Sei sulla pagina 1di 16

PROFITABILITY VS.

WELFARE 2019

Dr. SHAKUNTALA MISRA NATIONAL REHABILITATION UNIVERSITY

Lucknow

Faculty of Law
TITLE FOR PROJECT

[EMPERICAL RESEARCH STUDY ON CORPORATE SOCIAL RESPONSIBILTY


(PRACTICALITY OF CORPORATE SOCIAL RESPONSIBILTY, ITS EFFECT AND IMPACT)]

For

COURSE ON ‘PROFITABILTY VS. WELFARE’

Submitted by

[KUNWAR ASHISH SINGH]

[154140032]

Academic Session: 2018-19

Under the Guidance of

Vijeta Dua Mam


Asst. Prof. in Law & Faculty for PROFITABILTY VS. WELFARE
Faculty of Law
Dr. Shakuntala Misra National Rehabilitation University

1
PROFITABILITY VS. WELFARE 2019

ACKNOWLEDGEMENT
The completion of this Assignment could not have been possible without the participation and
assistance of so many people whose names may not all the be enumerated. Their contribution are
sincerely appreciated and gratefully acknowledged. However, I would like to express my deep
appreciation and indebtedness particularly to the following:

Vijeta dua mam for her endless support, kind and understanding spirit during making of this
assignment.

To all relatives, friends and others who in one way or another shared their support, either
morally, financially and physically, thank you.

Above all, to the Great Almighty, the author of knowledge and wisdom, for his countless love.

I thank you all.

Kunwar Ashish Singh

4th year Student

B.Com.LL.B(Hons.)

2
PROFITABILITY VS. WELFARE 2019

TABLE OF CONTENT
1. Introduction..........................................................................................................03
2. Defining corporate social responsibility...............................................................04
3. What is corporate social responsibility.................................................................05
4. Advantages of corporate social responsibility......................................................06
5. Effect and impact of corporate social responsibility............................................08
6. Dimension for corporate social responsibility......................................................09
7. Trends in corporate social responsibility..............................................................12
8. Potential benefits of implementing a CSR approach............................................13
9. Conclusion.............................................................................................................14

3
PROFITABILITY VS. WELFARE 2019

INTRODUCTION:
“Corporate Social Responsibility (CSR) is a powerful way of making sustainable competitive
profit and achieving lasting value for the shareholder as well as for stakeholders. CSR and the
reporting thereof is a win-win opportunity, not just for companies and for financial investors
but for social at large”. (europe2003)

The World Business Council for Sustainable Development (WBCSD) has defined corporate
social responsibility as ―the commitment of business to contribute to sustainable economic
development ―The primary purpose of CSR is to engage with the internal and external
stakeholders. CSR is concerned with the treating the stakeholders of the firm ethically or in a
socially responsible manner. The aim of social responsibility is to create higher standards of
living, while preserving the profitability of the corporation. (Michael Hopkins 1998). During the
initial phase of industrial development in the Western countries, philanthropic contributions to
civil society were popular. The initial debate on CSR took place in the United States during the
‗60s. During this period, the debate focused on the changing role of companies in society; and
the increased power especially of multinational companies, among others.1
One view sought regulations to protect society and the environment, and that the
priority of companies should be to make profit within these regulations. In contrast, others
argued that companies not only should have a responsibility to their shareholders, but also to
their other stakeholders.

Your business doesn't exist in isolation, simply as a way of making money. Your employees
depend on your business. Customers, suppliers and the local community are all affected by you
and what you do. Your products, and the way you make them, have an impact on the
environment. Corporate social responsibility (CSR) takes all this into account and can help you
create and maintain effective relationships with your stakeholders. It isn't about being "right on",
or mounting an expensive publicity exercise. It means taking a responsible attitude, going
beyond the minimum legal requirements and following straightforward principles that apply
whatever the size of your business. This guide explains how you can exploit the benefits that
CSR can bring to your bottom line.

1
http://en.wikipedia.org/wiki/Corporate_social_responsibility

4
PROFITABILITY VS. WELFARE 2019
DEFINING CORPORATE SOCIAL RESPONSIBILITY:

World Business Council for Sustainable Development defines Corporate Social


Responsibility (CSR) as ―The continuing commitment by business to behave ethically and
contribute to economic development while improving the quality of life of the workforce and
their families as well as of the local community and society at large.

Philip Kotler and Nancy Lee (2005):


“A commitment to improve community well being through discretionary business practices and
contributions of corporate resources”

MallenBaker:
“A way companies manage the business processes to produce an overall positive impact on
society.”

The European Commission advocates CSR as ―Being socially responsible means not only
fulfilling legal expectations, but also going beyond compliance and investing more into human
capital, the environment and relations with stakeholders.2
Globalization and rise in competition
War for talent; tapping the vast talent pool
Strategic importance of Intangible Assets
Retrenching of the state and its roles
Thus CSR exhorts firms to diverge from their sole aim of maximizing profits and to lay more
importance on improving the economic and social standards of the community in their countries
of operation. CSR can be thus be simply defined as the additional commitment by businesses to
improve the social and economic status of various stakeholders involved while complying with
all legal and economic requirements. As Warhust (2001) points out, the three major elements of
CSR are product use which focuses on contribution of industrial products which help in well
being and quality of life of the society, business practice which focuses on good corporate

2
http://www.csreurope.org/pages/en/activities.html

5
PROFITABILITY VS. WELFARE 2019
governance and gives high impetus for the environmental well being and equity which tries for
distribution of profits equitably across different societies especially the host community.3

World Business Council for Sustainable Development

“Corporate Social Responsibility is the continuing commitment by business to behave ethically


and contribute to economic development while improving the quality of life of the workforce
and their families as well as of the local community and society at large”.

What is Corporate Social Responsibility ?


The term is often used interchangeably for other terms such as Corporate Citizenship and is also
linked to the concept of Triple Bottom Line Reporting (TBL), which is used as a framework for
measuring an organization‘s performance against economic, social and environmental
parameters. The rationale for CSR has been articulated in a number of ways. In essence it is
about building sustainable businesses, which need healthy economies, markets and
communities.4

Asia Pacific perspective


Corporate social responsibility is represented by the contributions undertaken by companies to
society through its core business activities, its social investment and philanthropy programmed
and its engagement in public policy. In recent years CSR has become a fundamental business
practice and has gained much attention from chief executives, chairmen, boards of directors and
executive management teams of larger international companies.
They understand that a strong CSR program is an essential element in achieving good business
practices and effective leadership. Companies have determined that their impact on the
economic, social and environmental landscape directly affects their relationships with
stakeholders, in particular investors, employees, customers, business partners, governments and
communities.5

3
Ahuja, Ram. 2001. Research Methods. New Delhi: Rawat Publications: 155-184.
4
Been, S. and Dianne Bolton. 2011. Key Concepts in Corporate Social Responsibility. New Delhi: Sage
Publications Ltd:
5
http://www.bsr.org/en/bsr-conference/session-summaries/2011/

6
PROFITABILITY VS. WELFARE 2019
The Asia Pacific context is distinct. On the one hand, there are long-standing traditions of respect
for family and social networks, and high value placed on relationships, social stability and
education. Diverse religions and cultures also bring distinct attitudes towards community social
behavior and engagement as well as support and philanthropic contributions.

World Economic Forum & CSR


The World Economic Forum has recognized the importance of corporate social responsibility by
establishing the Global Corporate Citizenship Initiative. The Initiative hopes to increase
businesses' engagement in and support for corporate social responsibility as a business strategy
with long-term benefits both for the companies themselves as well as society in general. At the
Forum's Annual Meeting 2002, the Initiative launched a joint CEO statement, Global Corporate
Citizenship: The Leadership Challenges for CEOs and Boards. This joint statement recommends
a framework for action that business executives can use to develop a strategy for managing their
company's impact on society and its relationships with stakeholders.6

Advantages of corporate social responsibility

 Japanese companies often have 100 year business plans. If you are planning to be around in
business for the long-run then making sure ALL your stakeholders are looked after is wise. If
you mess the environment up people notice. If you mess people around people remember. If
you mistreat people they never forget. And yet when you care for the environment you are
awarded. When you care for people you are awarded. You are rarely forgotten when you
genuinely care. A business enterprise is no different to a human - people will have feelings
about it and that impacts business positively or negatively.
 Many companies say they care and yet they may not take the actions of caring. Going beyond
what is expected becomes exemplar and noted. An enterprise' actions are notes the most by
its employees and staff. The business team that runs an organization knows what is going on.
They know all the high and low points of a company. These exact same people interact each
and every day with the businesses customers. How they feel about the company they work
for impacts the bottom line of a company directly. A sales person who loves his work and the

6
http://corpgov.net/stakeholders/

7
PROFITABILITY VS. WELFARE 2019
company will sell more. The receptionist who cares for her company will care for its
customers making them feel better and of course they are then more likely to return.
 Many businesses make a loss the very first time a customer shops with them. This is an
amazing little known fact outside of the business world. It may cost thousands of dollars for
some companies to gain new customers because of long lead times or expensive advertising
campaigns. If they only sell to a customer once then they don't ever recover their investment
in acquiring that new customer or make a profit. Customers these days are spoilt for choice.
Many customers choose a business on how they feel about the company of the people in the
company. Most purchasing decisions are subjective. Adding subjective and hard to measure
components to a business such as solid CSR programmes add to the perceived value added
benefit a customer received when they shop with the company.
 2008's Good purpose global study of consumer thinking showed that almost seven out of 10
(68%) consumers say they would remain loyal to a brand during an economic downturn if it
supports a good cause.7 Surprising. And logic-defying!
 That same very recent study highlighted some other interesting things too. Like this: half
(52%) of global consumers are more likely to tell others about a brand that supports a good
cause over one that does not, with 54% saying they would help a brand promote a product if
there was a good cause behind it. And going even further…Around the world, consumers
have voiced a strong desire for business marketers to link their brands to social action. Forty-
two percent say that if two products are identical in price and quality then the one that has the
commitment to a social purpose trumps key factors like design, innovation and brand loyalty
when selecting one brand over the other. Stunning isn't it?
 The citizen brand emerges. And this comment from this key report just says it all: It means
that putting meaning into marketing is more important than ever. One of the reporters puts it
this way: "These findings present brands with an opportunity to engage in 'mutual social
responsibility'-brands and consumers working together to effect positive social change for
mutual benefit -and to realize a 'return on involvement,' a new metric that looks at
participation and involvement as true builders of brand loyalty.

7
http://www.weforum.org/

8
PROFITABILITY VS. WELFARE 2019

EFFECT AND IMPACT OF CORPORATE SOCIAL RESPONSIBILITY:

Social responsibility is an ethical ideology or theory that an entity, be it an organization or


individual, has an obligation to act to benefit society at large. Social responsibility is a duty every
individual or organization has to perform so as to maintain a balance between the economy and
the ecosystem. There is always a trade-off between economic development, in the material sense,
and the welfare of the society and environment. Social responsibility means sustaining the
equilibrium between the two8. It pertains not only to business organizations but also to everyone
who‘s any action impacts the environment. This responsibility can be passive, by avoiding
engaging in socially harmful acts, or active, by performing activities that directly advance social
goals.
Businesses can use ethical decision making to secure their businesses by making decisions that
allow for government agencies to minimize their involvement with the corporation. (Kaliski,
2001) For instance if a company is proactive and follows the United States Environmental
Protection Agency (EPA) guidelines for emissions on dangerous pollutants and even goes an
extra step to get involved in the community and address those concerns that the public might
have; they would be less likely to have the EPA investigate them for environmental concerns.
―A significant element of current thinking about privacy, however, stresses "self-regulation"
rather than market or government mechanisms for protecting personal information‖ (Swire ,
1997) Most rules and regulations are formed due to public outcry, if there is not outcry there
often will be limited regulation. Critics argue that Corporate social responsibility (CSR) distracts
from the fundamental economic role of businesses; others argue that it is nothing more than
superficial window-dressing; others 5 argue that it is an attempt to pre-empt the role of
governments as a watchdog over powerful multinational corporations though there is no
systematic evidence to support these criticisms.9 A significant number of studies have shown no
negative influence on shareholder results from CSR but rather, a slightly positive correlation
with improved shareholder returns.

8
Kottler, Philip and Nancy Lee. 2005. Corporate Social Responsibility: Doing the Most Good for Your Company
and Your Cause. New Delhi: Wiley India Pvt. Ltd.
9
http://www.weforum.org/reports

9
PROFITABILITY VS. WELFARE 2019
DIMENSIONS OF CSR:
Dimensions of CSR are generally divided in two parts i.e; Internal Dimension and second is
External Dimension are as follows:
.
INTERNAL DIMENSION:
This relates to practices internal to the company which need to be modified to incorporate CSR
practices.
A. Human Resource Management
CSR can be successfully implemented in an organization through precise management of its own
work force. The internal dimension of CSR includes elements like providing an environment for
lifelong learning for employees, employee empowerment, better information flow, improving the
balance between work, family, and leisure, diversified work force, profit sharing and share
ownership schemes, concern for employability as well as job security among others. Active
follow up and management of employees who are off work due to disabilities or injuries have
also been shown to result in cost savings for the companies. Molding of recruitment policies to
include people from ethnic minorities, older workers, women and the long-term unemployed
would be a significant step forward to incorporating CSR practices in Human Resources
Management.

B. Work safety and health measures


Worker safety and labor health have been documented to be having a direct impact on
productivity of the labor force. Although legal measures exist in most nations on maintaining
standards for ensuring worker safety and providing health benefits, recent trends have made it
imperative for companies to adopt a proactive approach to this issue. In emerging markets
having significant cost advantages in labor, outsourcing of labor and processes have led to the
situation where companies not only need to maintain high safety levels in their own premises but
also ensure that their suppliers and other connected parties comply with these principles.

C. Adaptation to change
A recent trend in the global business scenario has been the wide spread use of mergers and

10
PROFITABILITY VS. WELFARE 2019
acquisitions for business expansion. Also downsizing has been used, often ineffectively, as a cost
cutting measure by firms in their relentless push for profits. In practice the process is often as
important as the substance to the success of restructuring. In particular this involves seeking the
participation and involvement of those affected through open information and consultation.

D. Management of environmental impacts


The importance of this aspect of CSR cannot be overemphasized. Optimization of resource
utilization and reducing environmentally damaging effluents can reduce the environmental
impact. This will also enable the firms to affect significant cost savings in energy bills and
pollution costs. Many firms in emerging markets have had to face serious repercussions from the
state and society for over exploitation of natural resources and disregard for environmental safety
measures.

EXTERNAL DIMENSION:
This dimension relates to practices concerning external stakeholders. The significance of this
dimension of CSR has come to the forefront with the advent of globalization leading to the
development of international standards for business practices.10

A. Local communities
The development of positive relations with the local community and thereby the accumulation of
social capital is particularly relevant for non-local companies. These relations are being
increasingly used by multinational companies to support the integration of their subsidiaries into
various markets in which they are present. Deep understanding of the local community and
social customs is an asset which can be utilized by the companies to gain strategic advantage. In
emerging markets, this is more relevant than ever because of the availability of cheaper labor
from the local communities. Companies would find it in their interest to substitute capital
substitution with labor and reap the cost benefits.

10 http://svn.org/get-inspired/svn-news-program
11
PROFITABILITY VS. WELFARE 2019
B. Business partners
Building long term relationships of sound ethical foundation with suppliers, customers (and even
competitors in rare occasions) will enable companies to meet customer expectations better while
reducing complexity and costs. Companies should realize their CSR practices will be judged
taking into account the practices of their partners and suppliers throughout the supply chain. The
effect of corporate social responsibility activities will not remain limited to the company itself,
but will also touch upon their economic partners.
Companies in emerging markets actually take on additional CSR responsibilities because of the
existence of outsourcing opportunities in the form of suppliers and outsourcing agents. Also as
part of their social responsibility companies are expected to provide high quality products and
services, which meet customer expectations in a manner reflecting the company‘s concern for the
environment and the local conditions. Thus in emerging markets, consumer based business
strategies would enable companies to build long lasting relationships with consumers based on
trust.

C. Human rights
According to Robbins (2000), ―Companies operating in countries where human rights are
regularly violated may experience a climate of civil instability and corruption that makes for
uneasy relations with government officials, employees, local communities and shareholders.‖
Amnesty International states:‖ Companies have a direct responsibility to ensure the protection of
human rights in their own operations. They also have a responsibility to use their influence to
mitigate the violation of human rights by governments, the forces of law and order or opposition
groups in the countries in which they operate.11

11
www.wbcsd.org

12
PROFITABILITY VS. WELFARE 2019

Trends in Corporate Social Responsibility :

Thinking globally’ to ‘Thinking locally”

The last decade has seen a mad rush amongst multinational companies to gain first mover
advantages in emerging markets by establishing operations and subsidiaries. However most of
the firms have found out to their cost that local competition was not as easy to overcome as they
had thought with matters made being worse by cutthroat competition amongst the multinationals
themselves.12 Most multinationals are beginning to realise that loss making operations cannot be
continued year after year under the pretext of investment for future expectation of profits. It is
high time that the local subsidiaries start to deliver profits of their rather than continuing to act as
sinks of the firm’s global resources.

 Return on Investment (ROI): More businesses are recognizing the benefits of CSR, from cost
savings on energy and materials to direct benefits like enhanced reputation among customers
and clients and indirect benefits like employee satisfaction. Most importantly, CSR programs
provide rewards—and increased monetary value—through the creation of products and
services that support sustainability.
 Increasing Rewards for Communities and Workers: Companies are working to mitigate their
impacts on community resources such as water through conservation and by promoting
sustainable development that benefits communities and employees.
 New Media and the Fight for Customers’ Mindshare: Through CEO blogs, YouTube videos
and other new media tools, smart companies are arming customers with more information
about CSR efforts.
 New Opportunities in Environmental Markets: Beyond reducing their climate impact through
decreased carbon emissions, advanced companies are working to monetize and develop
markets for environmental services like water, nutrients and biodiversity.
EX: Yahoo! Launches New Business & Human Rights Initiative

12
http://svn.org/get-inspired/svn-news-program

13
PROFITABILITY VS. WELFARE 2019

Potential benefits of implementing a CSR approach13:

Key potential benefits for firms implementing CSR include: Better anticipation and management
of an ever-expanding spectrum of risk. Effectively managing social, environmental, legal,
economic and other risks in an increasingly complex market environment, with greater oversight
and stakeholder scrutiny of corporate activities, can improve the security of supply and overall
market stability. Considering the interests of parties concerned about a firm's impact is one way
of anticipating and managing risk.

Improved reputation management. Organizations that perform well with regard to CSR can build
reputation, while those that perform poorly can damage brand and company value when exposed.
This is particularly important for organizations with high-value retail brands, which are often the
focus of media, activist and consumer pressure. Reputation, or brand equity, is founded on values
such as trust, credibility, reliability, quality and consistency. Even for companies that do not have
direct retail exposure through brands, their reputation as a supply chain partner -- both good and
bad -- for addressing CSR issues can make the difference between a business opportunity
positively realized and an uphill climb to respectability.

Enhanced ability to recruit, develop and retain staff. This can be the direct result of pride in the
company's products and practices, or of introducing improved human resources practices, such
as “family-friendly” policies. It can also be the indirect result of programs and activities that
improve employee morale and loyalty. Employees become champions of a company for which
they are proud to work.

13
Kottler, Philip and Nancy Lee. 2005. Corporate Social Responsibility: Doing the Most Good for Your Company
and Your Cause. New Delhi: Wiley India Pvt.

14
PROFITABILITY VS. WELFARE 2019

Conclusion:
Corporate Social Responsibility is not a fad or a passing trend, it is a business imperative that
many Indian companies are either beginning to think about or are engaging with in one way or
another. While some of these initiatives may be labeled as corporate citizenship by some
organizations, there basic message and purpose is the same. A successfully implemented CSR
strategy calls for aligning these initiatives with business objectives and corporate values thereby
integrating corporate responsibility across the business functions and enhancing business
reputation. The challenge for us is to apply fundamental business principles to make CSR
sharper, smarter, and focused on what really matters.

This can be done by:

• Focusing on priorities
• Allocating finance for treating CSR as an investment from which returns are expected
• Optimising available resources by ensuring that efforts are not duplicated and existing
services are strengthened and supplemented
• Monitoring activities and liaising closely with implementation partners such as NGOs to
ensure that initiatives really deliver the desired outcomes
• Reporting performance in an open and transparent way so that all can celebrate progress
and identify areas for further action.
A long term perspective by organizations, which encom-passes their commitment to both
internal and external stakeholders will be critical to the success of CSR and the ability of
companies to deliver on the goals of their CSR strategy. Wealth has to be created before it can be
distributed. The responsibility to create wealth is of business. And responsibilities and rights
must go together. Hence, the society cannot disarm business of its rights which are essential for
creating value.

15
PROFITABILITY VS. WELFARE 2019

BIBLIOGRAPHY

 http://en.wikipedia.org/wiki/Corporate_social_responsibility
 http://www.csreurope.org/pages/en/activities.html
 Ahuja, Ram. 2001. Research Methods. New Delhi: Rawat Publications: 155-184.
 Been, S. and Dianne Bolton. 2011. Key Concepts in Corporate Social Responsibility.
New Delhi: Sage Publications Ltd:
 http://www.bsr.org/en/bsr-conference/session-summaries
 http://corpgov.net/stakeholders/
 http://www.weforum.org/
 Kottler, Philip and Nancy Lee. 2005. Corporate Social Responsibility: Doing the Most
Good for Your Company and Your Cause. New Delhi: Wiley India Pvt. Ltd.
 http://www.weforum.org/reports
 http://svn.org/get-inspired/svn-news-program
 www.wbcsd.org
 http://svn.org/get-inspired/svn-news-program
 Kottler, Philip and Nancy Lee. 2005. Corporate Social Responsibility: Doing the Most
Good for Your Company and Your Cause. New Delhi: Wiley India Pvt.

16

Potrebbero piacerti anche