Managing risk is the main part of many corporate strategies. Reputations that take decades to build up can be cleaned out in hours through incidents such as corruption scandals or environmental activities. These occurrences can also draw unwanted attention from regulators, governments, courts etc. Building a genuine culture of 'doing the right thing' within a corporation can offset these risks.
In crowded marketplaces companies strive for a unique selling proposition which can separate them from the competition in the minds of consumers. CSR can play a role in building customer loyalty based on distinctive ethical values.
Several major brands, such as The Co-operative Group and The Body Shop are built on ethical values. Business service organizations can benefit too from building a reputation for integrity and best practice. So businesses should be more responsible for their environment.
License to operate
Corporations are keen to avoid interference in their business through taxation or regulations. By taking substantive voluntary steps they can persuade governments and the wider public that they are taking current issues like health and safety, diversity or the environment seriously and so avoid intervention. This also applies to firms seeking to justify eye-catching profits and high levels of boardroom pay. Those operating away from their home country can make sure they stay welcome by being good corporate citizens with respect to labour standards and impacts on the environment.
CSR from a Business Perspective
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It is apparent that in today's business practice, CSR is entwined in many multinational organizations strategic planning process. The reasons or drive behind social responsibility towards human and environmental responsibility is still questionable whether based on genuine interest or have underlining ulterior motives. Corporations are fundamentally entities that are responsible for generating a product and or service to gain profits to satisfy shareholders (Prof Malloy, 59). As Milton Friedman believes, there is no place for social responsibility as a business function.
However a business still comprises people
those posses both the humanistic and naturalistic view points. The humanistic view is that
a deteriorating environment and planet is of no relevance in sustaining human life let
alone a business. The naturalistic view is where we draw the line between exploiting our
natural resources and destroying our fauna and flora for the sake of profiteering and
sustainability (Grace and Cohen 2005,144). The need to create an ideal scenario that is
"pareto efficient" may be the main reasons such mediators are there to adjudicate.
Influence from the population, government and competitors are possible forces that can
destabilize an organization should its motives or unethical processes become clear. Legal
structures in place, are created to ensure international borders are not left exposed to
multimillion dollar organizations' self interest. Stringent laws and penalties are governed
by legal bodies such as the International Court of Justice that are capable of sanctioning
non abiding organizations (ICJ 2007).
CSR has been an issue of some debate. There are some people who claim that Corporate
Social Responsibility cherry-picks the good activities a company is involved with and
ignores the others, thus 'greenwashing' their image as a socially or environmentally
responsible company. There are some other people who argue that it inhibits free markets.
Disputed business motives
Critics of CSR will attribute other business motives, which the companies would dispute.
For example, some believe that CSR programmes are often undertaken in an effort to
distract the public from the ethical questions posed by their core operations. Some that
have been accused of this motivation include British American Tobacco (BAT) which
produces major CSR reports and the petroleum giant BP which is well known for its high
profile advertising campaigns on environmental aspects of their operations.
Critics who believe that CSR is self interested
This group argues that the only reason corporations put in place social projects is for the
commercial benefit they see in raising their reputation with the public or with
government. They suggest a number of reasons why self-interested corporations, solely
seeking to maximize profits are unable to advance the interests of society as a whole.
Always on Time
Marked to Standard
They would point to examples where companies have spent a lot of time promoting CSRpolicies and commitment to Sustainable Development on the one hand, whilst damagingrevelations about business practices emerge on the other. For example the McDonald's Corporation has been criticized by CSR campaigners for unethical business practices, and
was the subject of a decision by Justice Roger Bell in the McLibel case (which upheld
some of these claims, regarding mistreatment of workers, misleading advertising, and
unnecessary cruelty to animals). Similarly Shell has a much publicized CSR policy and
was a pioneer in triple bottom line reporting, but was involved in 2004 in a scandal over
the misreporting of its oil reserves which seriously damaged its reputation and led to
charges of hypocrisy. Since this has happened the Shell Foundation has become involved
in many projects across the world, including a partnership with Marks and Spencer (UK)
in three flower and fruit growing communities across Africa.
These critics generally suggest that stronger government and international regulation
rather than voluntary measures are necessary to ensure that companies behave in a
socially responsible manner.
Other views from this perspective include:
Corporations really care little for the welfare of workers or the environment, and given
the opportunity will move production to sweatshops in less well regulated countries.
Companies do not pay the full costs of their impact. For example the costs of cleaning
pollution often fall on society in general. As a result profits of corporations are enhanced
at the expense of social or ecological welfare.
Social responsibility of a business refers to what the business does, over and above the
statutory requirement, for the benefit of the society. The term corporate citizenship is also
commonly used to refer to the moral obligations of the business to the society. This
implies that just as individuals, corporates are also integral part of the society and their
behaviour shall be guided by certain social norms. The operations of business enterprises
affect a wide spectrum. The resources they make use of are limited to those of the
proprietors and the impact of their operations is felt also by many a people who are in no
way connected with the enterprise.
BENEFITS FOR BUSINESSES
Being socially responsible is not just good business practice but also makes good
business sense. CSR has positive effects on the economics of the company, its public
relations, customers, employees and shareholders. If integrated into the business strategy,
CSR is a potent business tool. There are several benefits to companies
1. Getting license to operate from key stakeholders not just shareholders:Cert ain
industries like mining etc that displace people or have environmental impact require a
license to operate from the community whom they impact by their operations. Failure to
do so could not only make the operations difficult, but the hostility can sometimes make
the operations even unviable in extreme cases.
2. Enhanced reputation and brand value:Â The business environment is increasingly
sensitive to a company's social, ethical, and environmental performance due to
globalization, the communication revolution, and mobility of customers and suppliers.
Reputation is an important sustainable competitive asset, because it is difficult and time
consuming to develop and cannot be easily mimicked by competitors. Brand identity is
also growing in importance. Interbrand, a leading international branding consultant,
predicts that the brand worth of companies will rise to 45 percent of stock market
capitalization by 2010. This is up from five percent in 1960 to 30 percent in 2000.
3. Increased efficiency in operations:Â Using the CSR framework in corporate business
strategy can result in high efficiency in operations, for instance, improved efficiency in
the use of energy and natural resources; reduced waste such as reducing emissions of
gases; and selling recycling materials. Better human resources also benefit business.
Work-life programs that result in reduced absenteeism and increased retention of
employees often save companies money through increased productivity and by a
reduction in hiring and training costs. For example, companies that improve working
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conditions and labor practices among their offshore suppliers often experience a decrease
in defective or unsalable merchandise. A study of 15 large employers conducted by the
Medstat Group and the American Productivity and Quality Center found that health
benefit programs can increase productivity and decrease company costs related to
absenteeism, turnover, disability and health-care claims by 30 percent.
4. Increased Sales and Customer Loyalty:Â According to the Millennium Poll on Corporate
Social Responsibility, the majority of 25,000 people interviewed in 23 countries want
companies to contribute to society beyond making a profit. While businesses must first
satisfy customers' key buying criteria - such as price, quality, appearance, taste,
availability, safety and convenience - studies also show a growing desire to buy based on
other values-based criteria, such as "sweatshop-free" and child-labor-free clothing,
smaller environmental impact.
5. Increased Ability to Attract and Retain Quality Employees:Â In interviewing 150 top
employees in 24 organizations, the UK consulting firm, Stanton Marris, learned that employer reputation was a key factor in accepting a job offer. Seventy-six percent of
those polled by the Cone/Roper Corporate Citizenship Study said a company's
"commitment to causes" was an important consideration in deciding where to work.
Attracting and retaining a committed and skilled workforce is vital to business success.
6. Innovation in market and product development through cooperation with local
communities:Â Cooperation with local communities helps in tailoring products and
services to local markets. For e.g. IBM's community partnership programs have produced
six new products for market and 15 patent applications in 2000 alone.
SOCIAL RESPONSIBILITY EXAMPLES:
BG INDIA LTD
Natural gas is becoming the fuel of choice in a world increasingly concerned with the
environmental impact of its energy consumption and India is no exception. Demand for
natural gas in India is expected to more than double over the next two decades, rising to
13,700 million standard cubic feet per day (mmscfd) by 2025
With its natural gas industry expertise, BG India is well placed to make a significant
contribution to the country's future energy needs.
1995: Formation of Mahanagar Gas Ltd: joint venture with the Gas Authority of India Ltd
1997 : BG acquires majority interest in Gujarat Gas Company Limited
2000 : GGCL commissions 73 km Hazira-Ankleshwar transmission pipeline
2002 : BG acquires 30% interest in Panna, Mukta and Tapti fields
BG India's exploration and production assets include a 30 per cent interest in the Taptigas field and the Panna/Mukta oil and gas fields. Significant investment is planned forfurther development in the fields.
BG India has a 65.12 per cent controlling stake in Gujarat Gas Company Limited, which supplies natural gas to the cities of Ankleshwar, Bharuch and Surat in south Gujarat. BGIndia also has a 49.75 per cent stake in Mahanagar Gas Limited, which is developing anatural gas distribution system in Mumbai. Both companies deliver piped natural gas todomestic, commercial and industrial customers as well as compressed natural gas (CNG)for natural gas vehicles.
BG India is part of BG Group, a leading international energy company that has expertise
across the spectrum of the natural gas chain.
India is one of BG Group's six core geographic areas of operation. BG India is
responsible for managing and developing the upstream and downstream interests of the
Group in the country. BG India has been patron ofÂ St Teresa's Special School,Â Santa
Cruz, which is for differently challenged children. The company provides support for
According to the information provided by the administration people at St Teresa's Special
School, BG India provided financial support to the school once and that was almost two
years ago. Since then, there has been no contact regarding this subject on their part. When
asked about the policies to approach the company for donations and other voluntary
forms of support, the staff member informed us that the company delays the matter for a
couple of months every time they do so.
The company claims that Corporate Responsibility (CR) remains a top priority at BG
India, based on a recognition that the company has a duty to act responsibly both towards
its employees and the wider community in which it operates.
BG India mainly contributes to society in several ways: delivering gas to markets;
providing energy and infrastructure to support development; creating and sustaining jobs
in local economies; and through taxes and duties paid. These benefits are enhanced by the
company's CR strategy, which not only ensures that it behaves in a socially responsible
manner, but also makes a positive and meaningful contribution to community
Presently Tata Tea is running its campaign on motivating Indians to vote in elections. It
has launched a website to help voters in registering them into voter list
Dr.Â Reddy's Foundation
â€¢ Founded by Dr. K Anji Reddy in 1996
â€¢ Engaged in promoting PPP models linking life, learning and livelihoods
â€¢ Addresses the cause of poverty alleviation
â€¢ Believes in empowering people to support themselves
â€¢ Believes in giving back to the society.
Dr. Reddy's is one pharmaceutical company that has evolved from a social initiation
backdrop into a corporate giant. CSR rating agency - Karmayoga states that Dr. Reddy's
& Lupin Laboratories are the only two pharmaceutical companies that are making
genuine efforts for the society.
The company continuously tries to meet society's expectations by developing innovative
medicines that enable people to live longer and healthier lives . To facilitate policy development, implementation and communication, a cross-functional team was
established at the beginning of 2002 to ensure a comprehensive and coordinated
approach. The team is made up of representatives from the key business areas who ensure
that policies are in place and mechanisms exist for their implementation and monitoring.
They also contribute to reporting progress through this report and in other ways, for
example through conference presentations and on company's website.
A business with fewer stakeholders to satisfy, their greatest concern appears to be their
customers and their own ability to satisfy the demand for products effectively.
Businesses are demonstrating that well managed corporate responsibility actually
supports business objectives, especially amongst large corporate where improved
compliance, reputation and relationships has been shown to increase shareholder value
and profitability. For privately held businesses, the pressure to act can stem from the
demands of the supply chain, with large multinationals increasingly demanding that
suppliers conform to ethical business practices.Incorporating corporate responsibility
into a business's core strategy can also enhance its attractiveness as an employer.