Corporate Social Responsibility (CSR) – BMS Notes
Since CSR is a word that is still under development, it lacks a widely accepted definition and set of precise standards. Being a relatively recent addition to management theory, CSR is often a word that is used frequently but not well understood.
“Profit making exclusively,” “moving beyond profit making,” “volunteer activities,” “concern for the larger social system,” and “social responsiveness” are a few of the most often used definitions of corporate social responsibility. Despite the lack of a consensus definition, corporate social responsibility (CSR) is often understood to be an organization’s approach to incorporating the economic, social, and environmental aspects of their operations.
Though the phrase is new, the principle is ancient. Although the idea of corporate social responsibility has lately acquired popularity in India, Indians have always embraced it as a way of life to improve societal welfare and well-being.
These moral principles from ancient India still apply now and direct the corporate companies’ financial operations. For businesses to fulfil their social obligations and become more integrated into society, they must absorb these values and spirits.
“A continual commitment by business to conduct ethically and contribute to economic progress while enhancing the quality of life of the workers and their families as well as of the local community and society at large” is how Holme and Watts describe corporate social responsibility (CSR).
“Social obligations relate to the businessman’s choices and activities done for causes at least somewhat outside the firm’s immediate economic or technical interest,” according to Keith Davis (Davis 1960). Corporate social responsibility, to put it briefly, is the business’s response to the societal issue of the day.
Components of Corporate Social Responsibility Carroll and Buchholtz define CSR as “Corporate social responsibility covers the economic, legal, ethical, and charitable demands put on corporations by society at a specific moment in time.”
Participation of the Community
It describes a broad variety of steps businesses take to optimise the benefits of their investments in time, money, and services for the general welfare of the community.
Human Rights
The rights and dignity of workers and communities may be significantly impacted by corporate activities. The major goal is to build an inclusive workplace where learning and creativity may thrive, where appropriate norms of behaviour for professionals can be established, and where a healthy balance can be achieved.
Workplace Safety
It encompasses the freedom of association and the realisation of the right to collective bargaining, the outlawing of child labour and all types of forced and compulsory work, and the removal of discrimination based on job status and occupation.
Protection of the Environment
Since environmental problems are of global relevance, the business sector also concentrates on reducing its own environmental effect and developing sustainable solutions for natural resources. Environmental responsibility has grown over the last several years to include much more than just adhering to all relevant laws and regulations or even a select few programmes like energy conservation or recycling.
Environmental responsibility is defined by a lot of people, environmental groups, and leading corporations as a holistic approach to a company’s operations, products, and facilities, which includes evaluating the business, products, procedures, and maintenance of a work-life balance.
Business Standard: It addresses a wide range of corporate activism topics, including financial returns, environmental conservation, and ethics.
Education and the Development of Leadership
Since education is a crucial component of both pro-poor and sustainable development, businesses can play a significant role in ensuring that all people have access to high-quality education by collaborating with the public sector and civil society. Businesses can also have a more significant impact on the development process by elevating the bar for corporate education and leadership development.
Corporate Social Responsibility Is Important
Without a doubt, the idea that fulfilling corporate social responsibility comes with expenses that lower earnings has shown to be incorrect. Rather, it is well known that fulfilling social responsibility fortifies a company’s capacity to generate profit throughout the long term as well as the short term. In the business world, there are a tonne of these tales.
One well-known example of a firm prioritising the good of the public above its own interests (profit), particularly when the company is a victim, is Johnson & Johnson. On September 28, 1982, Johnson & Johnson produced Extra Strength Tylenol, which resulted in cyanide poisoning and several fatalities for Chicago.
Johnson & Johnson shown their deep concern for social welfare by offering a $1.0 million reward for information leading to the identity of the perpetrator in addition to cooperating with the investigation into the event.
Johnson & Johnson lost a considerable deal of money due to the Tylenol problem, including the removal of 31 million bottles from the market that had a combined retail value of more than $100 million. Perhaps the most catastrophic expense came from a decline in public trust. Six weeks after it took Tylenol capsules off the market entirely, the corporation brought the medicine back in tamper-proof packaging—a feature seen in all modern pharmaceuticals.
Remarkably, Johnson & Johnson was able to recapture 95% of its pre-Tylenol market share (Waldholz 1982). This Johnson & Johnson anecdote demonstrates how an organization’s foundation—better known as its “Organisational Character”—is strengthened by its concern for social welfare, which in turn increases the organization’s ability to make profits. The basis for all wealth is character. According to Swami Vivekananda, “Build character first; everything else will come.”
An other example of a company that put social welfare ahead of its own interests is Maruti Udyog Limited (MUL). Approximately 50,000 Maruti 800 passenger vehicles, the company’s best-selling product, were recalled from the market in 1997 out of all the cars sold between January and April due to suspicions that the steel used in them was subpar. Since it was the largest recall of automobiles from the Indian market, this made press headlines.
This favourable association seems to be based on the idea that businesses who become involved in society reap many advantages that outweigh the expenses. Positive customer perception, a more committed and driven staff, high public trust, societal acceptability, and even less intervention from regulatory bodies are some of these advantages.
Understanding the significance of corporate social responsibility may be gained from our ancient teaching of Propkaram Paramam Dharma, which holds that the most holy duty is to aid others—a concept known to sociologists as altruism. Fulfilling one’s duties is “Dharma,” and truth is “Dharma.”
Truth endures for a very long time and triumphs in its own forms. Our historical records bear testimony to the fact that, in the end, satyamev jayate—that is, truth alone—wins and triumphs in all spheres of life. Cooperate social responsibility is a business’s “dharma” that allows it to endure and prosper over time.
A dishonest or unethical company will eventually come to an end, just like any other falsehood. Numerous corporate instances, such as Arthur Anderson, Enron, Union Carbide, Harshad Mehta Stock Corporation, and others, attest to the fact that no business can thrive in the absence of the approval and support of the community in which it operates. Without the approval of society, business will inevitably fail and die.
Here are a few additional arguments in favour of companies carrying out their social responsibilities. A lot of these (Mintzerg 1983) are usually expressed in terms of enlightened self-interest, meaning that the company engages in social responsibility to the extent that it serves its own interests.
Consumers who see a company as socially responsible may reward it with more business and/or higher levels of satisfaction, while customers who view a company as irresponsible may reject it or boycott it. In 2007, Pepsi and Coca-Cola faced a boycott from Indian consumers.
According to research, workers are drawn to and even grow more devoted to companies that exhibit socially conscious behaviour (Greening and Turban 2000).
Businesses that voluntarily participate in social initiatives and programmes may also prevent laws from being passed and guarantee a higher level of corporate autonomy from the government.
Contributing positively to society by acting in a socially responsible manner may be seen as a long-term investment in building a more stable and better business environment.
Along with the previously mentioned commercial arguments in support of corporate social responsibility (CSR), the following significant moral arguments are also in favour of CSR:
Due to the societal problems that corporations create, such as pollution and dirtiness, businesses have a moral obligation to address these issues and work toward preventing such problems in the future.
As social actors, corporations make use of social resources, which are often limited. As a result, they ought to utilise these resources sensibly to advance society.
Any kind of corporate activity, like as offering goods and services, hiring people, and so on, has an influence on society that might be favourable, unfavourable, or neutral. Therefore, companies have the accountability for these effects.
In actuality, companies depend on the contributions of a broad range of stakeholders, or constituencies, including local communities, suppliers, customers, and so on, in addition to shareholders. Thus, businesses have an obligation to consider the objectives and interests of stakeholders, including shareholders.
There has never been any question regarding the need or importance of the socially conscious actions that firms do, especially in light of the multitude of arguments supporting corporate social responsibility.
Corporate Social Responsibility Types (CSR)
The “Four-Part Model of Corporate Social Responsibility,” put forth by Archie Carroll and later improved by Carroll and Buchholtz, is arguably the most well-known and acknowledged model of CSR that addresses the forms of CSR among the organisational researchers who have occasionally attempted to identify and describe the various forms of CSR. The following Figure 1 shows this model. Carroll’s Formula for Corporate Social Responsibility in Four Parts. Carroll claims that corporate social responsibility (CSR) is a multifaceted idea made up of four interconnected facets of responsibilities: charitable, legal, ethical, and economic. He depicts these many duties as tiers that build up to one another like a pyramid.
“Corporate social responsibility comprises the economic, legal, ethical, and charitable demands put on corporations by society at a specific moment in time,” is how he defines CSR.
Figure: Carrol’s four-part CSR (corporate social responsibility) approach
A business must fulfil its financial obligations by providing investors with a reasonable return, paying staff fairly, and providing consumers with products at fair pricing, among other things. As such, fulfilling one’s financial obligations is both the first and foundational layer of duty. It is nevertheless true that all companies must fulfil their financial obligations in order to continue operating.
Legal Occupation
Businesses must follow the rules of the game and the law of the country as part of their legal responsibilities. The social code’s dos and don’ts are codified in laws.
Following the law is a must for every firm to be socially conscious. There are several examples in corporate history of legal violations preventing firms from operating. Global Trust Bank, Union Carbide, Enron, and other corporations are prime examples of societal rejection and boycott from the business community.
Moral Obligation
These responsibilities are duties that companies have that are proper, reasonable, and equitable. Adhering to legal requirements, protocols, and guidelines alone does not guarantee ethical or moral corporate practises. Corporate behaviour that goes above and beyond the law and promotes societal welfare is said to be ethical.
Therefore, businesses have an ethical duty to act in a way that benefits society, even if it means breaking the law or following other rules and regulations. Stated differently, a corporation’s ethical obligations include societal norms and standards that beyond legal and financial obligations.
Social Duty
The direct translation of the Greek term “philanthropy” is “the love of one’s fellow human.” When this concept is applied to a business setting, it encompasses actions that a company may choose to do in order to enhance the lives of its workers, the communities in which they live, and eventually the general public.
The philanthropic tasks that companies fulfil include contributions to charity organisations, the construction of recreational facilities for the benefit of their workers and their families, support for educational institutions, sponsorship of art and related activities, etc. It is crucial to remember that companies want to engage in charitable endeavours; society does not compel them to.
CSR’s dimensions
The responsibilities a company has to its interest groups, commonly referred to as “stakeholders,” are among the many parts and dimensions of corporate social responsibility. A business’s stakeholders might include its owners or shareholders, customers, workers, the government, the community, etc.