CSR and models.pptx for business students
- 1. 1 Topic CSR and its Models
- 2. 2 INTRODUCTION We live in an age in which companies have grown so large that they control much of the earth’s resources, and intervene in so many areas of social life, that they must be held responsible towards society and the environment. The developments in information technology and the effectiveness of knowledge-based economies have led to the creation of a new model of corporate governance. Business leaders are now concerned about the responses of the community and the sustainability of the environment.
- 3. 3 CSR is about how companies manage the business process to produce an overall positive impact on society. Let us consider Fig. 9.1. Fig 9.1 The Business in Society in Relation to Its Responsibility Companies need to answer two questions relating to their operations: 1.The quality of their management both in terms of people and processes (the inner circle). 2.The nature and quality of their impact on society in various areas.
- 4. 4 The ethical and social behaviour of corporations is essential for the generation of profit, owing its source to the reputation the corporation would acquire in view of its social behaviour. Accountability to Society Corporations’ Debt to Society
- 5. 5 DEFINITIONS OF CSR The World Business Council for Sustainable Development defines , ‘Corporate Social Responsibility is 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. CSR is about capacity building for sustainable livelihoods. Today, leading practitioners of CSR believe that CSR is an integral part of the wealth creation process and that it should enhance competitiveness of business and help the company in times of crisis.
- 6. 6 TODAY’S CORPORATE SOCIAL RESPONSIBILITY Today’s corporate social responsibility is to ensure the betterment of the society in which it functions. Possible reasons for CSR achieving such importance may be • the result of greater acceptance of business as linked to its external environment; • greater professionalism of management; and • drawing of managers from all levels of the general society. • The concept of corporate social performance includes a business organization’s • – configuration of principles of social responsibility; • – process of social responsiveness; and • – policies, programmes and observable outcomes as they relate to the firm’s societal relationships.
- 7. 7 Implementation of CSR The systematic implementation of CSR means: 1.the adoption of strong organizational values and norms depicting behaviours that are appropriate towards a variety of stakeholders; and 2.the continuous generation of intelligence about stakeholder issues, along with positive responses to these issues.
- 8. 8 MODELS FOR IMPLEMENTATION OF CSR A model for implementation of CSR is one that enables organizations to apply a particular concept or theory as a workable proposition. Though there are several theories to justify CSR activities of corporations, not all of them lend themselves to be put into practice.
- 9. 9 Table 9.1 Four Models of Corporate Social Responsibility Model Emphasis Proponent Ethical Voluntary commitment by companies to public welfare Mahatma Gandhi Statist State ownership and legal requirements determine corporate responsibilities Jawaharlal Nehru Liberal Corporate responsibilities limited to private owners (shareholders) Milton Friedman Stakeholder Companies respond to the needs of stakeholders—customers, creditors, employees, communities, etc. R. Edward Freeman
- 10. 10 Ethical model: In the ethical model, there is a voluntary commitment to public welfare. It has its roots in the Gandhian philosophy of trusteeship. Examples of this model are found in the Tatas, Birlas, and Reliance Industries—who have provided cash for social welfare projects, community investment trusts and schools. Many companies, particularly family-run businesses, continue to engage in philanthropic activities based on this model. Statist model: This model is based on the state-owned public sector units (PSUs). It is based on the socialist and Nehruvian mixed economy format that India had adopted for its economy. Propounded by Jawaharlal Nehru, this model calls for state ownership and legal requirements of CSR. For example: The PSUs provide housing and schools to workers. They have existed in India since 1947, such as in Bhilai and Bokaro.
- 11. 11 • Liberal model: This is the liberal approach where the belief is that the free market would take care of corporate responsibility. It is drawn from Milton Friedman’s view which states that a company’s responsibility lies mainly in improving the economic bottom-line and increasing the wealth of the shareholder. It is sufficient for the corporate to obey the law and generate wealth, which can be directed towards social ends through fiscal policy and charitable choices. • Stakeholder model: Since the late 1980s and through the 1990s, there has been an increasing realization that business has a social responsibility. It is generally understood that a stakeholder in an organization is an individual or a group of individuals who can affect or is affected by the objectives and activities of the organization. This has come about through public campaigns and pressure on the shareholders. Companies like Nike have been sourcing raw material from developing countries.
- 12. 12 CSR AS A BUSINESS STRATEGY FOR SUSTAINABLE DEVELOPMENT When CSR is adopted as a business strategy for sustainable development, it goes to improve corporate performance. It offers manifold benefits to corporations both internally and externally. Externally, it creates a positive image and goodwill among the public and earns a special respect amongst peers, customers, government agencies, investors and media, all of which go a long way in promoting long-term shareholder value and sustainable development. Internally, it cultivates a sense of loyalty and trust amongst employees in organizational ethics.
- 13. 13 ADVANTAGES OF CSR There are several advantages to corporations when they exhibit a sense of CSR and implement it. These advantages are the following: • Increased sales and customer loyalty: • Enhanced brand image and reputation: • Improved financial performance: • Increased ability to attract and retain employees: • Innovation and learning: • Reduced regulatory oversight • Risk management: • Easier access to capital: • Reduced operating costs:
- 14. 14 SCOPE OF CSR Three levels of social responsibility can be identified (evolution of areas of social responsibility) • Voluntary actions: • Market forces: • Mandated actions: CSR addresses the following issues: • community, assistance in solving community problems; • health and welfare; • education; • human rights; • natural environment; and • culture (i.e., music, arts, sports, etc.).
- 15. 15 • Understanding Social Responsibility of Business • Protecting and Promoting Stakeholders’ Interests • To consumers and community – Goods must meet the requirements of different classes, their tastes and purchasing power. – Goods must be reasonably priced, must be of dependable quality and of sufficient variety. – Provision of after-sales service advice, guidance and maintenance. – A fairly widespread distribution of goods and services among all sections of consumers and community. – Provision of free competition and prevention of concentration of goods in the hands of a limited number of producers or purchasers or groups. – Present a ‘good image’ in the minds of the public for honesty and integrity of character. – Advertising policy should be based on moral/ethical principles. It should not mislead by false, misleading and exaggerated advertisements.
- 16. 16 – Support to educational, charitable and other programmes for the benefit of the community. – Social accountability to consumers and public regarding the business conditions. – Avoidance of social and moral dangers of ‘high spots’ and ‘social tensions’. – Prevention of the growth of slums, improvement of housing conditions, elimination of crimes in industrial areas by providing training and job counselling for youth in situations where they may take to crime, and meeting the heavy costs of pollution and waste disposal. – Business should have a progressive outlook.
- 17. 17 – Proper training should be offered to the existing employees. – Should be a law-abiding citizen of the State. – To pay its dues and taxes to the state fully and honestly. – Maintain impartiality towards political affairs, that is, to abstain from direct political involvement; and not to support political parties. – To follow honest trade practices, and avoid activities leading to restraint of trade and commerce. – To try not to contact public servants for selfish ends. – To sell commodities without adulteration.
- 18. 18 • To employees – Promote a spirit of cooperative endeavour between employees and employers through participation in decision making and in improving production and administration. – To pay fair and reasonable wages to labourers and fair salaries to executives. – To develop and adopt a progressive labour policy based on recognition of genuine trade union right; settlement of disputes and conciliation; to create a sense of belonging to the business, and improving human qualities of labour by education, training, living conditions, housing, leisure and amenities. – To provide reasonable and just work conditions. – To recognize the labourer as a ‘human being’ and respect his dignity, and to preserve his or her individual liberty. – Provide facilities for joint consultation and collective bargaining. – Help development of proper leadership from among the employees. – Guarantee religious, social and political freedom to workers to take part in civic activities.
- 19. 19 • To owners and inter-business establishments – To provide a fair return or dividend on the capital invested. – Give fair and impartial treatment to all. – Develop healthy cooperative business relationship between different businesses. – Check the advance of such unfair practices as price- rigging, undercutting, patronage, unfair canvassing and unethical advertisements. – Help in the control of monopoly and promotion of healthy competition. • Promotion of Common Welfare Programmes
- 20. 20 STEPS TO ATTAIN CSR • The International Chamber of Commerce recommends the following nine steps to attain CSR: • Confirming CEO/Board commitment to prioritize responsible business conduct; • Stating company purpose and agree on company values; • Identifying key stakeholders; • Defining business principles and policies; • Establishing implementation procedures and management systems; • Benchmarking against selected external codes and standards; • Seting up internal monitoring; • Using language that everyone can understand; and • Setting pragmatic and realistic objectives.