Corporate Social Responsibility

Human Resource Management

Assignment-1 Corporate Social Responsibility: Reality or an eye wash?

Submitted to: Hema Harsha Maam

Submitted by: Adil Pasha Roll No: 01 Section A MBA 2nd Sem

Corporate Social Responsibility

Table of contents

Index
Introduction Definition Concept of Social Responsibility Reasons for corporate to be socially responsible Responsibility towards Different Interest Groups Responsible Companies in the age of globalization Corporate Social Responsibility in reality International Initiatives for Corporate Social Responsibility Corporate Social Responsibility in India Problems Solutions Challenges Bibliography

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Corporate Social Responsibility

Corporate Social Responsibility

Introduction
Corporate social responsibility is basically a concept whereby companies decide voluntarily to contribute to a better society and a cleaner environment. Corporate social responsibility is represented by the contributions undertaken by companies to society through its business activities and its social investment. This is also to connect the Concept of sustainable development to the companys level. Over the last years an increasing number of companies worldwide started promoting their Corporate Social Responsibility strategies because the customers, the public and the investors expect them to act sustainable as well as responsible. In most cases CSR is a result of a variety of social, environmental and economic pressures. The Term Corporate Social Responsibility is imprecise and its application differs. CSR can not only refer to the compliance of human right standards, labour and social security arrangements, but also to the fight against climate change, sustainable management of natural resources and consumer protection. The concept of Corporate Social Responsibility was first mentioned 1953 in the publication Social Responsibilities of the Businessman by William J. Bowen. However, the term CSR became only popular in the 1990s, when the German Betapharm, a generic pharmaceutical company decided to implement CSR. The generic market is characterized by an interchange ability of products. In 1997 a halt in sales growth led the company to the realization that in the generic drugs market companies could not differentiate on price or quality. This was the prelude for the company to adopt CSR as an expression of the companys values and as a part of its corporate strategies. By using strategic and social commitment for families with chronically ill children, Betapharm took a strategic advantage. Today, every company invests a considerable amount of money, energy and boardroom time on developing or strengthening its CSR strategies and initiatives. More and more companies across the world are integrating a social perspective in their operations in addition to what is required by law.

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Recently, the Government of India proposed in the Companies Bill 2011 that corporations with a net worth of INR 5000 million or turnover of INR 10,000 million will be required to constitute a CSR Committee of the Board and allocate at least 2 per cent of their average profits to corporate social responsibility initiatives. However, the bill which has now been withdrawn raised several questions within the industry as well as outside it on the feasibility and rationality of such a decision. While some argue that a government cannot regulate CSR initiatives of a company considering CSR is still an ambiguous concept; others believe that facilitating development in a democracy is purely the prerogative of the government and that the corporations can only be expected to play a collaborative role of their own free will.

Definition of 'Corporate Social Responsibility'

Corporate Social Responsibility is corporate initiative to assess and take responsibility for the company's effects on the environment and impact on social welfare. The term generally applies to company efforts that go beyond what may be required by regulators or environmental protection groups. Corporate social responsibility may also be referred to as "corporate citizenship" and can involve incurring short-term costs that do not provide an immediate financial benefit to the company, but instead promote positive social and environmental change.

Concept of Social Responsibility

Profit making is not the sole function of business. It performs a number of social functions, as it is a part of the society. It takes care of those who are instrumental in securing its existence and survival like- the owners, investors, employees, consumers and government in particular and the society and community in general. So, every business must contribute in some way or the other for their benefit. For example, every business must ensure a satisfactory rate of return to investors, provide good salary, security and proper working condition to its employees, make available quality products at reasonable price to its consumers, maintain the environment properly etc.

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However, while doing so two things need to be noted to view it as social responsibility of business. First, any such activity is not charity. It means that if any business donates some amount of money to any hospital or temple or school and college etc., it is not to be considered as discharge of social responsibility because charity does not imply fulfilling responsibility. Secondly, any such activity should not be such that it is good for somebody and bad for others. Suppose a businessman makes a lot of money by smuggling or by cheating customers, and then runs a hospital to treat poor patients at low prices his actions cannot be socially justified. Social responsibility implies that a businessman should not do anything harmful to the society in course of his business activities. Thus, the concept of social responsibility discourages businessmen from adopting unfair means like black-marketing, hoarding, adulteration, tax evasion and cheating customers etc. to earn profit. Instead, it encourages them to earn profit through judicious management of the business, by providing better working and living conditions to its employees, providing better products, after sales-service, etc. to its customers and simultaneously to control pollution and conserve natural resources.

Reasons for corporate to be socially responsible

Social responsibility is a voluntary effort on the part of business to take various steps to satisfy the expectation of the different interest groups. As you have already learnt, the interest groups may be owners, investors, employees, consumers, government and society or community. But the question arises, why the corporate should come forward and be responsible towards these interest groups. Let us consider the following points:

i. Public Image - The activities of business towards the welfare of the society earn goodwill and reputation for the business. The earnings of business also depend upon the public image of its activities. People prefer to buy products of a company that engages itself in various social welfare programmes. Again, good public image also attracts honest and competent employees to work with such employers.

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ii. Government Regulation - To avoid government regulations businessmen should discharge their duties voluntarily. For example, if any business firm pollutes the environment it will naturally come under strict government regulation, which may ultimately force the firm to close down its business. Instead, the business firm should engage itself in maintaining a pollution free environment.

iii. Survival and Growth -Every business is a part of the society. So for its survival and growth, support from the society is very much essential. Business utilizes the available resources like power, water, land, roads, etc. of the society. So it should be the responsibility of every business to spend a part of its profit for the welfare of the society.

iv. Employee satisfaction - Besides getting good salary and working in a healthy atmosphere, employees also expect other facilities like proper accommodation, transportation, education and training. The employers should try to fulfil all the expectation of the employees because employee satisfaction is directly related to productivity and it is also required for the long-term prosperity of the organisation. For example, if business spends money on training of the employees, it will have more efficient people to work and thus, earn more profit.

v. Consumer Awareness - Now-a-days consumers have become very conscious about their rights. They protest against the supply of inferior and harmful products by forming different groups. This has made it obligatory for the business to protect the interest of the consumers by providing quality products at the most competitive price.

Responsibility towards Different Interest Groups

After getting some idea about the concept and reasons of social responsibility of business let us look into the various responsibilities that a business has towards different groups with whom it interacts. The business generally interacts with owners, investors, employees, suppliers, customers, competitors, government and society. They are called as interest groups because by each and every activity of business, the interest of these groups is affected directly or indirectly.

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i. Responsibility towards owners Owners are the persons who own the business. They contribute capital and bear the business risks. The primary responsibilities of business towards its owners are to: a. Run the business efficiently. b. Proper utilisation of capital and other resources. c. Growth and appreciation of capital. d. Regular and fair return on capital invested.

ii. Responsibility towards investors Investors are those who provide finance by way of investment in debentures, bonds, deposits etc. Banks, financial institutions, and investing public are all included in this category. The responsibilities of business towards its investors are : a. Ensuring safety of their investment, b. Regular payment of interest, c. Timely repayment of principal amount.

iii. Responsibility towards employees Business needs employees or workers to work for it. These employees put their best effort for the benefit of the business. So it is the prime responsibility of every business to take care of the interest of their employees. If the employees are satisfied and efficient, then the only business can be successful. The responsibilities of business towards its employees include: a. Timely and regular payment of wages and salaries. b. Proper working conditions and welfare amenities. d. Opportunity for better career prospects. e. Job security as well as social security like facilities of provident fund, group insurance, pension, retirement benefits, etc. f. Better living conditions like housing, transport, canteen, crches etc. g. Timely training and development.

iv. Responsibility towards suppliers Suppliers are businessmen who supply raw materials and other items required by manufacturers and traders. Certain suppliers, called distributors, supply finished products to the consumers. The responsibilities of business towards these suppliers are:

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a. Giving regular orders for purchase of goods. b. Dealing on fair terms and conditions. c. Availing reasonable credit period. d. Timely payment of dues.

v. Responsibility towards customers No business can survive without the support of customers. As a part of the responsibility of business towards them the business should provide the following facilities: a. Products and services must be able to take care of the needs of the customers. b. Products and services must be qualitative c. There must be regularity in supply of goods and services d. Price of the goods and services should be reasonable and affordable. e. All the advantages and disadvantages of the product as well as procedure to use the products must be informed do the customers. f. There must be proper after-sales service. g. Grievances of the consumers, if any, must be settled quickly. h. Unfair means like under weighing the product, adulteration, etc. must be avoided.

vi. Responsibility towards competitors Competitors are the other businessmen or organizations involved in a similar type of business. Existence of competition helps the business in becoming more dynamic and innovative so as to make itself better than its competitors. It also sometimes encourages the business to indulge in negative activities like resorting to unfair trade practices. The responsibilities of business towards its competitors are i. Not to offer exceptionally high sales commission to distributers, agents etc. ii. Not to offer to customers heavy discounts and /or free products in every sale. iii. Not to defame competitors through false or ambiguous advertisements.

vii. Responsibility towards government Business activities are governed by the rules and regulations framed by the government. The various responsibilities of business towards government are: a. Setting up units as per guidelines of government b. Payment of fees, duties and taxes regularly as well as honestly.

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c. Not to indulge in monopolistic and restrictive trade practices. d. Conforming to pollution control norms set up by government. h. Not to indulge in corruption through bribing and other unlawful activities.

viii. Responsibility towards society A society consists of individuals, groups, organizations, families etc. They all are the members of the society. They interact with each other and are also dependent on each other in almost all activities. There exists a relationship among them, which may be direct or indirect. Business, being a part of the society, also maintains its relationship with all other members of the society. Thus, it has certain responsibilities towards society, which may be as follows: a. to help the weaker and backward sections of the society b. to preserve and promote social and cultural values c. to generate employment d. to protect the environment e. to conserve natural resources and wildlife f. to promote sports and culture g. to provide assistance in the field of developmental research on education, medical science, technology etc.

Following are the various responsibilities of business towards the different interest group as discussed above. i. Protection of environment. ii. Better living conditions like housing, transport, canteen, crches etc. iii. Promotion of sports and culture. iv. Opportunity for better career prospects v. Regular supply of goods and services vi. Proper working conditions and welfare amenities vii. Goods and services at reasonable and affordable price. viii. Prompt after sales services.

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Responsible Companies in the age of globalization

How a company perceives its societal responsibility depends on various factors such as the markets in which it operates, its business line and its size. In recent years CSR has become a fundamental business practice and has gained much attention from the management of large international companies. They understand that a strong CSR program is an essential element in achieving good business practices and effective leadership. Companies have explored that their impact on the economic, social and environmental sector directly affects their relationships with investors, employees and customers.

Whilst so far Corporate Social Responsibility was mainly promoted by a number of large or multinational companies, it is now also becoming important to small national companies. Teflon Companies. Shell was one of first companies which made the experience, that early responsible acting is better than later crisis management. Shell was taken by complete surprise when the Greenpeace campaign against sinking the former drill platform Brent Spar achieved its goals. There was a widespread boycott of Shell service stations. The Brent Spar affair has brought quite some change of attitude to Shell.

As companies face themselves in the context of globalization, they are increasingly aware that Corporate Social Responsibility can be of direct economic value. Although the prime goal of a company is to generate profits, companies can at the same time contribute to social and environmental objectives by integrating corporate social responsibility as a strategic investment into their business strategy.

A number of companies with good social and environmental records indicate that CSR activities can result in a better performance and can generate more profits and growth. Research has shown that company CSR programs influence to an extensive degree consumer purchasing decisions, with many investors and employees also being swayed in their choice of companies.

A major challenge for companies today is attracting and retaining skilled workers. There is not only an image gain for the companies using CSR, but it is also important for the

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employees. Within the company, socially responsible practices primarily involve employees and relate to issues such as investing in human capital, health and safety and managing change.

In India there are an existent but small number of companies which practice CSR. This engagement of the Indian economy concentrates mainly on a few old family owned companies, and corporate giants such as the Tata and Birla group companies which have led the way in making corporate social responsibility an intrinsic part of their business plans. These companies have been deeply involved with social development initiatives in the communities surrounding their facilities. Jamshedpur, one of the prominent cities in the north-eastern state of Bihar in India, is also known as Tata Nagar and stands out at a beacon for other companies to follow. Jamshedpur was carved out from the jungle a century ago. TATAs CSR activities in Jamshedpur include the provision of full health and education expenses for all employees and the management of schools and hospitals. In spite of having such life size successful examples, CSR in India is in a very nascent stage. In the informal sector of the Indian economy, which contributes to almost the half of the GNP and where approximately 93% of the Indian workforce is employed, the application of CSR is rare. On the contrary, the fight against poverty, the development of education, as well as the conservation of the environment are not existent in most of the Indian enterprises.

India has an advantage as far as labour is concerned. To some extent, business and capital go to those places where costs are less or standards are lower like the ones in India. But also in India, the demand for responsible and ethical goods is constantly increasing. To guarantee the supply of responsible and ethical goods, it is especially important to implement a nationwide system of CSR standards.

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Corporate Social Responsibility in reality

Due to the lack of international CSR guidelines, the practical application of CSR differs and CSR Strategies within most companies still show major deficiencies. There are still complaints about multinational companies wasting the environment and NGOs still denouncing human rights abuses in companies. Some critics believe that CSR programs are undertaken by especially multinational companies to distract the public from ethical questions posed by their core operations. That meanwhile even multinational companies such as Microsoft or Pepsi confess to their social responsibility, is discussed quite controversial. While companies increasingly recognize their social responsibility, many of them have yet to adopt management practices that reflect it: company employees and managers need training in order to acquire the necessary skills and competence. Pioneering companies can help to implement socially responsible practices by guiding the processes. The Copenhagen Centre and CSR Europe have recently launched a program to bring the business and academic community together with the aim to identify and address the training needs of the business sector on Corporate Social Responsibility. While corporate social responsibility can only be taken on by the companies themselves, employees, consumers and investors can also play a decisive role in areas such as working conditions, environment or human rights, in the purchasing of products from companies which already adopted CSR or in prompting companies to adopt socially responsible practices. Critics suggest that better governmental and international regulation and enforcement, rather than voluntary measures are necessary to ensure that companies behave in a socially responsible manner. Corporate social responsibility should therefore not be seen as a substitute to regulation concerning social rights or environmental standards. In countries where such regulations do not exist, efforts should focus on putting the proper regulatory framework in place on the basis of which socially responsible practices can be developed.

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International Initiatives for Corporate Social Responsibility

Why are governments interested in CSR? Their task is to make sure that the process of global and economic and social change is managed properly and fairly. Several guidelines or standards have been developed to serve as frameworks for CSR: The OECD Guidelines for multinational Enterprises and the ILO - International Labour Standards form the principles for the societal responsibility of companies and will help to implement CSR on the international level.

Corporate Social Responsibility in India

India is one of the fastest growing economies, socio-economic problems like poverty, illiteracy, lack of healthcare etc. are still ubiquitous and the government has limited resources to tackle these challenges. This scenario has opened up several areas for businesses to contribute towards social development. CSR is not a new concept in India. Corporates like the Tata Group, the Aditya Birla Group, and Indian Oil Corporation, to name a few, have been involved in serving the community ever since their inception. Many other organizations have been doing their part for the society through donations and charity events. Today, CSR in India has gone beyond merely charity and donations, and is approached in a more organized fashion. It has become an integral part of the corporate strategy. Companies have CSR teams that devise specific policies, strategies and goals for their CSR programs and set aside budgets to support them. These programs, in many cases, are based on a clearly defined social philosophy or are closely aligned with the companies business expertise. Employees become the backbone of these initiatives and volunteer their time and contribute their skills, to implement them. CSR Programs could range from overall development of a community to supporting specific causes like education, environment, healthcare etc.

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For example, organizations like Bharath Petroleum Corporation Limited, Maruti Suzuki India Limited, and Hindustan Unilever Limited, adopt villages where they focus on holistic development. They provide better medical and sanitation facilities, build schools and houses, and help the villagers become self-reliant by teaching them vocational and business skills. On the other hand GlaxoSmithKline Pharmaceuticals CSR programs primarily focus on health and healthy living. They work in tribal villages where they provide medical checkup and treatment, health camps and health awareness programs. They also provide money, medicines and equipment to non-profit organizations that work towards improving health and education in under-served communities. Many CSR initiatives are executed by corporates in partnership with Non-governmental organizations (NGOs) who are well versed in working with the local communities and are experts in tackling specific social problems. For example, SAP India in partnership with Hope Foundation, an NGO that works for the betterment of the poor and the needy throughout India, has been working on short and long-term rebuilding initiatives for the tsunami victims. Together, they also started The SAP Labs Center of HOPE in Bangalore, a home for street children, where they provide food, clothing, shelter, medical care and education. CSR has come a long way in India. From responsive activities to sustainable initiatives, corporates have clearly exhibited their ability to make a significant difference in the society and improve the overall quality of life. In the current social situation in India, it is difficult for one single entity to bring about change, as the scale is enormous. Corporates have the expertise, strategic thinking, manpower and money to facilitate extensive social change. Effective partnerships between corporates, NGOs and the government will place Indias social development on a faster track.

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Problems
The Corporate Social Responsibility Initiatives by a company is generally looked as an 'Eyewash Exercise'. And one can frankly accept that It has been so, in the Majority of cases. Only few Companies have shown seriousness in this regard. The Top Management may come up with new conferences saying that they have adopted a new Village, They have invested in new public welfare schemes etc. But the Questions are, How effective are these schemes? How Employees look at these CSR Initiatives? The Truth is, Majority of the employees don't really care about the CSR Initiatives. And these Schemes generally fail for some inherent reasons. Why CSR is Important? It improves the Economic & Social status of the Society. It improves the Corporate Image & the Brand Value (especially when there is a Real Progress) To make Employees responsible for their actions, certain steps have to be taken. I believe that linking their Salaries with the amount of Community Developmental Works that he/she performs, is the solution. Organizations are not isolated entities, but they are highly interconnected with the Community. If the Community is strong, then there is a good chance that the organization will thrive. The following quote by the American Writer, Henry George highlights the irrefutable Truth... So long as all the increased wealth which modern progress brings goes but to build up great fortunes, to increase luxury and make sharper the contrast between the House of Have and the House of Want, progress is not real and cannot be permanent." The Corporate Social Responsibility Initiatives by a company is generally looked as an 'Eyewash Exercise'. And one can frankly accept that it has been so, in the majority of cases. Only few Companies have shown seriousness in this regard. The Top Management may come up with new conferences saying that they have adopted a new Village; they have invested in new public welfare schemes etc.

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But the Real Questions are, How effective are these schemes? How Employees look at these CSR Initiatives?

The Truth is majority of the employees don't really care about the CSR Initiatives. And these Schemes generally fail for some inherent reasons. Why CSR is Important?

It improves the Economic & Social status of the Society. It improves the Corporate Image & the Brand Value (especially when there is a Real Progress).

To make Employees responsible for their actions, certain steps have to be taken. I believe that linking their Salaries with the amount of Community Developmental Works that he/she performs, is the solution. Organizations are not isolated entities, but they are highly interconnected with the Community. If the Community is strong, then there is a good chance that the organization will thrive.

The following quote by the American Writer, Henry George highlights the irrefutable Truth...

" So long as all the increased wealth which modern progress brings goes but to build up great fortunes, to increase luxury and make sharper the contrast between the House of Have and the House of Want, progress is not real and cannot be permanent."

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Solutions
The Solution to the problem will be the Linking of Compensation System to the Amount of Community Developmental Work an Employee Performs. I believe that this should implemented at all levels (that includes Top Management). I would like to explain the System with some illustrations. Let us take Employee 'X', whose monthly salary is Rs.10000. Let us assume that the Fixed Component be Rs.7000. And the Variable component which is work performance related is Rs.3000. I would suggest that, Out of this Rs.3000, at least half of it, that is Rs.1500 should be linked to his Performance in Community Developmental Activities (CDA).

Let us see it in the form of an Equation. Monthly Salary=Fixed Component (70%) + Variable Component 1 (15%) + Variable Component 2 (15%) Where, Variable component 1 is related to Performance inside the Organisation Variable Component 2 is related to the performance outside the organisation (Community Developmental Works) The Variable Component 2 can be measured in terms of Social Benefit Points (SBP). There is an Upper Limit to this. The Limit is equal to 15% percent of Total Monthly Salary. If one exceeds the Limit Continuously, he can be considered for Fast Track Growth (Faster Promotions, Better Incentives etc.) SBP can be measured by an Independent Agency. It can be related to Number of Community hours one has spent, Quality of Work Performed, Number of beneficiaries etc. How a company should go about in doing Community Developmental Works? I would suggest 3 Ways by which this can be implemented ( according to the type of Organisation.)

Number-1: If it is a Service Based (Generally IT companies), Then Company can look at Adopting Villages (or Socially- Economically Backward regions) per Project. That is, if a company has 25 projects in its hand, then, It can adopt 25 villages. And people working on those projects are responsible for the development of that particular Village.

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Number-2: If it is a Product based Industry, then Allocation can be done to Regional offices. According to the size of the regional office, certain number of villages can be allotted to it.

Number-3: If it is purely a manufacturing Industry, then Department-wise allocation can be done. In other words, certain number of Villages per Department. It can be based on the strength of the department. The CDA can be organised based on free hours available. It can be a Compulsory Weekend Program (Example: 2 weekends every month) or A Day can be allotted each week to the project team / department / regional office. I think that the company can look at adopting Villages or other Socially-Economically Backward regions. I believe this Solution can produce great changes that would speed-up the process of development of the society.

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Challenges
Challenge 1: The employees may view the system as an unproductive one. They may think that they are being forced. Suggestion: An Orientation Program can be conducted to dispel all the apprehensions that the employees may have got. The Fact that Sustaining the Society is the Key to the Growth of the Organisation should be made clear to all stakeholders. The Employees may feel that it is eating into their personal space (time spent with family). This self-centred attitude should be changed. Employees should open-up. For a good Corporate Citizen, There should be a shift in thinking from Materialistic life to Meaningful Life. Hence, This Message should be put across, to make it a successful program.

Challenge 2: Top management may view that the move could have an impact on the Bottom-line. (Company have to spend some money on these projects) Suggestion: Long Term Profits are important. This move can make a minor dent in short term profits, but in the long run, there will be a definite enhancement of Brand Image & thereby Profits will increase substantially.

Challenge 3: The Top Management may feel that they need not get involved directly. Suggestion: Top Management is the real face of the company. If they get involved in the project, It will definitely be a good move. All other stakeholders (that includes employees) will get motivated because of their direct involvement.

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Bibliography

Website: www.wikipedia.org

Search engines: Google.

Books Referred: Corporate social responsibility- Philip Kotler, Nancy Lee. Corporate social responsibility- Gower publishing limited. Business Environment- Francis Cherunilam.