Corporate Social Responsibility: In Purview of General Management

Author 01 Diwakar Chakravorty dic.contracts@gmail.com 8750369661 Symbiosis Law School, NOIDA

Author 02 Shashank Dixit dixit3563@gmail.com 8285530205 Symbiosis Law School, NOIDA

Abstract
T h e r e a r e n o u n i v e r s a l l y a c c e p t e d d e f i n i t i o n s o f C o r p o r a t e S o c i a l R e s p o n s i b i l i t y. O n e extreme view is that a company that complies with the laws of the land in which it operates is being socially responsible. The other extreme view is that a socia lly responsible company is one that is purely philanthropic in that it gives without expecting a return or a benefit. I n d i a ' s i n d u s t r i a l e c o n o m y, w h i c h h a s i n v e s t e d m u c h i n a d v a n c e d t e c h n o l o g y i n i t i a t i v e s such as digital communications and space research, contrasts with the poverty that persists, particularly in rural areas. The country ranks among the top dozen in the world by gross national product. It is a responsibilit y of a corporate to come up in front and cover its responsibilities w h i c h i t o w e s t o t h e s o c i e t y. Now if the Company bill 2011 is passed by the parliament then according to its clause 135. every company with a net worth of Rs 500 crore or more, or turnover of Rs 1,000 crore or more, or net profit of Rs 5 crore and above in a fiscal will ha ve to spend 2% of t h r e e ye a r s a v e r a g e p r o f i t t o w a r d s C S R a c t i v i t i e s . I n c a s e , a c o m p a n y f a i l s t o s p e n d t h e 2% prescribed, it would have to explain to the shareholders the reason for such a failure.

INTRODUCTION
We need to think of CSR simply as ensuring that our business is aware of its impacts, is accountable for its actions, and that it undertakes these actions in a responsible manner. Furthermore, a well-run business is transparent in its decision-making and processes and this makes for good governance. CSR can be described as an approach by which a company does the following: Recognizes that its activities have a wider impact on the society in which it operates, and that developments in society in turn impact on its ability to pursue its business sustainably. Actively manages the economic, social, environmental and human rights impact of its activities both locally and across the world, basing these on principles which reflect both international values and the organizations own values (ethics), reaping benefits for both its own operations and reputation as well as the communities in which it operates. Seeks to achieve these benefits by working closely with other groups and organizations local communities, civil society groups, other businesses and home and host governments.

Review of Literature
Geoffrey Reel (2004) observed an economically coherent analysis of corporate social responsibility (CSR), and suggested how it is reflected in financial markets. CSR is defined as a program of actions taken to reduce externalized costs or to avoid distributional conflicts. It is an institution that has evolved in response to market failures, a Coasian solution to some problems associated with social costs. In some sectors of the economy private and social costs are roughly in line and distributional debates are unusual: here corporate social responsibility has little role to play. Such sectors are outnumbered by those where CSR can play a valuable role in ensuring that the invisible hand acts, as intended, to produce the social good. In addition, it seems clear that a CSR program can be a profitable element of corporate strategy, contributing to risk management and to the maintenance of relationships that are important to long-term profitability. Catherine J Morrison, Donald Siegal (2006) presented that CSR activities may affect the productive impacts of efficiency, technical change and scale economies, as well as increase input costs and composition (potentially increasing outsourcing and reducing investment and employment). The findings also indicated that these impacts were dependent on firm characteristics such as the motivations for socially responsible actions, tax laws, location, and plant age and innovation activities. These results provided provocative insights, therefore, regarding how CSR must be balanced by benefits or regulations (implied social benefits) to motivate firms to carry out such activities.

Michael Hopkins (2004) observed that Corporate Social Responsibility (CSR) has been an increasingly important issue for private and non-government businesses to consider when investing in countries. Observations specifically address about transnational corporations and how they can negatively affect the development of countries when socially irresponsible and notes the increasing consumer awareness of corporate irresponsibility. It argued that better relationships between governments and corporations need to be established to reduce low living standards, exploitation, poverty, and unemployment, which would contribute to overall sustainable development.

Objectives of the study

To develop an understanding about Corporate Social Responsibility and linking with general management

Origin of Corporate Social Responsibility

In the 1970s and 80s environmental concerns such as loss of the rainforest and the effects of pollution led to a recognition that something had to be done to change the way we were using the planet resources. As a result, heads of state came together at Rio, Brazil in 1992 for what was called the Earth Summit. At Rio, governments pledged action to stop the unsustainable use of resources and to promote sustainable development. Put simply, sustainable development is about society growing in such a way that future generations are not compromised and have access to the same resources that we have. For this to happen social, environmental and economic considerations should be assessed together and not in isolation. The Earth Summit produced various United Nation conventions including conventions on biological diversity and climate change. CSR is now sometimes considered as the business response to the challenge of sustainable development. The 1990s saw social concerns come to the fore. Poverty and disease became global concerns, as did examples of poor business practice in dealing with social issues such as child labour, bribery and corruption that were exposed by the media. Society began to recognize that governments alone could not solve these problems. Indeed the outcomes from the Earth Summit's successor the World Summit for Sustainable Development in 2002 focused on partnerships. There appeared to be a role for everyone governments to provide fair and socially just laws, business to behave responsibly and consumers to think about their actions by reducing waste or asking questions about how and where their goods came from.

How corporate social responsibility is relevant and when it is so?

As CSR is all about values and accountability then it is also about the behavior of people and the behavior of suppliers. In this sense virtually everything that is found within the HR remit - from training, recruitment, staff retention, policies, procedures and strategy - involves CSR. Traditionally HR and CSR have been led by the need for compliance and keeping up with new laws on employment as well as environmental, ethical and social issues. Increasingly HR managers are crucial to the delivery of training to deal with these issues in terms of organizational objectives and strategy. Equally important is the importance CSR has to recruitment: 75% of UK professionals take social or ethical considerations into account when changing employment. Whilst over half of graduates will not work for companies they believe to be unethical. Corporate governance is a board level hot topic - you only have to look at how much publicity the Higgs report on the role of non-executive directors received and it will continue to develop, as there is increased recognition that how an organization is run is the key. This can cover many areas such as financial integrity, transparency and accountability, leadership from the board and being employer of choice. It is central to the implementation of policies and programmers. Having good corporate governance means that these areas are embedded in the organization and deliver to the business and to stakeholder objectives, and are not just nice-to-have. The HR manager has become central to this role in helping deliver culturally open and transparent organizations where dialogue is celebrated not feared. For a business being CSR compliant is also an exercise in future-proofing its business as risks and opportunities are identified. Quite often changes lead to performance improvements such as increased staff retention and customer satisfaction. Adding this value is one of the main reasons why CSR is of increasing relevance to the HR manager. CSR is a crosscutting topic under which numerous issues can be grouped including training and education, capacity building, leadership, health and safety, working conditions, human rights, stakeholder engagement and corporate governance. Large multi-national companies were the first to identify CSR as a potential tool to improve performance and now through their supply chain they are asking suppliers to comply with their standards.

How Corporate Social Responsibility can help to manage risk?

Positive actions that reduce the negative impact of an organization on these issues can be seen as a way of managing risk. An example of this could be a retailer constantly monitoring its employment policies to ensure that is adhered to throughout its supply chain, so avoiding any scandals on human rights abuse or potential litigation over working standards. We need to understand that what are the main areas of risk to a business? Corporate reputation, governance and ethics are headline issues associated with corporate social responsibility that have made the news headlines in the last few years. Examples include the ethics of arms and defence deals, fat cat director salaries and shareholder activism, illegal workers and supply chain issues, the financial scandal of Parmalat, and the famous collapses of Enron and WorldCom and false accounting. These are all topical issues that have demonstrated areas of risk to companies. All are important issues in their own right. By answering the following questions we hope to demonstrate the important role HR has within a business in identifying and addressing risk. What is risk? What do words like governance really mean? Why are they headlining news? And what can HR do? Managing and controlling risk is the key to running a successful organization. Risk can be defined as the possibility of suffering harm or loss. Within the area of CSR there are four general areas of risk.

1. Supply chain country specific such as human rights abuses, or company specific risks such as pollution. 2. Operational risks this covers compliance with regulation, employee satisfaction and dangerous operations 3. Product this covers use of hazardous raw materials (e.g. nuclear energy) waste during production, and health and safety issues. 4. Societal expectations this covers what society demands of a business in the 21st Century Good governance will ensure both current and future risks that affect all stakeholders are identified and that the appropriate internal controls (accountability mechanisms, systems and procedures) are used to mitigate, and in some cases, turn risk into opportunities.

Poor governance reflects a culture where employees are not involved in the way things are done, or even worse one where corporate governance (the way a business operates and the role of the board) procedures do not exist and whistle blowing becomes necessary. An organisations reputation is built on its relationship with staff, customers, suppliers, investors and the community they operate within. These stakeholders are the very same that CSR activities seek to involve. This is why CSR can help maintain and enhance reputations. A change in reputation can lead to a number of negative impacts such as a drop in share value of the a business, a decrease in profitability as customer and staff loyalty drops, a decrease in business opportunities (as potential partners question the trust and integrity), a decrease in new investment as the business is seen as a greater risk, and even increased insurance premiums. How to manage risk is the main issue here First the risk needs to be identified. Having an organizational culture of accountability, transparency and staff involvement (inclusiveness) is beneficial as staff and suppliers can act as risk detectors and feedback on early warning signs. Here Human Resourses has a role to play ensuring the culture of the organization is one where there is a planned process that captures this feedback. The pharmaceutical industry is a highly legislated and regulated environment with numerous industry standard operating procedures (SOPs), guidelines covering all aspects of good practice in clinical trials, and review processes through external ethics committees. Through facilitated workshops the dilemmas experienced by Roche employees in everyday work that were not covered in SOPs or in Roches own corporate principles were identified and their impacts analyzed. The findings revealed that the organization could be at risk if staff did not have a planned way to deal with dilemmas e.g. an ethical concern became a full-blown issue if left unmanaged. The need for some type of internal support for staff on ethical decisions and responsibilities became apparent. Staff did not want another policy but a process that enabled staff to engage with the issues and resolve them. From this debate a process that dealt with four key themes: patients, colleagues, trust and integrity was developed. The approach was trialled and human resources staff and trainers have been key to integrating the approach into training and induction sessions.

Through trialling, measures of success have been developed so that its implementation can be monitored and the approach improved. The strength of this work was the governance and buy-in generated by participation alongside the flexibility of bringing in facilitators and champions of issues in society. This example demonstrates the emergent involve me culture reflected in the wider corporate social responsibility agenda in which stakeholders, in this case employees, are working in partnership with their organization to deliver an environment where risk, or indeed opportunity, is identified and managed. Human Resourse has a crucial role in the development and implementation of Corporate Social Responsibility within an organization. The development and implementation of CSR policies acts as a mechanism to support employees facing risks. By first benchmarking your organizations performance on CSR activities you will identify areas of risk. Other tactics include:

Workshops to engage with staff and suppliers to explore areas of risk Develop interactive intranet sites that show case examples of good practice, or build in opportunities for promotion of good practice at staff meetings Review company policy and procedures to ensure values are consistent procurement, recruitment, training, appraisals and exit interviews

Consult and involve staff more in the running of a business Provide feedback questionnaires for employees, customers and suppliers to show the organization is living its values

Lessons from India: social profitability

There is a long time commitment from Indian businesses to serve others while also being financially profitable. While corporate social responsibility creative capitalism and the triple bottom line are relatively new, trendy ideas in the West, many Indian businesses have long measured their success by how they care for their most important asset - their people.

A recent study among the 100 leading businesses in India found that social mission trumped shareholder value for every executive surveyed - a result that would be unthinkable among their American counterparts. For example, ITC, a leading multi-business conglomerate involved in the study said, "Envisioning a larger societal purpose has always been a hallmark of ITC. The company sees no conflict between the twin goals of shareholder value enhancement and societal value creation." Two-thirds of the profits of the mammoth Tata Group companies go back into society through charitable foundations. Another conglomerate, the Godrej Group, builds schools, medical clinics and housing for its employees. There are important debates about whether it's really the company's right to use profits this way or whether shareholders should simply be paid their dividends and allowed to personally decide how to use their profits to make the world a better place (an argument largely rooted in an individualist versus a collectivist perspective). And some argue that Bill Gates did more to help the world as profit-producing CEO of Microsoft (by giving millions of people access to technology) than he ever will as a philanthropist. Others are better qualified to debate these issues. I'm simply calling us to pay attention to the inspiring, exemplary work of many Indian businesses that sheds new light on what it looks like to invest in human capital - both employees and society as whole. The researchers behind this recent study are careful to point out that not all Indian businesses are characterized by what they found. And just as we can't simply take 10 principles of effective organizations from the U.S. and transfer them elsewhere, so also we ought to beware of simply thinking we can replicate the Indian model in other cultural contexts. So much of their commitment to social mission flows from the ebb and flow of Indian culture and society. But let's not miss out on the lessons to be learned from India. It's fun to describe the way Google's work environment, complete with free massages and food contributes to their success. But let's also talk about how Indian companies have remained viable while also building complete communities for their employees and families. We should remember that India's economy barely felt the recent "Great Recession" and Indian companies have a track record of making the U.S. publicly-traded companies they acquire more profitable (financially and socially).

Corporate Social Responsibility and Business future

In a speech calling for a 21st century vision of business as both self-rewarding and socially vital, Sir John called on companies to change their attitudes to both the community as a whole and to their own employees. Repairing the reputation of business must become our over-riding cause, a prerequisite for achieving other goals," he said. "Reputation matters. Reputation for reliable performance attracts investors. Reputation for fairness guarantees good industrial relations. Reputation for quality and value for money wins customers. "Without public trust we'll be vulnerable to even more heavy-handed regulation, to even greater political interference and to even higher taxation," he warned I embrace the principles of corporate social responsibility because I've experienced their practical value. I've learned from experience that a stakeholder approach encourages loyalty from all the players who can influence a company's success, he said. Without public trustwe'll find it difficult to get top quality young people - there's no point in the CBI campaigning for high quality education if the educated young turn their backs on business. The toughest challenge the UK faced is productivity, he said. And a significant part of the answer is in business trusting its employees and working together: Its when we motivate our employees to contribute their ideas and their experience as well as their energy that we perform at our best, he said. Sir John attributed much of the blame for the lack of public trust in business to recent financial scandals in the United States. It may be unfair that US problems have damaged business everywhere, but they have. We cherish our relationship with US business but we also want to urge upon them more effective corporate governance." He said that business should make clear that the CBI expects executives to be open and transparent, non-executive directors to challenge and auditors to audit in the cause of the shareholder, not the management.

I know from practical experience that corporate social responsibility and attention to the concerns of a company's stakeholders really works for the company as well as society. That's why this cannot be seen as a passing trend. The CSR movement is for us not a threat but an opportunity - it offers a course to follow that can help to establish a new relationship between business and society based on trust and shared values, leading to greater freedom for business and a more enlightened public attitude to profit.

Bottom Line and Corporate Social Responsibility

The study, by the Kenexa High Performance Institute, surveyed some 30,000 employees in 21 countries for their views on corporate responsibility and its impact on their organisations. Globally, more than half of employees (56 per cent) said that their organisation contributed to the community and displayed a genuine commitment to corporate responsibility efforts. These employees also believed their companies properly balanced short-term business decisions with longer term investments in the community. Employees of organisations in which CSR is a cultural value and practiced with consistency also displayed startling high levels of engagement (89 per cent) compared to just 21 per cent for employees of organisations working in a 'low' CSR culture. "Employees who work in organisations that have a greater sense of responsibility towards their communities and environment, both ecological and social, have an engagement level that is four times higher than it is for employees who work in a low CSR culture. they also found that companies that prioritise CSR have a considerably higher rating for providing excellent customer service," In fact, the report found that 84 per cent of employees working in 'high' CSR cultures rated their organisation's performance highly, and 91 per cent believed that their customers were very satisfied. In contrast, where corporate responsibility is not a cultural value, just 29 per cent of employees reported strong organisational performance, and only 27 per cent believe their organisation provides better quality products than the competition. An analysis of the financial metrics confirms this. The study examined the results of 175 companies and found that those organisations that were most committed to CSR reported an average return on assets that was 19 times higher than the average of those least committed to CSR (a gain of 4.83 per cent, against a mere 0.25 per cent).

When analysing the total shareholder returns of these companies over the three years from 2007 to 2009, the researchers found that many of the organisations had reported a financial loss. However, low-scoring CSR organisations lost, on average, 11 percentage points more than high-scoring CSR companies. "There is now a need to expand the body of research into CSR to further explore and understand the relationship between CSR and organisational success," For example, do CSR actions actually produce these tangible business benefits or do highly successful companies simply have more resources to devote to CSR, creating a positive cycle? Whether they do it to manage their public image or because it's the ethical and right thing to do, one thing is certain: organisations in every industry in all of the major economies around the world are now paying heed to the notion of corporate responsibility."

Conclusion
Corporate social responsibility promotes a vision of business accountability to a wide range of stakeholders, besides shareholders and investors. Key areas of concern are environmental protection and the wellbeing of employees, the community and civil society in general, both now and in the future. The concept of CSR is underpinned by the idea that corporations can no longer act as isolated economic entities operating in detachment from broader society. The concept of corporate social responsibility is now firmly rooted on the global business agenda. But in order to move from theory to concrete action, many obstacles need to be overcome. A key challenge facing business is the need for more reliable indicators of progress in the field of CSR, along with the dissemination of CSR strategies. Transparency and dialogue can help to make a business appear more trustworthy, and push up the standards of other organizations at the same time

REFERENCES
Heal Geoffrey, Garret Paul (2004), Corporate Social Responsibility. An Economic and Financial Framework, Columbia Business School
Morrison Catherine (2006) , Corporate Social Responsibility and Economic Performance, Department of Agricultural and Resource Economics University of California

Hopkins Michael (2004), Corporate social responsibility: an issues paper, International Labour organization. P. Cappelli, H. Singh, J. Singh, & M. Useem, (2010) The India Way, Academy of Management Perspectives, Kumar P. (2003) Corporate Social Responsibility Assessment of Global and Indian Trends and Prospects, Paradigm: Journal of Institute of Management Technology. McWilliams, A. and D. Siegel. 2001. Corporate Social Responsibility: A Theory of the Firm Perspective. Academy of Management Review