Maratha Mandirs Babasaheb Gawde Institute Of Management Studies

CORPORATE SOCIAL RESPONSIBILITY IN INDIAN ORGANISATIONS

Dr. Mohammad Khalil Ahmed Associate Professor, Burhani College of Commerce & Arts Mumbai, khalila8@gmail.com
Introduction In early 1950s & 60s the literature was not heavily represented in CSR discourse. However, this decade marked a significant growth in attempts to formalize, or more accurately, state what CSR means (Carroll, 1999). According to Carroll, CSR encompasses the economic, legal, ethical and discretionary (philanthropic) expectations that society has of organizations at a given point in time. Some of the most prominent writers during that time were Keith Davis, Joseph W McGuire, William C Frederick and Clarence C Walton. Frederick wrote that Social responsibility in the final analysis implies a public posture toward societys economic and human resources and a willingness to see that those resources are used for broad social ends and not simply for the narrowly circumscribed interests of private persons and firms(Carroll 1999) Howard Bowen in 1953 argued that since social institutions shaped economic outcomes it was to be expected that business firms as an economic outcome of societal interests should consider the social impact of business activity. According to Bowen, CSR refers to the obligations of businessmen to pursue those policies to make those decisions or to follow those lines of relations which are desirable in terms of the objectives and values of our society. CSR implies some sort of commitment, through corporate policies and action. This operational view of CSR is reflected in a firms social performance, which can be assessed by how a firm manages its societal relationships, its social impact and the outcomes of its CSR policies and actions (Wood, 1991). Social reporting and social audits are examples of how firms can assess their social performance. In 1960s Keith Davies argued that CSR refers to the firms consideration of, and response to, issues beyond the narrow economic, technical and legal requirements of the firm (Davies, 1973). Frederick 1960 stated Social responsibility means that businessmen should oversee the operation of an economic system that fulfills the expectations of the people. And this means in turn that the economys means of production should be employed in such a way that production and distribution should enhance total socio-economic welfare (Fredrick, 1960). Thus, the definitions of CSR in 1960s were an attempt to link society and businesses, defining society in broadest terms. OBJECTIVES OF THE STUDY: To explore the various definitions and descriptions of Corporate Social Responsibility (CSR). To study the theoretical concepts expounded by various researchers To elaborate upon development of CSR in India To study the deployment of current CSR practices in India. SCOPE OF THE STUDY Scope of the study is limited to study concept of CSR and mostly focusing on the different CSR activities carried out by Indian corporates. METHODOLOGY: The study was conducted using both primary and secondary data. Karmyog Study Report on CSR. Secondary data It was collected from various books, articles, journals and blogs on CSR . LIMITATIONS OF THE STUDY: The study does not consider each and every company i.e. only few companies are taken as examples. A responsible enterprise also takes into account employees, suppliers, dealers, local communities, and the nation. Carroll 1979 offered the following definition of CSR. The social responsibility of business encompasses the economic, legal, ethical, and discretionary (or philanthropic) expectations that

Maratha Mandirs Babasaheb Gawde Institute Of Management Studies

society has of organizations at a given point in time (Turner, 2006). European Commission described CSR as a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis. World Business Council for Sustainable Development defined 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. In 80s & 90s there were fewer definitions but more efforts to measure and conduct research for the purpose of operationalizing CSR. It is holistic concept that can mean different things to different groups and stakeholders. Gray, Owen, & Maunders in 1987 defined CSR as the process of communicating the social and environmental effects of organizations economic actions to particular interest groups within society and to society at large. Similarly, Perks 1993 defined corporate social reporting as the disclosure of those costs and benefits that may or may not be quantifiable in money terms arising from economic activities and substantially borne by the community at large or other stakeholders. A term corporate social innovation was first introduced by Rosabeth Moss Canter in 1999 who argues that firms should use social issues as a learning laboratory for identifying unmet needs and for developing solutions that create new markets. Large corporations began to go public about corporate social responsibilities and publish some of their efforts, but they also made public that any approach to corporate responsibility must begin with the practical recognition that the corporation must be profitable enough to provide shareholders a return that will encourage continuation of investment (Wilson, 2000). Another trend appearing in literature is the increasing dialogue between stakeholders. Companies are augmenting their discussions with labor unions, environmental groups and other relevant stakeholders and the implementation of certification solutions by corporations, which is the establishment of codes of conduct (Kapstein, 2001), monitoring and reporting. Kingston and Wagner 2004 suggest that leadership on sustainability and CSR are important to set priorities and to ensure that commitments are achieved. Bebbington et al.(2008) use the term CSR reporting, which highlights the link between the reporting function and the organizational functions and operations that are concerned with, and impacted by, activities associated with CSR. The CSR movement was an early response to an article published in 1970 by Friedman stating that social responsibility of business is to increase its profits. CSR has emerged as the business issue of the 21st century and has been studied for over 50 years. To this day academics do not have a consensus on its definition (Wood, 1991; Carroll, 1991). Bowens definition of social responsibility of businessmen was it refers to the obligations of businessmen to pursue those policies to make those decisions, or to follow those lines of relations which are desirable in terms of the objectives and values of our society (Carroll, 1999). Corporate Social Responsibility in India In India, CSR has evolved to encompass employees, customers, stakeholders and sustainable development or corporate citizenship. The spectrum of CSR includes a number of areas as human rights, safety at work, consumer protection, climate protection and caring for the environment, and sustainable management of natural resources. From the perspective of employees, CSR activities include providing health and safety measures, preserving employee rights and discouraging discrimination at workplace. This helps in fostering a healthy environment within the company. For example, after 1945, TATA implemented social welfare provisions for its employees that have since become the legislative norm. From the perspectives of customers, CRS activities may include commitment to product quality, fair pricing policies, and so on. CSR taken up by various genres of companies primarily focuses on poverty alleviation, environmental protection and sustained development. Companies are taking initiatives for developing infrastructure in rural areas, e.g., TATA Motors provides desks, benches, chairs, tables cupboards, electrical fittings and educational and sports material to various primary schools in Singur. The company has also planned similar programmes to upgrade school infrastructure and is also planning to set up a computer laboratory in one of the high schools. Similarly, TVS Electronics was involved in CSR during the Tsunami to provide relief measures to the victims. They have also participated with the government to improve sanitation in a village called Tiruvidenthai. Such

Maratha Mandirs Babasaheb Gawde Institute Of Management Studies

initiatives will help in improving the conditions of rural people. Satyam Foundation of Satyam Computer Services Ltd., Infosys Foundation of Infosys Technologies Ltd., GE Foundation of the General Electric Company are exemplary instances of the philanthropic commitment of the corporate sector in India. After Independence, JRD Tata who always laid a great deal of emphasis to go beyond conducting themselves as honest citizens pointed out that there were many ways in which industrial and business enterprises can contribute to public welfare beyond the scope of their normal activities. He advised that apart from the obvious one of donating funds to good causes which has been their normal practice for years; they could have used their own financial, managerial and human resourced to provide task forces for undertaking direct relief and reconstruction measures. Slowly, it began to be accepted, at least in theory that business had to share a part of the social overhead costs of. Traditionally, it had discharged its responsibility to society through benefactions for education, medical facilities, and scientific research among other objects. The important change at that time was that industry accepted social responsibility as part of the management of the enterprise itself. The community development and social welfare program of the premier Tata Company, Tata Iron and Steel Company was started the concepts of Social Responsibility. (Gupta, 2007) The term corporate social performance was first coined by Sethi (1975), expanded by Carroll (1979), and then refined by Wartick and Cochran (1985).In Sethis 1975 three-level model, the concept of corporate social performance was discussed, and distinctions made between various corporate behaviors. Sethis three tiers were social obligation (a response to legal and market constraints); social responsibility (congruent with societal norms); and social responsiveness (adaptive, anticipatory and preventive) (Cochran, 2007). An ideal CSR has both ethical and philosophical dimensions, particularly in India where there exists a wide gap between sections of people in terms of income and standards as well as socio-economic status (Bajpai, 2001). According to Infosys founder, Narayan Murthy, social responsibility is to create maximum shareholders value working under the circumstances, where it is fair to all its stakeholders, workers, consumers, the community, government and the environment. Commission of the European Communities 2001 stated that being socially responsible means not only fulfilling legal expectations, but also going beyond compliance and investing more into human capital, the environment and the relation with stakeholders(Bajpai, 2001). Over the time four different models have emerged all of which can be found in India regarding corporate responsibility (Kumar et al.2001). CSR Surveys: In the context of India, CSR studies were few and limited. Singh and Ahuja 1983 conducted the first study in India on CSR of 40 Indian public sector companies for the years 1975-76 and found that 40 percent of the companies disclosed more than 30 percent of total disclosure items included in their survey. Raman (2006) used content analysis technique to examine the chairmans message section in the annual reports of the top 50 companies in India to identify the extent and nature of social reporting. This study concluded that the Indian companies placed emphasis on product improvements and development of human resources (Raman, 2006). According to a survey done by Partners in Change 2000, which covered 600 companies and 20 CEOs for judging Corporate Involvement in Social Development in India 85 percent agreed that companies need to be socially responsible; only 11 percent companies had a written policy; over 60 percent of the companies were making monetary donations; health, education and infrastructure were most supported issues. From 2000 onwards, 4 important surveys have been conducted, which give significant macro level conclusions about Indian corporate. The first and second surveys were carried out in 2001 and 2002 by Business Community Foundation for TERI-Europe. The survey sought to explore the perception of workers, company executives and general public about social, economic and environmental responsibilities. It was found that all companies irrespective of size or sector have awareness of CSR and its potential benefits. Many companies were collaborating with NGOs, have labor and environmental policy guidelines in place.

Maratha Mandirs Babasaheb Gawde Institute Of Management Studies

A third survey was jointly conducted in 2002 by CII, United Nations Development Program (UNDP), British Council (BC) and Price Water Coopers (PWC). The most striking features of the responses to the survey is that the respondents are in near unanimity that CSR is very much a part of the domain of corporate action and the passive philanthropy is no longer sufficient. A significant proportion of respondents, recognize CSR as the mean to enhance long-term stake holder value. The fourth survey, the Karmyog CSR rating 2007-08 is for the largest 500 companies. Karmayog is a platform for the Indian non-profit sector providing research on CSR activities of Indian companies. It rated the 500 largest Indian Companies based on their CSR activities. The companies were rated on 0 to 5 levels based on criterias like products & services, reach of CSR activities, expenditure on CSR, harmful processes etc. This is the basic premise for Karmayog undertaking a rating of the Corporate Social Responsibility activities of Indias 500 largest companies (by sales). This is the first time that such an exercise has been done in any country. Observations from the Karmayog CSR Rating of Indias 500 largest companies: Most companies are not doing any CSR. Many companies are only making token gestures towards CSR in tangential ways such as donations to charitable trusts or NGOs, sponsorship of events, etc. Most companies believe that charity and philanthropy equals to CSR; very few companies are using their core competence to benefit the community. Most companies use CSR as a marketing tool to further spread the word about their business. The fact that companies are hiring advertising agencies for their CSR further highlights this. Only 5 Indian companies (from this study) publish a Corporate Sustainability Report to measure and assess the impact of their business on the environment. Very few companies openly state the processes followed by them, the damage caused by these processes, and the steps taken to minimize this damage. Very few companies state how much they spend on CSR. There is no mention of the amount spent in any of their balance sheets or annual reports. Most companies just list and describe their CSR activities and seem to be spending minimal amounts on CSR. Very few companies are engaged in CSR activities in the local communities where they are based. Very few companies have a clearly defined CSR philosophy. Most implement their CSR in an ad-hoc manner, unconnected with their business process. Most companies spread their CSR funds thinly across many activities, thus somewhere losing the purpose of undertaking that activity. Most companies appear reluctant to themselves fulfill their CSR unless it is mandatory by law. The Karmayog CSR Ratings are from 0 to 5 (5 being the highest). In India there are an existent but small number of companies which practice CSR. This engagement of the Indian economy concentrates mainly on a few old family owned companies, and corporate giants such as the Tata and Birla group companies which have led the way in making corporate social responsibility an intrinsic part of their business plans. These companies have been deeply involved with social development initiatives in the communities surrounding their facilities. Jamshedpur, one of the prominent cities in the northeastern state of Bihar in India, is also known as Tata Nagar and stands out at a beacon for other companies to follow. Jamshedpur was carved out from the jungle a century ago. TATAs CSR activities in Jamshedpur include the provision of full health and education expenses for all employees and the management of schools and hospitals. In spite of having such life size successful examples, CSR in India is in a very nascent stage. The rationale for Corporate Social Responsibility in India Gandhiji was a person who in several respects was ahead of his time. His view of the ownership of capital was one of trusteeship, motivated by the belief that essentially society was providing capitalists with an opportunity to manage resources that should really be seen as a form of trusteeship on behalf of society in general. Today, we are perhaps coming round full circle in emphasizing this concept through an articulation of the principle of social responsibility of business and industry. While the interests of shareholders and the actions of managers of any business enterprise have to be governed by the laws of economics, requiring an adequate financial return on investments made, in reality the operations of an enterprise need to be driven by a much larger set of objectives that are today being defined under the term Corporate Social Responsibility (CSR).

Maratha Mandirs Babasaheb Gawde Institute Of Management Studies

The broad rationale for a new set of ethics for corporate decision making, which clearly constructs and upholds a companys social responsibility, arises from the fact that a business enterprise derives several benefits from society, which must, therefore, require the enterprise to provide returns to society that have now become even more important than traditional relationship between government and business. These go far beyond what was the case a few decades ago. Role of Social Responsibility in Indian companies: In a global CSR study undertaken in 7 countries (viz. India, South Korea, Thailand, Singapore, Malaysia, The Philippines and Indonesia) by the U.K. based International Centre for CSR in 2003, India has been ranked second in the list. This ideally shows the value that is important to customers in India. Bharat Petroleum and Maruti Udyog have been ranked as the best companies in the country. The next comes in the list are Tata Motors and Hero Honda. Canara Bank,Gujarat Ambuja and Wipro are involved in community development work of building roads, running schools and hospitals. ACC has been rendering social service for over Five decades. They are setting up schools, health centers, agro-based industries and improving the quality of rural life. BHEL is actively involved in the Welfare of the surrounding communities is helping the organization to earn good will of the local people BHEL is also providing drinking water facilities, construction of roads and culverts, provision of health facilities, educational facilities, and so on companies like ONGCs are encouraging sports by placing good players on their pay rolls. TISCO, TELCO and HINDALCO won the award for excelling in CSR, jointly given by FICCI and Business world for the 2003. ONGC has also committed resources by adopting a few villages to implement president Dr. Abdul Kalams idea of PURA (Provision of Urban Amenities in Rural Areas). NTPC has established a trust to work for the cause of the physically challenged people. Similarly in the private sectors like Infosys, Wipro and Reliance are believed to be most socially responsible corporations. In 1999 Kofi Annan of the United Nations invited corporate leaders for a Global Compact to promote nine principles covering three areas: human rights, labor rights, and sustainable development. Today, India can be legitimately proud to have had the second largest number of companies from any country subscribing to the Global Compact. Several public sector companies have joined together to form the Global Compact Society of India. Recommendations for better CSR Corporates no doubt have made significant contributions towards the sustainable development of our country. Considering the limitations of the corporates in their CSR activities, we can make some recommendations which can be used towards satisfaction. Companies should extend their CSR activities in less privileged states rather than concentrate in resource rich states. It is essential that companies develop an effective value chain system of their products through their CSR activities, which is essential for competing in the global market. It will give better results if activities are based on a more participatory approach and touch the grassroots level. Voluntarism among employees should be encouraged and institutionalized through recognition and incentives. There is also need for public-private partnership with well-defined controls and process for the best use of resources for social change. Special training need to be given to business mangers in working with social issues. Participation of small and medium business should be encouraged. Experience has shown that working with NGOs is more worthwhile and result-oriented. Joining hands with related NGOs is therefore advisable. The Road Ahead The parliamentary standing Committee on Finance has proposed mandatory corporate social responsibility(CSR) by companies as part of changes to Companies Bill 2009. The committee has stated that every company having a net worth of Rs. 5000 crore or more or a turnover of Rs. 1000 crore or more, or a net profit of Rs. 5 crore or more during a year shall be required to spend every

Maratha Mandirs Babasaheb Gawde Institute Of Management Studies

year at least 2% of the companys average net profit during the three immediately preceding financial years on CSR activities as decided by their BOD. In event of non-compliance of this requirement, BOD in their annual report will have to highlight the reasons for not undertaking CSR activities. The companies have been given free hand in deciding the areas/ activities of CSR. The traditional view is that business is primarily established to multiply its income. Corporate profits belong to the shareholders and if companies are required to pursue socially responsible objectives, it means managers are spending money that belongs to others. As opposed to this, the liberal view prescribes that a business should be sensitive to potential harms of its actions on various stakeholders. In the middle lies the trusteeship model as suggested by Mahatma Gandhi. Business should manage their enterprises as a trust held in the interest of the community. Corporate profits enhanced during 1990s, and business realized that they had certain responsibilities towards the society. This resulte4d in the evolution of the stakeholder model wherein companies measure their performance using the triple bottom line approach taking into account ecological and social performance in addition to financial results and evaluating actions in terms of people, planet and profit. Companies must adopt a strategy included in their day-to-day business operations and integrate with their core business objectives. Consider for instance,. Dabur, Daburs efforts towards sustainable cultivated sources for herbal ingredients and reducing the strain on natural herbal habits is commendable. The BPO facilities set up by the JSW foundation at JSWs remote locations to provide an alternate livelihood to the local population is remarkable.. ITCs sustainability Report is an expression of ITCs abiding commitment to build secured future for India. Its Triple Bottom Line performance measured in terms of increasing economic, environmental and societal capital is praiseworthy. ITC inspired by lofty vision of making a contribution to the national goals of sustainable development and inclusive growth has innovatively crafted unique business models that combines long term shareholder value creating with improving societal capital. Presently, e-choupals cover 4000 villages and benefit over 4 million framers, while providing a unique source of competitiveness of ITCs agri-product sourcing. ITCs Integrated Watershed Development initiative has helped create fresh water potential covering over 46,000 hectares water-stressed areas. Concerns like Infosys, Wipro, Tata, L&T ITC, Dabur, Mahindra and Mahindra, NTPC, BHEL, Aditya Birla Group of companies and many others are doing yeomen service in the field of CSR. Conclusion Business houses all over the world are increasing in realizing their stake in the society and engaging in various social and environmental activities. CSR holds a very important place in the development scenario of the world today and can pose as an alternative tool for sustainable development. As companies have shown great concerns for their immediate community and the stakeholders, it can be safely concluded that much of the fate of society lies in the hands of the corporate. A successfully implemented CSR strategy calls for aligning these initiatives with business objectives and corporate responsibility across the business principles to make CSR sharper, smarter, and focused on what really matters. There are several companies in India involved in diverse issues such as healthcare, education, rural development, sanitation, microcredit, and women empowerment. Analysis of several surveys in India suggest that though many companies in India have taken on board the universal language of CSR, CSR seem to be in a confused state. Individual companies define CSR in their own limited ways and contexts. The end result being that all activities undertaken in the name of CSR are mainly philanthropy, or an extension of philanthropy. It seems that CSR in India has been evolving in domain of profit distribution. There is a need to increase the understanding and active participation of business in equitable social development as an integral part of good business practice. A long term perspective by organizations, which encompasses their commitment to both internal and external stakeholders, will be critical to 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

Maratha Mandirs Babasaheb Gawde Institute Of Management Studies

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. With increasing and widespread commitment of corporate resources to CSR, attention is now shifting to the strategic formulation, implementation, and measurement of the market returns to CSR initiatives. But still a concern to companies is whether their focus on doing good, will provide positive returns to their CSR actions. This emphasize the need for better measurement models of CSR that capture and estimate clearly the effects of a companys CSR actions on its stakeholders as well as the nations in which they are operating. In this paper I have tried to highlight that developing economy like India is progressing at a growth which is much higher to its social growth. It is increasing the gap between the different strata of society in the country in terms of employment, human development, capital distribution and poverty. Public sectors companies and government are continuously introducing reforms to achieve the balance but it seems that it is not sufficient to bring revolutionary changes in the social progress. References: Arora, B. and Puranik R. (2004), A review of corporate social responsibility in India, Development, Vol.47 No. 3, pp.93-100. Ashok Leyland Report on Corporate Social responsibility 2009-10. Bajpai, G.N. (2001), Corporate Social Responsibility in India and Europe: Cross Cultural Perspective, available at: http://www.ficci.com (accessed 12 January 2009).

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