Long time in the past the profit maximisation was the sole business objective, but this view no more holds good. Sacrificing the part of the profits has now become prerequisites if the companies wishes to survive and maintain the growth in the market.
Nowadays organisationsare moreaware of the significances of social responsibility because the economic criteria alone cannot justify the existence of business organisations. It have to take along the Social, moral and ethical aspects of business as well because the responsibility of the corporates are not restricted to meet only the needs of the society but also creates long-term and sustainable market for its products.
The outlook of the organisation has changed from economic aspects to social aspects of the business decisions. The relationship between business and society is described through a variety of ways. Corporate Social Responsibility (CSR) remains among the most widespread concepts in politics, business, and academia.
It can be a hard-edged business decision, not because it is nice things to do or because people are focusing us to do it. The key is how profits are made, not the pursuit of profits.
Corporate Social Responsibility could be a method that’s involved with treating the stakeholders of an organization or establishment ethically or in a very accountable manner.
The wider aim should be to create higher standards of sustainable living along with preserving the profitability and integrity.(Flammer,2015)
The concept of CSR is originated in United States of America (ref: Carroll 1999; Matten & Moon 2005:338), the idea was to explicitly state and communicate the corporates about their responsibilities towards society and their stakeholders.
What is Corporate Social responsibility (CSR)
A self-regulating business model that helps a company be socially accountable. CSR is much more than a law, it’s a feeling from within– i.e. Call of the Soul. It’s about caring and sharing for the People for the Environment, for the Economy and for the Development of the nation. CSR is a gesture of showing concern and sense of responsibilities towards other (Stirling, et al, 2016)
It is a broad concept that can take many forms depending on the company and industry. Through CSR program businesses can benefit society while boosting their own goodwill and brands.
It is often described as an umbrella concept which embraces a variety of overlapping concepts such as Business Ethics, Sustainability, Corporate Citizenship, Corporate Philanthropy, Corporate Governance, Corporate Social Performance, Corporate Social Responsiveness, and environmental responsibility.
Based on the contemporary literature on CSR, companies are considered to be responsible to a broader group of stakeholders than just the owners of a company, i.e. the shareholders (Marrewijk 2003:96). This perception builds on Freeman’s stakeholder management theory which defines a stakeholder as any group or individual who can affect or is affected by the achievements of the firm‘s objectives (Freeman 1984 in Neergaard 2006:26).
In order to profit and survive, which is the primary goal and responsibility of a company, corporates need to identify and act in accordance with the demands and expectations of its stakeholders (Neergaard 2006:26,80; Lindgreen et al. 254
Companies are an integral part of the society in which they are placed and operate. Their actions are considered to affect society in general and thus companies are considered accountable for their impacts on society as a whole. Businesses should serve constructively the needs of society to the satisfaction of society.
CSR: Corporate + Social + Responsibilities
It is a multidimensional concept that incorporates the interaction between:
- The policies and programs designed by corporations,
- The process of social responsiveness, and to address the social Issue
- The principles of social responsibility
According to The World Business Council for Sustainable Development in its publication “Making Good Business Sense” CSR is defined as:
“The continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large.”(Hopkins,2016)
From the Above definition it can be stated that CSR is about :
- Continuing Commitment : converging the thinking of “they want” into “ they need”
- Ethical Behaviour: Do What is Right & Fair !
- Contribution towards economic development : Contribute resource to the Community
- Improving Quality of Life: Growing together (as business cannot grow if surrounding is falling)
The most widely cited definition of CSR is :
“the process of communicating the social and environmental effects of organizations’ economic actions to particular interest groups within society and to society at large. As such it involves extending the accountability of organizations (particularly companies), beyond the traditional role of providing a financial account to the owners of capital, in particular, shareholders. Such an extension is predicated upon the assumption that companies do have wider responsibilities than simply to make money for their shareholders.”
(Gray, Owen, and Maunders, 1987, p. ix)
“The social responsibility of business encompasses the economic, legal, ethical and discretionary expectations that a society has of organizations at a given point in time.”
- Carroll, 1979; 2008, 500
“A concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis.”
The EU in Oct, 2011 restated that CSR is ‘the responsibility of enterprises for their impacts on society’.
- EU Definition of CSR
“CSR is about how companies manage the business processes to produce an overall positive impact on society”
Published Standards for CSR
- ISO 26000 :
Helps organizations translate CSR principles into effective actions.
- Agenda 21:
Provided a framework for CSR and acknowledge the importance to encourage improved corporate environmental management
- ECFICBeijing Declaration:
Pledge taken by corporate citizen of China to undertake their social duties and responsibilities.
- CERES Principles:
A ten-point code of corporates environmental conduct for use as an environmental mission statement or ethics
The guidelines for MNCs to obey and understand the sense of social responsibilities (Greyson and Hodges, 2017)
Corporate Social Responsibilities is an important standard of corporate governance which can be considered as the heart and Soul of an organisation. It’s an essential mechanism for corporate accountability, profitability and environmental sustainability and indispensable for maintaining the integrity inside and outside the corporation
As well said by a learned person “Because the business is not just about creating economic value, but also social value”. It can be said that :
- Corporates need to shift from profit maximisation to profit optimization
- Achieve profit from right activities
- Think beyond business ( Value, ethics & sentiments)
Need of CSR
- Reduce Social Cost
- Enhance the Performance of the employee
- An Alternative form of Investment
- Leads to industrial peace
- Improve brand will and public image
- Multiply Profit
- Provide Moral justification
- Result in Satisfaction of the stakeholder
Range of activities involved in CSR :
- Working in partnership with local communities
- Socially responsible investment (SRI)
- Developing relationships with employees and customers
- Environmental protection and sustainability
Driving forces behind CSR
- Power & influence of business corporation
- Growing access to education & information
- Growing awareness of environmental issue
- Spread of corporate scandals and public distrust
Reasons of motivation to a company to engage in CSR activities
- Value-driven : businesses are considered to be self-motivated to have a positive impact on the society regardless of external social pressures
- Performance-driven: CSR is seen as a strategic instrument to enhance the general performance and to achieve economic objectives (profits and sales volume) of a company
- Stakeholder-driven: Stakeholders and members of society in general expect and demand from the company to fulfil its social responsibilities(Crowther and Seifi, 2018)
Dimension of Corporate Social Responsibility
- Corporate Governance
- Business Ethics
- Continuous commitment to development
- Human Rights
- Workers’ Rights & welfare
Corporate Social Responsibility Trends In 2018
- The beginning of the end of workplace harassment and inequality
“Me-TooMovement”have made it abundantly clear that women in every industry have had to deal not only with rampant sexual harassment, but also with corporate cultures and policies that are designed to keep them quiet and disempowered.
- Expanding the diversity conversation
As the population and workforce continue to grow more diverse all the company needs to focus on creating cultures, experiences and products that speak a wide range of identities and perspectives.
- Focused and forward-thinking brand activism
More resources toward proactive initiatives; more focused actions in social or policy areas
- A shift from disaster recovery to climate resilience
As no company will be immune from the consequences of climate change so every corporates are now investing in technologies & business models that can appropriately address these challenges
- More CSR in the C-Suite
With the heightened expectations on corporations as influencers in the social and environmental sphere, more companies are bringing CSR into the C-Suite. In last 5 years, the number of companies directing corporate citizenship from the C-Suite has increased about 75%
- Higher standards for suppliers
Corporates are setting up of responsible business practices through their global supply chains (by setting transparency, accountability (for environmental performance and human rights issues)
- Prioritizing privacy and data protection
Privacy and data protection are the most important thing, in 2018, companies are seems to be more diligent in protectingtheir data banks
CSR Management: Plan, Do, Check, Act method
- Consult stakeholders
- Establish code of conduct
- Set targets
- Establish management systems and personnel
- Promote code compliance
- Corrective action
- Reform of systems
- Measure progress
- Restricts the classic economic goal of profit maximization
- Business is not equipped to handle social activities
- Dilutes the primary purpose of business
- Increases the power of business
- Limits the ability to compete in a global marketplace
- Addresses social issues brought on by business, and allows business to be part of the solution
- Protects business self-interest
- Wards off future government intervention
- Addresses issues by using business resources and expertise
- Addresses issues by being proactive
- The public supports CSR
Issuesand trends that is expected to be continue into 2019
- Fewer stands, more dialogue.
- Back to school (sexual harassment, inequality)
- More disaster prevention, less relief
- Equity joins diversity and inclusion
It is equally valuable for the company as well as for the community cause it helps to forge a stronger bond between employee and corporation which ends up in form of boost morale which eventually and can help in developing the strong connect not only between employees and employers but also with the world around them.
The corporates must conjointly aims to conduct their business in ethical manner i.e. taking into account the social, economic and environmental impact, and thought of human rights(Wang, et al, 2016).
Therefore, the ancillary objective of every organisation must be to fulfil their social and environmental responsibilities. They must effort to attain its monetary goals without impacting society or the environment
The CSR Movements that must be established in 2019 are:
- Taking A Stand
Companies need to live, not just laud the values.
- Expanding Diversity And Inclusion
Hyping neurodiversity as a business decision with measurable value, not just corporate charity.
- Making Sustainability Real
Sustainability is not just about recycling soda cans, it’s much more than that.
- Taking Personal Responsibility
Stepping up and taking action
- Empowering New Generations:
As younger generations ascend to positions of influence; they have the capacity to champion the change.
The corporates should sense and uphold their social & environmental responsibility and work hand-in-hand with Governments to promote economic and social development. Government must also support these organisation and look after vulnerable groups and not wait for the urge of corporate philanthropy.
To conclude, it can be clearly stated that, an organisation which is philanthropically generous but unaware of its corporate responsibilities will not be in business for very long. As Michael Porter wrote:
“If companies are just being good and donating a lot of money to social initiatives then they will bewasting shareholders’ money. That is not sustainable in the long-run, and shareholders will quicklylose interest “
- ECFIC Beijing Declaration On Corporate Social Responsibilities (CSR)http://caefi2.mofcom.gov.cn/aarticle/demand/200603/20060301778115.htm
- BSR’s report, The Future of Sustainable Business
- Crowther, D. and Seifi, S. eds., 2018. Redefining Corporate Social Responsibility. Emerald Group Publishing.
- Unit, B., 2015. Corporate social responsibility.
- Grayson, D. and Hodges, A., 2017. Corporate social opportunity!: Seven steps to make corporate social responsibility work for your business. Routledge.
- Schrempf-Stirling, J., Palazzo, G. and Phillips, R.A., 2016. Historic corporate social responsibility. Academy of Management Review, 41(4), pp.700-719.
- Hopkins, M., 2016. The planetary bargain: corporate social responsibility comes of age. Springer.
- Wang, H., Tong, L., Takeuchi, R. and George, G., 2016. Corporate social responsibility: An overview and new research directions: Thematic issue on corporate social responsibility.
- Flammer, C., 2015. Does corporate social responsibility lead to superior financial performance? A regression discontinuity approach. Management Science, 61(11), pp.2549-2568.