Maratha Mandirs Babasaheb Gawde Institute Of Management Studies

CORPORATE SOCIAL RESPONSIBILITY OF INDIAN BUSINESS HOUSES

Dhond Arvind A Assistant Professor (Selection Grade), St. Xaviers College Mumbai, arvinddhond@gmail.com

Introduction to social responsibility of business

Social Responsibility of business refers to what business does over and above the statutory requirement for the benefit of the society. The word responsibility emphasizes that the business has some moral obligations towards the society. The term corporate citizenship is also commonly used to refer to the moral obligations of the business towards the society. It implies that like individuals, corporate are also the part of the society and their behavior shall be guided by the social norms. Social Responsibility has been defined by Davis as follows: Social responsibilities refer to businessmans decision and actions taken to reason at least partially beyond the firms direct economic or technical interest. H. S. Singhania classifies CSR into two categories: (i) The manner in which a business carries out its own business activity. (ii) The welfare activity that it takes upon itself as an additional function.

Objectives of research paper

a. To understand the concept of CSR and its relevance to business houses. b. To study the CSR practices adopted by Indian business houses. Concept of CSR The concept of CSR originated in the 1950s in the USA and the concept came into prominence in public debate during the 1960s and 1970s. At that time US had lots of pressing social problems like poverty, unemployment, race, urban blight and pollution. Corporate Social Responsibility became a matter of utmost importance for diverse groups demanding change in the business. During the 1980s to 2000, corporations generally recognized a responsibility towards society and weighed against the demands of being competitive in a rapidly changing global economy. The Social Responsibility cannot be understood without an examination of the nature of corporations and their objectives. Nature of Corporations and their Objectives Corporate Social Responsibility recognises that business firms have not one but many different kinds of responsibility, including economic and legal responsibility.

Fig. No. 1: Corporate Social Responsibilities of Corporate Firms

1. Economic Responsibilities includes:

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(a) To produce goods and services and to provide jobs and good wages to the work force while earning a profit. (b) Obligation to seek out the suppliers of raw materials, to discover new resources, technological improvements and to develop new products. 2. Legal Responsibilities includes: (a) To act as a fiduciary, managing the assets of a corporation in the interest of share holders. (b) Numerous responsibilities to employees, customers, suppliers and others legally. The concept of CSR is expressed as a voluntary assumption of responsibilities that go beyond the economic and legal responsibilities of business firms. The exercise of social responsibility must be in consistent with the corporate objective of earning a satisfactory level of profit. It implies a willingness to forego a certain measure of profit in order to achieve non- economic aids. 3. Ethical Responsibilities: (a) Additional behaviors and activities that are not necessarily codified into law but nevertheless are expected of business by society members. 4. Discriminatory Responsibilities: (a) Not legally required or even demanded by ethics. (b) Corporations accept them in order to meet societys expectations. Concentric Circles In 1971, the Committee for Economic Development issued a report that characterized CSR in a similar fashion but without an explicit mention of legal responsibilities. The responsibilities of corporations are described consisting of three concentric circles.

Fig. No. 2: Concentric Circles indicating the Responsibilities of Corporations Source: The Ethics of Management, L. T. Hosmer

(a) Inner Circle: Clear cut, basic responsibilities for the efficient execution of the economic function products, jobs and economic growth. (b)Intermediate Circle: Encompasses responsibility to exercise this economic function with a sensitive awareness of changing social values and priorities. Eg. With respect to environmental conservation, hiring and relations with employees, expectation of customers for information, safety factors, etc. (c.) The Outer Circle: Newly emerging and still amorphous responsibilities that business should assume to become more broadly involved in actively improving the social environment. Defining CSR in the Present Context Various definitions have been offered by EU, World Bank and others. There is no accepted definition of Corporate Social Responsibility. However we have two extreme views on this subject. a) A company that complies with the laws of the land in which it operates is being socially responsible. b) A socially responsible company is one that is; purely philanthropic, in that it gives without expecting a return or a benefit. A socially responsible company is responsible to all its internal and external stakeholders.

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a) Social responsibilities for core business activities should look at its policies, operations and production activities (in terms of safety, quality, employee welfare, environmental implications, etc.) both within the business as well as its backward and forward linkages such as suppliers, distributors and customer relations. b) Social Responsibility should also redesign its social investments and philanthropy i.e. moving from ad hoc giving to strategic approaches to building community partnerships, looking for win-win solutions, applying core competencies to such investments and linking community investments to mainstream business strategy. It should differentiate between pure philanthropy issues and strategic issues for community support. c) Public policy dialogue wherein business advocates with the state for changes in public policy that may benefit the business but its core motivation is public interest. In this context CSR in broader terms can be defined as Operating a business in a manner that meets or exceeds the ethical, legal, commercial and public expectations that the society has of business. Hence, while dealing with the subject matter of social responsibilities of business it is important to understand what constitutes to responsible conduct of corporate at Market Place, Work Place, Environment and Communities. There are many situations in which managers, and indeed shareholders too, may need to consider what it would be right to do as well as what is both legal and profitable. For instance absence of effective legislation should not excuse a soft drink company to use pesticides in the drink. Both shareholders and boards of directors should be willing, to risk or forgo profits at the margin for such causes as ensuring product safety, disclosing possible safety risks, reducing harmful pollution, eschewing bribery, or dealing fairly with other parties, even where no legal obligations are in question. Laws and official regulations may lag behind events, and in any case cannot be expected to cover all contingencies. Where governments are corrupt or ineffective, the range of debatable issues and problems, and the need for companies to make their own assessments and judgments, become greater. Everywhere there may be episodes and situations where the issue of what constitutes responsible conduct on the part of a business has to be faced and cannot be left to governments alone to review, decide and pronounce on. Corporate Social Responsibility in India A number of recent surveys have been conducted in India to understand what Corporate Social Responsibility (CSR) means in the Indian context, what the expectations of different stakeholders are and the drivers and barriers facing companies. It traces back the history of CSR in India and suggests that there are four models. 1. Ethical Model by Mahatma Gandhi: The ethical model as suggested by Mahatma Gandhi, where companies voluntarily committed to public welfare and participated in nation building. 2. Statist Model by Jawaharlal Nehru: Then followed the statist model post Indias independence propounded by Jawaharlal Nehru. This model calls for state ownership and legal requirements of CSR. 3. Liberal Model by Milton Friedman: The liberal model by Milton Friedman talks about CSR being limited to private owners or shareholders. 4. Stakeholders Model by R. Edward Freeman: And the latest is the stakeholders model championed by R. Edward Freeman, which calls for companies to respond to all stakeholders needs. All these four models co-exist in India today. One of the weaknesses of the current system is that the agenda is set by the industrialized world with little understanding of the diversity of approaches and track record in other parts of the world. Some of the main findings are: a) Environmental pollution was regarded with great concern by all groups. b) The main expectation of the companies by the public was that they provide good quality products at low prices, treat employees well without discrimination, protect the environment, help bridge the gap between the rich and the poor, and help in social and economic development. Many leading foreign MNCs and domestic titans, pre-eminently members of the Tata Group, have been standard setters on core CSR issues such as labor conditions, health and safety, environmental management, corporate governance and integrity. One of the Tata Group of companies, Tata Steel, is the first in the country to produce a corporate sustainability report and administers the only industry town in the world, Jamshedpur, which has received ISO 14001 environmental quality certification. Given the increasing importance given to

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CSR in corporate circles world wide, and attendant public pressure for corporate probity, many leading Indian corporate have exhibited their keenness to broadcast their CSR credentials. Regrettably this is too often more a public relations exercise relying on slick advertising, rather than a true reflection of a well-thought out committed business strategy and corporate culture predicated on CSR values. In India, as elsewhere, verification of corporate commitment to voluntary efforts is still a long way off and will require both stakeholder partnership and independent oversight. The Confederation of Indian Industry (CII) Indias largest industry body has taken a noteworthy lead in promoting CSR amongst its membership. It has adopted a set of positive example to other industry bodies in India such as FICCI (Federation of Indian Chambers of Commerce & Industry) which have also held CSR related events. There is a need, however, to move beyond one-off events, towards the development of a more systematic, and inclusive approach by industry bodies in partnership with NGOs, trade unions and other stakeholders. This will be critical to the successful mainstreaming of CSR in Indian business and industry - especially in the absence of a vibrant consumer movement as a key driver. CSR Practices of Tata Group in India Clause No. 10 of Tata Group A Tata Company shall be committed to be a good corporate citizen not only in compliance with all relevant laws and regulations but also by actively assisting in the improvement of the quality of life of the people in the communities in which it operates with the objective of making them self reliant. Such social responsibility would comprises, to initiate and support community initiatives in the field of community health and family welfare, water management, vocational training, education and literacy and encourage application of modern scientific and managerial techniques and expertise. This will be reviewed periodically in consonance with national and regional priorities. The company would also not treat these activities as optional ones but would strive to incorporate them as integral part of its business plan. The company would also encourage volunteering amongst its employees and help them to work in the communities. Tata companies are encouraged to develop social accounting systems and to carry out social audit of their operations. Benchmarking Corporate Social Responsibility A study on Benchmarking Corporate Social Responsibility Activities, by the Gas Authority of India Limited (GAIL), finds Tata Steel creating a benchmark in corporate social responsibility (CSR). The study has been based on Organisation Dynamics. The purpose of the study was to identify the best practices in CSR activities available in Tata Steel and enable GAIL to undertake the interventions more effectively and in a more focused manner. Tata Steel is a pioneer in the concept of CSR. It believes that the loyalty and commitment of its employees depends upon the quality of life they are provided with at work and at home. Consistent with the Group Purpose, Tata Steel has declared in its vision statement that it will constantly strive to improve the quality of life of the communities it serves through excellence in all facets of its activities. The company has received a number of awards in recognition of its CSR efforts. The most recent testimony to Tata Steels contribution is The Energy & Resources Institute (TERI) Award conferred on it in recognition of corporate leadership for good corporate citizenship and sustainable initiatives. Tata Steel is the only Indian company to have pledged to translate the Global Compact principles on human rights, labour and environment into practice and was conferred the Global Business Coalition Award for Business Excellence in the Community for HIV /AIDS. Over the years, the nature of the companys involvement with the community has undergone a change. It has moved away from charity and dependence to empowerment and partnership. The many facets of Tata Steels efforts are medical and health services in the rural and semi-urban areas, sports, womens health and education, water harvesting and tribal development, relief and rehabilitation and income generation, among others. Tata Corps of Volunteers: Giving out the Best from Tata Employees Mission Statement We continue to evolve a common direction to enrich the Tata Way on social - responsibility in order to strengthen out belief in serving the society, through all Tata employees in all our Companies, by working as

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volunteers, while also learning from the community. We constantly strive together to improve processes, to stretch capabilities, to share skills, expertise and talents, in order to build strong and self-reliant communities. We believe this enriches our personalities, improves our attitude towards life and makes us better citizens; and accordingly, better employees of our respective Companies. Tata Steels CSR Policy On unveiling Tata Steels Corporate Social Responsibility Policy, its Managing Director, Mr. B. Muthuraman, said; Tata Steel believes that the primary purpose of a business is to improve the quality of life of people. Tata Steel will volunteer its resources, to the extent it can reasonably afford, to sustain and improve the quality of life of the people of the areas in which it operates. Tata Steels commitment to its corporate social responsibility (CSR) also finds reflection in its adoption of the Corporate Citizenship Index, Tata Business Excellence Model and the Tata Index for Sustainable Development. Tata Steel spends 5-7 per cent of its profit after tax on several CSR initiatives. Broadly speaking, the companys CSR initiatives are spread across three core areas - employee welfare, the environment and the welfare of the community at large. Under this broad spectrum, diverse areas are covered. These include environment management, economic development, employee relations, civic amenities and community services, healthcare, sports and adventure, relief during natural calamities, education, arts and culture and social welfare. (a) Supports Social Welfare Organisations: To achieve its desired objectives in this regard, Tata Steel supports various social welfare organisations. They include the Tata Steel Rural Development Society, Tribal Cultural Society, Tata Steel Foundation for Family Initiatives, National Association for the Blind, Shishu Niketan, School of Hope, Centre for Hearing Impaired Children and the Indian Red Cross Society, East Singhbhum. Tata Steel has hosted 12 Lifeline Expresses in association with the Ministry of Railways, Impact India Foundation and the Government of Jharkhand. It has served over 50,000 people. Five thousand people have availed of surgical facilities and over 1,000 people received aids and appliances. In all, over seven Lakh rural and another seven Lakh urban population have been benefited by the CSR activities of Tata Steel. CSR initiatives on the rural front include training in agriculture that is provided to villagers in the Saraikela Kharsawa area through the village development committees. In collaboration with the Ministry of NonConventional Energy and the Confederation of Indian Industry, focus is laid on renewable energy for rural livelihoods. Integrated wasteland development programmes have been taken up as also watershed development programmes for rain-fed areas. (b) Self-Help Groups (SHGs): The National Horticulture Mission programme that has been taken up in collaboration with the Government of Jharkhand has already benefited more than a thousand households. Over 500 self-help groups are currently operating under various poverty alleviation programmes. Of this, over 200 are engaged in activities of income generation thorough micro enterprises. Womens empowerment programmes through Self-Help Groups have been extended to 700 villages. Between 2003 and 2006, the maternal and infant survival project had a coverage area of 42 villages in Gamharia block in Seraikela Kharsawa even as a replication project was taken up in Rajnagar block. For providing portable water to rural communities 2,600 tube wells have been installed for the benefit of over four Lakh people. (c.) Healthcare Projects: Other CSR activities of Tata Steel include facilitation of child education, immunization and childcare, plantation activities, creation of awareness of AIDS, healthcare projects and promotion of sporting activities such as football and archery. In its 100th year, the Tata Steel Centenary Project has just been announced. (d) Economic Empowerment: A programme aimed at economic empowerment through improvised agriculture will be taken up in three backward tribal blocks in Jharkhand, Orissa and Chhattisgarh. A corpus of Rs 100 crore has been earmarked for the purpose and the programme is expected to benefit 40,000 tribal living in over 400 villages in these three States. Low key and Profile For Tata Steel, discharging its CSR mandate is something that is generally kept low key. And that is how the companys visionary founder wanted it to be, when he said that We do not claim to be more unselfish, more generous and more philanthropic than other people. But we think we started on sound and straightforward

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business principles, considering the interests of the shareholder, our own, and the health and welfare of the employees, the sure foundation of our prosperity.

Suggestions/recommendations
A corporate firm exists and operates within the societal framework and hence it has to fulfill its obligations not only towards internal stakeholders but also towards its external stakeholders. A corporate organization must fulfill its responsibility towards not only its owners-shareholders but all its stakeholders. It must constantly strive towards this which in turn helps a corporate firm in creating a good name as a good corporate citizen in the society. Every decision and every action taken must take into consideration the corporate image. Every firm must consider the House of Tatas as the role model in the field of CSR and must follow the path shown by the Tatas in the field of CSR. CSR must not be just to prepare reports for publicity purpose but in action in the true sense. A true CSR is not made for publicity but just as a silent philanthropy. For the success and survival in the long run for any corporate firm not just pure business mindset but CSR will help a lot.

Conclusion
It is important to note that though corporate social responsibility is synonymously and interchangeably used with either corporate philanthropy or corporate citizenship. In theoretical sense corporate philanthropy has to do with a business societal contribution that may or may not bring it direct returns, whereas corporate social responsibility is all about fulfilling the basic responsibility of good business without which the business and society would not be able to enter into a mutually beneficial virtuous cycle. Over the past ten years or so, corporate social responsibility (CSR) has blossomed as an idea, if not as a coherent practical programme. CSR commands the attention of executives everywhere - if their public statements are to be believed - and especially that of the managers of multinational companies. It would be a challenge to find a recent annual report of any big international company that justifies the firms existence merely in terms of profit, rather than service to the community. Such reports often talk proudly of efforts to improve society and safeguard the environment - by restricting emissions of greenhouse gases from the staff kitchen, say, or recycling office stationery - before turning hesitantly to less important matters, such as profits.

Reference:
I) Books:

1. 2. 3. 4. 5. 6. 7. 8. 9.

Sherlekar S.A. (1999), Ethics and Management, Mumbai: Himalaya Publishing House. Theophand A. Mathias, Corporate Ethics, New Delhi: Allied Publishers Ltd.. R. Edward Freeman (1991), Business Ethics, Oxford University Press. Williams and Aguilera (2006), CSR in a Comparative Perspective. William G. Shepherd (1975), Public Policies Towards Business. John Donaldson (1989), Key Issues in Business Ethics. David Murray (1997), Ethics in Organization. Dr. Raj Riluparna (2003), A Study in Business Ethics. Dr. Sharma Subash (1998), Ethics and Human Values in Management: Indian Ethos and Indian Management.

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10. 11. 12. 13. 14. 15.

Larae Tone Hosmer, The Ethics of Management, New Delhi. Skinner Ivanevich, Business Ethics. C.S.V. Murthy, Business Ethics. Ferrell, Business Ethics. E.P. Samuel Abideen and K.P. Muralidharan, Ethical and Social Issues. Chakraborthy S.K., Ethics in Management.

(II) Journals:

1. A brief history of Social Reporting, Business Respect 2003. 2. CSR: Meeting Changing Expectations, 1999. (III) Newspapers & Magazines: 1. 2. 3. 4. 5. 6. 7. Thomas M. Garrett (1970), Business Ethics, Mumbai: The Times of India Press. Times of India. Mumbai Mirror. Economic Times. Business Today, July 7, 1999. Business Week, March 18, 1985. Business Outlook.

(IV) Webliography: 1. http://www.csrwire.com 2. http://www.tata.com/0_our_commitment/community_initiatives/tcci.htm