Corporate social responsibility

CORPORATE SOCIAL RESPONSIBILITYProf. S V K

05/03/2023 Prof.SVK

CSR Definition

The World Business Council for Sustainable Development -

“Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large”

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European Commission - A concept whereby companies decide voluntarily to contribute to a better society and a cleaner environment. A concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis.

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Philippines- “CSR is about capacity building for sustainable livelihoods. It respects cultural differences and finds the business opportunities in building the skills of employees, the community and the government from Ghana, through to CSR is about business giving back to society ”

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 ISO 26000 -“Social responsibility is the responsibility of an organisation for the impacts of its decisions and activities on society and the environment, through transparent and ethical behaviour that:

•Contributes to sustainable development, including the health and the welfare of society•Takes into account the expectations of stakeholders•Is in compliance with applicable law and consistent with international norms of behaviour, and•Is integrated throughout the organization and practised in its relationships.”

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Models of corporate social responsibility

• Classical Economic Model• Socio economic Model• Friedman model• Ackerman Model• Carroll Model• Environmental Integrity & Community Model.• Corporate Citizenship Model.• Stockholders & Stakeholders Model.• New Model of CSR.

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• The Classical Economic Model (Adam Smith)– An “invisible hand” (i.e., the efforts of competing

entrepreneurs) promoted the public welfare when individuals tried to maximize short-run profits in pursuit of their own economic self-interests.• Equates short-run profitability to social responsibility

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• The Socioeconomic Model– Business has an obligation to meet the needs of the

many groups in society besides stockholders in its pursuit of profit.• Stakeholder audit: Systematically identifying all the

parties that could possibly be affected by the company’s performance

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Friedman Model(1962-73)

• A businessmen should perform his duty well, he is performing

a social as well as a moral duty.

• A businessmen has no other social responsibility to perform

except to serve his shareholders & stockholders.

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Ackerman Model (1976)• The model has emphasized on the internal policy goals & their

relation to the CSR.• Four stages involved in CSR.

» Managers of the company get to know the most common social problem & then express a willingness to take a particular project which will solve some social problems.

» Intensive study of the problem by hiring experts & getting their suggestions to make it operational.

» Managers take up the project actively & work hard.

» Evaluating of the project by addressing the issues.

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Contd….

• Six Strategies in the adoption of CSR.• Rejection strategy• Adversary strategy• Resistance strategy• Compliance strategy• Accommodation strategy• Proactive strategy

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Carroll Model(1991)

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Carroll Model(1991)• Philanthropic requirements: Donation, gifts, helping

the poor. It ensure goodwill & social welfare. • Ethical responsibility: Follow moral & ethical values

to deal with all the stakeholders.• Economic responsibility: Maximize the shareholders

value by paying good return.• Legal responsibility: Abiding the laws of the land.

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Environmental Integrity & Community Health Model.

• This model developed by Redman.

• Many corporate in US adopted this model.

• Corporate contribution towards environmental integrity &

human health, there will be greater expansion opportunities.

• Healthy people can work more & earn more.

• CSR is beneficial for the corporate sector.

• CSR in a particular form is welcome.

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Corporate Citizenship Model• To be a corporate citizen, a corporate firm has to satisfy four

conditions:» Consistently satisfactory» Sustainable economic performance» Ethical actions » Behaviour.

• A particular firm’s commitment to corporate citizenship requires the fulfillment of certain social responsibilty.

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Stockholders & Stakeholders Model

1

Productivism

2

Progressivism

3

Philanthropy

4

Ethical Idealism

Self

Duty

Interest

StakeholderModel

Stockholders Model

Moral

ORIENTATION

MO

TIV

ES

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Contd………….• Productvists believe that the only mission of a firm is to

maximize the profit.• Philanthropists who entertain the stockholders. CSR is

dominated by moral obligations & not self-interest.• Progressivists believes the corporate behaviour basically

motivated by self interest & should have ability to transform the society for good.

• Ethical Idealism concern with sharing of corporate profits for humanitarian activities.

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A Sample Stakeholder Audit for Wal-Mart, the World’s Largest Retailer

Prof.SVK

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New Model of CSR

CSR (+) CSR(-)

CSR(-) CSR(-)

Ethical Rooting

Fina

ncia

l Cap

abili

ty

Strong Poor

Stro

ng

Poor

Best Practices of CSR• To set a feasible, Viable & measureable goal.

• Build a long lasting relationship with the community.

• Retain the community core values.

• The impact of the CSR needs to be assessed.

• Reporting the impact.

• Create community awareness.

Need for Corporate Social Responsibility

• To reduce the social cost.• To enhance the performance of employees.• It is a type of investment.• It leads to industrial peace.• It improves the public image.• Can generate more profit.• To provide moral justification.• It satisfies the stakeholders.• Helps to avoid government regulations & control.• Enhance the health by non polluting measures.

Arguments for CSR

• Corporate should have some moral & social obligations to

undertake for the welfare of the society.

• Proper use of resources, capability & competence.

• The expenditure on CSR is a sort of investment.

• Company can avoid many legal complications.

• It create a better impression.

• Corporate should return a part of wealth.

• Fundamental principles of business gets violated.

• It vey expensive for business houses.

• CSR projects will not be successful.

• These are not the special areas of any business.

• CSR is to induce them to steal away the shareholders money.

Arguments against the CSR

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Types of Social Responsibility

1. Responsibility towards Shareholders• To ensure a reasonable rate of return over

time.• To work for the survival & the growth of the

concern.• To build reputation & goodwill of the

company.• To remain transparent & accountable.

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2.Responsibility towards Employee

• To provide a healthy working environment.• To grant regular & fair wages.• To provide welfare services.• To provide training & promotion facilities.• To provide reasonable working standard & norms.• To provide efficient mechanism to redress worker’s

grievances.• Proper recognition of efficiency & hard work.

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3.Responsibility towards consumers

• Supplying socially harmless products.• Supplying the quality, standards, as promised.• Adopt fair pricing.• Provide after sales services.• Maintaining consumer’s grievances cell.

CA 2013 - Applicability

• Section 135 applicable to Companies with - Net worth Rs. 500 crore or more, - Turnover Rs 1000 Crore or more or - Net Profit Rs. 5 Crore or more

during any financial year

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Clause 135, Companies Act, 2013• The CSR provisions within the Act is

applicable to companies with an annual turnover of 1,000 crore INR and more, or a net worth of 500 crore INR and more, or a net profit of 5 crore INR and more..

• It also require companies to set-up a CSR committee consisting of their board members, including at least one independent director.

• The Act encourages companies to spend atleast 2% of their average net profit in the previous three years on CSR activities.

CA 2013 - CSR CommitteeComposition

• At least 3 directors, one of whom should be an independent director

• In a company where appointment of an independent director is not mandatory

• CSR committee of a private company having only two directors can have only two members

• CSR committee would be a committee of the board

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CA 2013 – CSR expenditure

• At least 2% of average net profit of preceding 3 financial years in every financial year

• Average Net Profit shall be calculated as per Section 198 of Companies Act 2013

• It shall not include the net profit of an overseas branch or branches, whether operated as separate company or otherwise

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1. Eradicating Hunger, Poverty and Malnutrition, 2. Promoting Education3. Promoting Gender Equality4. Ensuring Environmental Sustainability5. Protection of National Heritage, Art and Culture 6. Measures For The Benefit of Armed Forces 7. Training to Promote Rural Sports8. Contribution To The Prime Minister’s National Relief Fund 9. Contributions or Funds Provided By Technology Incubators 10. Rural Development Projects

Areas Where The CSR Budget Can Be Spent :

CSR ACTIVITIES IN INDIA

(Source - Study conducted by Ernst & Young and PHD Chamber, published in Global CSR Summit - 2013)

CSR ACTIVITIES IN INDIA

EDUCATIONThe study indicates that providing infrastructure support is the most common activity in the education domain, undertaken by approximately 88% or 44 out of a total of 50 companies.Source - Study conducted by Ernst & Young

CSR ACTIVITIES IN INDIA

HEALTHCAREIn the healthcare domain, organising health camps to offer curative services and raising awareness on health issues are the most common activities implemented by nearly 74% of the companies.

CSR ACTIVITIES IN INDIA

ENVIRONMENTCSR initiatives aimed towards the betterment of the environment include green initiatives such as tree plantationdrives to promote afforestation, as well as efforts to conserve water, and to manage and dispose of waste responsibly. Green initiatives garner the highest attention with 76% of all companies undertaking specific initiatives to improve the environment and approximately 64% taking measures to conserve water.

CSR ACTIVITIES IN INDIA

RURAL DEVELOPMENTIn rural development, 68% of companies have been working towards betterment of rural areas by providing infrastructure support.

Key Players of India

Source-economic times

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Mahindra & Mahindra• Focus on the girl child, youth and farmers through programmes in the domains of

education, public health and environment. • Mahindra Pride Schools provide livelihood training to youth from socially and

economically disadvantaged communities and have trained over 13,000 youth in Pune, Chennai, Patna, Chandigarh and Srinagar. 

• There's Project Hariyali, which has planted 7.9 million trees till date, including four million trees in the tribal belt of Araku Valley. M&M has constructed 4,340 toilets in 1,171 locations across 11 states and 104 districts specifically for girls in government schools as part of Swachh Bharat Swachh Vidyalaya. 

• Expenditure on CSR in the last fiscal was Rs 83.24 crore — 2% of PAT. Set up by Anand Mahindra in 1996, Project Nanhi Kali supports the education of over 11 lakh underprivileged girls in ten states, providing material support (uniforms, bags, notebooks, shoes and socks) and academic support (workbooks, study classes). The key outcomes of the project include an increase in both enrolment of girls in schools and curtailing dropouts to less than 10%. 

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Tata Power• Key CSR Areas: Education, environment, community development, health, safety,

security, resource and energy conservation, women empowerment, skill development and livelihood generation. 

Tata Steel • Key CSR Areas: Education, healthcare, facilitation of empowerment and

sustainable livelihood opportunities, preservation of ethnicity and culture of indigenous communities and sports. Initiatives run across ten districts in Jharkhand, Odisha and Chhattisgarh, covering nearly 500 core villages. 

L&T• Key CSR Areas: Water and sanitation, education, healthcare and skill building.

L&T partners with local governments on health programmes focused on reproductive health, tuberculosis & leprosy control, integrated counselling & testing centres for HIV/ AIDS. L&T's community health centres are located at Mumbai, Thane, Ahmednagar, Hazira, Vadodara, Coimbatore, Chennai, Lonavala and Kansbahal. 

Tata ChemicalsKey CSR Areas: Focused on sustainable community development and preserving the ecosystem. 

“We generate wealth for the people. What comes from the people must, to the extent possible, therefore get back to the people.” - J R D Tata