UNIT – 4
Corporate Social Responsibility (CSR)
Corporate social responsibility (CSR) is a business model of self-regulation that helps a business to be socially accountable to itself, its stakeholders, and the public. Companies can be aware of the kind of impact they have on all aspects of society, including economic, social and environmental aspects, by practicing corporate social responsibility, also called corporate citizenship.
Participating in CSR means that a company operates in ways that improve society and the environment in the ordinary course of business, instead of contributing negatively to them.
Understanding Social Corporate Responsibility (CSR).
Corporate social responsibility is a broad concept which, depending on the company and industry, can take many forms. Businesses can benefit society through CSR programs, philanthropy, and voluntary efforts while boosting their brands.
It is equally valuable for a business, as important as CSR is for the community. CSR activities can help build a stronger employee-corporate bond, boost morale, and help both employees and employers feel more connected to the world around them.
- For both consumers and businesses, corporate social responsibility is significant.
- In many aspects of its business, Starbucks is a leader in creating corporate social responsibility programs.
- Corporate responsibility programs are a great way for the workplace to raise morale.
4.1.1 Evolution of CSR
India has the world's richest corporate social responsibility tradition (CSR). The term CSR may be relatively new to India, but the idea dates back to the history of Maurya, where philosophers such as Kautilya emphasized ethical practices and values while conducting business. In ancient times, CSR was informally practiced in the form of charity for the poor and disadvantaged. In several places, Indian scriptures have mentioned the importance of sharing one's earnings with the deprived portion of society. We have a culture of sharing and caring that is deeply rooted.
In promoting the notion of CSR, religion also played a major role. Islam had a law called Zakaat, which rules that in the form of donations, a portion of one's earnings must be shared with the poor. Merchants of the Hindu faith gave alms, made temples and night shelters for the poorer class. Hindus followed Dharmada where a particular amount from the buyer, which was used for charity, was charged by the manufacturer or seller.
The amount was known as the amount of charity, or Dharmada. Sikhs followed Daashaant in the same fashion.
Here, we can understand that India's history of CSR runs parallel to India's historical development. In stages such as community engagement, socially responsible production, and socially responsible employee relations, CSR has developed. The history of Corporate Social Responsibility in India can therefore be divided broadly into four stages:
The first phase of CSR was driven by philanthropists' noble deeds and charity. It has been affected, along with industrialization, by family values, traditions, culture and religion. Until 1850, by setting up temples or religious institutions, wealthy businessmen shared their wealth with society.
They opened their granaries for the poor and the hungry in times of famine. With the arrival of colonial rule in 1850, the approach towards CSR changed. The pioneers or propagators of industrialization also supported the concept of CSR in the pre-independence era. In the 1900s, by setting up charitable foundations, educational and healthcare institutions, and trusts for community development, industrialist families such as Tatas, Birlas, Modis, Godrej, Bajajs and Singhanias promoted this notion. It may also be interesting to note that political motives were also driving their efforts for social benefit.
The second stage was the period of struggle for independence, when the industrialists were pressured to demonstrate their dedication to the benefit of society. For the benefit of the underprivileged section of society, Mahatma Gandhi urged powerful industrialists to share their wealth. He introduced the notion of trusteeship. This notion of trusteeship has helped India's socio-economic growth. The Indian companies and industries were considered "Temples of Modern India" by Gandhi. In order to build trusts for colleges, research and training institutions, he influenced the industrialists and company houses.
These trusts also worked to enhance social reforms like rural development, women empowerment and education. CSR was influenced by the emergence of public sector undertakings to ensure the proper distribution of wealth in the third phase from 1960-1980. Corporate malpractice has resulted from industrial licensing policies, high taxes and private sector restrictions. This resulted in legislation being enacted concerning corporate governance, labor and environmental issues.
The PSUs still didn't succeed very well. A natural shift in expectations from the public to the private sector and their active participation in socio-economic growth has therefore occurred. A national CSR workshop was established in 1965 by academics, politicians and businessmen, where great emphasis was placed on social responsibility and transparency.
In the fourth phase, Indian companies integrated CSR into a sustainable business strategy from 1980 onwards. The country's economic growth boomed with globalization and economic liberalization in the 1990s, and with the partial withdrawal of controls and licensing systems. This has led to an increased momentum in industrial growth, allowing companies to make a greater contribution to social responsibility. What began as charity is now understood and accepted as accountability.
In the current Indian scenario, the new Companies Act, amended in December 2012, requires companies to spend 2% of their average net profits on CSR over the last three financial years. This applies to undertakings with a turnover of 1000 Cr/ PAT of 5 Cr/ or a net value of 500 Cr. The new bill replaces the 1956 Companies Act and stresses the promotion of the Corporate Social Responsibility agenda.
4.1.2 Types of Social Responsibility
1. Environmental responsibility
Initiatives in the field of environmental responsibility aim to reduce pollution and greenhouse gas emissions and to make sustainable use of natural resources.
2. Human rights responsibility
Initiatives for human rights accountability include providing fair labor practices (e.g. equal pay for equal work) and fair trade practices, and disavowing child labor.
3. Philanthropic responsibility
Things such as funding educational programs, supporting health initiatives, donating to causes, and supporting community beautification projects can be part of philanthropic accountability.
4. Economic responsibility
Economic responsibility initiatives include improving the business operation of the company while engaging in sustainable practices, such as using a new production method to minimize waste.
Key Takeaways:
- Corporate social responsibility (CSR) is a business model of self-regulation that helps a business to be socially accountable to itself, its stakeholders, and the public
- Corporate social responsibility is a broad concept which, depending on the company and industry, can take many forms.
- Businesses can benefit society through CSR programs, philanthropy, and voluntary efforts while boosting their brands
- Corporate social responsibility is a broad concept which, depending on the company and industry, can take many forms. Businesses can benefit society through CSR programs, philanthropy, and voluntary efforts while boosting their brands.
The idea of sustainable development emerged from the debate on environmental protection and was set up at the 1992 UN Earth Summit in Rio de Janeiro at the political level as a guiding principle for society as a whole.
Sustainable development is, “a form of development that meets the needs of the present without compromising the ability of future generations to meet their own needs”
While these terms are very often used interchangeably, few philanthropic acts such as donation, establishment of educational facilities, health services, etc. are normally used in the name of CSR, and a part of the profit is used for that. But charity is not CSR; sustainability is not charity. Sustainability implies that business must be carried out in a sustainable and profitable manner, rather than creating undue pressure.
In recent years, the term corporate citizenship has also come into widespread use in relation to corporate social obligations. In the German business community, this term is becoming popular and is often inaccurately used as a synonym for CSR. There are in fact significant differences between the two ideas. Corporate citizenship refers to the commitment of a company to address societal problems beyond and beyond its own business activities and is usually limited to the local environment of the company. Typical examples of corporate citizenship include donation and sponsorship (corporate donation), the creation of benevolent corporate institutions (corporate foundations) and the direct involvement of corporate employees (corporate volunteering) in social projects and undertakings [MUTZ 2003]. In its scope, the concept of CSR is much broader: it encompasses the company's fundamental responsibilities and all its contributions to sustainability, irrespective of whether the activities concerned are part of its ordinary business activities or are outside of them.
In its scope, the concept of CSR is much broader: it encompasses the company's fundamental responsibilities and all its contributions to sustainability, irrespective of whether the activities concerned are part of its ordinary business activities or are outside of them.
There are some terms in the world of CSR that get confused often. When they are in fact different ideologies, Corporate Social Responsibility and Corporate Governance (CG) are often used interchangeably. The concept of governance has existed since the start of corporations, but until the late 20th century, the phrase itself did not appear in financial literature. It has gained popularity only in the last 10 years, because it is often used in conjunction with or instead of CSR.
To put it a little clearly: in the course of defining CSR, CG is, but not really, an essential part of it. Good governance, corporate or otherwise, rather than rules, is about values. CSR is how, in a corporate environment, those values manifest themselves. The need for CSR is often negated by having a good concept of CG. CSR is easy to fake in more practical terms, and governance is not.
Good governance is important for corporate performance to be viable. This is where stewardship, which is another sentence that further confuses CSR, fits in. Organizational leadership is concerned with management, which is essentially proper resource management, financial, social, environmental, etcFurthermore, the concept of sustainability grapples with those resources which are externally located in relation to the company, specifically environmental resources. Sustainability is the stewardship branch that maximizes resource potential as well as keeps an organization focused on the future by ensuring that future business activities are not constrained by the current use of resources.
Where is CSR coming in, then? Three basic activities are included in CSR: sustainability, accountability and transparency. CSR is also the physical manifestation of CG, and as organizations mature in their attitude towards stakeholders, some allowances for developmental changes must therefore be given. CG's updated idea is more aligned with CSR and emphasizes corporate ethics, accountability, reporting and disclosure. The root cause of confusion, which is not merely semantics, is the increase in areas of overlap between the two concepts.
Risks taken with CSR can have a financial impact on a business, but because of the fact that it would have fewer PR holes, a business with strong CG principles can bounce back faster from these lapses. By defining governance as part of investor relationships and CSR as part of stakeholder relationships, some businesses make a distinction. As part of risk management, others think of CSR. It may not always be so clear-cut, however. The understanding of CG and CSR is hampered by important global issues and better multi-national cooperation will ensure that codes of agreement exist that would create a distinction between the two.
In particular, with global supply chains and multi-stakeholder business models, CSR is in itself a complex regulatory process. In fact, there are very few CG and CSR practices that don't overlap and one drives the other often. There is this idea that CG is a precursor to CSR that not only allows but also encapsulates CSR performance. CSR and CG are often values that converge at a governance level that often requires reclassification of business ethics boundaries. CSR itself will play a more important role in corporate boardrooms, as these points are renegotiated.
1. Better Public Image:
To secure more clients, better employees and higher profit, each company must enhance its public image. Acceptance of the objectives of social responsibility leads to an enhanced public image.
2. Conversion of Resistances into Resources:
If business' innovative capacity is turned to social problems, many resistances can be transformed into resources, and many times the functional capacity of resources
can be enhanced.
3. Long Term Business Interest:
A better society would create a better environment in which profit can be maximized for the company in the long term. A firm that is sensitive to community needs would like to have a better community to conduct its business in its own self-interest. It would implement social programs for social welfare in order to achieve this.
4. Avoiding Government Intervention:
Regulation and control, both in terms of money and energy, are expensive for businesses and limit their decision-making flexibility. Failure to assume social responsibilities by businessmen encourages government to intervene and regulate their activities or control them. The prudent course for business is to understand the threshold of its power and how to use that power carefully and responsibly to prevent government intervention.
I. A Thriving Economy in a Democratic Society
Three primary components are dependent on democratic societies with thriving economies: free enterprise, the rule of law, and individual initiative. In such a way that the lack of one greatly hinders the efficacy of the others, these three conceptual components are interrelated. Political freedom begets economic freedom, and vice versa. In order for free enterprise to exist, the rule of law must establish and protect individual citizens' rights to own private property and to use that property in accordance with the will of each individual. If the rule of law fails to secure individual rights, free enterprise's integrity is undermined and one's self-reliance, along with the innovation and virtues involved, is threatened. It is difficult to imagine how political freedom or civil liberties can be meaningfully exercised when personal choice, voluntary exchange, and the protection of private property are not secure. It is therefore of paramount importance that companies engaging in CSR practices do so in accordance with and for the benefit of these three main components.
Any company looking to implement a CSR model would benefit from incorporating practices that use and promote the three main components of a successful democratic, free market society.
II. Three Essential Organizations of a Successful Community
There are three key but separate organizations that make up a successful community: government, business, and non-profit organizations (NPOs). Each serves a unique purpose that complements the roles of the other two in the community, enabling each to function as effectively as possible to achieve their respective goals without submitting to a single, centralized authority the entire workings of society, as is the case in totalitarian states. Although each sector operates as a separate entity from the others, they operate together within a community to maximize the effective potential of each one.
NPOs are entities whose objective is to promote social causes and affect the quality of a community's life through the organization, promotion and/or financing of education, healthcare, the arts, youth activities, etc. Although many NPOs often operate like companies, their non-profit status shows that their purpose is not consigned to market rules or restricted by the duty to raise shareholder value. Without endangering the political or economic stability of a community, NPOs can act in non-market and non-governmental capacities.
To meet the most basic needs of community members, these three components of a community work together. Where one is unable to function without inefficient or unfair overreach, another is able to step in to ensure that the void in the welfare of the community is filled. The government works to protect people's freedoms. In order to create jobs and stimulate the economy, for-profit companies work. NPOs work to meet the community's needs that arise outside the other two's immediate purview.
Therefore, all CSR practices implemented by a company must not impede the role of the company in maintaining the community's tripartite equilibrium, or else the company runs the risk of undermining the welfare of the market or the community.
III. Communal Retention and Relocation
Having a vibrant, multigenerational population that is involved in social activities and community construction is the key to a thriving community. The community must be able to attract individuals to the community and retain those already living there for communities that plan to grow economically. While the foundation of every community is formed by the three essential organizations of a successful community, there are other elements of communal living that determine whether people consider moving to or staying in a community. People want to know, for example, what activities, organizations, educational institutions, cultural experiences, and social groups are offered by a community.
People want to know what educational and recreational opportunities are available to their children and what adults can do with spouses/partners, families, and friends for enjoyment. There is a greater chance that fewer people will move to the community if a community fails to provide social and leisure activities and that the community will be unable to retain those members of the community who already live there. It would therefore be prudent for companies to consider investing in the community by contributing as part of their CSR practices to these types of activities and organizations, because doing so will yield a good return on investment by attracting more people to the community and retaining those who already live there. In this way, companies can implement CSR without compromising their primary role as an economic actor and job creator, a practice known as 'strategic CSR,' to promote social goods in their best interest.
IV. Human Rights and Social Responsibility
The cornerstone of developed democracies and marketplace operations is human rights. Without a rule of law that protects the rights of the individual, a society can not have free enterprise in which people contribute to the common good through innovation and job creation by means of individual initiative. This is why the rights of others must be respected by all members of society, including corporations. The inalienable nature of human rights, particularly in CSR, should therefore be observed in all government and business practices.
However, human rights advocacy need not be antithetical to the market performance of a company. In accordance with the principles of supply and demand, the principles of equal opportunity and remuneration in the marketplace are proportionate to the contributions of each actor. This implies that the principle of equality that is functioning in the corporate sphere implies that players receive equal pay for equal work and equal opportunities for equal skills; it does not imply that each player has the same opportunities as each other or that each player will be compensated equally for each individual contribution to the corporate activities. But Lynch is correct in pointing out that in all business operations there is certainly both private and public interest in protecting human rights, it is simply a matter of understanding the proper way to frame those rights according to each sphere of society. A human rights concern should be included in the object of a CSR model.
V. Meeting the Needs of the Common Good
For democratic societies, discourse about the common good is important because it provides a framework for considering the relationship between private and communal interests. Classical Greek philosophers such as Plato and Aristotle argued that the common good, which for them primarily involved justice and security, must be sought by a successful society. Hamilton, Madison, and Jay even cited the "public good" along with "private rights" in the Federalist Papers, both of which are undoubtedly intertwined, as the central motivators for ratifying the United States' new Constitution. For a community, the concept of the common good serves as a lynchpin; it unifies the community in the joint pursuit of some goal that the community considers to be essential to the whole and to the well-being of its individual members.
VI. The Constituency of a Community
Corporations must take into account their constituency or community stakeholders, comprised of children, adults, and the elderly, when implementing CSR practices. In order to contribute to the community, each age group has its own needs, interests and abilities. Adjusting the scope of CSR practices to include individuals at different stages of life enables a business to indiscriminately meet the needs of each constituent group. CSR practices that neglect one or more of these groups would have a negative effect on the whole community, because a lack of concern for or the trust of one generation will, in the long run, affect the others.
VII. Community Service as an Investment
Possible CSR practices could include: helping to create a better community to attract more people to the community; helping to create a better pool of employees in the educational system; helping communities to have better social and athletic programs for children to make the community more attractive by improving the quality of life for both children and their families.
VIII. The Benefits of CSR to a Corporation
By taking a holistic approach that maximizes returns by calculating non-market externalities when implementing business practices, CSR practices function as investments that benefit companies in the long term. Corporations try to realize possible non-market returns, which are often overlooked but have previously unseen market value, by taking non-market externalities into account. Businesses that incorporate CSR practices into their business models do so because they recognize that their assets and market values rely on social goods outside the market forecast and that those who implement them benefit from smart CSR practices. The following are two primary ways that a corporation benefits from CSR.
First, by engaging and capitalizing on social resources that short-term investments have not used, CSR creates an improved marketplace that allows for growth, increased profits, and maximized opportunities for business success. For example, a UNESCO report found that a corporation can contribute to the eradication of poverty by investing in a community's educational and cultural opportunities, particularly targeting children in low-income neighborhoods, and a decrease in poverty is good for business because it strengthens the economy and increases society's purchasing power by creating more consumers and investors.
Ultimately, as human needs are met and aspirations grow, a healthy economy creates an increasing demand for business, but this requires the private sector to invest capital in a socially responsible way. But if companies pursue their own goals at the expense of the society in which they operate, they will find that their performance is temporary and potentially harmful to stakeholders or the overall health of the economy, because companies engaged in questionable practices are not sustainable in the long term, particularly within a society that closely monitors and scrutinizes business practices.
Second, CSR creates different possibilities for a better quality of life, which is a fundamental objective for most individuals. Businesses that promote CSR practices contribute to the effort of a community to ensure that individuals can attain the highest possible standard of living for themselves, their families, and their friends. In this way, CSR is a marketing strategy for public relations that promotes a positive public image and makes employees proud to work for an upstanding company that generates loyalty from the community and employees to the organization. This attracts quality people, decreases the turnover of employees, and motivates the organization to have a greater purpose. It also promotes continuous learning and self-fulfillment for employees, which helps to keep employees sharp, involved, and happy, all of which are good for productivity. This is important because productivity contributes to business success, business performance stimulates strong economic growth, and strong economic growth gives people the leisure they need to engage in democratic d free-market activities.
Key Takeaways:
- Sustainable development is, “a form of development that meets the needs of the present without compromising the ability of future generations to meet their own needs”
- Three primary components are dependent on democratic societies with thriving economies: free enterprise, the rule of law, and individual initiative.
- Any company looking to implement a CSR model would benefit from incorporating practices that use and promote the three main components of a successful democratic, free market society.
- Local social license to operate: Discussions on the environmental and social impacts of developments in natural gas in the United States, labor and community unrest in Africa and Central Asia, and the growing application of the principles of free, prior and informed consent (FPIC) in engagement with indigenous peoples are just some of the headlines in 2012 that highlighted the growing importance of social licensing to operate as a trade. Quantitative evidence now confirms what many have known or suspected for a long time: capital project delays are significant and more common than many other technical or commercial factors due to "above-ground" or non-technical risk issues. Given this, the most successful companies will be those with realistic timelines for capital projects and operating budgets that account for robust strategies for community engagement based on building trust and partnership with communities.
2. Integration of CSR into mainstream business: While we are seeing greater awareness of CSR among the industry's leading businesses, many businesses remain on the periphery. In particular, there is still a lag in the business processes and systems needed to manage the complexities of social and environmental performance, specifically coordination across environmental impact functions, legal issues, procurement, HR, government relations, and community affairs. Looking ahead, it will be critical for successful capital project development and implementation to fully integrate CSR into business strategy, functions, and operations by international and national/local companies alike. This involves robust management systems that draw on industry-leading practices and the deployment of professionals who recognize the intersection of business priorities and social expectations.
3. Collaborative approaches to cumulative sustainability impacts: As well as the combined activities of other industries such as agriculture and manufacturing, the cumulative environmental and social impacts of mining and energy projects are leading policymakers and many businesses to think differently about their contributions to sustainable development. There are significant opportunities for companies to partner with governments and civil society in 2013, ranging from air quality and carbon emissions to the demands on biodiversity, climate adaptation and land and water use. In order to smooth the "boom and bust" cycles of energy or mining activity that can significantly impact local employment and business, tax revenues, and real estate swings, it is also important for businesses to consider partnering with local government.
4. Changing expectations about human rights issues: The large-scale projects of the energy and mining industries have significant physical and economic impacts on host nations, often affecting entire national economies as well as localized individual communities. In view of this, as well as the social, economic and political stakes associated with these projects, it is important for businesses to consider human rights, not only to mitigate downside risks (such as preventing security forces abuses), but also to improve programming for social investment and the corresponding provision of local benefits that help businesses secure and maintain social licenses. Company management, staff and contractors, government officials, local communities, and civil society need to be involved in considering these aspects of human rights. A useful framework is provided by the Guiding Principles on Business and Human Rights. Focusing on integrating human rights into due diligence approaches to proactively identify and address issues will be standard practice for businesses this year.
5. Local content and growing demands for benefit sharing: Through legislation and regulations, hard and soft fiscal assertiveness, prohibitions on foreign takeovers, and export taxes, countries continue to look for opportunities to capture a greater proportion of the benefits of resource extraction. While this pressure for the oil and gas sector is not new, regulatory emphasis is now increasing in the mining sector, which has seen a number of governments, ranging from Ghana to Indonesia, put in place strong provisions on local content. Company responses to these pressures will not only affect business strategies and host government relationships, but will also affect the results of social licensing.
6. Accountability and responsibility for social and environmental performance in the supply chain: The CSR performance of suppliers can have a significant impact on their customers' operational, reputational, and financial success. Companies are under more pressure than ever to implement practices that promote transparency, prevent corruption, advance environmental sustainability, protect human rights, and facilitate supply chain goals for "local content." In response, more businesses are struggling with how to set clear expectations, develop assurance mechanisms, and manage their supply chain by balancing cost implications. While this will lead to contract amendments and new monitoring, oversight and reporting procedures, greater coordination between the customer and the supplier will be needed to achieve the intended results and benefits.
7. Evolving NGO agendas and relations with business: We've seen the number and types of NGOs flourish over the last few years. NGOs are not a homogeneous group, ranging from collaborators to critics, and many work with hybrid strategies, whereby individual companies are friends and enemies on different issues or across distinct geographies. We expect the NGO landscape to continue its evolution in the years ahead with new problems, organizational models, and modes of operation, especially as NGOs respond to their own stakeholder pressures for greater accountability in governance, impact, and transparency. With these changes, businesses will need to reconsider their relationships with NGOs and look for constructive ways to find common ground as businesses push into new geographies.
8. Balancing the competition for water resources: Climate change and population growth are putting increasing pressure, especially in developing countries, on the global supply of water. With limited supply and higher demand from water-intensive industries such as mining, oil sands and the development of natural gas, concerns about water resource competition are likely to increase and become a source of friction for communities and industries, such as large-scale agricultural projects. Leading companies have already started investing in innovative solutions for sustainable management of water and expect to see more investment in this area in the near future.
9. Labor relations and regaining worker trust: In South Africa, Kazakhstan, and Indonesia, among other countries, a series of violent confrontations have brought labor issues to the fore for multinational companies, labor unions, and their local partners. Among mining and oil and gas companies, employees and, perhaps more significantly, contract workers, particularly in countries with poor governance and weak protection of workers' rights, have begun to demand better pay and working conditions. Companies will find it increasingly important to review and improve their labor management practices, as well as those of their suppliers and business partners, beginning in 2013.
10. Revenue transparency and corporate and government accountability: In many resource-rich nations, corruption and lack of government accountability are considered the largest barriers to growth. Over the past year, both in the U.K. In terms of revenue transparency for the energy and mining industries, U.S. governments and U.S. governments have strengthened requirements (U.K. Anti-Bribery Act and U.S. Dodd-Frank Act). While there are different views on the effectiveness of regulatory and voluntary mechanisms, both NGOs and businesses agree that greater transparency is necessary to hold essential services such as clean water, health care and education accountable to the authorities. Companies see support for multi-stakeholder initiatives such as the Transparency Initiative for the Extractive Industry as critical for moving forward. Transparency will remain a critical item on the business and sustainability agenda for 2013.
Key Takeaways:
- Quantitative evidence now confirms what many have known or suspected for a long time: capital project delays are significant and more common than many other technical or commercial factors due to "above-ground" or non-technical risk issues
- There are significant opportunities for companies to partner with governments and civil society in 2013, ranging from air quality and carbon emissions to the demands on biodiversity, climate adaptation and land and water use
- Climate change and population growth are putting increasing pressure, especially in developing countries, on the global supply of water
- Companies will find it increasingly important to review and improve their labor management practices, as well as those of their suppliers and business partners, beginning in 2013.
Business is a socio-economic activity and draws its input from society, so the welfare of society should be its goal. It should be responsible for solving many social issues. In the present age of increasing technological, economic, cultural and social awareness, accounting must not only fulfill its function of stewardship for the company's owners, but also perform its social function.
In order to fulfill their social duties, changing environments and social parameters have forced business enterprises to account for and report information. The boundaries of conventional accounting principles, practices and skills have been extended to the areas of social disclosure and certification with regard to social program measures.
As a result of high-level industrialization that has brought prosperity as well as many problems to society, the concept of 'social accounting' has gained significance. The corporate sector, with enormous amounts of funds at its disposal, was forced to invest significant amounts in social activities in order to nullify the adverse effects of industrialization. "In modern times, accounting efforts have been extended not to the satisfaction of any individual or group, but to the assessment of the state of society and social programs, but to the application of evaluative procedures in the allocation of resources towards better social well-being as a whole."
The study and analysis of the accounting practice of those activities of an organization is concerned with social accounting. The concept of society's socialist pattern, civil rights movements, environmental protection and environmental conservation groups, raising society's awareness of corporate social contribution, etc. They have contributed to Social Accounting's increasing importance.
The objective of Social Accounting, also known as Accounting for Social Responsibility, Socio-Economic Accounting, Social Reporting and Social Audit, is to measure and inform the general public about the social welfare activities carried out by the enterprise and their impacts on society.
On 6 key dimensions, viz., the framework assesses maturity.
1. Governance, Oversight and Communication
2. Strategic Direction
3. Implementation, Review Mechanism & Performance Measurement
4. Human Resources
5. Volunteering
6. Results
On each of the dimensions, the maturity is assessed by seeking information on some key aspects. Based on the responses received for the questions, a maturity level is assigned ranging from 1 to 5. 1 indicates the absence of a process, practice or initiative and 5 indicates the most mature state to be reached by each business.
Formation of the evaluation team
- This assessment team could include employees from CSR, Strategy, HR, and Legal, Marketing, Operations and Procurement / Supply Chain teams.
- The team could even have external representation in the form of development sector experts or non-profit partners' representatives.
- In a one-day debate or workshop, this team can then collectively go through the framework to fully understand the various dimensions of the framework and the rating criteria.
- For the discussion / workshop, a TSG team member may be invited.
- The team should collectively arrive at a common understanding, which should be formally recorded in the assessment document, under assumptions, whenever there are areas of ambiguity about application or interpretation.
Application of framework
- Once the team has developed a common understanding of the framework administration, it is possible to divide the team into 2 or 3 sub-groups, with each group undertaking the evaluation by applying the framework at the level of the company.
- The groups should go through the documentation available on the strategy and projects for CSR.
- In order to better understand the projects, systems and processes on the ground, groups may also choose to visit certain projects.
- The team could go together wherever the groups are required to meet certain teams/functions/colleagues to search for inputs for the evaluation.
- The sub-groups should maintain separate ratings, however.
Arriving at a maturity rating for the company
- Once the evaluation exercise is completed by all sub-groups, they must meet together to discuss the ratings for each dimension and arrive at a final rating unanimously.
- The sub-groups should present their rationale for the rating given by them if there is a significant difference in the ratings.
- The team should then reach a common rating collaboratively, acceptable to all sub-groups.
The most frequent rating of 1 to 5 can be used as a broad indication of the company's overall maturity. It is possible to interpret the overall maturity level for the firm as follows:
Level 1: The Company focuses on business only and takes steps to increase
Gains, sometimes even at the expense of society and the environment. This actively makes it
Withstands regulation & other CSR pressures.
Level 2: By obeying the law and applicable law, the Company manages its liabilities
Regulations, but CSR is regarded as an expense to be minimized. The organization
It does not have a true vision of CSR and carries out ad-hoc activities to meet
Minimum industry standards / expectations of the community.
Level 3: The Company understands the need to be socially responsible and takes action
To act responsibly towards its immediate environment and community.
Level 4: The Company believes that CSR can contribute to the development of shared value and undertakes
Aligned to core competencies, strategic CSR
Level 5: The Company is driven by a passionate dedication to improving the business.
Society and surroundings. CSR is regarded as a core function of the company's
Business activities. The Company may even change its own in some instances,
Business model for addressing social and environmental problems and meeting requirements
The bottom part of the pyramid.
CSR Vision: A broad company vision that guides every CSR activity undertaken by them. For example, the CSR vision of the Aditya Birla Group is "To actively contribute to the social and economic development of the communities we operate in." Build a better, sustainable way of life for the weaker sections of society and increase the human development index of the country by doing so.
CSR Strategy: The overall strategic goal of the organization is the CSR strategy, detailing what it wants to accomplish through its CSR and the approach it will take to achieve the same. It is a guiding document that is constantly evolving through its CSR journey, based on changing the company's internal and external environment and learning. For Indian businesses, the 'CSR policy' required to be established in accordance with Section 135 of the Companies' Act, 2013 would be broadly aligned with the CSR strategy. While the CSR policy may be an annual document (or may have a component updated annually in the form of the annual plan), there is a 3-5 year time frame for a CSR strategy.
Focus areas of CSR: Focus areas are the broad themes that a company identifies as part of the development of its CSR strategy and undertakes CSR in areas such as education, health, the environment, etc. For Indian companies, a list of activities specified in Schedule VII of Section 135 may be mapped to the focus areas. A company may have one or more CSR initiatives (programs/projects/interventions, etc.) within each focus area, which are defined with the help of a target community & geography, specific objectives and KPIs.
Target communities & geographies: The intended beneficiaries of the CSR initiative are the target communities.
Could be target communities
1) Gender-based: women, kids, etc.
2) Tribals, religious minorities, etc.-Identity-based
3) Based on the age group: infants, school children, adults, etc.
4) Farmers, commercial sex workers, rag pickers, etc., based on occupation.
5) Disability- Visually challenged, impaired hearing, etc.
6) Any other basis-displaced individuals, migrants, etc.
Geographies define where, based on a rationale, the CSR initiative and / or the target communities will be located.
Goals: Each CSR initiative under a focus area is defined by a goal. A goal clearly states the purpose of the CSR initiative and by when is it to be achieved.
Examples of goals can be
- XX number of young people have a job or have set up their own company by the year YYYYYYYYY.
- All anganwadis will be fully functional by the year YYYYY in 3 blocks of District xxxx.
- XX% of the target area's small farmers will see increased productivity by at least PP percent by year YYYYY.
KPIs: KPIs or key performance indicators are indicators tracked to evaluate the achievement of the objectives
1)Skill Development: number of people trained, number of people, percent of women, percent of people with disabilities, etc.
2)"Early childcare & education: number of covered anganwadis, number of fully functional anganwadis (need to describe what "fully functional" means), etc.
3) Agriculture: number of small landholders based and covered by the program, increase in productivity, etc.
The Committee (1978) examined the social responsibilities of companies, among other things. Every company apart from being able to justify itself on the test of economic viability will have to pass the test of a socially responsible entity.
In this context, different tests depending on the circumstances in each company and in each area will be judged.
Therefore, a chemical company that can declare a very high dividend may still be liable for water and air pollution and would have to be designated as a socially irresponsible company.
Similarly, it would certainly be regarded as an irresponsible act to discharge waste from factories resulting in the loss of fish and thus depriving a large number of fishermen of their livelihood as well as posing a risk to those eating fish. No company can disown its social responsibility these days.
The committee favored "openness in corporate affairs" in order to ensure responsible behaviour, i.e. adequate disclosure of information for the benefit of shareholders, creditors, workers and the community.
It suggested that the social cost-benefit analysis, which was one of the primary considerations for public sector investment decisions, should be taken into account when it comes to private sector investment.
Public sector accountability to individuals through Parliament must find its parallel in the private sector in the form of social accountability, at least to the extent that it informs the public of the extent and manner in which, in the course of its own economic operations, it has or has not been able to fulfill its social obligations.
It is in this sense that, as far as the private sector is concerned, corporate social responsibility is social responsibility and is merely an extension of the public disclosure principle to which corporations must be subject.
1. Most of the country's population lives in rural areas and their well-being is essential. A business that consciously and intentionally establishes its business in such areas will certainly be held to have played a more socially responsible role, even if it is less profitable than other businesses in terms of its returns on investment.
2. Social responsiveness may also be judged from the policy of employment followed by a company so far as the socially handicapped and the weaker sections of the community are concerned.
3. The test to assess a company's awareness of the public's interests may include: the interest it plays in the area of its operation, the well-being of its staff, the spread of adult literacy, and so on.
4. Each year, it should be mandatory for a company to provide a social report demonstrating to what extent it has been able to fulfill its social obligations.
5. While quantifying the contribution that a company claims to have made to social obligations, the social report should specify that neither the directors or their relatives, nor any association in which the directors and their relatives have any personal interest, received any part of the benefit from the contribution made by the company.
6. The Companies Act should be amended appropriately, requiring each company to provide a social report together with the director's report, indicating and quantifying the various activities carried out by a company in the previous year related to social responsibilities.
In 1980, TISCO invited a team of eminent individuals to carry out a "social audit" of their organization and published the findings in the form of a report.
It is not worthy of an estimated Rs. 400 crores being spent annually on corporate philanthropy in India by corporate organizations.
Key Takeaways:
- In order to fulfill their social duties, changing environments and social parameters have forced business enterprises to account for and report information.
- The boundaries of conventional accounting principles, practices and skills have been extended to the areas of social disclosure and certification with regard to social program measures.
- A broad company vision that guides every CSR activity undertaken by them. For example, the CSR vision of the Aditya Birla Group is "To actively contribute to the social and economic development of the communities we operate in." Build a better, sustainable way of life for the weaker sections of society and increase the human development index of the country by doing so.
- The Committee (1978) examined the social responsibilities of companies, among other things. Every company apart from being able to justify itself on the test of economic viability will have to pass the test of a socially responsible entity.
As companies grow internationally, they must not only understand the mission, vision, objectives, policies and strategies of an organization, but also take into account the legal and ethical issues of international business. When companies plan their long-term expansion into a foreign environment, in order to make their expansion a success, they have to address serious moral and ethical challenges and decision-making.
Outsourcing, working standards and conditions, workplace diversity and equal opportunity, child labor, trust and integrity, supervisory oversight, human rights, religion, the political arena, the environment, bribery and corruption are some of the most common ethical issues in international business. It is expected that companies trading internationally will fully comply with federal and state safety regulations, environmental laws, statutes of fiscal and monetary reporting, and civil rights laws.
A business that conducts business globally can also be made or broken by cultural considerations. Each culture and nation has a history, customs, traditions and code of ethics of its own. Cultural barriers include language, which often means that when speaking to business contacts and clients, a company must rely on translators. In countries where females do not have the same rights as men, gender can be a problem. At certain times, religious holidays and other cultural events can prohibit trade. It is crucial for a multinational company to act in accordance with ethical and cultural values to win the support and business of customers and to achieve a competitive advantage in a particular market.
For qualified professionals who are familiar with global markets, business practices, cultural considerations and ethical issues in international business, the rapid growth of international business has increased demand. In an online Master of Business Administration (MBA) program, you can study the complex legal and ethical issues encountered when conducting business overseas. In addition to unique customs and attitudes, government policies, monetary systems, trade fundamentals, cross-cultural management and other factors that impact global operations, MBA students learn about international law and ethics.
On a multinational level, an MBA can be one of the best ways for professionals to prepare for a management, trade or general business career. A range of positions are becoming increasingly available in numerous fields and industries.
The guidelines were first released and then refined by the Ministry of Corporate Affairs in 2009. These guidelines can be applied by all businesses regardless of size, location and sector. In fact, they merely serve as indicators of what companies should aim at and, in fact, if possible, companies should try to do more than the guidelines specify. The guidelines target the company's spirit. Listed below are the nine principles;
For companies, both locally and globally, CSR is increasingly becoming an important activity. These programs benefit the industry or company and so all companies try to embrace them. CSR also aims to develop sustainable business practices, taking into account the triple bottom line: people, planet and profit.
Corporations are not just accountable to their shareholders, but to society as a whole as well. Therefore, these guidelines are consistent with the nature of business practices and will help to improve the company's image and reputation and also assist in employee engagement. CSR is not philanthropy, but an investment in social and environmental aspects that can contribute to the company's participation in these processes.
Provisions for mandatory spending requirements 2% of CSR profits for organizations the guidelines also include a set of core elements that elaborate the principle. The rules are not exclusive, i.e., they should be implemented in full. A company should not adopt only those rules that it finds easy to adopt. This will make them responsible socially, environmentally and economically. It should be transparent and accountable for a company to be liable. The guidelines suggest that a Business Responsibility Reporting Framework should be put in place; it can not only help to reach different stakeholders, but also create some good models of guidance.
Although the most demanding feature of sustainability guidelines is mandatory spending, their 2% profit on CSR has not been approved under the Company Bill, but today no company can hide behind the excuse that due to lack of resources it can not implement these guidelines. In fact, with so much emphasis on CSR and sustainability, businesses may tend to lose out on future business opportunities if they do not incorporate these guidelines, and will cease to remain socially relevant.
For companies to engage in controversial social issues, society has created expectations. In response, demand for CSA and communications in the public interest continues to rise. This study lists eight theoretical proposals that summarize this argument and express the theoretical future of communications in the public interest:
- Our post-nationalist society demonstrates that globalization creates an environment where power and influence can be harnessed by actors independent of the government.
- The pluralization of modern society weakens the nation-"legitimacy state's and authority."
- In traditional institutions like government and the media, the Edelman Trust Barometer (Edelman 2017) demonstrates the erosion of trust.
- The loss of government and media confidence serves as a warning to companies and public relations as to what could happen if they neglect the interests of the people they serve.
- They need to keep activists in mind when companies consider stakeholders.
- Companies are increasingly engaged in issues that transcend their specific organization's interests.
- The post-nationalist society of today is born of corporate commitment to controversial social-political issues.
- The roles of business and government in society are being redefined by globalization, pluralization and the erosion of traditional institutions.
- Businesses are increasingly expected to engage in social-political discourse and the creation of public goods in order to maintain legitimacy.
- The shifting dynamic of business-government-society has consequences for our modern conceptualization and models of democracy.
- As part of this shifting dynamic, public relations must embrace new theories and concepts of scientific revolution that describe the role of democratic public relations.
- For the creation of public goods, multi-objective, participatory business models require further exploration.
- Scholars and professionals in public relations are situated in a prime location to explore and advocate for the public good.
The original purpose of companies is to generate profit, and the government's initial purpose is to generate public goods. The expectations of these institutions have been challenged and changed by globalization and pluralization. These changes are not reflected in modern public relations theory and should be adapted to consider corporations as political actors. The shift in dynamic business-government-society demands communications of public interest to survive for organizations.
Corporate social responsibility, referred to as 'CSR', was the response of the private sector to a debate on the scope of business responsibility for trade's social and environmental consequences. It was the embodiment of an age-old concept in the twentieth century; that company is often moved to give something back to its workers and communities who, through private forms of wealth redistribution, dedicated lifetimes of hard graft. Andrew Carnegie, an entrepreneur who donated Carnegie Hall to the city of New York, was a famous nineteenth century philanthropist. In the 1960s, the formal practice of CSR arose against the backdrop of rapid globalization and industrialization of trade and trade, especially as the practices and activities of businesses were moved offshore and away from the public eye and became more difficult to scrutinize. The public watched as the reputation (and stock price) of Nike plummeted in the 1990s in the wake of the exposure of its unethical labor practices in Asian sweatshops. Others rallied by implementing CSR strategies and teams to prevent similar damage. In-house experts have devoted themselves to managing the reputations of brands and any negative press caused by public criticism.
At this time, CSR was mainly about businesses creating a case for improvements that could promote the 'three Ps'; positive social and environmental impact (people and planet), while benefiting the bottom line at the same time (profit). For a price-competitive business strategy, CSR could be leveraged to drive resource efficiencies by installing long-lasting LED light bulbs or reducing waste to reduce production costs. In order to provide higher quality products and services, brands could buy from more sustainable, certified producers and suppliers if the business strategy was focused on competing in a premium market. It was also used as a defensive measure to reduce the cost of complying with government regulations. For many companies, one way to spread the costs of operational investment (in legal worker standards and benefits, cleaner factories, etc.) and any penalties from falling behind was to get ahead of the regulatory curve. CSR had to support a business case either way, and the business case needed to promote competitiveness, differentiation and profitability. CSR teams, in turn, could produce positive stories that might build on the company's long-term positive reputation.
The debate, however, has continued to revolve around 'how far CSR needs to go' and the degree or share of responsibility that must be taken by each actor in society. In 1987, when the term 'sustainable development' took shape with United Nations teams advocating a more long-term and holistic approach to protecting the planet and our common future, the debate developed significantly. For the first time, the global consensus addressed all interlinked societal and environmental issues, from ocean health protection to gender equality and equitable economic development for all citizens. It was agreed that global development, driven mainly by the private sector (regulated by the public sector), had to be carefully managed in order to ensure access to the benefits of economic growth for everyone living today and for future generations. As the effects of human activity on the environment and the climate have continued to come to light (the 2018 IPCC report forecasting the effects of average warming temperatures to 2 degrees Celsius on average), discussions on the pressures faced by companies have shifted from being primarily about reputation management to being more fundamental to the business model; existential, even. The ecosystem services that sustain all economic activity are now reaching a breaking point, as many scientific studies have shown, and will soon be unable to replenish and maintain today's fast-paced way of operating. The fact that CSR may not be optional but critical for the long-term survival of the private sector has begun to seem realistic.
So now where are we? Covid-19 requires certain specific aspects of the broader debate on corporate responsibility. These include the 'resilience' of companies, social security, social equality and the question of the externalized environmental costs generated by companies, such as ocean pollution. In new ways, the 'good' and 'bad' implications of business activity have been highlighted: supermarket workers have become 'heroes' while those affected by industrial pollution see their health improve from the shutdown of industrial activity. The issue of inequality, which both fuels and perpetuates unsustainable modes of production, is one of the key sustainable development challenges pushed to the forefront of the debate. Where climate change has already affected vulnerable groups such as smallholder farmers whose yields have decreased due to harsher summers and changing micro-climates, Covid-19 is the first 'nature' crisis in one way or another that has affected absolutely everyone, regardless of wealth. The incredible ripple-effect damage that a single knock can do to a complex, interconnected human system, and who has the resources and influence to do something about it, was highlighted by Covid-19. The need for a structural transformation towards sustainability and the 'resilience' to which many have begun to refer has truly been demonstrated.
We seem to have reached the moment when CSR does not seem optional anymore. Long-term survival in a changing environment becomes a business case in itself for established corporations. Achieving long-term survival will require doing things in a way that, while reducing exposure to climate risk, brings as much benefit as possible. Roadmaps, including net zero emissions, sustainable production modes, zero waste and greater stakeholder participation, will need to be put in place to secure organizational transformations to achieve sustainable levels of operation. As the world went into decline, global growth contracted; the 'pie' of GDP shrank everywhere. The traditional demarcations of responsibility have been blurred overnight: business is responsible for providing products and services; governments responsible for health care have all been blurred. It didn't matter what was expected or who was to blame for events before that. Collectively, it was understood that everyone had to react as members of a species undergoing a crisis, but they could. Businesses and communities pulled out the stops to provide hospitals with additional kits,' workers' blue collar became' key 'and put their lives on the line to provide doctors and nurses with food and transportation. There were thrown up in the air the traditional demarcations of responsibility. All of us have reconnected with the most fundamental values of humanity: resourcefulness, creativity, compassion. We noted that when economic systems shut down and business cases become redundant, values are all left behind. The role of bodies with capital, resources, talent and influence in investing in sustainable development, which aims to protect society from future shocks to the system, will be further emphasized by Covid-19.
Key Takeaways:
- Outsourcing, working standards and conditions, workplace diversity and equal opportunity, child labor, trust and integrity, supervisory oversight, human rights, religion, the political arena, the environment, bribery and corruption are some of the most common ethical issues in international business
- The original purpose of companies is to generate profit, and the government's initial purpose is to generate public goods. The expectations of these institutions have been challenged and changed by globalization and pluralization.
- Although the most demanding feature of sustainability guidelines is mandatory spending, their 2% profit on CSR has not been approved under the Company Bill, but today no company can hide behind the excuse that due to lack of resources it cannot implement these guidelines
- We noted that when economic systems shut down and business cases become redundant, values are all left behind.
Reference books:
- Dr.A.K. Gavai, Business Ethics, Himalaya Publishing House, 2008
- S.K. Mandal, Ethics is Business and Corporate Governance, McGraw Hill, 2010
