csr

BRAJESH RAWAT | Corporate Social Responsibility 1

INTRODUCTION Corporate social responsibility (CSR)

delineates the relationship between

business and the larger society.

CSR can be defined as a concept whereby companies voluntarily

decide to respect and protect the interest of a broad range of

stakeholders and to contribute to a cleaner environment and a

better society through active interaction.

Corporations have a degree of responsibility not only for the

economic consequences of their activities, but also for the social

and environmental implications.

This is sometimes referred to as a ‘triple bottom line’ approach

that considers the economic, social and environmental aspects of

corporate activity.


NATURE OF CORPORATION

Originally, company has been considered an artificial person.

But with the advent of organic theory, a company is considered a

living organism, is entitled to rights and also liable for duties Law

confers personality to the company and strictly speaking

personality denotes having rights and duties.

In India, the Supreme Court has categorically declared that even

though company is not a citizen, it can claim the protection of

fundamental rights, which are guaranteed under the Constitution

of India

Now, if a corporate entity enjoys rights, it has to bear certain

duties or responsibilities like natural person. Thus, with the

change in the nature of a corporation, its role has also changed.


NEED FOR CSR

1. Reputation management / Goodwill Creation

2. Employee attraction

3. Competition (in general)

4. Investor relations

5. Corporate liabilities /Legal claims

6. Cost efficiency

7. Quality


ROLE OF CORPORATION IN SOCIETY

Corporations are not only a profit churning organizations, the

working of which would be no concern to the society, rather

they are multinational giants affecting the different sectors of

society by their functioning.

Maximization of social welfare should be the legitimate goal of a

company

Present role of corporation Starting company in rural area

o Employing socially handicapped and weaker sections of

community

o Taking interest in work, welfare of employees and their

families including the spread of adult literacy

o Environmental protection

o Consumer’s health, welfare and safety.


SOCIAL RESPONSIBILITY

Social responsibility emphasizes the intimacy of the relationship

between the corporation and society

Means of production of economy should be so employed that it

leads to enhancement of total socio- economic welfare

In every society there are social forces which form the basis of

social responsibility. These forces are as follows:

Social institutions

Labour organizations

Social consciousness

Modern management


CLASSIFICATION OF SOCIAL RESPONSIBILITY

Responsibility towards itself:

o Each corporate entity to do business and stay in the business

has to work towards growth, expansion and stability and

thus earn enough profits.

Responsibility towards shareholders:

o Secure and safeguard the shareholders’ investment and

endeavor to provide a reasonable return on their money.

Responsibility towards State:

o Foremost duty to not indulge in tax evasion practices to

realize fruits of welfare state concept

Responsibility towards consumers:

o It is imperative for every corporate entity to fulfill its

contractual obligations to its customers


DEVELOPMENT OF CSR

Present age is money dominated. Business enterprises are coming

up with new strategies to earn more and more profits.

Globalization led to the opening of the markets and thereby

facilitated in cross-border trades. Centralized mode of production

has given way to a highly decentralized mode of production which

is spread across the world.

Rules of corporate governance have changed. On one hand,

globalization and liberalization have provided a great opportunity

for corporations to be globally competitive by expanding their

production base and market share. On the other hand, the same

situation poses a great challenge to the sustainability and viability

of such mega-businesses, particularly in the context of emerging

discontent against MNCs across the world.

By capping and limiting the unsustainable use of resources, a

healthy environment can be sustained

Threats to sustainability include climate change (despite

improvements in energy efficiency we still burn too much fossil

fuel), increasing scarcity of water, loss and fragmentation of

biodiversity (deforestation continues apace in the tropics), and

buildup of colossal toxic pollutants in the environment


The current wave of interest in CSR differs from the past

experiences

No longer limited to social concerns, SRI now takes environmental

issues into account

Today, social responsibility is no longer the purview of just a

handful of managers concerned with the social or environmental

impact of their firm’s operations. Quite often, it is a part of the

overall business strategy

Upsurge in ‘voluntary initiatives’ associated with codes of

conduct, improvements in environmental management systems,

improved health and safety standards, etc.

Large companies are also participating in so-called ‘multi-

stakeholder initiatives’ and ‘public-private partnerships’ with

NGOs and governmental or multilateral organizations

The United Nations has played an important role in promoting

partnerships with transnational companies (TNCs) through various

arrangements

Criticism: Many CSR initiatives amount to ‘green wash’ and CSR is

a genuine attempt on the part of big business to improve social,

environmental and human rights conditions but the CSR agenda

needs to be broadened and implementation strengthened .


CSR AND ENVIRONMENT

If we consider the corporation to be the ‘public vehicle of society’

and if we take ‘social responsibility’ to imply a broadly-based

responsibility to society, then the responsibility of corporate

executives is to order the priorities of the corporation and set the

managerial balance in line with changing needs of society, while

at all times keeping an eye on the interests of the stakeholders in

corporate management.

This does not imply that social responsibility is the ‘primary

responsibility’ and economic responsibility the ‘secondary

responsibility’. Rather, social responsibility must be recognized as

a concept that encompasses both, and whose aim is to create the

synergetic development of society and the corporation by

harmonizing the two responsibilities on a higher dimension.


BHOPAL GAS DISASTER

The disaster at Union Carbide Corporation (UCC) plant on

December 3, 1984, released 40 tons of poisonous methyl

isocyanate gas (MIC).

The aftermath of the disaster left 15,000 dead, numerous ill, with

a polluted environment that is yet to recover

The victims of the disaster are yet to receive adequate

compensation and medical help from the company

NEED FOR CSR ,Dow Chemicals, which took over UCC in 2001,

from the beginning of takeover, ensured that there were no

outstanding liabilities in relation to the Bhopal disaster

It did not take any responsibility for the tragedy, as well as

cleaning up the site and ground water, medical monitoring,

economic compensation and rehabilitation for the victims

It put entire responsibility on government and freed itself from

taking any legal obligation saying that it wanted to protect the

shareholders’ interest. At the 2003 annual shareholder meeting,

William S Stavropoulos, CEO of Dow Chemicals, stated that the

case of disaster had been resolved in court and thus they are not

liable for it any further.

Having seen the impact of negligence, Bhopal Gas Leak Disaster

(Processing of Claims) Act, 1985 and Environmental Protection

Act, 1986 were enacted

Dow being financially sound should have been more responsible

towards socio, economic and environmental issues. Hence, for

Dow, it was high time to take some positive action and proper CSR

approach towards human rights.


HUMAN RIGHTS AND CSR

Four basic trends can be identified as catalyzers of the new

human rights presence in business discourses and top level

economic forums

FIRST – the controversial process of economic globalization

SECOND – the emerging network society

THIRD – information and knowledge technologies which

create expectations of greater corporate transparency

while fast tracking and multiplying content and information

on these issues in local and global interactions

FOURTH – the emerging risk society by which company

reputation, image and identity are coming under the

scrutiny of certain rising values in a civil society that is

increasingly informed and mobilized on such issues.

Corporations are part of the entire society and human rights focus

on the dignity and worth of the human beings who compose the

society

Human rights form part of international law and corporations are

bound by those laws that are applicable to non-state parties


A current development lies in the area of environmental crimes

and humanitarian law

In the international arena, human rights are often in a state of flux

and satisfactory human rights condition in a country may

deteriorate because of an outbreak of civil conflict or some other

apocalyptic event. The corporation then has to choose whether to

disinvest or risk accusations of collusion with the human rights

violators. Very often the corporation may be a supporter of

international human rights standards and yet be in a nation where

human rights policies are difficult or impossible to implement.


CODES FOR CSR CONDUCT

UN Copenhagen World Summit for Social Development of 1995;

UN World Summit on Sustainable Development, Johannesburg,

2002; ILO’s 1998 Declaration on Fundamental Principles and

Rights at Work Standards; OECD’s Updated Study on International

Trade and Core Labour Standards, 2000 as The International

Organization for Standardization (ISO)

NGOs like Amnesty International, Human Rights First have also

developed standards for the CSR arena

Protect environment

Attain equitable access to education and primary health care

Reduce absolute poverty by a target date

Eliminate forced child labour

Accelerate development of the least developed countries.


CSR INITIATIVES AND EXAMPLES

ANAND CORPORATE SERVICES LIMITED:

Twenty-five years ago, the SNS Foundation, an expression of

Anand’s corporate social responsibility, was born. The

Foundation has created programs in the fields of health,

education, natural resource management and life skills

training, only to make sure that fellow humans could

breathe easy.

INFOSYS TECHNOLOGIES LIMITED:

Infosys promoted, in 1996, the Infosys Foundation as a not-

for-profit trust to which it contributes up to 1% PAT every

year. Additionally, the Education and Research Department

(E&R) at Infosys also works with employee volunteers on

community development projects.

ITC LIMITED:

ITC is engaged in elevating its partnership with the Indian

farmer to a new paradigm by leveraging information

technology through its trailblazing ‘e-Choupal’ initiative. It is

significantly widening its farmer partnerships to embrace a

host of value-adding activities viz. creating livelihoods by


helping poor tribes make their wastelands productive,

investing in rainwater harvesting to bring irrigation to

parched dry lands, empowering rural women by helping

them evolve into entrepreneurs, and providing

infrastructural support to make schools an exciting platform

for village children.

LARSEN & TOUBRO LIMITED:

L&T promotes Construction Vocational Training in India by

establishing a Construction Skills Training Institute (CSTI) at

Manapakkam, Chennai and many other parts which imparts

free of cost basic training in farm work, carpentry, masonry,

plumbing and sanitary, etc.


VIOLATION OF CSR PRINCIPLES

CASE OF COCA COLA IN INDIA

Coca Cola is one of the most recognized brands across the globe.

It ranks among one of the top foreign investors in India

High degree of public protest against the Coca Cola plant at

Plachimada, Kerala got international attention and led to

government intervention for closure of the plant

Plant at Plachimada was alleged to have exploited the ground

water resources leading to drying up of wells and other natural

water resources in the area

Company had to deal with protest from the local community and

environmental conservation groups

Company was also accused of supplying poisonous waste as

fertilizers to the local farmers.

The sludge which was disposed in open ground ran along with rain

water to the natural water resources. Tests also showed that the

water available to the wells was contaminated and unsuitable for

consumption

Added to these were the findings from the Center for Science and

Environment which said that twelve large soft drinks brands

manufactured by Coca Cola and its rival Pepsi, sold in and

around Delhi, contained a cocktail of pesticide residues including


chemicals which can cause cancer and damage the nervous and

reproductive system and also reduce the bone mineral density

The case clearly shows that emerging markets can respond and

protest against the irresponsible behavior of MNCs

The case also shows that emerging markets might have loose laws

which do not protect interests of local population or laws that are

not implemented properly


CONCLUSION

• The role of a successful company is to contribute to national

wealth, generate employment opportunities, promote e-business

and e-commerce, bring transparency in management policies, and

provide open communication and a safe working environment

• India is facing many problems viz. unclear, unpractical and poorly

monitored regulations, poor infrastructure, a complicated tax

system, and too much bureaucracy

• Broad frameworks on corporate governance should be developed

and followed. And further, penalties for non-compliance should

be strictly implemented

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