Corporate Social Responsibility (CSR)

The Premise of CSR

CSR goes hand-in-hand with ethics Corporations dont operate in a universe composed solely of shareholders they exist within larger social entities:
community the nation global humanity

CSR was first referred by Chester Barnard in Functions of the Executive in 1938

Some Questions
What is best for the society as a whole? How do you get the cost to society? Which groups (of the society) should pay for such costs?

Business Has Some Responsibilities Towards Some Specific Groups

Customer(s) supposedly the king - in the long-run he holds the cards - in the short-run, bait-and-lure techniques may work Employees merit, seniority, safety, welfare, growth and suchlike considerations Financers and stockholders to provide accurate and timely information about financial affairs Stakeholders all associated with the business, say, suppliers, distributors, specific groups, advertisers, and others

Business Has Responsibilities Towards

Community and the State The natural environment (conducting business in a way that protects the natural environment while making economic progress, thus meeting needs of the present generation without compromising the ability of future generations to meet their own needs, is referred as sustainable development) Other businesses

Business and its Interest Group

External
Government Society

Internal
Shareholders

Employees Global Community Business Suppliers consumers Financial Institutions

Law

Social Responsibility A Nebulous Idea

A standard definition of social responsibility is managements consideration in its decision making of social effects in addition to purely economic effects CSR is seriously considering the impact of the companys actions on society

Social Responsiveness A Newer Concept

The ability of a corporation to relate its operations and policies to the social environment in ways that are beneficial to the company and to the society The main difference between social responsibility and social responsiveness is that the latter implies actions and the how of enterprise responses

Arguments For Social Involvement of Business

Arguments For Social Involvement of Business

Business is a subset of the society and hence has to respond to the needs of the society Improvement of social environment benefits both the society and the businesses. Society gains through better employment opportunities: businesses benefit from better community that is the source of its workforce and the consumer of its products and services

Arguments For Social Involvement of Business

Social involvement reduces government control and hence more autonomy in decision making for businesses Businesses have a lot of power which, it is reasoned, should be accompanied by an equal amount of responsibility Social involvement may be in the interest of stockholders

Arguments For Social Involvement of Business

Modern society is an interdependent system, and the internal activities of the enterprise have an impact on the external environment Problems can become profits (waste can be reused and recycled) Social involvement creates favourable public image

Arguments For Social Involvement of Business

Businesses are capable of generating novel ideas which could be used to solve societal problems Similarly, business talent pools could lend their expertise to solve societys problems It is better to prevent social problems (and potential problems) through business involvement than to cure them

Arguments Against Social Involvement of Business

The primary task of businesses is to maximize profits. Social responsibility could reduce economic efficiency Social involvement will raise prices and make the business less competitive Social involvement must be left to other specialist elements of the society

Arguments Against Social Involvement of Business

There is lack of accountability of business to society. Unless accountability is established, businesses should not get involved socially There is no complete support for involvement in social actions. Consequently different groups with different viewpoints may cause friction

Arguments Against Social Involvement of Business

Those who attempt to be too socially responsible may end up going out of business Being profitable ensures creation of wealth which is anyways ploughed back into the society

Playing with the Arguments

Most managers consider social responsibility an achievable aim in consonance with most of their missions Social responsibility helps in disaster mitigation and preventing major problems No enterprise should wait for problems to develop before preparing to face them Reactive social involvement is a pass: proactivity is the essence

A Convergence of Interests
Pure Philanthropy S o c i a l B e n e f i t

Combined Social & Economic Benefit

Economic Benefit

Pure Business

Different Ethical Views on Social Responsibility

Communist view imposing social responsibilities on the business through the instrumentality of the State Capitalist view Pragmatic view acknowledges the importance of profits but simultaneously stresses the need for social responsibility Trusteeship view advocates just enough retention for honourable use

Corporate Philanthropy

Corporate Philanthropy
Maximized benefits of natural resources and human resources Intangibles Advancing knowledge and practice Added PR focus creates social value and adds to opportunities Boosts employee morale Strategic philanthropy corporate philanthropy with a focus, theme or goal

Strategic Philanthropy
Serving the worlds poor, profitably / adding reach / reaching top-line growth / reducing costs (by outsourcing) / innovation / cause-related marketing Leveraging competitive advantage of corporate philanthropy (philanthropy can often be the most cost-effective way for a company to improve its competitive context, enabling companies to leverage the efforts and infrastructure of nonprofits and other institutions)

Strategic Philanthropy
Generating corporate virtue Being a corporate with a conscience and positioning accordingly Being a corporate citizen competing on price and corporate citizenship is smarter than competing on price alone a smarter two-pronged approach eg, Prudentials life policies for AIDS patients

Efficacy of Social Programs

Efficacy of Social Programs

One view looks at costs involved Another viewpoint says that cost alone is an inadequate measure Weigh costs of social programs (say plan A or plan B) in terms of effectiveness, reach and implications

Evaluating Corporate Social Responsibility

Affirmative social responsibility involves five categories of obligations:
Broad performance criteria broader criteria for measuring the organizations performance and social role than those required by law Ethical norms Operating strategy eliminate or substantially reduce negative effects of organizations plans Response to social pressures Legislative and political activities must work for enactment of rules for openness

How Businesses Are Made To Discharge Responsibilities

How Businesses Are Made To Discharge Responsibilities

Self-awareness Self-education Legislation Encouraging internal accountability Collateral benefits

Responsibility Accounting
Responsibility accounting can be defined as a system of accounting under which each organizational / departmental head is made responsible for the (social) performance of his organization / department Disclosure norms

Norms Might Include

Equity and responsibility in dealings with employees, customers and suppliers Community involvement Environmental concern Openness Integrity and responsiveness to criticism and complaints

Other Endeavours
SA 8000 certification (as a standard for global business practices) by Social Accountability International (SAI) these address: child labor, health, safety, forced labor, discrimination, working hours, etc Consumerism
Consumer rights Consumer responsibilities

Business codes & occupational codes

Other Endeavours
WAVE (We Are Volunteer Employees) Program or PULSE Program helps employees connect with volunteer opportunities The Ron Brown Award for Corporate Leadership encourages leaders become more active in contributing to the society

Other Endeavours
EMAS (European Unions EcoManagement and Audit Scheme) ISO 14000 Various Corporate Governance Norms

Social Audit

Social Audit
A social audit is a systematic study, evaluation of the organizations social performance as distinguished from its economic performance. The term social performance refers to any organizational activity that effects the general welfare of the society. First propounded by Howard R Bowen

Benefits
It develops a sense of social awareness among all employees. In the process of preparing reports and responding to evaluations, employees become more aware of the social implications of their actions

Benefits
It supplies data for comparison with the organizations social policies and standards. The management can determine how well it is living up to its social objectives

Benefits
It provides information for effective response to external groups which make demands on the organization

Limitation
A social audit is a process audit rather than an audit of results This means that a social audit determines only what an organization is doing in social areas and not the amount of social good that results from these activities

Current Social Plus Paradigm

When an organization sets performance benchmarks, others ape To improve standards and enrich the society is also a social responsibility Setting the framework for quality and organizational excellence, is actually being socially responsibility Giving the best of performance is also a social obligation