Corporate Sustainability

Lect 5
In the past – Charity and Philanthropy

• Charity
o Charity was an ingrained part of business practice in most merchant communities. It was aided by the fact that there was little outlet
for merchant wealth at the time.
o Not unmixed with self-interest.
o also linked to business needs and an extension of business practices. Business enterprise and its human as well as material resources
were often used to sustain and reinforce both social and religious bonds
o Gifting played a particularly critical role in gaining political influence and smoothing relations with rulers whose origin was outside the
city, community or country.
o Charity was deemed good business strategy (for reasons which echo today’s CSR debate) and a desire to enhance social status also
played a large part.
• From Charity to Philanthropy (1850–1914), towards being more secular, more inclusive in terms of caste, creed and community and more
oriented towards progress of society
• Beginning of industrialization and the establishment of British rule marks the transition from merchant charity to industrial philanthropy
• E.g. Jamsetji Jeejeebhoy, Bombay’s leading merchant, freely helped every deserving cause. In all, he gave away nearly 2.5 million for
charities of all kinds.
Philanthropy, CSR, Corporate sustainability

• Philanthropy is typically a private matter, and donors may not be held accountable for how their funds are used.
• In contrast, CSR involves a company's public commitment to act in a socially responsible way, and there is a greater level of
accountability to stakeholders and the wider community.
• 1960s onwards - deceleration of industrial growth, controls on industry, a high tax regime and changes in the attitudes of
the new business class had several adverse consequences for philanthropy
• Move from institutional infrastructure creation to direct engagement with the community
• Companies interfaced with the community
o E.g. corporate NGOs set up by the Tatas, Lupin, IPCL, Excel and Arvind Mills
o Public–private partnerships (PPP) as in the case of collaboration of some companies like ITC, IOC and others with the
government for social marketing of condoms and pills for family planning
o Corporate sponsorships of charitable events and campaigns
Philanthropy, CSR and Corporate sustainability

CSR is an initiative taken by companies to contribute to society beyond their economic objectives.
Corporate sustainability - pursuing responsible environmental, social, and economic (or governance) strategies.
Models of CSR
1991, Archie Carroll’s Pyramid of CSR
To be socially responsible, a business must meet economic, legal, ethical, and philanthropic expectations
given by society at a given point in time

Source: Carroll (1991)

Models of CSR

Altruist model
• Altruistic Corporate Social Responsibility is the CSR of a philanthropic nature.
• Includes individual and organization voluntarily giving time and money to good works which contribute to the well-being
of various societal needs.

Stakeholder model
• Often associated with R. Edward Freeman, whose seminal analysis of the stakeholder approach to strategic management
in 1984 brought stake holding into the mainstream of management literature (Freeman, 1984).
• Rise of globalization has brought with it a growing consensus that with increasing economic rights, the range of social
obligations of businesses is also growing.
• As a consequence, gave rise to the stakeholder model of corporate responsibility.
Models of CSR

Statist model

• First International Summit on CSR, jointly organized by the Ministry of Corporate Affairs and ASSOCHAM in New Delhi in
the year 2008

• Clear boundaries between state and society defined for state enterprises

• Elements of corporate responsibility, especially those relating to community and worker relationships, were enshrined in
labour laws and management principles.

• Statist model is what India follows now

• Ethical and legal responsibilities enshrined within regulations and acts such as the labour laws or the Companies Act,
which both need to follow.
Models of CSR

Liberal model

• This approach was encapsulated by the American economist Milton Friedman, who in 1958 challenged the very notion of
corporate responsibility with the idea that companies are solely responsible to their owners (Friedman, 1971).

• As argued in this model, it is sufficient for a business to obey the law and generate wealth, which through taxation and
private charitable choices can be directed to social ends.

• This ultimately fulfils the social responsibility of an organization towards the community and the nation.
Models of CSR
History and Evolution of Corporate Responsibility

Creating
shared Value
Social
responsibility
and CSR
Generation of
Profit

Note: CSR is about using a business's resources to respond to social and environmental problems in the world.
Shared value is about incorporating that positive social and environmental impact into the company's business model in a way
which generates economic value.
Creating shared value

• Shared value focuses on finding the business opportunities hidden in social

problems
• New business models that address unmet social needs
• New business processes
Creating shared value
Creating shared value

• Example of CSR: issues in relation to water conservation, health and

hygiene, skill development, education etc…..
• Example of CSV: Transforming procurement to increase quality and
yield
Creating shared value

Porter and Kramer suggested 3 broad ways:

1. Reconceiving products and markets
2. Redefining productivity in the value chain
3. Enabling local cluster development
Reconceiving products and markets

Innovative products and services that better serve existing markets or allow
access new ones
Examples:
• Food companies focus on taste and quality -> unmet need for better nutrition
• Intel, IBM harness digital intelligence for power usage savings
• Wells Fargo
• GE Ecomagination – build more efficient machines that produce cleaner energy, reduce
greenhouse gas emissions, clean water and cut its use, and make money while doing it.
$18 billion sales in 2019
Redefining productivity in the value chain

Societal problems can create economic costs in the firm’s value chain
Example: Walmart reduced excess packaging and developed smart
routing to cut 100 million miles and save on energy costs
Energy use and logistics
Use of energy throughout the value chain
Resource Use
Procurement
Enabling local cluster development

Need of reliable local suppliers, functioning infrastructure of roads, and

telecommunications, access to talent, and an effective and predictable
legal and regulatory framework
Shared value

Key enabler for creating shared value – innovation in all aspects of

business operation including product development, business modeling,
delivery channel development, and management approaches.
Case discussion – M & M

• Why did M&M want to reduce waste?

• Why did it choose zero waste , specifically ZWL?
• What are the challenges in achieving zero waste in your home?
• What are the challenges in achieving zero waste at M&M?
• What abilities and resources are required to achieve a zero waste factory?
• If you were MD, how would you handle the challenge regarding cotton gloves?
• How would you overcome the challenges of achieving zero waste?
Case discussion – M & M

What happened?
• Achieved a diversion rate of nearly 99% and got ZWL certification in 2017
• Total cost savings – Rs, 648000 per year
• Reduction upto 12 tonnes of material
• Changed gloves to blue color
• Free to ask for new gloves
• Reduced issuance of new gloves by 18%

Adapt and evolve business frameworks that can combine sustainability, generation of shared value,
redefine the purpose
Thanks…