Generations of CSR

Contrary to popular belief that CSR is a product of 1990s, but traces back to 1950s. CSR was born out of re-examination of the nature of relationship between the business, society and the governments. While the primary role of the business is to produce goods and services, that the society needs, there is also interdependence between business and society in need of a stable environment. Up to 1970s the understanding of CSR mostly focused on companies obligation to work for social betterment. In the start of 1970s, the focus shifted towards social responsiveness in that to respond to social pressures. It was change from philosophical approach to more on managerial action. Simon Zedak (2001) describes the development of CSR in terms of 3 Generations.

The First Generation

The 1st Generation of CSR showed, companies can be responsible in ways that do not detract from, and may contribute to commercial success. It is the most traditional and widespread form of CSR and most often manifested as corporate philanthropy. Ted Turner and Bill Gates donated huge sums of money towards eradication of Polio and AIDS. (This was not part of the main business of the company but may have added commercial value through reputation enhancement.

The First Generation

In recent years, several events and trends have contributed to companies changing the way they approach their philanthropy. The most prominent changes include: a) Adoption of a strategic approach to philanthropy, in which companies align charitable giving, with their core business interests. b) Expansion of the geographic focus of the corporate giving, to reflect the needs/ expectations of a global work force, & customer base.

The First Generation

c) Development of management tools for evaluating the impact of charitable contribution. d) Innovation in the ways the companies incorporate greater stakeholder participation in philanthropic activities, create long term relationships with nonprofit organisations, and organise their philanthropic programmes.

The Second Generation

The 2nd Generation is now developing where companies, and whole industries, see CSR as an integral part of long term business strategy. Nowadays lots of companies are taking CSR seriously for good of their business. Leadership by pioneering companies like TATA Steel, and business leaders like Bill Gates, Warren Buffet, Ratan Tata, Rahul Bajaj etc., has been crucial in moving industries towards 2nd generation CSR.

The Second Generation

The business level of strategy and goal setting addresses the issue of How should a firm compete in a given business?. The natural hierarchy of goals and strategies become obvious. No organisation sets goals and strategies in isolation, but through a process of careful planning and integration of the organisation into the larger environment and interactions among its sub divison. Proper management requires optimal coordination and integration.

The Third Generation of CSR

A 3rd Generation of CSR is needed to make a significant contribution to addressing poverty, exclusion from main stream and environmental degradation. This will go beyond voluntary approaches by individual companies and will involve leadership cos. And organisation influencing the market in which they operate and involve whole markets towards sustainability. This will need to involve both partnership with civil society & changes in public policies; both rewarding CSR & penalising poor performances.

The Third Generation of CSR

However all of the above issues raise many contentions and unanswered questions regarding the parameters of the responsibility of a company. a) Where should lines be drawn between corporate, public and civil society in terms of their responsibility to deliver the public good? b) Whether the market able to shift in line with leading CSR cos., or whether these leading lights will be priced out of market? In essence, what is required is an understanding of the action plan towards 3rd Generation CSR, that achieves social as well as development. However presently it is just a vision.

Definitions of CSR
Buchholz (1991) found 5 key elements found in most, if not all definitions. i) Corporations have responsibilities that go beyond the production of goods and services as profit. ii) These responsibilities involve helping to solve important social problems, especially those they helped to create. iii) Corporations have a broader constituency than stakeholders alone. iv) Corporations have impacts that go beyond simple market transactions. v) Corporations serve a wide range of human values than can be captured by a sole focus on economical values.

Definitions of CSR
According to Wood (1991) A) The basic idea of CSR is that business and society are interwoven rather than distinct entities. B) Expectations are placed on business due to its three roles; as an institution in society, as a particular corporation or organisation in society, and as individual managers who are moral actors within the corporation. C) 3 Levels of analysis: institutional, organisational and individual; expressed in 3 principles of CSR legitimacy, public responsibility and managerial discretion.

Definitions of CSR
Bowen (1953) suggested that The concept of specific business ethics can be traced back to certain business men and academics in 19th century, who spread the belief that a) Private Business is a public trust. b) Businesses exist at the pleasure of society and that their behaviour & methods of operations must fall within the guidelines set by society. c) Businesses act as moral agents within society.

The Social Responsibility Debate

Business should be involved in society: 1. Existence of the business enterprise system depends on its acceptance by society. 2. To avoid public criticism and to discourage further govt. involvement or regulation, business must take a social responsibility role. 3. Business must realise that society is a system of which corporations is a part, and that the system is interdependent.

The Social Responsibility Debate

4. There is a mutual involvement amongst individuals, groups, and organisations in society, or among sub - sectors of the society. 5. Social responsibility is in the stockholders interest i.e. socially responsible simply will be responsible in the long run. 6. Investors see failure to practice social responsibility as failure to perform in financial matters. 7. Business must realise that solving social problems creates opportunities ( example; Pollution control leads to usage of the waste.).

The Social Responsibility Debate

8.Long term view to social responsibility may lead to long term improvement in profitability.( example TISCO construction 15000-20000 living quarters for workers, in 1940-50). 9. Business houses must look at the good will & brand image created by social responsibility. 10. Normally a business solves a social problem better and in cheaper way than the govt. It brings humane face to business. 11. Prevention is better than cure, and proactive social work by a business helps it in getting acceptance. 12. Business people are also human beings and must show that part to pay their dues to society as normal human beings.

The counter argument

In Friedmans views (1970), the business is an economic entity & specialises in economic (rather than social) affairs. There only social objective is to maximise profits for the owners. Organisations are purely as legal entities incapable of taking value decisions. Social policy is the jurisdiction of govt. not businesses. Social responsibility is used by business houses to increase its power base. Business involvement in social matters may lead to profir reduction or even business failures.

The counter argument

There is no acknowledged guidance for social responsibility by business. As institutions in society, business corporations cannot be held accountable for their actions in a way sufficient to satisfy demands for social involvement. There is a divided support in the business community for social involvement.

Summing up
CSR is and will remain the bridge between the business and the society. Pure Profit making objective may make a business very mercenary and will lead to confrontation/ conflict in near future. We can not remain immune to our social moorings and only socially responsible industries will flourish.