Corporate social responsibility - a strategic imperative for sustainable growth
| Author | Filomina P. George |
| Position | School of Communication and Management Studies Prathap Nagar, Muttom, Aluva, India |
| Pages | 119-131 |
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Contemporary corporate literature is abounding with citation on defining corporate social responsibility (CSR). CSR is all about the philanthropy of giving back to the society. While the concept of CSR is widely accepted, there is no single, universally accepted definition of CSR. In generic terms, it refers to business decision- making linked to ethical values, compliance with legal instruments, and respect for people, communities and the environment. Business for Social Responsibility (BSR) defines CSR as "operating a business in a manner that meets or exceeds the ethical, legal, commercial and public expectations that society has of business." In this context, CSR refers to companies conducting business in a manner mindful of the impact of their business practices on various stakeholders, which include employees, shareholders, investors, suppliers, consumers, regulators etc. CSR therefore envisages integrating social and environmental concerns in their voluntary interaction with stakeholders and may involve investment in community outreach, employee relations, creation and maintenance of employment, environmental stewardship and financial performance.
Good management - companies closely associated with a strong commitment to good causes that benefit their employees and society at large while aiming to improve the companies' bottom line, Borrowed virtues - activities such as corporate philanthropy, financed out of corporate profit, which it considers morally
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dubious when undertaken by corporate management, which is supposedly the custodian of shareholders' financial interests, Delusional activities - by mere provision of them through a CSR establishment (e.g. dedicated CSR staff,) with no much commitment neither beneficial to the company nor the society, and Pernicious CSR activities - by offering above market conditions which indirectly compels others to follow similar practices.
There are two extreme views on CSR which are diametrically opposite. One is that firms should use their resources selflessly for society's benefit in which society comes first and the other extreme, propounded by Nobel Laureate Milton Friedman, which argues that the social responsibility of business is to increase profits. It is outside the business of corporations to expend the resources of its shareholders. In his own words, Milton Friedman himself makes the point, "there is one and only one social responsibility of business-to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud." If the goal of a company is to make profits, the goal of a CSR, run by a company, is to increase its profits, one way or other. It could be by assuring quality of supply of its raw materials, securing its interests or simply increasing goodwill or brand awareness. In doing so, it does something that benefits society at large. Michael E. Porter added a new dimension to these views by stressing that the economic objectives of the corporate should not be isolated from the social context. According to Porter corporate can leverage their capabilities and relationship strategically and improve the competitive context and the long term business prospects. Porter's theory is more apt in the context of modern business environment where corporate business objectives and corporate philanthropy go hand in hand for the long- term sustainability of business enterprises. For example ITC sells cigarettes, but does not ask people to choose smoking and appear to be good citizen by complying to the rules of business and it becomes an acclaimed corporate citizen through its e-choupal which has gained global recognition as exemplar model of CSR.
This approach would require adopting context oriented strategies focussing on
- investing in factors (human capital and infrastructure) that improve productivity,
- the comparative advantage and expanding the market developing
- crafting competitive strategy
- managing information and knowledge management
The origin of the first ethical model of corporate responsibility lies in the pioneering efforts of 19th century corporate philanthropists such as the Cadbury
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brothers in England and the Tata family in India.
The nineteen eighties brought the stakeholder (Edward Freeman 1984) point of view into the mainstream of corporate arena whereby the corporate interest had to take care of a wider circle of stake holders than mere shareholders. This included customers, workers, lenders and the like as interested parties to the affairs of the corporate along with the shareholders. The corporate objectives began to be restated and if observed diligently corporate policies and actions would take good care of the society in wider circle.
Later the philosophy of CSR in most companies became "a borrowed virtue." There were many companies who thought in the Friedman way, which firmly believed the responsibility of business was to make profit. And companies' responsibilities were solely to the shareholders and it would be sufficient to generate wealth legally taking care of the economic bottom line. The corporate contribution by way of taxation and private charitable choices (mainly for tax avoidance) was directed for social needs. With the mushrooming of private enterprises small and large alike, profit maximization was at the core of business objectives. With competition hotting-up activities such as provision of housing, medical facilities and other welfare schemes were perceived as avoidable costs and became a social cost. With the market economy setting in, the bone of contention became the Cost to the Company (CTC) than
Benefits to the employee. So in the new age corporate philosophy, there was no much room for being socially responsible from the workers' perspective. The commercial viability of business could not provide any room for expending money outside the enterprise. Many of the cost reduction programmes axed the so called social benefits. Between the two extremities, corporate lost their vision about their responsibility to society.
With the advent of the multinationals and with the onslaught of globalization the style and structure of CSR changed. Corporate wanted to appear to be socially responsible to a reportable scale for different reasons in the context of global transformation of market environment and deepening of competition, either by their desire for global acceptance or for fear of their empowered customers. In the urge of trying to look globally acceptable some business enterprises engaged themselves in 'delusional' and 'pernicious' CSR activities. In the new light of things CSR has become an important agenda in the corporate reporting.
What has been all along part of the corporate well being now comes under scan, for it is on the list of claims companies would make as part of their Corporate Social Responsibility. CSR has started receiving an important place in Corporate Annual Reports and reportable CSR encompasses corporate actions in the areas of providing health, education, quality of life, environment protection etc. Disclosures,
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whether voluntary or regulated, increase transparency and credibility for all companies extending business ethics to extra-corporate issues; and as a result many companies now seek to at least appear dedicated to one or another version of CSR.. CSR has now emerged as a paradigm of corporate image and an indicator of good corporate governance. By reporting the accountability through commitments to CSR, many companies hope to send positive signals about corporate behaviour to their existing and prospective stakeholders. Meanwhile, ISO has begun its work to develop an international CSR standard, which will sit alongside other voluntary standards like the ISO9000 and ISO14000 series upon its completion by 2007.
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