1] The concept was further
expanded in the January 2011 follow-up piece entitled "Creating Shared Value:
Redefining Capitalism and the Role of the Corporation in Society". [2] Written
by Michael E. Porter, a leading authority on competitive strategy and head of the
Institute for Strategy and Competitiveness at Harvard Business School, and Mark
R. Kramer, Kennedy School at Harvard University and co-founder of FSG,[3] the
article provides insights and relevant examples of companies that have developed
deep links between their business strategies and corporate social
responsibility (CSR). In 2012, Kramer and Porter, with the help of the global not-
for-profit advisory firm FSG, founded the Shared Value Initiative to enhance
knowledge sharing and practice surrounding creating shared value, globally.
The central premise behind creating shared value is that the competitiveness of a
company and the health of the communities around it are mutually dependent.
Recognizing and capitalizing on these connections between societal and economic
progress has the power to unleash the next wave of global growth and to
redefine capitalism.
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Critics, on the other hand, argue that Porter and Kramer basically tell the old story
of economic rationality as the one and only tool of smart management, with faith in
innovation and growth, and they celebrate a capitalism that now needs to adjust a
little bit. They regard the authors arguments as a one-trick pony approach with
little chance that an increasingly critical civil society will buy into such a story.[4]
Mechanism
Companies can create shared value opportunities in three ways:
Reconceiving products and markets Companies can meet social needs

while better serving existing markets, accessing new ones, or lowering costs
through innovation
Redefining productivity in the value chain Companies can improve the
quality, quantity, cost, and reliability of inputs and distribution while they
simultaneously act as a steward for essential natural resources and drive
economic and social development
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Enabling local cluster development Companies do not operate in isolation

from their surroundings. To compete and thrive, for example, they need reliable
local suppliers, a functioning infrastructure of roads and telecommunications,
access to talent, and an effective and predictable legal system
Many approaches to CSR pit businesses against society, emphasizing the costs and
limitations of compliance with externally imposed social and environmental
standards. CSV acknowledges tradeoffs between short-term profitability and social
or environmental goals, but focuses more on the opportunities for competitive
advantage from building a socialvalue proposition into corporate strategy.
Comparison with corporate social responsibility
Corporate social responsibility (CSR) differs from Creating Shared Value,

although they share the same ground of "doing well by doing good".[6] Mark
Kramer, the co-writer ofHarvard Business Review article on Creating Shared
Value,[7] states in his "Creating Shared Value" blog that the major difference is
CSR is about responsibility, whereas CSV is about creating value.[8] Whether it is
an extended "new form of CSR" or "shared value", CSV is fundamentally different
from the CSR activities of the past.[9]
Rather, CSV is a transition and expansion from the concept of CSR. Business
responsibility has evolved from Traditional CSR 1.0 (Stages: Defensive,
Charitable, Promotional and Strategic), Transformative CSR 2.0 and to CSR 3.0
what is similar to CSV.[10] Such development of stages by redefining CSR has laid
theoretical foundations for companies and society to sustainably and communally
overcome societal issues. As capitalism matures, it is companies duties to break
itself out of the traditional CSR by realizing its limitations and try to restructure
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and pursue new market strategies that value both economic and societal
development.
CSV concept supersedes CSR for it is a way for corporations to sustain in the
competitive capitalistic market. Whereas CSR focuses on reputation with placing
value in doing good by societal pressure, it generates both economic and societal
benefits relative to cost in real competition of maximizing the profits. Instead of
being pushed by external factors, CSV is internally generated not confined to
financial budget as CSR is. With the advent of CSV and following strong
worldwide advocacy for it, companies started to overthink about their vision for
their sustainable growth.
Critics, however, argue that Porter & Kramer seem to have a very particular and
limited understanding of CSR, one that neither reflects the academic debates of the
past few decades nor captures most of todays CSR practices adequately. ()
Instead of dealing with a contemporary understanding of CSR, corporate social
responsibility seems to be used instead as a straw man to rhetorically justify the
authors contribution and its proclaimed originality.
Origins and development of shared value
A literature review was conducted into the important early work of 'shared value'.
Researchers found some literature focusing on the development of shared value by
Porter and Kramer (2006) with most work coming from few sources like the
Monitor Group.
More extensively the literature is from development organisations focusing on case

studies into the interrelated area of business ventures at the bottom of the
pyramid orinclusive business strategies/models.
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Outside these case studies, limited literature was found so the paper presented
lessons learnt from shared value and interrelated business models to show how
they developed and business strategies to engage with the bottom of the pyramid.
the term shared value is found in Porter and Kramer (2006), Strategy and
society: the link between competitive advantage and corporate social
responsibility and was a development by Porter of previous thinking on business
strategy.[13]
From the Corporate Social Responsibility perspective, they observed companies

could have worked harder reflecting flaws in CSR that business is pitted against
society rather recognising their interdependence; and second, CSR is viewed in a
generic sense rather than strategically.
To boost innovation and competitive advantage they say companies need to make
CSR part of their core business strategy and researchers saw this as development of
Porters 1985 Competitive Advantage work where firms activities were
redefined through their value chains to boost competitive advantage through cost
improvements or differentiation.
They argue shared value can do both contrasts with Milton Friedmans view that
the social responsibility of business is to increase its profits.[13]
Social value activities can overlap with traditional CSR. Efforts to promote
sustainability through CSR may cut costs for the company and boost profitability,
CSR and core business processes can become indistinguishable from one another,
moving to what the authors term corporate social integration. By drawing
attention to the way society impinges on business (rather than only business on
society) it provides justification for solving societys problems as a core business
strategy.
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Porter and Kramer (2002) The Competitive Advantage of Corporate

Philanthropy, seeks to address the tension of addressing the demand for greater
levels of CSR with the demand for short term profits focusing on how a societys
competitive context impacts business arguing it is possible to see long term
economic and social goals as connected.
Creating shared value
The researchers found Shared value has not greatly progressed, with subsequent
literature focused on the types of models and activities that businesses are
undertaking to create shared value (create shared value).
They claim a slight development was Porter and Kramers 2011 attempt to broaden
the concept of shared value beyond the arena of corporate social
responsibility with a greater focus on the nature of capitalism and markets, noting
dislocations with current capitalism, emphasising the inherent social nature of
markets, and suggesting that by adopting shared value principles business and
society will be reconnected creating new innovation and socially imbued
capitalism.
Whilst it can be argued that capitalism would certainly change if businesses on

mass re-orientated their core frameworks to focus on shared value there is little
analysis on how this would occur. The authors themselves recognise this.
Porter and Kramer identify GE, Google, IBM and Unilever as having adopted
shared value principles but note that, our recognition of the transformative power
of shared value is still in its genesis. and argue that addressing social constraints
does not necessarily raise internal costs for firms. Through innovation in new
technologies, operating methods, and management approaches a firm can improve
society while increasing their productivity and profitability.
102
To create shared value companies should:-
Reconceive products and markets to provide appropriate services and meet

unmet needs. For example, the provision of low-cost cell phones developed
new market opportunities as well as new services for the poor.
Redefine productivity in the value chain to mitigate risks and boost
productivity. For example, in reducing excess packing in product distribution
reducing cost and environmental degradation.
Enable local cluster development by improving the external framework that
supports the companys operations, for example by developing the skills of
suppliers.
The business perspective
The researchers found little evidence of an overall business perspective on the

shared value framework, not surprising given the relatively newness of the concept
as firms may have been pursuing shared value practices without it being realised as
such, especially outside of the US and it was not clear how to measure if a business
is pursuing shared value as opposed to overlapping areas of CSR or philanthropic
activities. Counterfactuals of non SV approaches in case studies were not offered
and tools and strategies to integrate,operationalise and measure shared value are
only now being developed.
They found authors that have promoted shared value provide case studies from US
based MNCs that are explicitly pursuing shared value principles and that resource
flows could be significant as GE are investing $6bn to improve health-care access
through there Healthymagination programme. They found little analysis as to
how much this represents of total GE investment or how shared value investment
in a sector compares with nonshared value- investment.
103
The researchers claim Multi National Corporation motivations are mixed with
some highlighting climate change and others a desire for employees to have better
links with local communities.
They found little documentation outside success stories of influence elsewhere.

Porter noted in, Measuring shared value; how to unlock value by linking social
and Business Results that without clear evidence of the impact of the shared value
proposition (and tools to measure it) it will be difficult to attract investors.[13]
The researchers propose that shared value may have added to the wider discourse
that views the private sector as key for development and profitable business
models as consistent with enhancing social impact but make clear that they dont
mean that shared value directly influenced the more established interest
in inclusive business, with few of the initial inclusive business papers discussing
shared value concepts in any detail. They say a more direct influence, consistent
with moves in inclusive business, is companies pursuing shared value developed
new types of relationships with other organisations like NGOs.
Shared value and the bottom of the pyramid
Much focus has been on the application of shared value at the bottom of the
pyramid reflecting both greater social needs among this group and the new markets
they offer.
The researchers mention Porter and Kramers example of Hindustan Unilevers

innovation in hygiene products distribution, using smaller package sizes, creating
new business opportunities and appropriate products for the poor, a classic the
bottom of the pyramid model. They also mention Prahalad and Harts The Fortune
at the Bottom of the Pyramid paper which sets out how attractive the bottom of
the pyramid is for MNCs with commercial and social opportunities through mutual
104
value creation by reorientating their core business to provide products for these
consumers.
The researchers claim this thesis challenged assumptions that business success and
creating social value was not possible at the lower end of the market.
Inclusive business models
Direct links between shared value and the bottom of the pyramid were further
brought together in a 2007 conference titled The role of the private sector in
expanding economic opportunity through collaborative action hosted by Harvard
CSR Initiative, FSG Social Impact Advisors, and the IFC focusing on how
companies could improve livelihoods of the bottom of the pyramid through both
new services and new markets.
Two complementary frameworks companies were using promoting shared value

were examined by the researchers:
inclusive business models which aim to directly involve the poor in their
value chains
complementary strategies that aim to enhance the overall environment for
such models to flourish, for example by shaping public policy or up-skilling
workers.
The researchers used the 2008 UNDP definition create value by providing
products and services to or sourcing from the poor, including the earned income
strategies of non-governmental organisations to describeInclusive business
models as an umbrella term for a range of models.
They show the UNDP paper (2008) Creating Value for All: Strategies for Doing
Business with the Poor which examines over 50 inclusive business ventures and
the partnership between World Business Council for Sustainable Development
105
(WBCSD) and SNV (2008) which developed the concept in Latin America,
captured in, Inclusive Business - profitable business for successful development.
They found whilst inclusive business is closely related to shared value in that both
highlight profits motives as being compatible with doing good, its origins are
less centred in CSR strategies, and that Caroline Ashley in her 2009 paper that as
the shared value concept moved CSR to be more grounded in business strategy
and inclusive businessmoved sustainable business terminology towards a more
profit and less ethical framework.
Within inclusive business there is also less of a focus on gaining competitive

advantage through social impact (although that is still one of the potential benefits)
with the overriding feature that marries profit with development impact. Inclusive
business models can be found in a wide variety of companies, while shared value
literature has so tended to be focused on MNCs, and as noted in relation to
Hindustan Unilever, a number of business models could be described as consistent
with shared value and inclusive busines
106
Conclusion
Organization are coming to realize the bottom-line benefits of incorporating

sustainability into their DNA. Its beneficial for attraction and retention and its the
right thing to do HR is a key organizational leader and can take the lead or partner
with other executives to work cross-functionally to integrate. CSR objectives into
how business gets conducted. HR practitioners can act as translates of the
organizations CSR commitment vertically and horizontally across department.
Most will find upon reading this respect that they have many good practices
underway. Many will find they have a new structure for their thinking they can
apply practically in the workplace.
107
Bibliography
Newspapers and Magazines
Times of India
Economics Times
http://www.answers.com/topic/social-responsibility-and-organizational-ethics
http://en.wikipedia.org
http://www.iso.org
www. corpwatch.org.
gradestack.com/.../Social-Responsibility
www.slideshare.net
smallbusiness.chron.com
www.triplepundit.com
108
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Corporate social responsibility towards business

Chapter No Topic Page No.

3 Philanthropy and community service 10

6 Ethics and training 16

9 Socially responsible investing 32

10 Socially responsible marketing 38

12 Internet corporate governance controls 54

CHAPTER NO. 1 : INTRODUCTION

Corporate social responsibility

CSR policy functions as a self-regulatory mechanism whereby a business monitors

Critics questioned the "lofty" and sometimes "unrealistic expectations" in CSR. or

Political sociologists became interested in CSR in the context of theories

CSR is titled to aid an organization's mission as well as a guide to what the

Business dictionary defines CSR as "A companys sense of responsibility towards

A broader definition expands from a focus on stakeholders to

The objectives of corporate social responsibility strategy

I. We are a reliable business partner.

II.We feel responsible for the environment.

III. We ensure good and safe working conditions.

IV. Active participation in community life.

patron of sports, to promote the development of scientific institutions, health

Environmental performance is concerned with a business' total impact on the

Essentially, this argument against social responsibility remains true until

Developing a Culture of Responsible Business

Many successful organisations believe that their sustainability is a result of having

offer incentives for team members who demonstrate a commitment to social

CHAPTER NO. 3 : PHILANTHROPHY AND COMMUNITY

Philanthropy and community service are considered to be important aspects of

CHAPTER NO. 4 : APPROACHES

Some commentators have identified a difference between the Canadian (Montreal

A more common approach to CSR is corporate philanthropy. This includes

Another approach to CSR is to incorporate the CSR strategy directly into

Many companies employ benchmarking to assess their CSR policy,

In competitive markets cost-benefit analysis of CSR initiatives, can be examined

Initially, CSR emphasized the official behavior of individual firms. Later, it

CHAPTER NO. 5 : IMPLEMENTATION.

An engagement plan can assist in reaching a desired audience. A corporate social

Accounting, auditing and reporting

Social accounting is the communication of social and environmental effects of a

Social accounting emphasizes the notion of corporate accountability. Crowther

AccountAbility's AA1000 standard, based on John Elkington's triple bottom

The Prince's Accounting for Sustainability Project's Connected Reporting

The United Nations Intergovernmental Working Group of Experts on

CHAPTER NO. 6 : ETHICS AND TRAINING.

The rise of ethics training inside corporations, some of it required by government

Common CSR actions include:

Environmental sustainability: recycling, waste management, water

Ethical marketing: Companies that ethically market to consumers are placing a

Social license refers to a local communitys acceptance or approval of a

can nevertheless be acquired through timely and effective communication,

Displaying commitment to CSR is one way to achieve social license, by enhancing

Potential business benefits

A large body of literature exhorts business to adopt measures non-financial

Triple bottom line

Managing risk is an important executive responsibility. Reputations that take

Some companies use CSR methodologies as a strategic tactic to gain public

Corporations are keen to avoid interference in their business

Appropriate CSR programs can increase the attractiveness of supplier firms to

CHAPTER NO. 7 : CRITICISMS AND CULTURE.

Milton Friedman and others argued that a corporation's purpose is to maximize

Better governmental regulation and enforcement, rather than voluntary measures,

A story of CSR promoted by AzimPremji Foundation in India

One motivation for corporations to adopt CSR is to satisfy stakeholders.

environmental and social implications of their day-to-day consumption decisions