CORPORATE SOCIAL RESPONSIBILITY

PREPARED FOR

PREPARED BY:

MEMO OF TRANSMITTAL

TO: FROM: DATE: SUBJECT:

Mr. Razi Allah Lone Group-1 May 6, 2009 Prevailing environmental issues and their solution from the responsibility.

perspective of Corporate Social

Here is the report you have assigned us to prepare on environmental issues regarding corporate social responsibility. It will describe different approaches on social responsibilities those can be adopted by the companies according to their own needs and requirements. Most of the prevailing environmental issues are linked with corporations as increased industrialization is posing serious threats on environment. Corporations are making huge profits and revenues and they have enough resources to resolve these issues by showing some socially responsible behavior. Atmospheric hazards are increasing progressively through different forms and sources. However, these issues can be controlled if proper steps are taken by organizations. Environmental issues includes a wide range of problems like Global Warming, Pollutions in many forms, Toxicity issues etc. Those are of immense importance for the health and safety of the whole living community including plants and animals. To solve this crucial problem companies have to take some serious steps of action to remove the problem from the very bottom. They have to modify their production practices by adopting ways of getting green and making environmental friendly goods. Instead of focusing on the cost only, companies have to take measures like recycling, green marketing and adopting suitable ways for discharging wastes from the factories.

This is an interesting topic that has provided us deep insights and knowledge about the current scenario regarding atmosphere. It broadens our visions and enhances our awareness about the subject. Thanks for giving us the opportunity to work on this area that provides us real education. If you have any queries regarding the report you are welcome to ask.

TABLE OF CONTENTS

EXECUTIVE SUMMARY

CORPORATE SOCIAL RESPONSIBILITY

INTRODUCTION

Corporate social responsibility means the obligations of a company to perform such activities those are beneficial for the protection and welfare of the society. Its actually businesss own intentions as it is beyond legal and economic duties means to do the right things and act in a way that is good for the whole society. According to H.R. Bowen: Business and managers have an obligation to pursue those policies, to make those decisions, or to follow those lines of action that are desirable in terms of the objectives and values of our society. Management, challenges for tomorrows leaders (5e). This concept is relatively recent as it began to emerge in late 1800s when the number of industries started increasing. It gained momentum in the period of Great Depression when the collapse of stock market eventually created Securities and Exchange Commission. Then with the passage of time various social movements like civil rights, women libration etc, changed the peoples concepts about companies social responsibilities.

PURPOSE, SCOPE AND LIMITATIONS

SOURCES AND METHODS

REPORT ORGANIZATION

DIFFERENT APPROACHES ABOUT CORPORATE SOCIAL RESPOSINSIBILITY

Different views emerged in different times stating their own approaches and ideas. Some of them are: The Invisible Hand (According to which the entire responsibility of companies is to make profits and obey law.) Hand of Government (It states that government can serve confirm the interests of society better than the corporations.)

The Hand of Management (It states that corporations and managers are expected to act in such ways that can protect and improve the welfare of the society.)

All of these approaches carry their own views but broader aspects of social responsibility that are acceptable in almost all three perspectives are:

1. Economic and Legal responsibilities: The economic and legal duties of firms are accepted by all three perspectives of corporate social responsibility and it includes earning profits and observing law. 2. Ethical and Discretionary responsibilities:

The Hand of Management view accepts the ethical and discretionary responsibility of an organization along with economic and legal duties. Ethical responsibilities include behaviors and activities those are expected from the organizations while discretionary responsibilities are those activities performed voluntarily by the firms for the benefits of the community. Another famous economist Milton Friedman had described these above mentioned views with different names. These are: The classical view: It states that managements only social responsibility is to maximize profits. In this view he only gives importance to the interests of shareholders i.e. financial returns. He was of the view that firms can spend money on social goods but these spending will add to their costs. He was not against the society but he gave priority to maximize profits. The socioeconomic view: Another view was socio economic view that describes that organizations social responsibilities are not only to maximize profits for shareholders but they should also participate to improve and protect the societys welfare. As organizations profits depend on their products and services they offer to the public, so they should engage themselves in social activities. Comparing the two views: Both views of corporate social responsibility are different regarding their

applications and activities. For example Socio economic view gives more importance to protection and improvement of societys welfare whereas classical view emphasized on maximization of profits. Lesser Greater Stage 1 Stage 4 Stage 2 Stage 3 Social responsibility

Owners and Specific Environment

Employees Society

Constituents in the Broader Management

This chart shows that in stage 1 manager are following classical view of social responsibility in which they are more concerned toward the interest of the shareholders. Then in stage 2 managers focus on expanding the rights of their employees increasing job security and human resource concerns. At stage 3 managers widen their responsibilities to stakeholders in specific environment, mainly customers and suppliers by providing them good quality products and services with fair prices. Finally in stage 4 managers start practicing socioeconomic view by promoting social justice, support and protecting the environmental and culture activities. CSR is the interaction between business and the social environment through which they can make their good will and credibility among their social stakeholders.

SOCIAL STAKE HOLDERS OF COMPANIES

Companies are organizations those are earning their profits and revenues from the public by taking loans from them in the form of issuing shares and then they sell their products and items to them. In this way the public is directly associated with the companies operating in their regions. The stake holders of companies can be divided in to following category: Shareholders Employees Customers Local Community Society International Community.

IMPORTANCE OF SOCIAL CORPORATE RESPONSIBILITY

Corporate social responsibility is of great importance for the society as well as for the companies. There is a wrong impression among the firms that performing socially responsible activities are only going to help the societies. But for companies its just an additional cost. However, their benefits are far more than the costs. In fact they are for Long run profits Meeting public expectations Creating better environment Improving public image Stockholder interests Controlling further governmental regulations Balancing responsibility and power Proving prevention is better than cure

Moreover, it serves as a free publicity for the firm increasing its profitability side by side means that companies who are performing these activities regularly and fulfilling their obligations emerged as a strong name in the market. Apart from customers they are a source of attraction for the investors also. Its because of their responsible attitude towards their duties and actions, so they think that they will use their money in the same manner. In 2002 PricewaterhouseCoopers has surveyed of 1,200 business leaders, and found that 70% of CEOs agrees that Corporate Social Responsibility is vital for the profitability of any company.

MAJOR AREAS UNDER CSR

Corporate social responsibility is a wide area that includes a lot of activities that can be fulfilled by companies to make the world a better place to live in. As companies

are operating in different areas with different goals and objectives therefore they can show responsibility in different areas according to their own suitability but most prominent areas are: Environmental issues. Accountability and Governance. Health issues. Human Rights.

ENVIRONMENTAL ISSUES
In this sector companies can control their activities that are causing pollution and injurious affects for the whole planet. These are the issues emerged due to irresponsible behavior firms in discharging their waste materials either in air or water contaminating the whole area.

ACCOUNTABILITY AND GOVERNANCE

Companies are actually collecting finance and capital for running their business from the general public. So it is their duty to use this properly and guard their interest. For this purpose government has made certain rules and regulations on public limited companies to protect their rights. Companies should keep proper checks through conducting audits to show their corporate responsibility towards the shareholders.

HUMAN RIGHTS

Human right is another important area where companies can demonstrate their concerns for the welfare of humans by taking certain steps regarding education, health and labor issues. So there are a number of fields where companies can donate a part of their funds and make the world better but our report will focus on issues related to the environment and atmosphere of the planet.

ENVIRONMENTAL PROBLEMS
In the current scenario environmental issues are increasing rapidly due to rising industrialization. As industries and firms are growing faster, their associated problems are also emerging at the same speed. There are many environmental issues posing threats. Some of them are: Pollution Deforestation Climate changes Global warming Toxicity and health issues

POLLUTION
Pollution is basically the contamination of water, soil, and air by substances which are harmful to the living organisms and the environment. It is a process that disturbs the whole natural system as it is in every form including Water pollution Noise pollution. Air pollution Soil pollution

It is a worldwide problem faced by all of the nations either developed or underdeveloped. Even the developed countries though they have taken strict measures to minimize the level of pollution are still facing the problem. The people in developing countries do not consider it an important problem due to lack of awareness and no proper accountability and enforceability in this regard. Moreover, there are no sufficient resources needed to abide by such responsibilities and practices. Now a days all companies are more or less involved in such practices whether multinational or national, they are engaged in polluting activities through discharging gases from chimneys, by mixing industrial wastes into fresh waters and using hazardous fertilizers and sprays on crops. These practices are more common in developing countries like Pakistan, India, Srilanka etc. the same companies when operate in foreign countries show different behavior. But with the passage of time nations are realizing the importance of such issues. That is why the concepts of corporate responsibility are emerging.

Air pollution Carbon dioxide is artificially produced by factories through combustion of fossil fuels and chemicals and it is one of the main pollutants of air. When inhaled cause different injurious results including Asthmatic disorders. Another pollutant is Carbon monoxide that is generated by burning of fuels. Moreover, they are involved in deforestation that means they are removing even the components those can minimize the effects of those chemicals prevailing in the atmosphere. Political economy research institute have found that top corporate companies of USA are involved in creating air pollution. They listed top 100 companies and named them as toxic 100. These companies throw air releases of chemicals across the US. These companies are among top 500 fortunes but they are also involved in creating air pollution. Among them top 5 are:

E.I. Du Pont de Nemours & Co. US Steel Conoco Phillips GE Eastman Kodak.

Water pollution Next is water pollution that is because of industrial discharge, unchecked oil spillage and radioactive wastes. Industries are used to discharge their wastes in the water of streams, rivers and oceans affecting the aqua world. Moreover, this water is used for drinking and irrigation purposes. So in this way these practices are raising serious threats for the whole world and it is the need of hour that corporations should act upon these problems and take appropriate measures. It is their social responsibility to overcome these issues and think seriously about the betterment of the community. According to Polaris institute in China Global corporations such as Panasonic, Pepsi cola and Nestle are among the 33 companies that are blacklisted by the government for releasing wastes through improper ways. These companies are considered as examples corporate responsible firms in their home countries but due to outsourcing in China they failed to maintain their standards.

GLOBAL WARMING:
The term global warming means a gradual increase in the earths atmospheric and oceanic temperature caused by the burning of fossil fuels and other carbon based materials. This wide increase of carbon content in the atmosphere not only contaminates the surroundings but also impose serious threats to the climate. This increase in the world wide temperature causes many harmful results for the inhabitants of the planet. This serious problem is emerging in the world because of green house effect that means a phenomenon through which some of the gases,

mainly carbon dioxide with some water vapors accumulates in the suns heat and reflected back to earth making it warm for the natives. In this way our Earth is getting warmer continuously inviting different sorts of problems for the Earth disturbing it socially, politically and economically. There is a wide range of its harmful effects including the enhanced probabilities of droughts, melting of ice caps, formation of hot water and chances of more hurricanes. Moreover, this warming is increasing the rate of diseases also because as countries gets warm many of the insects carrying diseases with them migrate to these hot areas. So in this way a set of problems are emerging from this single global warming.

MAIN CAUSES OF GLOBAL WARMING

The main causes and factors that are posing such serious threats to the planet are directly associated with our corporate world. The companies and corporations operating in the world for generating their profits and revenues are connected with this problem as their activities are actually making this world warm. Global Warming is a complex process consists of many factors such as: Water pollution Formation of excessive smoke Deforestation Ozone layer depletion.

Global warming is itself nothing but a collection of problems mostly emerged due to increased industrialization. Their methods, processes and practices are the actual causes of all these above mentioned points.

Water Pollution: Its actually the contamination originated from the industrial wastes. Companies are mostly concerned with a proficient production of their products and items but they

are least bothered about the disposal of wastes formed due to those activities. Most of the companies deals with different sorts of chemicals during their production processes those are very harmful and injurious for the human health and the atmosphere. These wastes produce different gases those when merge with the air cause the temperature to rise making the area warmer and difficult to live in.

Ozone Layer Depletion: Another important aspect is the depletion of ozone layer. Our atmosphere is formed of different protective layers. The layer closest to the Earth is troposphere and next to it is the ozone layer that is basically to protect the living beings from the harmful emissions of sun. The ozone layer is the protective shell that controls the harmful radiations of sun those are harmful to humans, animals, and plant life. But this layer is being destroyed by certain wastes produced by corporations. Major sources for this are Refrigerants. Pesticides used on crops. Green house gases.

Deforestation: The intentional cutting of trees also facilitates the global warming. Today most of the businesses are only concerned about their own needs and requirements without considering the harmful effects produced in return. Woods and trees are valuable assets of our nature. They are important in controlling this global warming as trees emit oxygen and absorb the extra heat leaving the entire environment with a cooling effect. There importance can be considered through different aspects including: Major sources of food Habitat of animals

In spite of their obvious importance most of the companies does not hesitate to use them according to their own needs and requirements. In this way they not only

disturb the other species but also produce drastic changes in the environment that are injurious to our own atmosphere as well. So consequently forests as well as species are going extinct reducing our biodiversity. Smoke and Air Pollution: The release of smoke containing hazardous gases and chemicals will automatically increase the temperature. The discharge heavy smoke through industrial chimneys pumping contamination in the clouds and air around us causes injurious effects for the whole living community including plants and animals. Another important result is the melting of ice caps that has its own adverse effects. Among these more prominent are: Increasing sea level. Desalinating the oceans Migration of different species.

When excessive snow and ice caps melt they will automatically raise the sea level forming threats of floods. Moreover, this melting of fresh water with salted one is disturbing the composition of water that becomes a problem for aquatic life causing their migration or extinction, in such cases only the most adaptable will survive. So in this way global warming is actually a vicious circle of problems generating from a different sources but can be solve through different steps taken by companies.

TOXICITY AND HEALTH

Another important aspect of environment is toxicity issues concerned with health. Hygiene in the consumers products are of great concern meaning that how a product can be useful or harmful for a person while consuming it. Companies often use chemicals that are somehow toxic but now people are more careful about their health issues due to the major role of media giving them awareness and knowledge.

There are some products like baby toys, tooth paste, pet foods etc those can contain components those can be considered as harmful. But now investors know that if their product contains any harmful item, it will only damage their companys goodwill and bear financial loss in the future. So today companies are trying to produce the products those are user friendly as well as environmentally safe.

RISKS
Still there are a lot of corporations those are paying least importance towards these values. No doubt, that they are enjoying some sort of benefits but the level risks are far more than these profits. Here we can take the example of a toy company named RC2 which was demolished because its products contain toxic components those had affected the health of children. That issue not only disturbs their goodwill but also decreases their market value of shares. Before this issue shares were trading on $40 but after one year their share value went down to $20. In this way their short term profits turned into long term losses. Examples of Risks faced by companies: At the end of 2002 companies had paid $ 70 billion due to 730,000 injury claims because of asbestos chemical used in the products and the company became bankrupt. Lead paint used in toys shatter the public confidence and trust for other companies as well. In 2001, Netherlands government banned the sale of Sony play station because of excessive cadmium content. As a result they lost their sales and faced losses of $ 150 million. Companies must be aware about the minimum and maximum level of toxicity in their products as mentioned by the government or concerned authorities to stay competitive in the market.

Business Risk from Toxicity and health Perspective

Toxicity and health are important areas on which all the companies whether multinationals or small company. All the companies must consider it before making products and there side effects in the environment. Four business frameworks are identified to minimize business risks from toxicity and health view:

Corporate commitment:
CEOs should disclose all the required information. They should try to adopt methods through which they can reduce the harmful components in their products and such practices should be shared with the stakeholders as it will increase their goodwill and credibility. Strategy and Responsibility: Top Managers of the company must identify business risks of using of toxic chemicals. They should confirm the level of chemicals in supply chain and final products as they have the discretion in selecting the chemicals. Research and Development: Research should be done for production processes for making the product green and environmental friendly. Recycling of products is also a significant measure for preventing health issues.

Reporting and Dialogue: Company must inform the people about the chemicals they have used in making the products. They must show their annual reports including chemicals and components. By mentioning this they can minimize the risk and uncertainty.

HOW COMPANIES CAN CONTRIBUTE SHOWING CORPORATE SOCIAL RESPONSIBILITY

Corporate social responsibility is an activity, which enables companies to build a positive impact on society as this enables them to interact with societies and make a strong relation with them. It is not compulsory that company will gain a positive image through its high sales and huge profits. In fact these are the positive acts that build their strong and constructive image in a society. For this purpose companies can act in the following areas: GREEN MARKETING GLOBAL WARMING

GREEN MARKETING
Green marketing means the marketing of environmental safe products. It is a complete methodology that companies can adopt to make the atmosphere better. These includes modifications in Product composition Production processes Advertising

Now days mobile industries are also working on green projects to attract customers. One example is Nokia Pvt. Ltd in India. It has initiated a campaign to recycle electronic waste. Company has started this campaign through advertising for encouraging the consumers to leave old mobile phones at any of the green recycling bins at Nokia dealers care centers. During the campaign Nokia have collected around 3 tones of electronic waste, which includes mobile phones, chargers, batteries and other accessories, This is the very first step of any company in mobile sector for initiating green marketing.

In Pakistan different fast food franchises like McDonalds, KFC, and Subway etc are also practicing the same concept by providing food in paper bags instead of plastic one.

GLOBAL WARMING
Global warming is a serious matter from the last few years. Many companies are trying different strategies to overcome this problem establishing their own ways and methods for resolving this trouble. Like Olympus, a Japanese company which produces cameras and lens. Olympus is trying to reduce the use of CO 2 gas by replacing their equipments with more energy-efficient one so that the main source of this warming can be reduced. Some of the common steps are:
Recycling

of wastes:

By reducing the quantity of industrial waste companies can handle the issue. They should try to reuse their products through the process of recycling that is a very significant practice in this regard. Mostly paper, plastic, newspaper, glass and aluminum cans are recycled these days for saving the creation of carbon dioxide. Lesser heat usage: Heat directly increases the temperature of any material and it is also an important source for warming the earth. So by reducing heat consumption industries can serve their societies for a social cause that is to save Earth. . 3. Change a Light Bulb Wherever practical, replace regular light bulbs with compact fluorescent light (CFL) bulbs. Replacing just one 60-watt incandescent light bulb with a CFL will save you $30 over the life of the bulb. CFLs also last 10 times longer than incandescent bulbs, use two-thirds less energy, and give off 70 percent less heat. If every U.S. family replaced one regular light bulb with a CFL, it would eliminate 90 billion pounds of greenhouse gases, the same as taking 7.5 million cars off the road. 4. Drive Less and Drive Smart Less driving means fewer emissions. Besides saving gasoline, walking and biking are great forms of exercise. Explore your community mass transit system, and check out options for carpooling to work or school.

When you do drive, make sure your car is running efficiently. For example, keeping your tires properly inflated can improve your gas mileage by more than 3 percent. Every gallon of gas you save not only helps your budget, it also keeps 20 pounds of carbon dioxide out of the atmosphere. 5. Buy Energy-Efficient Products When it's time to buy a new car, choose one that offers good gas mileage. Home appliances now come in a range of energy-efficient models, and compact florescent bulbs are designed to provide more natural-looking light while using far less energy than standard light bulbs. Avoid products that come with excess packaging, especially molded plastic and other packaging that can't be recycled. If you reduce your household garbage by 10 percent, you can save 1,200 pounds of carbon dioxide annually. 6. Use Less Hot Water Set your water heater at 120 degrees to save energy, and wrap it in an insulating blanket if it is more than 5 years old. Buy low-flow showerheads to save hot water and about 350 pounds of carbon dioxide yearly. Wash your clothes in warm or cold water to reduce your use of hot water and the energy required to produce it. That change alone can save at least 500 pounds of carbon dioxide annually in most households. Use the energy-saving settings on your dishwasher and let the dishes air-dry. 7. Use the "Off" Switch Save electricity and reduce global warming by turning off lights when you leave a room, and using only as much light as you need. And remember to turn off your television, video player, stereo and computer when you're not using them. It's also a good idea to turn off the water when you're not using it. While brushing your teeth, shampooing the dog or washing your car, turn off the water until you actually need it for rinsing. You'll reduce your water bill and help to conserve a vital resource. Trees should be planted: If you have the means to plant a tree, start digging. During photosynthesis, trees and other plants absorb carbon dioxide and give off oxygen. They are an integral part of the natural atmospheric exchange cycle here on Earth, but there are too few of them to fully counter the increases in carbon dioxide caused by automobile traffic, manufacturing and other human activities. A single tree will absorb approximately one ton of carbon dioxide during its lifetime.

In 2001, Hill & Knowlton/Harris Interactive conducted a poll and the findings showed that 79% of Americans take into consideration corporate citizenship practices in their decision to buy a product. It is also observed that the companies, who continuously show their positive behavior towards social welfare of society, are given more relaxation by the government. For example, if a company gives a suitable amount of money for any social purpose such as free education or medical charges, this amount will be deducted from their tax, so that these kinds of actions are encouraged. Panasonic is working on a very interactive campaign go-to-school. In which the representatives of the company visits different schools and give lecture on environmental issues. This activity of Panasonic helps to increase the awareness among students on global warming and other environmental issues. It is also planning to start a media campaign to target adults.

SOME SOCIAL RESPONSIBLE COMPANIES:

Compan y
Coca-Cola Co. Ford, Honda, Lexus Jones

Actions
Uses recycled contents in packaging, started methods to reduce wastes. Produce at least one vehicle that is fuel efficient with lower polluting hybrid engine Designs environmental friendly buildings.

Studio, Inc General Electric Contributes money to Ghana and other countries for hospitals and water treatment Facilities.

BIBLIOGRAPHY
WEBSITES
1. Environmentalgraffitis Online. (2007). 5-Deadliest Effects of Global Warming. Retrieved September 11. 2007, from http://www.environmentalgraffiti.com/sciencetech/5-deadliesteffects-of-global-warming

2. Ess-homes Online. (0000). Ozone Depletion and Global Warming. From http:// www.ess-home.com/news/global-warming/ozone-depletion.asp 3. Myjamshedpurs Online. (2007). Good practice of Corporate Social Responsibility in Small- and Medium-sized medium-sized companies companies. Retrieved October 24. 2007, from http://www.myjamshedpur.com/good-practice-corporate-social- responsibility-small-and-

URL: (Top 10 Things You Can Do to Reduce Global Warming

By Larry West, About.com www.environment.about.com/od/globalwarming/tp/globalwarmtips.htm

ARTICLES:

Assira, J. (2002). Are they speaking English in Japan? Journal of Business Communication, 36(4), 72.

1. COMBATTING GLOBAL WARMING REALITIES, DIFFICULT QUESTIONS AND POSSIBLE

OUTCOMES. CSR insights contributed by associates of Article 13

www.article13.com,BY SIMON FORSTER. 02 DEC 2007 1. Forster, S. (2007). Combatting Global Warming Realities, Difficult Questions and Possible Outcomes. CSR insights-Associates of Articles. 2. Friedman, M. (1970, September 13). The social responsibility of business is to increase its profits. The New York Times. Retrieved September 13, 1970, from http://www.colorado.edu/studentgroups/libertarians/issues/friedman-soc-resp-business.html 3. Zadek, S. (2005). Five Steps of Corporate Responsibility. Harvard Business School Working Knowledge. (http://hbswk.hbs.edu/archive/4573.html)

Cuizon

4. What is Corporate Social Responsibility? How will CSR Benefit the Company Gwendolyn Cuizon ,Jan 29, 2009
http://social-corporate-responsibility.suite101.com/article.cfm/what_is_corporate_social_responsibility

5. Climate change and global warming, by Anup Shah. Jan 01, 2009.
http://www.globalissues.org/issue/178/climate-change-and-global-warming

REPORTS:

1.

Word from the Street: Toxicity & Health By Linda Hwang, Anu Yegnasubramanian, Rich Liroff April 2008 |

BOOKS:

Management third edition by Kathryn M. Bartol & David C. Martin published in 1998 printed by Mc Graw Hill companies