Introduction

Corporate Social Responsibility has been viewed as a business and developmental

approach but is now migrating from this fragmented view to one of interconnectivity.
CSR can be defined as “The concept whereby companies integrate social and
environmental concerns in their business operations and in their interaction with their
stakeholders, in a voluntary basis”; “Achieving commercial; success in ways that honor
ethical values and respect people, communities, and the natural environment”; “ The
continuing commitment by business to behave ethically and contribute to sustainable
development while improving the quality of life of the workforce and their families as
well as the local community and society at large”. Smart CSR is redefining Business’ role
in society on a social level while acquiring maximum profitability in a long term
commitment. It should be a concept and practice of today’s business.

Stakeholders

All businesses/corporations have stakeholders. Stakeholders are those groups or

individuals who are affected both in a negative and a positive way by the corporations’
actions. Stakeholders are the owners, employees, suppliers and the local community. The
concept of a ‘stakeholder’ is based on two concepts which are the Principle of Corporate
Rights (PCR): The Corporation and its managers should not violate the legitimate rights
of others to determine their own future and the Principle of Corporate Effect (PCE),
which is the corporation and its managers are responsible for the effects of their actions
on others. Freeman and Reed (1983) define two views of ‘stakeholder. First the ‘narrow
definition includes those groups who are important to the sustainability and profitability
of the corporation. Secondly, the ‘wider’ definition includes any group or individual who
can affect or is affected by the corporation. The latter is focused around PCE and PCR
while the former is based on Smart CSR as the success of both stakeholder and
corporation is dependent of each other. Management must ensure that the rights and
welfare of these groups are ensured and it must act in the interest of the stakeholders.
This will ensure the survival of the company because it secures the long-term stake of
each interest group. It is important to note that stakeholders have a right to be consulted
about any activity that can affect their welfare or any involvement of them being used as
a means to an end. Stakeholders have a right to claims on the firm and management
should has a right to acknowledge them or this can lead to conflict that can lead to
irreversible damage to the company’s reputation. Damage to a company’s reputation can
affect its profitability. Management must create a platform for stakeholders concerns and
interests to be heard that will be the foundation of long-term integrated relationship
between the firm and stakeholders. Systematic management of stakeholders concerns,
either issues under the firm’s control and influence or not is vitally important to its
reputation such as employment policies, environmental and social issues. Reputations are
built and maintained by the firm’s ability to fulfill expectations of multiple stakeholders.

Why the Growth o CSR?

CSR has not been entirely voluntary. Many companies were caught by surprise by the
public’s responses to issues that previously in their minds had nothing to do with its
business or strategy. Governments, Activists, media and other interest groups pressured
companies to act socially responsible and if not the consequences would be detrimental to
its profitability. Examples of some of the companies are Nike who faced an extensive
boycott after the New York Times and other media outlets reported abusive labour
practices at some of its Indonesian suppliers in the early 1990’s: Shell Oil’s sinking of the
Brent Spar ( an obsolete rig) in the North sea led to Greenpeace protests in 19995 and
caused a lot of negative publicity: Pharmaceutical companies realized that they were now
expected respond to Aids epidemic in Africa although its was not in line with their target
market and food and packaged food companies are now being held responsible for health
issues such as obesity and poor nutrition. A lot of well known branded clothing that has
suffered financially and reputably because of poor and exploitive labour practices. Like-
wise, some well-known wood product retailers was condemned as rainforest destroyers.
Companies now realize that historically investors were not concerned much with non-
financial aspects of the business but now few investors can ignore as a direct link shown
between a firm’s reputation and financial reputation. Companies are now compelled to
act ‘morally responsible’ in the interest of the stakeholders they interact with. They can
no longer be concerned with just the financial aspect of business but all to the social
aspects as it relates to people, community and natural environment that can be directly or
indirectly affected by their actions. They need permission from governments,
communities and stakeholders to operate and do business. Measures have been put in
place to measure a company’s corporate behaviour and are corporate performance is
publicized, influencing their adherence. The Dow Jones Index and the FTSE4Good Index
are used to rank a company’s corporate performance. However, these measures rarely
reflect accurate results as the data is self-reported by the companies itself and the surveys
responses are statistically insignificant. The DJSI evaluates some economical
performance but values customer service 50% higher than corporate citizenship whereas
the FTSE4Good Index is exclusive of any economic or customer service evaluation.
None of the above realistically measures corporate citizenship and is very cosmetic in
nature, showcasing the company as being a ‘good citizen’ but rarely offers any real
solutions to stakeholders concerns. This type of CSR is considered to be responsive. The
company will respond to various stakeholder groups or corporate pressure point through
various unrelated efforts. There is so long time or systematic plan is place and often result
in uncoordinated CSR that are disconnected from the company’s strategy that neither
make any social impact nor strengthen the company’s competitiveness. This is because of
a lot of companies still cannot envision CSR as a platform for financial growth and an
opportunity of gaining an outstanding competitive edge. Sadly to say, the consequence of
this action is lost opportunity to create social benefits that would have sustained both
communities and their businesses. Some companies like Ben &Jerry, Body Shop and
Patagonia are a few companies that have successfully implemented long-time CSR goals
but not real economic benefit.

Moving from Responsive CSR to Strategic CSR.

Companies are now creating a social agenda and are moving away from mitigating harm
to finding ways to reinforce corporate strategy by advancing social conditions. CSR
needs to be more than a response to ease social tension. Companies need to understand
the relationship and interdependency between themselves and society and how best they
can align their strategy based on this relationship to increase profitability. Responsive
CSR focuses too much on temporary solutions and the friction between a company and
society, creating no real opportunity for shared value between them. A healthy economy
need both to operate in harmony because a successful corporation needs a healthy society
and vice versa. A healthy society demands usually increase rapidly. These demands must
be met by the companies increasing their productivity and profitability. Companies create
employment, wealth and innovations that improve the quality of living for a society. If
their production operations are hindered, this will have a negative effect on society
because when a business suffers financially, this leads to job cuts, no wage increases and
possible lost of competitive edge. There will no wealth to pay taxes and support nonprofit
contributions. As a result, society suffers. It is then safe to say that business and society
needs each other. Companies are now finding ways to achieve social and economic
benefits simultaneously. It is through this that companies will reap the greatest social and
economic benefits. Strategic CSR also strengthens a company’s competitiveness because
the closer a social issue is aligned with its strategy, the greater opportunity to tap into its
resources and benefit society. Nestle has clearly epitomized the strategy creating great
social benefit and increased financial success. At the time Nestle’s milk business entered
the India Market in 1962, to build a diary in