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As a concept, Corporate Social Responsibility has been around for a long time and its history can be traced back to ancient Greece according to an article published by Nicholas Ebserstadt in 1973. However, the roots of modern Corporate Social Responsibility date back to the 1930s. Since then, the scope of CSR has undergone a sea change. While the main goal of any business is to remain profitable and yield returns to its various stakeholders, there is increasing consensus that corporations are in effect social enterprises that cannot function separately from the social-cultural values of the communities they seek to operate in.
Corporate Social Responsibility is no-longer defined as simple acts of charity. It has evolved from being viewed as a step beyond business ethics to a full-fledged marketing tool that proposes a win-win situation for both corporate houses and the beneficiaries. Corporate Social Responsibility has emerged as a strong marketing tool which is used properly can sometime be the single-most differentiating factors between two corporate powerhouses. In the Indian context, the most oft-quoted example would be that of Tata vis-à-vis Reliance. Tata has carefully built strong image of being an extremely socially responsible corporation while Reliance has struggled to achieve a similar image till date.
The need for businesses to be responsible and accountable has acquired a new level of importance in the global environment, accompanied, among others, by a greater demand for mandatory and non-mandatory reporting of social responsibility initiatives (Birch, 2003). Several examples, small and big can be cited of organizations that have taken Corporate Social Responsibility seriously and have also used it wisely as a marketing tool. Corporations belonging to different industries have realized the importance of CSR and are therefore making great efforts to ensure that they not only take appropriate initiatives but also ensure that they are communicated to stakeholders in an effective manner.
Some of the most commonly taken initiatives across industries are as follows:
Cause Promotions - Support of a social cause, in any form possible
Cause-related Marketing - Contributing a certain percentage of sales towards the cause taken up
Corporate Social Marketing - Taking up issues that will impact that society at large. Mostly day-to-day civic issues.
Corporate Philanthropy - Direct Contributions made to charities and NGOs.
Community Volunteering - Encouraging employees to offer their personal time in support of a cause
History of Corporate Social Responsibility
As a practise, Corporate Social Responsibility is as old as the existence of trade/business itself. The history of CSR can be traced back to Ancient Greece. There were ideas about what it meant for business to make a positive contribution to the rest of society centuries before the term corporate social responsibility was coined.
Lord Carnegie, Cadbury, Lever, Jamshedji Tata were some of the many individuals who utilized individual and company assets to improve the living conditions of nineteenth and twentieth century workers. In the twentieth century, companies like Tata, Norsk Hydro, Indian Rayon etc., would take responsibility for social conditions that their employees were working in. Most of these companies were situated in small isolated company towns and they all set up housing schools, hospitals and other social amenities.
Much public, political and academic debate was generated by the positive and negative impacts that business had on society. Many questions came up which were debated and discussed furiously. Some of the questions were - Could markets be relied upon to fairly distribute the wealth business created between shareholders, employees and wider society? Should companies give part of their wealth back to the communities within which they operated?
Questions like these gave rise to a nascent notion of corporate social responsibility. As mentioned above, the concept of social responsibility was initially focussed on the role played by individual business leaders with regards to how they took care of their employees and how they gave back to society. The part played by social responsibility changed distinctly over three main phases:
The Industrial Revolution
The mid-20th century welfare state and
Somewhere in the 1950s the focus of CSR shifted from the role played by individual business leaders to the responsibility of companies at large towards the society. This further generated debate about what exactly companies should be responsible for.
In the 1990s terms like 'corporate sustainability' were used to emphasize that environmental concerns were an area that companies were expected to take up responsibility for. Especially industries like oil and natural gas, mining, and other production-oriented companies.
Therefore, the focus and function of Corporate Social Responsibility as a discipline and practise has changed incredibly over the years. However, the basic crux of CSR remains - infusing social responsibility into the practise of maximizing profit.
For Davis (1973), corporate responsibility begins where the law ends. In essence, what Davis is trying to say is that Corporate Social Responsibility is about what companies do above and beyond their legal obligations to make a positive contribution to society.
Defining Corporate Social Responsibility
As mentioned above, various definitions of Corporate Social Responsibility have emerged with the passage of time. Some notable ones have been mentioned below:
"Social responsibility of business encompasses the economic, legal, ethical, and discretionary expectations that society has of organizations at a given point in time". - Carroll (1979).
"CSR is the proposition that companies are responsible not only for maximising profits, but also for recognising the needs of such stakeholders as employees, customers, demographic groups and even the regions they serve." - PricewaterhouseCoopers, www.pwcglobal.com, as on March 24, 2004.
"CSR 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" - Lord Holme, former executive director or Rio Tinto, and Philip Watts, former chair of Royal Dutch Shell.
"The continuing commitment by business to behave ethically and contribute to sustainable economic development while improving the quality of life of the workforce and their families as well as of the local community and society." - WBCSD (World Business Council for
"CSR is the commitment of business to contribute to sustainable economic development, working with employees, their families, the local community and society at large to improve their quality of life, in ways that are good for business and good for international development." - World Bank, www.worldbank.org/privatesector, as on March 24, 2004.
Why Corporate Social Responsibility?
We live in a world in which the richest 20% of people possess 86% of gross national product, in which one country accounts for 23% of worldwide energy consumption, and in which the USA and Europe account for 65% of annual wealth creation (Mattar, 2001).
We live in a world where prosperity is measure by economic growth which is fuelled by productivity, both at a group and individual level. Greater productivity is achieved my maximum utilization or resources and minimizing costs. And although new economic powerhouses are emerging in this ever-changing world, distribution of wealth in and between these countries is highly unequal.
Also, since we live in an age where wide-spread business failure is deemed unthinkable; companies find themselves subject to increased levels of transparency. Adverse disclosure can threaten shareholder confidence, brand reputation, employee trust, and other corporate assets, both tangible and intangible.
Therefore, in a world where Capitalism and Free Economy are the most widely accepted practises, there is a need to address some very basic concerns - environmental pollution, child labour, consumer rights, corruption etc.
Public opinion is increasingly becoming less tolerant of corporate malfeasance, but there is also increasing expectation that businesses will come up with solutions to some of the key social and environmental problems faced by mankind in the 21st century.
This is where Corporate Social Responsibility plays a crucial role in balancing these two sides of the same coin out. On one hand, it must deal with the problems associated with capitalism and on the other hand, it must also justify business as the means to find solutions to some of the biggest problems mankind is currently faced with.
"More and more, companies and other organizations acknowledge their responsibilities to the community: helping to maintain clean air and water, providing jobs for minorities, enforcing policies in the interests of all employees, and, in general, enhancing everyone's quality of life. This concept of social responsibility has become widely accepted among enlightened organizations."
Types and layers of Corporate Social Responsibility
In 1979, Archie Carroll, offered what is probably the most widely used framework for understanding the different types and aspects of Corporate Social Responsibility that had emerged over time. The four types identified by him are as follows:
The fundamental responsibility of any organization is to generate profit from the goods and services it produces for society. The organization has to first and foremost, fulfil its commitment towards the various stakeholders involved.
This refers to the responsibility if businesses to achieve their economic missions within the ambit of the law. This is to ensure that no organization engages in any practise that is punishable by the law. It acts as a framework to ensure smooth functioning across businesses.
Ethics start where the law ends. This layer refers to the ethical responsibilities that business have towards stakeholders and society at large above and beyond their legal responsibilities.
In the broader sense, this refers to the acts of charity and philanthropy that
CSR in India
Scholars have traced the overarching role of tradition, spirituality, and respect in the
evolution of corporate social responsibility in the Indian context (Balasubramanium, Kimber, &
Siemensma, 2005; Jose, Bandi, & Mehra, 2003; Mahajan, 2004; Mohan, 2001; Sagar & Singla,
2004). In its historical form, CSR in India has been dominated by a philanthropic approach to
business. Despite the early emphasis on philanthropy as the primary means of "giving back to
society," founders of large business families (e.g., Tata, Birla, Bajaj, Godrej) are credited with
setting up trusts and endowment funds to support local community development. The post-
Independence phase (1947 onwards) was marked by heightened business involvement in social
welfare and reform. One of the earliest CSR deliberations (1965) defined the enterprise "as a
corporate citizen" that was responsible not just to itself, but also to "its customers, workers,
shareholders and the community â€¦ if it is to enjoy confidence and respect â€¦" (Mohan, 2001, p.
110). CSR in 20th century India received an impetus by the emergence of non-family businesses,
"corporate will," and government and public expectations (Mohan, 2001, p. 111).
Scholars note that Indian CSR is now an important part of the movement away from
"rapid-growth, export-oriented, cost-advantaged-focused strategies to longer-term, business
development initiatives, supported by the government, financial markets and multinational
companies' (MNC) involvement" (Balasubramanium, et al., 2005, p. 82). The Indian
government has done its fair share to encourage CSR initiatives. The Confederation of Indian
Industry (CII) set up the Social Development Council (SDC) in 1995 to promote corporate
participation in social development by encouraging public-private partnerships. CII also
partnered the United Nations Development Program (UNDP) to establish the India Partnership
Forum charged with promoting "multi-stakeholder dialogue" and "a common understanding of
corporate citizenship particularly through the evolution of a common code" (adopted in 2001).
As of 2003, 70 companies had volunteered to participate in the Social Code of Business
(CII/UNDP, CEOs Meeting, 2003).4
Numerous surveys have been undertaken to evaluate perceptions of CSR, and track its
development in the Indian context. In 2002, a nation-wide survey reported an understanding of
CSR as different from "passive philanthropy," and noted that pressure from investors will drive
greater transparency in reporting financial and non-financial information (Corporate Social
Responsibility Survey, 2002). A study conducted by the Centre for Social Markets reported that
the primary factors driving attitude change toward CSR were increased awareness and the related
need to protect a company's reputation. Awareness of international and domestic trends in
specific sectors and rising standards in these sectors were also mentioned as strong influencers
More recently, a survey conducted by the Indian Market Research Bureau in 2003 found
that despite the optimism in making the move toward integrating CSR with business strategy, it
still remains largely philanthropic in nature, with 81% of the companies donating money for
social and/or charitable causes (Datta & Krishnan, 2003). The same study reported that public
sector units still lead the charge (95%) in undertaking development initiatives, closely followed
by multinational (84%) and privately held Indian companies (83%).