HISTORY OF CORPORATE SOCIAL RESPONSIBLITY

The origins of the social component in corporate behaviour can be traced back
to the ancient Roman Laws and can be seen in entities such as asylums, homes
for the poor and old, hospitals and orphanages. This notion of corporations as
social enterprises was carried on with the English Law during the Middle Ages
in academic, municipal and religious institutions. Later, it expanded into the
sixteenth and seventeenth centuries with the influence of the English Crown,
which saw corporations as an instrument for social development.During the
late 1800’s and early 1900’s, the creation of welfare schemes took a
paternalistic approach aimed at protecting and retaining employees and some
companies even looked into improving their quality of life, Also during this
period, there was a growing level of urbanization and industrialization marked
by large-scale production. This brought new concerns to the labour market
such as: new challenges for farmers and smalls corporations to keep up with
the new interdependent economy, the creation of unions of workers looking
for better working conditions, and a middle class worried for the loss of
religious and family values in the new industrial society.By the 1920’s and early
1930’s, business managers begun assuming the responsibility of balancing the
maximization of profits with creating and maintaining an equilibrium with the
demands of their clients, their labour force, and the community. This led to
managers being viewed as trustees for the different set of external relations
with the company, which in turn translated into social and economic
responsibilities being adopted by corporations.
INTRODUCTION

Corporate social responsibility (CSR) is a self-regulating business model that

helps a company be socially accountable—to itself, its stakeholders, and the
public. By practicing corporate social responsibility, also called corporate
citizenship, companies can be conscious of the kind of impact they are having
on all aspects of society, including economic, social, and environmental.
To engage in CSR means that, in the ordinary course of business, a company is
operating in ways that enhance society and the environment, instead of
contributing negatively to them.Corporate social responsibility is a broad
concept that can take many forms depending on the company and industry.
Through CSR programs, philanthropy, and volunteer efforts, businesses can
benefit society while boosting their brands.As important as CSR is for the
community, it is equally valuable for a company. CSR activities can help forge a
stronger bond between employees and corporations; boost morale; and help
both employees and employers feel more connected with the world around
them.

Thus, CSR is primarily a strategy of large corporations. Also, the more visible
and successful a corporation is, the more responsibility it has to set standards
of ethical behaviour for its peers, competition, and industry.
IMPORTANCE OF CORPORATE RESPONSIBILITY

Companies are increasingly ramping up their focus on social responsibility,

whether its championing women’s rights, protecting the environment, or
attempting to obliterate poverty, on local, national, or global levels. From an
optics perspective, socially responsible companies project more attractive
images to both consumers and shareholders alike, which serves to positively
affect their bottom lines.

 Being a socially responsible company can bolster a company's image and

build its brand.

 Social responsibility empowers employees to leverage the corporate

resources at their disposal to do good.

 Formal corporate social responsibility programs can boost employee

morale and lead to greater productivity in the work force.

Socially responsible companies tend to attract employees who are eager

to make a difference in the world—in addition to simply collecting a
paycheck. With large companies, there is strength in numbers, where
collective employee efforts can achieve substantial results, which
increases workplace morale and boosts productivity.
CSR AMENDMENTS UNDER THE COMPANIES (AMENDMENT)
ACT

India is the first country in the world to make corporate social responsibility
(CSR) mandatory, following an amendment to the Companies Act, 2013 in April
2014. Businesses can invest their profits in areas such as education, poverty,
gender equality, and hunger as part of any CSR compliance.

The amendment notified in the Companies Act, 2013 requires companies with
a net worth of INR 500 crore (US $70 million) or more, or an annual turnover of
INR 1000 crore (US $140 million) or more, or net profit of INR 5 crore (US
$699,125) or more, to spend 2 percent of their average net profits of three
years on CSR.

Prior to that, the CSR clause was voluntary for companies, though it was
mandatory to disclose their CSR spending to shareholders. CSR includes but is
not limited to the following:

Projects related to activities specified in the Companies Act; or

Projects related to activities taken by the company board as recommended by
the CSR Committee, provided those activities cover items listed in the
Companies Act.Until now, if a company was unable to fully spend its CSR funds
in a given year, it could carry the amount forward and spend it in the next
fiscal, in addition to the money allotted for that year.

The CSR amendments introduced under the Act now require companies to
deposit the unspent CSR funds into a fund prescribed under Schedule VII of the
Act within the end of the fiscal year. This amount must be utilized within three
years from the date of transfer, failing which the fund must be deposited in to
one of the specified funds.
The new law prescribes for a monetary penalty as well as imprisonment in case
of non-compliance. The penalty ranges from INR 50,000 (US $700) to INR 25
lakh (US $35,000) whereas the defaulting officer of the company may be liable
to imprisonment for up to three years, or a fine up to INR 5 lakh (US $7,023), or
both.
THE METHODOLOGY OF CSR

CSR is the procedure for assessing an organization’s impact on society and

evaluating their responsibilities. It begins with an assessment of the following
aspects of each business:
Customers;
Suppliers;
Environment;
Communities; and,
Employees.
The most effective CSR plans ensure that while organizations comply with
legislation, their investments also respect the growth and development of
marginalized communities and the environment. CSR should also be
sustainable – involving activities that an organization can uphold without
negatively affecting their business goals.
Organizations in India have been quite sensible in taking up CSR initiatives and
integrating them into their business processes.
It has become progressively projected in the Indian corporate setting because
organizations have recognized that besides growing their businesses, it is also
important to shape responsible and supportable relationships with the
community at large.
Companies now have specific departments and teams that develop specific
policies, strategies, and goals for their CSR programs and set separate budgets
to support them.
Most of the time, these programs are based on well-defined social beliefs or
are carefully aligned with the companies’ business domain.
EXAMPLES OF CSR IN INDIA

Tata Group

The Tata Group conglomerate in India carries out various CSR projects, most of
which are community improvement and poverty alleviation programs. Through
self-help groups, it has engaged in women empowerment activities, income
generation, rural community development, and other social welfare programs.
In the field of education, the Tata Group provides scholarships and
endowments for numerous institutions.
The group also engages in healthcare projects, such as the facilitation of child
education, immunization, and creation of awareness of AIDS. Other areas
include economic empowerment through agriculture programs, environment
protection, providing sports scholarships, and infrastructure development,
such as hospitals, research centers, educational institutions, sports academy,
and cultural centers.

Ultratech Cement

Ultratech Cement, India’s biggest cement company is involved in social work

across 407 villages in the country aiming to create sustainability and self-
reliance. Its CSR activities focus on healthcare and family welfare programs,
education, infrastructure, environment, social welfare, and sustainable
livelihood.
The company has organized medical camps, immunization programs,
sanitization programs, school enrollment, plantation drives, water
conservation programs, industrial training, and organic farming programs.
Mahindra & Mahindra

Indian automobile manufacturer Mahindra & Mahindra (M&M) established the

K. C. Mahindra Education Trust in 1954, followed by Mahindra Foundation in
1969 with the purpose of promoting education. The company primarily focuses
on education programs to assist economically and socially disadvantaged
communities.
Its CSR programs invest in scholarships and grants, livelihood training,
healthcare for remote areas, water conservation, and disaster relief programs.
M&M runs programs such as Nanhi Kali focusing on education for girls,
Mahindra Pride Schools for industrial training, and Lifeline Express for
healthcare services in remote areas.

ITC Group

ITC Group, a conglomerate with business interests across hotels, FMCG,

agriculture, IT, and packaging sectors has been focusing on creating sustainable
livelihood and environment protection programs. The company has been able
to generate sustainable livelihood opportunities for six million people through
its CSR activities.
Their e-Choupal program, which aims to connect rural farmers through the
internet for procuring agriculture products, covers 40,000 villages and over
four million farmers. It’s social and farm forestry program assists farmers in
converting wasteland to pulpwood plantations. Social empowerment programs
through micro-enterprises or loans have created sustainable livelihoods for
over 40,000 rural women.
ADVANTAGES AND DISADVANTAGES OF CSR

Profitability and Value

A CSR policy improves company profitability and value. The introduction of

energy efficiencies and waste recycling cuts operational costs and benefits the
environment. CSR also increases company accountability and its transparency
with investment analysts and the media, shareholders and local communities.
This in turn enhances its reputation among investors such as mutual funds that
integrate CSR into their stock selection. The result is a virtuous circle where the
company's stock value increases and its access to investment capital is eased.

Better Customer Relations

A majority of consumers – 77 percent according to a survey by branding

company Landor Associates cited by the University of Pennsylvania's Wharton
School – think that companies should be socially responsible. Consumers are
drawn to those companies that have a reputation of being a good corporate
citizen. Research at Tilburg University in the Netherlands showed that
consumers are prepared to pay a 10 percent higher price for products they
deem to be socially responsible.

CSR Costs Money to Implement

The main disadvantage of CSR is that its costs fall disproportionally on small
businesses. Major corporations can afford to allocate a budget to CSR
reporting, but this is not always open to smaller businesses with between 10
and 200 employees. A small business can use social media to communicate its
CSR policy to customers and the local community. But it takes time to monitor
exchanges and could involve hiring extra personnel that the business may not
be able to afford.
Conflicts with the Profit Motive

Even for larger companies, the cost of CSR can be an obstacle. Some critics
believe that corporate social responsibility can be an exercise in futility. A
company's management has a fiduciary duty to its shareholders, and CSR
directly opposes this, since the responsibility of executives to shareholders is
to maximize profits. A manager who forsakes profits in favor of some benefits
to society may expect to lose his job and be replaced by someone for whom
profits are a priority. This view led Nobel-Prize winning economist Milton
Friedman to write a classic article with the title: "The Social Responsibility Of
Business Is to Increase Its Profits."

Consumers are Wise to Greenwashing

Greenwashing is term used to describe corporate practices that appear to be

environmentally responsible without actually representing a change in how a
company conducts its business. For example, a product may be labelled as "All
Natural", even though it is being manufactured just as it always has. Some dry
cleaning services label their operations as "Organic" which sounds similar to
"organic food" but really carries no specific meaning. Some customers may
react positively to these types of claims, but others are wary of corporate
greenwashing.
RESPONSIBILITY TOWARDS DIFFERENT INTEREST GROUPS

The business generally interacts with owners, investors, employees, suppliers’

customers, competitors, government and society. They are called as interest
groups because by each, and Livery activity of business, the interest of these
groups is affected directly or indirectly. Responsibility of Business towards
Different Interest Groups.

Responsibility towards owners

Owners are the persons who own the business. They contribute capital and
bear the business risks. The primary responsibilities of business towards its
owners are to:
1. Run the business efficiently.
2. Proper utilization of capital and other resources.
3. Growth and appreciation of capital.
4. Regular and fair return on capital invested.

Responsibility towards investors

Investors are those who provide finance by way of investment debentures,
bonds, deposits, etc. Banks, financial institutions, and investing public are all
included in this category. The responsibilities of business towards its investors
are :
1. Ensuring safety of their investment,
2. Regular payment of interest,
3. Timely repayment of principal amount.
Responsibility towards employees

Business needs employees or workers to work for it. These employees put
their best effort for the benefit of the busing it is the prime responsibility of
every business to take care of the interest of their employees. If the employees
are satisfied and efficient, then only the business can be successful. The
responsibilities of business towards its employees include:

1. Timely and regular payment of wages and salaries.

2. Proper working conditions and welfare amenities.
3. Opportunity for better career prospects.
4. Job security as well as social security like facilities of provident fund
group insurance, pension, retirement benefits, etc.
5. Better living conditions like housing, transport, canteen, cr6ches, etc.
6. Timely training and development.

Responsibility towards suppliers

Suppliers are businessmen who supply raw materials and other items required
by manufacturers and traders. Certain suppliers, called distributors, supply
finished products to the consumers. The responsibilities of business towards
these suppliers are:

1. Giving regular orders for purchase of goods.

2. Dealing on fair terms and conditions.
3. Availing reasonable credit period.
4. Timely payment of dues.
Responsibility towards customers

No business can survive without the support of customers. As a part of the

responsibility of business towards them the business should provide the
following facilities:

1. Products and services must be able to take care of the needs of the
customers.
2. Product and services are must be qualitative
3. There must be regularity in supply of goods and services.
4. Price of the goods and services should be reasonable and affordable.
5. All the advantages and disadvantages of products as well as procedure
to use the products must be informed do the customers,
6. There must be proper after-sales service.
7. Grievances of the consumers, if any, must be settled quickly.
8. Unfair means like under weighing the product, adulteration, etc. must be
avoided.

Responsibility towards competitors

Competitors are the other businessmen, or organizations involved in a similar

type of business. Existence of competition helps the business in becoming
more dynamic and innovative so as to make itself better than its competitors.
It also sometimes encourages the business to indulge in negative activities like
resorting to unfair trade practices. The responsibilities of business towards its
competitors are
1. Not to offer exceptionally high sales commission to distributors, agents,
etc.
 2. Not to offer to customers heavy discounts and, /or free products in
every sale.
3. Not to defame competitors through false or ambiguous advertisements.

Responsibility towards government

Business activities are governed by the rules and regulations framed by the
government. The various responsibilities of business towards-government are:

1. Setting up units as per guidelines of government

2. Payment of fees, duties and taxes regularly as well as honestly.
3. Not to indulge in monopolistic and restrictive trade practices.
4. Conforming to pollution control norms set up by government.
5. Not to indulge in corruption through bribing and other unlawful
activities.
SIX CSR STRATEGIES THAT ARE GOOD FOR BUSINESS

Align CSR to your business strategy: CSR initiatives should connect to your
core business purpose and strategy in a way that makes intuitive sense.
Alignment with important metrics that have a bottom-line impact, such as
the reduction of food waste, enable CSR initiatives to fit within the
organization’s core business processes and enables success.

Earn support from the top with engagement at all levels: Getting senior
leaders, including the CEO, senior legal counsel, and c-suite executives on
board is vital for moving projects from paper to reality. Christine of the
Chicago White Sox noted the importance of getting full support from the CEO
or owner before launching new CSR programs (see our earlier post). Once
senior support has been received, it opens pathways for engagement from
other staff. This engagement can make work more meaningful, and can help
employees understand the full business process. O’Reilly extends engagement
to the fan (or customer) base, by creating emotional bonds.

Look for opportunities to build a future pipeline: One often overlooked

benefit of CSR is that it connects you to communities that can serve as a source
for future employees. O’Reilly shared a story of the White Sox travel baseball
league for teens, which helps youth from low-income neighbour-hoods gain
valuable competitive playing experience. The White Sox’s travel league has
seen 170 student athletes earn college scholarships and makes possible a
diverse pipeline of college-educated, baseball-knowledgeable leaders ready for
employment. In this example, and others, CSR benefits the community and
contributes to long-term employee pipeline strategies. Other industries can
replicate this by developing science, technology, engineering, and math
programming and scholarships in under-resourced communities.

Strong, sustainable partnerships equal automatic success: Almost all our

interviewees stressed the importance of finding outside partners. Partnerships
let you draw on the capabilities of other networks who have expertise in
different fields. Connecting with partners can help companies develop
thoughtful CSR initiatives faster, and more affordably, than trying to create the
opportunities on their own.

Find new drivers of innovation: For Campbell’s Soup, CSR may eventually
become a driver of innovation. Companies can see CSR as an innovation driver,
and invest in incubators and initiatives to research, develop, and implement.

Integrate design thinking approaches: Finally, our interviewees show an ability

to evolve their initiatives through a process similar to design thinking, that
moves to action faster than traditional design efforts.They describes it this
way, “At Aspire, we’re trying to do more Plan, Test, Plan, Test.” He says this
approach continually brings new information into the process and keeps the
work very close to the market.
GRAPHS: