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ABSTRACT
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that this project is all my own work and does not contain any
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ACKNOWLEDGEMENTS
different roles in affecting the completion of the project and I would like to take
grateful to all of those researchers, whose works have been cited in this project
and whose insights have directly or indirectly inspired me to initiate this project.
grateful for the, all out, support provided by her, during the course of my project.
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CSR in Developing Countries 5
Table of Contents
List of Tables
List of Figures
1.2 1960s
1.3 1970s
1.4 1980s
1.5 1990s
6 Trends in CSR
7 Growth of CSR
8 Importance of CSR
11.1.1 HRM
12.2 Sustainability
12.4 Accountability
12.5 Sustainability
20 Findings
Bibliography
Appendices
CSR in Developing Countries 8
List of Tables
List of Figures
Corporate Social Responsibility (CSR) the term might seem to be a recent phenomenon
but a short literature review suggests that this term has evolved over few decades in the
corporate world. The term through the same throughout, has evolved but in meaning from
standing for charitable works by companies to taking responsibility of all its actions and
incorporating CSR in the main business model. Globalization and free flow of
information has ensured that CSR is influenced by global trends and international law. 1
It is believed that CSR was invented by a debate between AA Berle and E Merrick Dodd
over the role of managers. In 1953, CSR was conceptualized as a social obligation - the
obligation ‘to pursue those policies, to make those decisions, or to follow those lines of
action which are desirable in terms of the objectives and values of our society’. Peter
Drucker wrote a book ‘The Practice of Management’ where he described in detail CSR as
1.2 1960s 1
There were a significant group of people who have actively written and described CSR
and its features like Fredrick, Clarence C Walton, and Keith Davis et. al. This decade was
a conscious effort to formalize and document all what CSR stood for in the corporate
world. It was still believed that CSR is only giving back to the society in return of the
gain which corporate make out of offering its products for a profit.
1.3 1970s 1
This was an era of debates and controversies, a big one created by Milton Friedman’s
Minimalist view of corporate responsibility. He had a view that role of businesses is only
CSR in Developing Countries 12
to abide by the law of the land and engage in only profitable activities pertaining only to
its line of business. This decade saw fierce opposition of this view by public, few
2003, Wheeler and Haub described CSR being overlapping with jobs, products, economic
profitability and growth, which is related to societal expectations and to activities aimed
1.4 1980s 1
By this decade the view of the corporate world started to become wider and wider and
they accommodated more liberal views and meanings of what should CSR constitute.
Alternative terms such as stake holder CSR, corporate social responsiveness and CSP
(corporate social performance) came into picture. More focus was given on sustainable
1.5 1990s 1
By this decade enough research was done on CSR and related terms, and hence this was
an era to build upon what existed and put them into practice. Business ethics, corporate
citizenship and CSR thinking took roots right in the deepest corners of the organization
and a top down implementation was taking place to ensure the company was up to the
mark when it came to its CSR. As described by Thomas G. in his working paper,
3) The positive duty view – self motivated businesses, trying to do good to the
Collapse of Enron, the James Hardie asbestos scandal in Australia and many others big
and small scandals brought CSR in a never before limelight. Corporate and private
enterprises are now no more seen as organizations run by a group of individuals, but are
public good as much as any other citizen. People expect them to take the ownership of all
the good, bad and ugly things happening by them and through their organization.
immense power to corporate world and CSR is one way to ensure that the companies not
only give back to society as a philanthropic act, but also as a duty with well defined
The world is becoming more and more integrated and the flow of information is seamless
from companies, to the stake holders to general public. Availability of data is regarding
activities of companies, legislations and governing rules is relatively easy and wide
Technologies). This has led to emergence of new types of CSR, with companies
In depth work was created to put CSR into perspective with the purpose, impact and the
benefits of philanthropic CSR, risk management CSR and value creation CSR. the same
1) Values – of doing good to the society, nature and the environment in general
2) Strategy – of being more responsible towards the society and the environment and
society and environment and more so urging them to do the right things.
Throughout history CSR has been a focus of discussion among public, government and
only TNC (Trans National Corporations). Recently a gradual shift has been observed in
CSR in Developing Countries 15
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’’. (World Business
‘‘ Being socially responsible means not only fulfilling social expectations, but also going
beyond compliance and investing more into human capital, the environment and relation
Hence CSR is best looked not from just a social perspective or a business perspective. It
needs a holistic approach and is much more than just social service by corporate. It
effects the corporate, the profits, the business processes, the business ideology, the
society, people at large and all stake holders including the environment.
This section is an attempt to put CSR into a definitive structure as per the current
meaning of CSR. As we have seen how the meaning and implication of CSR has changed
over last few decades it is important to keep the structure flexible and keep updating it by
including and excluding factors as per the existing demand of business and society.
CSR in Developing Countries 16
Table 1 describes how CSR is changing from having a legal and binding form to a broad
range stakeholder involvement model. From business perspective it is changing from pain
The question to ask is who are the stake holders in CSR and its implementation. Few
decades ago CSR was only a legal binding with traditional stake holders like government,
statutory organizations and legal bodies having regulatory powers. But this changed to
involving the customers and the business partners as the stake holders in CSR and
eventually what we see today is the more evolved form of CSR including almost
never ending debate if business are meant only for profit and practicality of life, or does it
owe anything to the society. But today things seen from the eye glass of CSR shows that
CSR in Developing Countries 17
principles, values and social responsibility can go hand in hand with profitability and
business acumen.
Pain alleviation is used by organizations when they are under compulsion and pressure by
the virtue of legal binding, public pressure or peer pressure. this is because the corporate
is worried about its reputation and brand image under which it abides by the CSR. But if
CSR looked deeper can lead to cost benefit. To quote a small example, More and more
organizations, both SME and large organizations are taking part in ethical trading
ensuring that the poor farmers who produce the raw materials get the required
remuneration for their labor and hard work. The Sainsbury’s group is one of UKs largest
retail chain who has taken part in the Ethical Trading Initiative (ETI) which covers the
code and conduct of international labor market. Many of the retailers withdrew from this
initiative bearing in mind the legal risk, but Sainsbury stuck to its word and came out
with flying colors. It works closely with Oxfam (UK) the most significant Non
governmental organization in ETI. 7 Hence this has lead to improvement not only in
brand image but also lead to decrease in cost as more producers are willing to do business
with Sainsbury’s for the reason of trust and belief. And eventually CSR can become a
part of the core strategy of business. Indira Noyee, CEO of Pepsi Co. mentioned in one of
her interview to NDTV ltd., India that Pepsi co. wants to eventually become a health food
company. company is constantly devising product range which has health benefits or at
least it does not have any side effects, and hence you can see how CSR can eventually
become the strategy for growth which people will embrace with both hands as eventually
Sustainability ltd. carried out a comprehensive research on how CSR is benefiting SMEs
profitability and incorporation of CSR in business strategy. however it states that the
profit is not in short term, and there might be significant investments to be made but
Hence the three ways, in which organizations engage in business case, namely pain
alleviation, cost benefit and strategic benefit the business in long run. But to achieve this
the level of engagement needs to broaden by the corporate and hence the next point of
discussion
Any organization works in CSR by engaging with the local authorities, government and
legal bodies at their level. It then engages to decrease the negativity of the society and
managing the risk of reputation and finally engages in a positive manner to create value
for the society through innovation, investment and overall environmental good.
Why are companies always behind more and more growth, why is it always behind
mastering best practices, huge profits and no. 1 position in market? The answer possibly
lies in expectations of people. At one side the social angle of CSR where people expect
companies to give back to the society, but at the other end they want companies to do
well on stock markets, have an impeccable balance sheet and make huge profits. Hence a
change has to come everywhere if CSR were to be implemented for overall good of the
society. Especially in case of SME, monopoly is rate, competition is driven by price and
hence CSR is sidelined and no body wants to sacrifice its cost structure in order to do
some good to society. Widening degrees of influence is all about how market influence
CSR decision and how markets can be remold to understand that less profitability with
worthwhile CSR ventures is better than doing nothing with huge profits sitting on the
balance sheet. And finally this has to evolve to a stage where the policy can be influenced
so that there no SME company in a conflict of better profitability and price war or of
Simon Zadek has beautifully described the development of CSR in three distinct stages
First generation CSR says the organizations can be responsible along with being
commercially focused. This is the most simple form of CSR which became highly
donated huge sum of money to NGOs for good causes. This directly does not affect the
CSR in Developing Countries 20
business, but adds the reputation and improve the perception of the co. and the brand in a
positive manner in eyes of all the stakeholders. People also term this as reputation
overshadowed by donating money and getting media attention more than the harm done
This has now developed where companies incorporate CSR in the core strategy for long
term and take lead without any pressure form government or public. There are
innumerable examples listed in the business case study to prove that this strategy works
well for small, medium as well as large organizations alike. CEOs are seen as the torch
bearers of such strategies and are often called ‘Citizen CEOs’, a coin termed by
Elkington. 11
Third type of CSR is what is needed really in today’s globalized and interconnected
world, a global village in true sense. Still there are parts of civil society untouched by the
benefits of the products and services the companies have to offer, or the philanthropic
deeds done by them for societies benefit. CSR needs to be integrated in the network in
such a way that it reaches the most unfortunate parts of the society, who need help the
most in education, health, sanitation and basic amenities of water, food and electricity.
Sustainability will play a major role and only those organizations which are sustainable in
All three phases of CSR can be described by use of a diagram, which shows how third
Dave Stangis, Vice president for CSR for Campbell’s spoke about 9 points which
companies can use to start their march towards third generation CSR. Unlike past
generations mentioned above which can be summed up in words like philanthropy and
leadership”
Campbell’s has taken CSR to a new level by even engaging its media and marketing
partners and ad agencies with its mission and vision with CSR strategy. 12
CSR in Developing Countries 22
Of the innumerable articles and books written on CSR the words of Milton Friedman
holds true even today that ‘the social responsibility of business is to generate profits’.
Those words made such big impact that it was the headline of New York Times in 1970.
13
. he went to clarify himself by writing ‘I have said that there is one and only one social
increase its profits, so long as it stays within the rule of the game, which is to say,
On 16th May 2001, an article appeared in Financial Times London, about how CSR is
holding back companies and hindering growth14. This article was based on a pamphlet by
David Anderson, the then Chief economist of OECD which said that CSR is conducted
mainly by activists, most of them who are critics of free market economy, growth and
multi national companies. Eventually this leads to the birth of neo – corporatism and
leads to companies making highly debatable environmental and political judgments. The
CSR in Developing Countries 23
end result is the corporate, the government and few NGO or activists groups promoting
CSR becomes so powerful that their cartel itself becomes a power centre and threatens
everything which ought to be the right way. Wolf concluded the article by saying ‘‘the
role of well run companies is to make profits, not save the planet. Let them not make the
An immediate response came from many individuals, groups and corporate, pro CSR,
about the misguiding nature of the article. One notable argument against Wolf’s article
came from Michael Hopkins, mhc international ltd. who stated that Wolf did not define
CSR at the first place; one school of thought is treating the stake holders ethically. Stake
organizations and customers. Wolf implied that CSR leads to decrease in profits, but
Hopkins argues that profits at what cost? Needs to be looked into deeper. Wolf stated
about triple bottom line, one that comprises of profits, environment and society and said
that this is against the free market economy which considers only profit. But there are
many examples stated by Hopkins about how a company can maintain a balance between
CSR leads to increase in costs. True, but the supporters claim that the long term benefit to
the society, environment and everybody eventually outweighs the cost. Not only the
internal and external stake holders, but the company itself benefits by way of better
reputation, loyal customers and better brand image leading to more business.
Keeping aside the argument of the 1970s, the rules of CSR are very dynamic and subject
to change all the time. It is a process, which is evolving towards perfection, but what is
CSR in Developing Countries 24
perfect no body knows. Hence follow the best practice available and make the most of
CSR is what experts suggest. It not only the external stakeholders like the
environmentalist and poor countries who are evaluating company through the watch glass
of CSR but the investors and employees are not behind. As the competition increase,
talent pool becomes limited as compared to the demand for skilled labor; employees are
ever choosier to see if the company values fit their own values. A reputed bank analyzed
the clicks of their website and found that around 75% of its applicants who visited careers
section, never failed to visit the CSR page and see what the ideology of the bank is when
it comes to being socially responsible. Investors are slowly changing their attitude
towards core profitability and slowly accepting companies with moderate profits but
The criticism for CSR actually helps to prevent two major side effects of CSR:
Imposing stringent standards which hinders value creation role of corporate and
eventually lead to job loss, under investment and lack of services which widens
Huge amount of criticism, pressure for change away from human rights violation,
improving things
To avoid these flaws to over power the benefits of CSR the business accountability
process need to be
Based on legitimate and reasonable rules and legislation and the decision making
economical areas.
Flexible enough to allow business to create better value along with following CSR
Milton Friedman was right about mentioning to stick to the rules of the game, which is
‘profit’ for corporate, but he wouldn’t have imagined that the rules will evolve so quickly
including such a vast range of issues which the corporate world is expected to address.
There are many researches which indicate that doing CSR motivates staff, improves
6 Trends in CSR
it is easy to find out first generation CSR deployed by companies and individuals alike,
with little efforts you can find handful of companies involved in second generation CSR,
but it is difficult to find a true example of third generation CSR. Especially in developed
economies, the SME segment is wary of CSR as it is, and prefers to stick to first
generation CSR at best. A study shows 95% of the companies are following first
generation CSR, with only 5% involved in second generation CSR. This 5% is a ray of
CSR in Developing Countries 26
hope that market is changing its attitude towards CSR to move in the right direction.
7 Growth of CSR
CSR in Developing Countries 27
Only by browsing the web for a mere hour will make one realize that CSR is not just one
topic of discussion or a department with few people working in it, but it’s a full fledged
mainstream strategic work involving attention of the top management of both big and
small organizations. BiTC Omnibus survey on CSR attitudes proved that CSR is not a
passing activity or just a fad of the philanthropic and activist world. CSR has gradually
now shift from ‘nice thing to do’ to ‘good thing to do’ to ‘you should do’ till ‘we need to
do’. Third generation CSR will see through this and lead us to a ‘will do’ attitude. 15
8 Importance of CSR
Increase in number of companies reporting global environment reports and CSR activities
and including them in the AGM and balance sheet. Over half of world largest companies
Increase in number of people who are interested in what the corporate are taking from the
environment and society and what are they getting back in return in terms of value.
Health and safety, equal opportunities, environment, bribery, racism, sexual assault at
work place, glass ceiling effect, child labor, corruption are few issues cited by every two
Public pressure for CSR is increasing by day and companies are forced to take action as
soon as possible, sometimes even when not possible. Like in the recent case of British
petroleum that was held responsible for oil spill which took the natural balance of the
Gulf of Mexico and many nearby areas went for a toss. 17 to 39 million gallons of crude
oil was spilled, around 150 endangered species of sea turtles are feared extinct, entire east
coast was damaged even effecting the west coast of Florida and a large number of people
living in that area are now see the ill effects of the oil spill on their health. 18 Had BP
CSR in Developing Countries 28
followed strict CSR involvement in its corporate strategy it would have thought through
the ill effects of such a disaster on the environment and possibly taken more steps to
prevent it? Estimated costs of clean up went up from $5 bn. To roughly $34 bn. When the
There is a reason why now the term ‘emerging markets’ and ‘developing countries’ is
used interchangeably, because developing countries are seeing a never before growth rate
and are developing at a far better pace than western developed world. ‘emerging markets’
was a term coined by IFC to describe those economies where international funds could
a world bank report defines developing countries as those with Gross National Income
(GNI) per capita of $9265 or less. They also classify economies as low income ($755 or
less GNI per capita), middle income ($756 - $9265 or less GNI per capita) and high
income ($9266 or more GNI per capita). The low and middle income countries are called
developing countries. 20
evolution of CSR in such economies is a topic of debate as there are contradictory views
and data available. Evaluation of 7 Asian economies was carried out (Indonesia, India,
Thailand, South Korea, Philippines, Malaysia and Singapore) and a conclusion was made
that CSR in these economies was still in very juvenile stage and that necessary
mechanism and procedures did not exists in corporate and governmental organizations
other than a mere charitable outlook. one of the reason stated in the research was the lack
of necessary legislations and appeal procedures for both general public, activist bodies
and corporate unlike the case with north America and Europe. Mean value for these
CSR in Developing Countries 29
seven economies came out to be just 41% penetration of CSR as compared to 98% in
developed nation like UK. however India stood at a mean score of 72% as compared to
one of the reason for low penetration, apart from lack of proper legislation is community
involvement only to the extent of philanthropic deeds by corporate, and the corporate
strategy to implement CSR only at an absolutely necessary basis rather than a voluntary
strategic basis. Unlike the EU and US, developing countries see CSR as a part of
corporate philanthropy and help government superficially to fund, let alone execute social
development strategies. Though there are exceptions in each economy which we shall
look in detail later, most of the organizations look at CSR as a small, trivial part of the
Moon (2002) presented a paper where he describes three methods of CSR reporting
‘socially responsible employee relation’. Thought these does not cover all aspects of CSR
like we saw in previous sections and is not exhaustive, it serves a good measuring scale
to see how developing countries fare against developed. In developing countries the
community involvement parameter is fully met in most of the organizations, but only at
the philanthropic level. Rest of the two parameters is internal to the company and are
often not incorporated in the strategy of the company or discussed with other
stakeholders. The end result of the study showed that developing countries through strong
on first method, lack vision and processes for CSR to achieve the second and third
Across the world CSR has been tried, tested, used and implemented by predominantly
large companies who are so big that they can afford to have a different section on CSR
working consciously on its growth and development. All eyes are always on what these
large corporations are doing and hence they are under constant threat of their reputation
and losing its market leadership. SME (Small and Medium Enterprises) are the ones
which can make a real difference to CSR development because of the number of them
present in developing countries and the business share which they have in developing
Small and Medium Enterprises (SME) are predominantly a large group of heterogeneous
organizations which are either privately owned or the stake holders have a limited
liability. Often they termed a SME based on their market capitalization or annual
handicraft, computer software, machining firms, agri business firms and even
construction companies. Some are completely family owned and not much change when
the management is taken over by the next generation, but few are dynamic growth
oriented organizations who prefer to hire professionals and move towards better
Definition of SME largely depends on the defining parameter, but it is important to note
that every large company we see today was at some point in time a SME. Not many
companies are directly born of the size of the national federal bank or proctor and
gamble. Every company has a modest start, like Vodafone was a little co. from racal,
CSR in Developing Countries 31
Microsoft started from a garage and Google was just an idea with a bunch of youngsters
who did it the way they wanted to. Face book, Hewlett Packard and even Volkswagen
has very humble beginnings and hence its worth to study the SME segment as this is
Latin America has 80% of its market dominated by SMEs and government has drastically
reduced red tape to ensure their growth. Except Argentina all other regions including the
flagship economy Brazil and Mexico increased in size due to SMEs. Colombia’s
Asia and Africa also has a significant portion of its economy driven by SMEs.
A step deeper into the status of SMEs in the developing world indicates that even today
these enterprises are serving small markets, with less productivity and poor quality.
technologically they are good but not as advanced as they can by with correct help from
the government and funding from market. Apart from financing, technological help is a
very big factor for development of SMEs which is evident from the proportion of funding
The government of the country cannot be entirely relied upon for creation of job and
providing the citizens with equal opportunities to work. Private sector bears the most
importance in such scenario and SMEs form a huge part of this private sector that create
jobs and support the economy. SMEs make up around 90 percent of business world wide
and about 50 percent of employment is due to SMEs 4. There is an array of data available
on SME contribution but the following points tries to summarize if not state each of them
in detail.
They act as the much needed building blocks to link government, public and other
catering to all people need. SMEs provide with vital services which big
SMEs are starting point for any large organization to take birth and it is only
SMEs deploy more labor and create more jobs than larger organizations. They are
not technologically so advanced and hence they need more labor than bigger
corporations.
SMEs are key for a developing country to get converted from agriculture
Income distribution is equitable when SMEs are operating and this avoids
They are highly flexible, innovation driven and changes can be made at a much
faster pace than larger organization due to which they are more adaptable and
customizable.
CSR is being implemented at a multiple stage in the SME segment via the government
involvement and self interest in general. There is a school of thought that the pressure
created by the unison of the above mentioned bodies creates an unfair pressure on SME
and that the net effect of this close monitoring will lead to a decrease in welfare of the
society. But on the other hand, we have examples of how CSR has provided SMEs with
greater market opportunities, reductions in costs and improving its marketability and
CSR in Developing Countries 34
profitability. It also leads to social benefits of education and health facilities where the
SME operates and takes care of the local community support it via labor and other
resources.
Hence it’s a debatable relationship of SME, CSR, government and society. It is very
important that all the bodies involved in driving CSR forward understand the implications
of the implementation of CSR and the pros and cons which we will see in the latter half
of the report. It is important the CSR be implemented not because of compulsion of the
model. Without the involvement of SME in the whole CSR approach, the developing
countries and the SMEs themselves will stand to lose more than what they might gain by
There are two dimensions of CSR when looked from a perspective of the beneficiaries of
CSR. Internal stakeholders, which include the employees, the company itself, all the
parties involved with that company in business, suppliers and the top management
11.1.1 HRM
This element includes employee relations, employee satisfaction, fair labor treatment, fair
payout rules, improving work and family balance for employees, diversified workforce,
profit sharing, equity stock options to be distributed fairly and fair recruitment policy. In
context of developing countries, this component of CSR is most important due to the
following factors
Lack of fast, effective and cheap judicial system due to which employees subject
dependent on its employees and hence care less about HRM CSR component
widespread as in western countries. Coco cola co. in India has not invested
heavily in vending machines, as it has done in EU, UK and USA because labor is
CSR in Developing Countries 36
cheap, people are not tech savvy and using that labor is cheaper for the company
coke and serves. Similarly in china an experiment was carried out to install
vending machines, but with a human inside to dispense a bottle of coke called the
This has a very important role to play as this might be a question for life and death for
vulnerable employees or people at risk. This factor has a direct impact on the productivity
of the work force and hence affecting the profitability. Most of the developing nations
have their policies in place for this factor, but companies need to be more proactive in
forming internal processes and policies for an emergency to ensure the health of the
employees are not put to risk in any instance. Companies like Unilever, Cipla
Pharmaceutical and Coco cola ensure that not only them, but the companies related to
them in the work environment also adhere to the strict standards of health and safety
parameters. Since this factor is so important even without considering CSR, most
Developing countries are a hot hub for mergers and acquisitions in corporate world. This
inevitably leads to job losses, or technological changes in the company due to which the
restructure in a socially responsible manner. TATA Steel, one of the top 10 business
CSR in Developing Countries 37
groups in India acquired Corus Steel in Europe in 2009 and was very careful in
downsizing the labor force for cost cutting and getting back the ailing co. in profit. 24
This is the most important and the oldest parameter of CSR which just cannot be ignored
or taken lightly. In today’s globalized world run by the single most powerful resource
called ‘oil’ it is of utmost important to think about the environment and global warming.
Companies must remain conscious of their impact, carbon footprint, on the globe by the
carbon emissions, reuse and recycle can reduce the environmental impact. Since
developing nations are the biggest source of carbon emissions in the world, it is better for
long term success of the country as a whole to take carbon emission levels seriously and
act on it. 25
government, local authorities, civil bodies and common public. This dimension had three
Developing countries is where more than half of the world’s populations reside, and
hence most of the multinational companies flock there in search for business. This leads
to a lot of foreign origin companies being established in those nations and the need for
keeping positive relation with local community, local authority and the state and national
government arises. TNCs cannot afford to exploit the resources of the nation, sell them
their products and eventually siphon off the profits away from them. They will need to
have a deeper understanding of the local community, the local flora and fauna and help to
maintain the balance. Many TNCs have setup large manufacturing plants in rural areas of
developing nations as they provide with cheap labor and hence cost efficient
manufacturing. Whirl pool, a TNC in manufacturing of white goods saw that it was
CSR in Developing Countries 39
unable to sell its fully automatic machines in developing countries and hence it had to
actually buy the obsolete technology which had disappeared from western world from
They are the most important parameter from business perspective, but it surprising to
know that even looking from the CSR point of view, it happens to be an important factor
in external stake holders. Smaller companies who work with large TNCs would like to
see the large company following CSR guidelines of the country and not exploiting the
resources in their country. It is important to develop and manage healthy relations with
business partners, local and international for long term growth. And since there are
smaller companies who dedicatedly supply only to one big organization, will definitely
be touched by the CSR practices which the large organization follows. This leads to a
trickle down effect in the whole supply chain and leads to an overall positive outlook for
This is by far the most debatable issue in many different subjects of study and can be
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,
that corporate have a direct responsibility to protect human rights and obligation to report any
violations. They are urged to use their influence on govt., local bodies and general public to
eradicate any differences and human rights violations if any as far as possible. The caux
round table conference stated that companies have responsibility to respect human rights and
CSR in Developing Countries 40
civil liberties and respect the democratic nature of institution and promote it wherever they
can.
In developing countries, TNCs are developing large infrastructure projects for betterment of
that nation. But this leads to relocation of thousands of poor people, which needs to be
handled with sensitivity. Firm needs to build confidence in the local community of the
positive effects of the project and that their human right of land shall not be compromised.
Companies must ensure that instances of forced labor, child labor or not providing with basic
facilities to workers in their factories do not occur in their company. there are cases where
nike, Addidas, Puma, Reebok etc were found to be involved in forced labor, paying minimal
wages and exploiting the labor class in Indonesia, China and India among other countries
which had a strong negative impact on the image and a long term dent in their top and bottom
line. In 1984 Nike closed its last running factory for manufacturing shoes in USA which lead
to loss of approx 65000 jobs in USA. In turn they did create employment in other developing
countries but at the cost of exploiting them. Most shoe manufacturing labor workers are
young, unmarried girls in Asian sub continent who are paid as low as $2.50 a day in
Indonesia. Minimum wage to service in Indonesia is around $4 to $4.5 a day, and even then
Nike is ignoring this statistic. More than 60% of labor of Nike lives in quarters provided by
Nike. They are one storey barrack like buildings, dark, less ventilation and very poor
sanitation facilities. Total of 350000 people work for Nike in Asia and there is nothing much
nike has done for its welfare as compared to what it can give the scale and profits of the
company. Nike spends roughly $250 - $280 Million dollars a year on athletic sponsorships
and media marketing, which suggest that nike can, if they want, plunge into third generation
CSR to give back to the society. 27. there are reports of Gulags or prison labor camps in
many regions of china where they produce products for not wages and those products are
CSR in Developing Countries 41
big corporations are abusing the power of the local ruling people for its own good.
There is an increased in number of people and organizations fighting for the newly
discovered consciousness of the quality and ethicalness of the product any company has
to offer, let alone the way it treats its employee, society or environment. They include
genetically modified food, AIDS drug testing, animal right, cigarettes and government
policy on it, junk food and its effect on population etc. these issues are difficult to solve
because they are ingrained in the core of the business for many organizations. Few
companies are working on this and have realized the fact that first and second generation
CSR will not help here and a more holistic view of the product they deal with has to be
taken.
Cadbury in India was under tremendous fire when one of its factory vessels full of
chocolate was found with worms in it. There was an immediate debate between FDA
(Food and Drug Administration) and a fact find mission by Govt. of state. Cadbury’s
tried to blame it on the storage by the retailers and stockiest, but immediate reaction was
that the packaging was so weak for it to be infiltrated by worms. It was a serious breach
of health and safety policy laid by government of India and so drastic was the retaliation
by public and civil bodies that Cadbury had to redesign it poly flow packaging to
reinstate trust in its products. There was a drop of 30% in sales in that quarter for
Cadbury’s which was so acute an impact on the bottom line and the image of Cadbury’s
CSR in Developing Countries 42
that it launched a special media campaign within three months of the instance on national
television saying that their products are top in quality and have been serving Indian
markets for decades now. Bharat Puri, managing director, Cadbury's India said, "While
we're talking about a few bars of the 30 million we sell every month - we believe that to
it calls for substantial investment and change, one must not let the consumers confidence
erodes." Whether this was proactive CSR or reactive CSR by Cadbury’s is best left to the
experts, but this shows that CSR if not a core part of the business strategy can make or
break you in matter of months, as in this small instance which risked taking the whole
Brazil is known for its ‘Brazilian blowout’, a keratin hair straightening process which
leaves you hair ever beautiful, straight and shiny. Keratin is a protein, and since hairs are
made of protein, the authors of the article ‘Brazilian blowout gone bad and other
chemical misdemeanors’ thought it would be safe to do this treatment. Within weeks the
shine had long gone and customers suffered severe problems with their hair, nose, throat
and eyes. Their research took them to discovering that actually the product used on their
hair was not only keratin but many chemicals were included in it, the most harmful being
formaldehyde. It was stressed that only ’11 out of the 10500 ingredients used in the
cosmetic industry in brazil are determined by the FDA to be fit to use in cosmetics. Skin
is porous and hence the nicotine patch works by absorbing the nicotine and giving it to
the blood. Similarly if such cosmetic products are used on skin, it might get in to the
blood stream and cause cancer and many unidentifiable complications. Formaldehyde is a
known carcinogen and this was a clear case of lapse of CSR on the part of the
CSR in Developing Countries 43
manufacturing company and the company which was selling the service of Brazilian
blowout. 29
Why it is important that CSR be implemented across the globe with similar and
interconnected and every single product is made of raw materials sources from different
countries. Each country has its own laws, processes of manufacturing and processing and
packaging it. Hence there can be a case of a lapse not because of faulty product, but
because of a faulty part or ingredient. In June 2007, Foreign tire sales inc. recalled all
tires imported from china. The tyre had problem of tread separation which led to
accidents and jeopardized lives of thousands on road. Nations largest recall was made by
ford motor co. in the year 2000 as well with similar problems. In this instance Hangzhou
Zhongce Rubber Co., of Hangzhou, China was left unaffected due to no rules and
regulations of accountability or CSR in global transaction and that the co. is solely based
12.2 Sustainability
In the words of Sanjay Agarwal, a faculty at Indian Institute of Management (IIM-K), ‘In
these turbulent times, when almost all corporate entities are searching for sustainable
ways of doing business in globally connected societies, the book under review spells out
the how and what of social responsibilities of corporate entities operating in India’ while
talking about a recently published book. High level of use of non renewable sources, use
environment and hence endangering lives of thousands of species are few examples how
greed of large organizations is endangering their own existence at the end of the day. To
CSR in Developing Countries 44
ensure that business run for long term, and are profitable, they need to be made
sustainable at the first place. Management has to think long term, and in terms of worst
case scenario and then act accordingly to create a sustainable business environment.34
As per Rosser (2010) the full definition reads: ‘CSR is a company’s commitment to take
part in sustainable economic development in order to improve the quality of life and the
environment, benefiting the company itself, the local community and society in general.’
Hence the work the company is doing might be very good in all aspects, but if cannot be
sustained on long term basis, this business can be actually deemed as wasting resources
A very different approach is taken by China in this case where it believes that if proper
education is imparted to its citizens, sustainability will come naturally to an extent. Banks
are encouraged to educate people on financial stability and decision, as well as create a
micro lending initiative in rural areas. Agricultural firms are encouraged to train farmers
and their families how best to cultivate for maximum productivity. If people are educated
and trained properly by existing corporations to maximum extent possible, one the load
of government will drastically decrease and two will lead to a much more sustainable
industries, is among the worlds greenest and most sustainable economies. 43% of its
reasources used are coming from renewable sources of energy, and hence it safe to
assume that each corporate using resources to produce goods and service uses 43% of
clean energy while delivering it. The size of investments for sustainable energy rose to
$7.9 B in 2007, up from $0.5 Bn in 2005. The due credit goes to the government of brazil
CSR in Developing Countries 45
which has approved regulatory framework for water, sanitation, waste management,
Imagine if the corporate of brasil join hands with the government, can actually turn the
table for CSR management and sustainability question marks from everything. Brazil has
a carbon credit market operating since 2005 where many companies have entered brazil
arket with carbon credit certified projects like BRF Brasil Foods and NocaGerar, a JV
This is one of the most talked about topic at various forums, internet, internally in the
country as well as outside. Developing countries have seen unprecedented growth over
the last decade and their economies are thriving like never before. Businesses are
billions, management is becoming a key issues. Specially when the topic of CSR, which
is relatively new, less researched specially in developing countries and still under
To tackle this, china has taken this issues hands on by appointing executive level CSR
committee like all other corporate does in all other countries. But in addition to it, a mid
level CSR position is created at each office, each manufacturing unit and each
warehouse. This would be the key person who will be actually implementing things and
reporting to the top management on regular basis. For example if the company has
operations 4 cities in china, there will be four mid level managers to look after CSR
CSR in Developing Countries 46
initiatives and activities in their regions. This will ensure maximum accountability, easy
communication between top management and CSR manager and the general public.
china for planning, execution and monitoring all CSR initiatives. COCs will contain
employees at all levels and will try to involve local people in local projects. This will
help the employees to relate more to the needs of their own community hence delivering
better results. 36
12.4 Accountability
There have been many scams and many frauds throughout the world, directly or
affected by this but for the fact that they are healthy and alive has given them one chance
to restart and follow their quest for success. But Bhopal Gas Tragedy, which happened on
Dec. 3, 1984, whereby a pesticide plant run by the then company called Union Carbide
spilled out approx. 40 tons of poisonous deadly chemical called Methyl Isocynate quickly
killing around 4000 people. The death toll gradually increased to 15000 over the next
decade as per various government reports. It’s been 25 years now and still people in
Bhopal city of India are taking to the streets to protest about no action on part of
government of India and union carbide getting free very easily. There is no accountability
in the company, the group of companies or the government of a disaster which is termed
as world’s worst industrial disaster. Roughly half a million people were affected by this
disaster due to contamination in air, water and food. Even today one can see the side
effects and mutation which occurred in the growing generation due to this spillage. The
CSR in Developing Countries 47
Prime Minister of India, Mr. Manmohan Singh gave a statement recently stating ''The
enormity of that tragedy of neglect still gnaws at our collective conscience, I reaffirm our
of the site, continuation of medical research, and any other outstanding issues connected
with the Bhopal gas tragedy,''. But when it comes to the corporate, it does not exist. Not
literally, but because it was taken over by Dow Chemicals Co. in 2001. Dow has taken a
stand that it does not owe anything to the public as the legal case was cleared in 1989
where it was settled between Union Carbide and government settled for $470 Million and
all the responsibility was transferred to the state government of Madhya Pradesh, India. 37
In a very recent case of non accountability of a companies actions was seen when
Wikileaks cables were released where USA was shown to be pressurizing the Bangladesh
Government for approving the 6000 hectares of a open coal mining project. This project
is said to have a life of 36 years and roughly 16 million tons of coal can be extracted
annually. But this is coming at the cost of relocation of 5000 people according to GCM
(Global Coal Management Resources) formerly known as Asia Energy Corporation. But
the government of Bangladesh severely contests those figures and an expert committee
report in 2006 says roughly 130000 people will get directly affected.38 There will be
severe water shortage for irrigation and hence food shortage as well. Secondly GCM says
2200 indigenous people will be replaced, however Bangladesh's Jatiya Adivasi Parishad
(National Indigenous Union) estimate that 50,000 people belonging to 23 different tribal
12.5 Sustainability
CSR in Developing Countries 48
Global reporting initiative and NYSE Euronext hosted a conference where who’s who of
the CSR world participated and it came out that top 11 challenges for corporate in no
1. Doubt
2. Liabilities
3. Denial
4. Resources
5. Causality
7. Benchmarking
9. Uncertainty
It these are given the much needed and long due attention, many problems can be
solved.40
There are companies now revolving around providing service to make other companies
more sustainable, because they believe at the end of the day, all the resources which the
globe has to provide are absolutely finite and there is now two doubt about it. One such
company called article 13 based in UK writes about sustainability as a whole reason for
existence. When it comes to sustainability, the main question that it takes form into is a
question of resource allocation. How much resource is the company using, can it reduce
it, can it reuse it, can it make it more efficient and once it answers all these questions, it
CSR in Developing Countries 49
takes one step nearer to sustainability. Because it is the limited resources and sometimes
Coco cola has been a pioneer in CSR in most parts of the worlds. It has got its share of
criticism as well in many sectors in different parts of the world. It was awarded the
stewardship and sustainability on world water day. It put in efforts in rain water
harvesting in association with CIDC, a body by Planning commission of India. Now that
can be termed as a sustainable business or a strategy. coco cola needs waters as the
largest ingredient in its plant, and steps taken to conserve water, rain water harvest and
water saving techniques can go a long way in helping coco cola recover the costs
Unlike other countries where governments encourage companies to do CSR and give a
hand in improvement of society and make a better and sustainable place, China has taken
a slightly different approach. China CSR Map (CCM) is a project launched with the help
of Chinese govt., GIZ, Syn Tao and China Credit Information Service (CCIS) since 2006.
the project introduction on their website goes on to describe its existence as “The CCM
and online resource providers. Our CSR definition consequently covers diverse fields,
environmental protection, health and safety, philanthropy, education, arts, women and
partners and publications. Profile of practitioners provides their CSR background and
experiences.” 41
decade has lead to issues as well for them. China alone produces 14% of world’s carbon
emissions. BRIC countries together account for roughly 25% of carbon emissions of the
world. China had highest population on earth, and has only 7% of fresh water resources
for its people 42. Samsung has used its sustainability report (2009) to describe the way it
has dealt with this issues and tried to understand, comply and communicate business
changes in operation and strategy to address China’s environmental crisis. Pepsi Co. is
not far behind when it created its first State-of-art ‘Green Beverage’ Manufacturing plant
in China which will roughly use 20% less resources for manufacturing the same thing. 43
As per the experts in the field of sustainability, affiliated with article 13, sustainability
corporate culture, coaching teams and groups to integrade sustainability and pushing
This is again a very pertinent and hot topic in ongoing times especially in developing
countries because they are still discovering their true potential in terms of growth and
CSR. This can be used interchangeably with the term CSR reporting and deals with ways
and mean of reporting CSR initiatives, activites and results. This report is for all the
interanal as well as external stake holders alike. Reports typically cover social impact,
review, carbon footprint, staff satisfaction, community investment etc. After many
CSR in Developing Countries 51
decades a phase has come once again when there is equal in interest in what is being
reported as much as how it is being reported. There are multiple frameworks which can
be utilized on its own or in conjunction with others to create a wholistic CSR report. The
most faouvred structure or framework is the one called Global Reporting Initiave (GRI),
first used in 1990s, and now is called G3 and is the most recognized. It tries to
well. Developing countries are well embracing this new framework but not as seriously
44
as their financial reporting.
A survey conducted by GRI and KPMG for what the readers want in a CSR report, the
top things which came out was hearing bad news?. This gave the readers a sense of
confidence in the company for the fact that company is openly accepting the problems it
is facing and hence is more prepared and ethical than those who do not directly report.
But the trend of reporting is in very nascent stage in developing economies as compared
to the highest rate of EU. GRI has been adopted in South America and South Asian
economies pretty well, and that of Japanese, French and Spanish companies are reporting
CSR for long term and get them audited by third parties.44
We have seen a bit about global warming and climate change in light of CSR and the
situation in developing countries. But why is Climate change a hot topic in CSR,
especially in developing countries? It is because more than 75% of the population live in
developing countries. They emit huge amount of green house gases (predominantly
carbon dioxide) and hence they are the major threat to world environment stability. But
this growth in driven by the thriving population which has buying power and the
CSR in Developing Countries 52
corporate which prodivdes the public with the products to buy. Its is the end
responsibility of both consumers and companies to realize that climate change is a big
issues which can only be tackled by joining hands and correct CSR steps.
There is a study which was first of its kind to reveal that plants have much more capacity
to absorb CO2 and hence the global warming is not because of green house gases. But it
was also mentiond that the capacity to absorb CO2 depends on availability of water.
Hence the problem of water needs to be tackled first. But the amount of uncontrollable
population growth the globe has seen, people are dying for basic needs like electricity
and hence there are dams being built for generating electricity. These dams not only
disrupts the water supply in hunders of square miles of ares, but also has an ecological
impact. 44Hence this is a very sensitivie topic and needs much more attention that the
A recent study on what FTSE250 companies are doing in arena of climate change and it
was interesting report to see many different and innovative, but farily easy and simple to
implement methods are available. Still the numbers are low as only 12.4% of FTSE250
implementation level and start giving their contribution in the climate change issue. They
need to take more part in global events on climate change like Carbon Disclosure Project
in 2007, where only 17% of the FTSE250 companies responded with verifiable data.
The biggest challenge while tackling climate change is development and excution of
clean energy. This can be solar energy, wind energy, tidal energy, nuclear energy to an
extent and geo thermal energy. Brazil has higest use of ethanol in its fuel consuming
CSR in Developing Countries 53
population using vehicles and public transport. It is rich in stock of sugar cane which is
better than corn for producing ethanol. China is very actively working and promoting
companies who are into manufacturing electric vehicals (EVs) and e vehical
infrastructure. This is much needed as china is worlds highest emitter of CO2 at 20%
annually. China faces water scarcity with 20% of worlds population resideing in a
country with only 7% of freash waters at their disposal. China has launched Top 1000
Energy Consuming Enterprises Program (2006 -2010) which focused on raising energy
resources and 43% of Chinas emissions. But the way Chinese government has taken the
problem of sustainability and climate change hands on, china is poised to become the
leading manufacturer of clean energy technology for the rest of the world.
India on the other hand is still a little behind china in terms of providing better quality of
life to its poor population. Worlds number two in population, some skeptics argues it cant
afford to invest in sustainable projects and should focus more on food, water, health and
electricity problems for most of its population. But Indian government is planning to
invest a total of $250 Billion by 2017 in promoting green business and sustainable
business practices. 44
since developing countires are the focus here, labor exploitation becomes a more
pertinent point, as these countries are thriving because of its cheap labor and a small
educated working class. Child labor, boded labor, working single young women and old
dependend labor are always exploited and a strong intervention of government and NGOs
India is the largest market for child labor, right from domestic jobs till working in heavy
metal industries children are subject to harsh working condition, with no health and
safety rules and no consideration of him or her being 10 year old or so. There is an anti
child labor law presnt in India now, but the media is reporting that this law is double
edged sword which is making things worse for others. There are children who are
working in retail and at restaurant who are losing jobs due to the strict rule of the
home and family to orphans living on the streets of each and every city of India. Even use
of children in advertisements or movies is under question and hence the rule is under
Nike, Reebok, Addidas all have their factories in Indonesia, China and India. There have
been innumerable instances of poor working facility due which the companies have been
subject to negative publicity. Not only labor, even in competitive markets like that of
India, where financial service industry is growing faster than ever is having problems
which CSR can address. Employees are put under tremendous stress of achieving targets
and hence pushing the company closer to its own goal of achiving sales and profits. This
has lead to so many urban life style diseases which is decreasing the overall quality of
life. One example is ICICI Bank Ltd., which is the largest private bank in India, and had
such fast growth in past one decade, but when the employess and customers are
interviewed by a local channel in Mumbai city, they were not happy with the way ICICI
Ivory coast is among examples of child labor. Out of 200000 child laborers, around
12000 might be subject to human trafficking. They work in cocoa production fields and
CSR in Developing Countries 55
are paid a meger amount by the corporate for a full days work. Ivory coast produces half
of the worlds cocoa, and you can imagine with coffee, chochlate and other peoducts so
popular across the world, ivory coast could be a much better place if it was paid its fair
share. To talckle this problems companies like Ben and Jerry’s have been in fair trade
since ages where a fair amount is paid to the raw material producer in developing
country. 46
This is a rather unique and less discussed topic in CSR but well worth a mention in this
thesis. This is an issue that impact both developed and developing countires alike,
people do not have rights to basic things like water, food, land to live and irriage and
sanitation and health facilities, right to education, technology and basic minimum wage.
Corporate world plays a major role in providing access to these basic human right along
with local government. Correct CSR strategy and its implementation will see through the
stakeholders with these facilities and lead to a better society. United nation in its report in
2009 identifies the role of business in reducing social exclusion, poverty, divide between
rich and poor and abuse of human rights. UDHR (Universal Declaration of Human
Rights) was developed after the catastrophic world war II in 1948. This provides the
common minimum global standard of the contract between the people and its
government. Recently CSR has been incorporated in it by including the role of business
leading society to a better state. UDHR supports the right to life, equality and fairness in
all the dealing in the world, which automatically leads to CSR being a part of it. It
prohibits slavery, torture in any form, pressure for work, freedom of movement and
CSR in Developing Countries 56
corporates have been involved in defining and abiding by a small set of human rights as
far as their businesses are concerned. Their role cannot be matched with that of the
government and hence they are expected to respect human right rather than protect them.
But there has been much work in this area to define and fabricate a blue print for
businesses to consider human rights and avoid social exclusion in their corporate
strategy. 47 48
the United Nations (UN) that promotes industrial development for reducing poverty,
inclusive growth and globalization and environmental sustainability. Its long term
objective is to achieve a sustainable, fair and just society which is equitable in terms of
with CSR.
UNIDO carried out this study in 2002 whereby it sent 60 questionnaires to developing
countries organizations including Sri Lanka, India, Egypt, Indonesia, Nigeria, Pakistan
Thailand etc. it got back 27 responses from various conglomerates, industry associations,
individual businesses, TNCs and CSR consultancies. They all were spread across various
CSR is on the radar of all the organizations and they deemed it to be important (13) or
very important (14) in their own sector. respondents were asked to highlight key CSR
Consumer issues (eg. Product safety, consumer rights, right to information etc.)
Transparency and accountability are major issues for majority (17 and 18 respectively)
and political involvement being the least important (8). Responsible marketing was an
company’s image and business both. While job creation and community development
was major issues in community category. Health and safety was the only paramerter in
labor standars which more than half of the respondents felt strongly about. Overall most
They were then asked about their knowledge of happening around the world on CSR like
the UN Global compact, supply chain labor standards, social and environmental
accounting developments etc. 20 respondent felt CSR was a threat to their business
smooth running. Few of them felt TNCs are a threat to SME of their country and
segment.
Overall conclusion of the study as stated in the UNIDO report released in Vienna
conference that there was an overall awareness of CSR. But the companies or
organizations were not 100% convinced or clear about how CSR can help them and can
CSR in Developing Countries 58
CSR be ever incorporated in the overall business strategy of any organization. Main CSR
issues seen by them are pollution and waste management, transparency and
accountability. At the same time there is a general concern the way importance of CSR is
increasing in the developing world, for it to become a barrier in the developing market.
Overall they believe the CSR poses both threats and opportunities and needs heightned
businesses alike.4
Eg. Of gap and agro cell in kutch, design inc in Zimbabwe, for fair-trade, richarda bay
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9
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10
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12
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13
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Print.
14
“Alternative view of Corporate Social Responsibility: A dialogue with the financial
(http://www.mhcinternational.com/corporate-social-
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15
“Business in the Community” Access Omnibus survey (1997) London. BitC. Print
16
“Developing CSR in UK Business and society” CSR network (2000) the global
Senate smashes estimates Deepwater Horizon disaster costs for clean up and
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21
Chambers, E., Chapple, W., Moon ,J. & Sullivan, M. (n.d). “CSR in Asia: A seven
and
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24
Kant, Krishna (2008) “Corus buy hauls Tata Steel next to Reliance” Economic Times,
Mumbai. Print.
25
developing countries emit more carbon
26
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27
Glenn, Tim. (n.d.) “Nike’s Cheap Labor” Campaign for Labor rights. Web. 1st May
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28
Vaid, Molshree (2006) “How Cadbury’s won the battle of worms”. Rediff
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29
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APPENDIX A
PROJECT PROPOSAL
DEVELOPING COUNTRIES
Supervisor:
Submission:
1. Scope/Rationale of Project
2. Methodology
3. Data Source
Primary Data
I Intend to interview at least two managers directly involved in managing the CSR of a
company in developing country or related to it
Secondary Data
The project will primarily benefit from the knowledge gained from the modules
countries and will also draw on aspects of Business Research and Strategic Management
modules.
Defining CSR
Components of CSR
Trends in CSR
Growth of CSR
Importance of CSR
Internal Stakeholders
External Stakeholders
6. Schedule of work
References
Luckas, Edit. (2009: 4). “THE ECONOMIC ROLE OF SMES IN WORLD ECONOMY,
adviser/sri/papers/Emerging_Markets.pdf)
California. Print.
CSR in Developing Countries 74