CORPORATE SOCIAL RESPONSIBILITY (CSR)

[Dr. Sanjiv Agarwal]

CSR can be  an important business strategy because, wherever possible, consumers want to buy products from companies they trust; suppliers want to have business partnerships with companies they can rely on; employees want to work for companies they respect; and NGOs, increasingly, want to work  together with companies seeking feasible solutions and innovations in areas of common concern. CSR  is a tool in the hands of corporates to enhance the market penetration of their products and its relation with stakeholders. 

What is CSR?

There are no universally accepted definitions of Corporate Social Responsibility (CSR). One extreme view is that a company that complies with the laws of the land in which it operates is being socially responsible. The other view is that a socially responsible company is one that is purely philanthropic in that it gives without expecting a return or a benefit.

Increasingly, there seems to be a convergence that neither of these two extreme positions adequately describe CSR. Why? To quote from UNCTAD’s 1999 Report on The Social Responsibility Corporations, an external programme of good deeds will not protect a firm whose actual operations harm its surrounding society. Thus, being purely philanthropic externally is not enough. At the same time, complying with the law is the minimum behaviour to legally stay in business and has nothing to do with society’s expectations, which are essential for the social in CSR to have any meaning.

Corporate and Social Responsibility (CSR) in India

The 1990s have perhaps been the decade of profound change inIndia’s economic paradigm and have significantly affected Corporate India. Structural adjustment has meant an increasing role for the corporate sector and freedom from controls – an opportunity of immense proportions. It has also meant competition, both from within and outside, and a breakdown of protections that the sector earlier enjoyed. As with very change, there are winners and losers. But it is undisputed that Corporate India will play, if it is not already doing so, a major role in the lives of all Indians. This cannot be ignored.

Corporate social responsibility (CSR), like many modern ideas, is not new toIndia. It is part of an ancient tradition, which is currently being practiced by some companies. It has been informed by ideas from the West through business collaborations between companies. Industry associations who have recognized that it is an essential part of business, have also promoted it.

In Indian context, CSR could encompass -

• All activities aimed at communities (be they philanthropic, social investment or commercial initiatives) that benefit them in a sustainable manner. However, a company that undertakes such activities but does not comply with business basics cannot be termed as socially responsible.

• Basic business practices and value chain that go beyond legal compliance to benefit the disadvantaged amongst the company’s stakeholders, e.g., poor customers, marginalized producers (small / marginal farmers or traditional craft persons, for instance) and so on.

• Advocating for change in public policy and laws that benefit disadvantaged people.

Why CSR

There are many business reasons for companies to be socially responsible. These can be grouped into following  main areas:

 

Reasons for CSR  

Internal                                                Philanthropic                              External       

 Employees                                          Education                                Local Communities    

Customers                                          Health                                      Publicity

Shareholders                                      Social Development                Pollution control

Tax benefits                                        Charity                                     Environment

Brand enhancement                           Donation                                  National Interest

 

CSR Policy

A policy on CSR seeks to ensure that the corporate initiatives are properly formulated and defined, structured and implemental though a well laid down system. It covers areas to be covered, initiatives  to be pursued and study the CSR impact .

Infact, each business entity should formulate a CSR policy to guide its strategic planning and provide a roadmap for its CSR initiatives, which should be an integral part of overall business policy and aligned with its business goals. The policy should be  framed with the participation of various level executives and should be approved by the board.

The CSR policy should normally cover following core elements:

• Care for all stakeholder

• Ethical functioning

• Looking after  workers' rights and welfare

• Respect  for human rights

• Concern  for environment

• Activities for social and inclusive development

  

Many companies now a days have such policy in place. For example, GAIL (India) Ltd, Indian Oil Corporation Ltd, ONGC Ltd. NTPL Ltd, Infosys Technologies Ltd, L & T Ltd, Jubilant Life Sciences Ltd, Shree Cement Ltd, ITC Ltd etc. To illustrate , GAIL’s CSR Policy provides  that “ the policy provides for its CSR initiatives to enhance value creation in the society and in community in which it operates and to promote sustained growth for the society and community and to fulfill its role as a socially responsible corporate with environmental concern. It provides for the structure for carrying out CSR activities and budgetary allocation of funds for CSR. GAIL's vision statement also incorporates essence of CSR- "Be the leading company in natural gas and beyond, with global focus, committed to customer care, value creation for all stakeholders and environmental responsibility”.

BHEL has formulated CSR policy focusing on eight thrust areas viz.,

• Self-employment generation

• Community Development

•  Environment Protection

• Education

• Health Management and Medical Aids

• Orphanages & Old-age Homes

• Infrastructural development

•  Disaster / Calamity Management

To be effective , CSR policy should cover the following –

• Vision: The CSR vision of the company should be such that it defines the purpose of the company's CSR initiatives and defines the company's CSR goal. The CSR vision should be well aligned to the business goals so that it benefits the company .

• Implementation:

  • Identification of thrust areas

  •  Identification of manner and nature of projects / activities

  • Defining measurable targets & time frame for the activities

  • Performance Management- Quality and standard of the work to be maintained

  • Organisational mechanism & assigning responsibilities for due performance of  CSR Projects

  • Manner of delivering CSR- Foundation / partnership with Non Government organisation/ participation of employees

• Fund resources - Budget allocation and its utilization

• Medium of dissemination of information on CSR

• Management  commitment