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Corporate Social ResponsibilityLecture- 5 (BECG)

Prof. C. AnandFaculty – IBS, Hyderabad

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Contents

I. Introduction to Corporate Social Responsibility (CSR)

II. Historical PerspectiveIII. The Changing Face of CSR: Responsibility Towards Employees Responsibility Towards Customers Responsibility Towards Intermediaries Responsibility Towards Shareholders Responsibility Towards Society Responsibility Towards Government

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I. Introduction to Corporate Social Responsibility (CSR)

Def. of CSR: “CSR refers to the business man’s decisions and actions taken for reasons at least partially beyond the firm’s direct economic or technical interest” –Kieth Davis.

CSR of business is understood from two different angles of business obligations, i.e. Socio-economic obligation, and Socio-human obligation.

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CSR (Contd..)

CSR is the sense of obligation on the part of the companies to build certain social criteria and manage the business activities by taking strategic decisions. Socially responsible companies should consider various issues, from the organization of the firm to build relationship with the community. The issue of CSR has come into focus through industrial revolution.

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II. Historical Perspective

Industrial Revolution (IR) introduced changes and influenced the relations between individuals and groups. The persistent influence of IR on various communities, over a period of time, changed the meaning of CSR. As the world of business environment is changing, the requirements for success and competitiveness are also changing. As a result, large corporations are emphasizing the strategic relationships with different sections of the society. In this process, CSR is gaining importance

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Historical Perspective (contd.)

IR was a period of change and transformation from hand-made items to machine made items and mass-produced goods. This change brought both positive (productivity, employment to both men and women, etc.) and negative (pollution, congestion, deterioration in working conditions, etc.) effects in general life. The government, art, literature, music, architecture and man’s way of looking at life changed during this period. Two industrial revolutions that took place resulted in both productive and dire consequences.

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Historical Perspective (contd.)

The First IR (1750-1850): England’s economy in early 1700s was based on its cottage industry, owned and managed by one or more people who maintained close relations with workers. In 1750, IR had begun introducing many changes, which were initially restricted to Textile Industry between 1712-1830 (Spg. Jenny, Power loom, and Spg. Mule), which helped increase of production of cotton goods. Steam Engine was introduced in the next phase between 1830-1875, which produced power.

The Second IR (1875-1905): It utilized electricity and improved technology and social life. During this period, chemicals were produced and communications improved with telephone/telegraph.

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Historical Perspective (contd.)

During the second half of 18th century, Britain experienced a sudden growth of technical and economic development. There was shift from agrarian to technology-based economy, which transferred the political power from the land owners to the industrial capitalists. According to Mathias, Britain saw the development of changes in relationships between individuals and groups (1740-80). There was large migration from countries to cities, from one work place to another and resulted in change in social values, which had lasted for centuries, resulting in recognition of characteristics.

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Historical Perspective (contd.)

Dark Satanic Mills: The shift from agrarian economy to industrial economy had many ill effects. The working conditions deteriorated and pollution increased.

Between 1760 and 1815, 7 million acres of land was captured by Parliamentary Enclose Awards. Locals were deprived of the enclosed common land’s share, which was known as “enclosure”. This led to growth of big cities like Birmingham, Bradford, Cardiff and Manchester.

In these cities, labor mobility, shifts in ownership patterns, and population pressure reduced the sense of “responsibility” for others and the rapport between individual and community was broken. This resulted in the concentration of power in a few hands.

British Monarchs introduced legislations against traditional enclosures. In 18th and 19th centuries the focus of government changed and governments committed to improvements.

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Historical Perspective (contd.)

Victorian Philanthropy (Robert Owen): During the late 18th century, the British Government’s Salvation Army tried to solve the problems of the dispossessed. Industrialists formed philosophical societies like Manchester Literary. The issues were relating to parliamentary reforms, education, health, and scientific development. The societies expressed a sense of responsibility towards the community. English civic universities were also started in Manchester, Liverpool, New Castle and Birmingham.

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Historical Perspective (contd.)

The Non-Conformist Challenge in Britain:In Britain, parliamentary reforms were in full swing to eradicate abuses in the factories, mines and homes. The Nonconformists and Utilitarians created opportunities for self-employment and tried to bring changes in personal behavior. As a result, Sunday Schools, Subscription Libraries, Mechanics Institutes, the new civic universities and engineering institutions were started. As a CSR, poor were given guidelines to improve. In early 19th century, self-help was replaced by a no. of movements for political, economic and social reforms.

Robert Owen showed that production could be efficient and responsible (Levers and Cadburys). He was engaged in social welfare activities such as public health, education and prohibition of liquor. He advocated rational principles to economic and social systems to develop the millennium.

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Historical Perspective (contd.)

Progressives in North America: During the early part of 19th century, CSR in North America varied from that of Europe. The perspective of individual, entrepreneurial and corporate responsibility in North America was centered on education. It was an important means to personal advancement. There was close relationship between the early entrepreneurs and educational institutions (Harvard, Yale, Cornell, Princeton, Duke, Columbia) have immensely benefited from these emerging entrepreneurs. At the same time, these entrepreneurs continued their investments in social welfare activities (housing, health).

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Responses in 1930s: After the great depression in 1930, the Roosevelt government in US intervened to solve social and economic problems. Following this, the Scottish Council for development and industry took up the changed responsibilities, which aimed at:-

- Streamlining existing resources that support indl. development and job creation in Scotland

- Supporting government and other remedial action - Encouraging firms to locate in Scotland - Creating a climate for growth and prosperity - Removing myths and misinformation about Scotland and its

economic prospects.Similar initiatives were implemented in Britain. In Europe and

North America, employees depended on philanthropic employers.

Historical Perspective (contd.)

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Historical Perspective (contd.)

Post-War Statism: The end of World War II necessitated re-examination of relationship between industry, the state and community. In Britain, Europe and Japan, many CSR programs were taken up for waging wars against poverty, unemployment and social injustice. As a result of such programs, the US economy experienced strong economic growth in the post war period registering tremendous growth in GDP and so on.

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Of late, it has been identified that CSR is not merely a charity, but much beyond that and is a tool to contribute directly or indirectly to the company’s bottom line and also ensure its long term sustainability.

CSR’s responsibility towards Internal Customers /Employees:

Treating the employees as Assets/Resources Developing Super-Ordinate Goals (making it

possible to match individual goals along with organization’s goals)

Better Job Design Employee Welfare

III. The Changing Face of CSR:Responsibility Towards Employees

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Responsibility Towards Customers:

Better Product Quality Better Service Quality Creation of Awareness Charging Fair Price

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Responsibility Towards Intermediaries:

Assured Returns Sharing the Risk Support and Facilitation Supply Chain Management

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Responsibility Towards Shareholders:

Better Financial Disclosures Adequate Information Protection of Interests Ensuring Return on Investment (ROI)

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Responsibility Towards Society:

Clean Environment Employment Opportunities Mobilizing Society towards Socially Relevant

Causes. Promoting Entrepreneurship

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Responsibility Towards Government:

Zero Tax Evasion Legal Compliance Higher Exports Creation and Maintenance of infrastructure

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Examples of some come Corporates in

India taking ideal CSR initiatives:

Dr. Reddy’s Labs (Livelihood Advancement Business School for under-privileged youngsters)

TVS HLL Wipro Agro-tech Foods Ltd (Sun-drop’s contribution to

heart patient children) Infosys Technologies

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The End