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CSR concepts - Theories and dimensions - Its essentiality - Role in business – Sustainability

Business to society – Stakeholders – Be a part of inclusive growth

Issues and challenges. 



Articles


Alarming call for Corporate on CSR 

 Violation of CSR Law


CSR and Indian scenario 

After its inclusion in The Companies Act 2013.





CSR Concept


Numerous definitions of CSR are available on a simple click on internet, which will show you a large variety of definition differing from each other in many aspects but at its core all definition speaks about care of stakeholder’s interest, community growth, environment management and regulatory compliances.


"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"

                                                        World Business Council for Sustainable Development - 2003


For us CSR is behavior & concern of the company to run business in a manner that meets the ethical, legal, commercial, environmental and stakeholder’s expectations. Giving back to society for next generation & taking affordable care of the community where the company operates or with whom the company relates their business.

 


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  People, Planet & Profit

 

 

From the above definitions, it is clear that:

  • CSR approach needs to be holistic and integrated with the core business strategy for addressing social and environmental impacts of businesses.
  • CSR needs to address the well-being of all stakeholders and not just the company’s shareholders.
  • Philanthropic activities are only a part of CSR, which otherwise constitutes a much larger set of activities entailing strategic business benefits. 


Theories and dimensions of CSR


Corporate Social Responsibility is not just for a companies or business houses it is for all business leaders and managers of tomorrow. So they must understand why CSR has become the integral part of any business. Here attempts are made to simplify the CSR in totality.



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Carroll’s CSR Pyramid


According to Carroll (1991), “corporate social responsibility involves the conduct of a business so that it is economically profitable, law abiding, ethical and socially supportive. To be socially responsible means that profitability and obedience to the law are foremost conditions when discussing the firm’s ethics and the extent to which it supports the society in which it exists with contributions of money, time and talent”. And the different layers in the pyramid help managers see the different types of obligations that society expects from businesses.


Economic responsibility - It concerns the responsibility of business for producing goods and services needed by society and selling them at certain profit. Companies have shareholders who demand a reasonable return on their investments, they have employees who want safe and fairly paid jobs, and they have customers who demand good quality products at a fair price. So, here comes the first responsibility of the business as it is to be a properly functioning economic unit and sustain in business. And this is the base of the pyramid, where all the other layers rest on.


Legal responsibility - The legal responsibility demands that businesses should abide by the law and play by the rules of the game.


Ethical Responsibility - The main concept of ethical responsibility as defined and expressed by Carroll (1991) is that generally expected by society over and above economic and legal expectations. Ethical responsibilities of companies cover its wide range of responsibilities & are not necessarily imposed by law, but they are expected from companies by the public and governments.


 Philanthropic responsibility - As it is in the top of the pyramid, actions that fall into the voluntariness are those that you are not required to do but these actions are based in what your company believes is the correct thing to do. They may be based in specific ethical values that your company holds. 



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Triple Bottom Line Concept of CSR(PPP)


John Elkington in his book “Cannibals with Forks” in the year 1998 gave the concept of Triple bottom line. He said that a company's responsibility lies with stakeholders rather than shareholders. "Stakeholders" refers to anyone who influences or is influenced either directly or indirectly, by the actions of the Business. And according to this concept the basic stakeholders are:

  • PEOPLE - (human capital) pertains to fair and beneficial business practices toward labor, employee, community, other stakeholder of interests and region in which a corporation conducts its business.
  • PLANET - (natural capital) refers to sustainable environmental practices. Company endeavors to benefit from the natural resources as much as possible but it is fair to the extent that it do no harm or have an adverse  impact on environment.
  • PROFIT - (wealth creation) is the economic value created by the organization after deducting the cost of all inputs, including the cost of the capital tied up. 



CSR & Business


Many companies think that corporate social responsibility is a peripheral issue for their business and customer satisfaction is more important for them. They perceive that customer satisfaction is now only about price and service, but they fail to point out on important changes that are taking place worldwide that could blow the business out of the water. This change is named as social responsibility, which is an opportunity for the business. According to the following pyramid defined by C.K. Prahlad (An eminent scholar & professor of Michigan business school) the power in any sense lies at the bottom of pyramid, therefore if you want to get success whether in business or in any other field you cannot ignore the bottom of pyramid. 


Business & bottom of pyramid:-

        

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The Power Lies at Bottom of Pyramid - C. K. Prahlad


CSR & Inclusive Societal Growth


India is a developing country & we want to be in the line with the developed countries and if we want or need to match our self, we have to keep increasing pace of inclusive growth that is “Broad based growth, shared growth, and pro-poor growth”. We need to decrease the growth of poverty in the country and increase the involvement of people into the growth process of the country.

Only then, the gap of extreme poor and extreme rich can be bridged & a developed society of India can be created.


CSR as a Tool for Inclusive Growth


CSR not only includes the activities that a company undertakes in order to utilize their profit to enable social and environmental development, but also includes the methods that a company employs in order to earn these profits including socially responsible investments, and transparency to various stakeholders among others. Realizing the importance and the long-term benefit many companies has adopted socially responsible business practices.


Business & Industry sectors are the critical driver of Inclusive growth. It stimulates economic development and growth because of its transformative impact on production processes and wealth that it creates through value addition to primary resources.

  • Provides foundation for entrepreneurship.
  • Promotes business investment.
  • Fosters technological up gradation & innovations.
  • Improves human skills.
  • Creates direct & indirect job opportunities.
  • Enhance service sector business & employability.
  • Provide market for agro, agro based produce & other local produce.
  • Expand different other source of employment & income generation.

 

Elements of Inclusive Growth


In fact inclusive and sustainable Business/Industrial development is the only solution to meet the global objectives of eradicating poverty and reducing income disparities while minimizing environmental damage. Inclusive growth by its very definition implies an equitable allocation of resources with benefits incurred to every section of the society.


Inclusive growth can bring reduction in the incidence of poverty, significant improvement in health issues, and universal access for children to school, increased access to higher education and improved standards of education, including skill development. There should also be an improvement in employment opportunities, increase in wage rates, and betterment in livelihoods and improvement in provision of basic amenities like water, electricity, roads, sanitation and housing. Corporate can endeavor to overcome the social commitment of their CSR initiatives. CSR programs need to be explored to put positive impact on the economic, social and environmental sector which directly affects their relationship with investors, employees and customers.

 

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Although the prime goal of a company is to generate profits, companies can at the same time contribute to social and environmental objectives by integrating CSR as a strategic investment into their business strategy.

Industrial growth with a firm commitment on social responsibility is an important component for inclusiveness of growth in India.


Issues & Challenges


    Misunderstandings of Corporate: - Many companies think that CSR is a peripheral issue for their business and customer satisfaction is more important for them, but they fail to point out on important changes that are taking place worldwide, which are critical to their business.

 

    The Shrinking Role of Government:-In the past, governments have relied on legislation and regulation to deliver social and environmental objectives in the business sector. Shrinking government resources, coupled with a distrust of regulations, has led to the exploration of regulatory initiatives.

 

    Demands for Greater Disclosure:-There is a growing demand for corporate disclosure from stakeholders, including customers, suppliers, employees, communities, investors, and activist organizations.

 

    Increased Customer Interest:-There is evidence that the ethical conduct of companies exerts a growing influence on the purchasing decisions of customers. Consumer Protection Act is there for protecting consumer’s interest, also it can cause major loss i.e. is the loss of reputation & Brand image.

 

    Growing Investor Pressure:-Investors are changing the way they assess companies' performance, and are making decisions based on criteria that include ethical concerns. A separate survey by Environics International revealed that more than a quarter of share-owning Americans took into account ethical considerations when buying and selling stocks so is with ‘Banking and investment' sectors.

 

    Competitive Labor Markets:-Employees are increasingly looking beyond paychecks and benefits, and seeking out employers whose philosophies and operating practices match their own principles. In order to hire and retain skilled employees, companies are being forced to improve working conditions.

 

    Supplier Relations:-As stakeholders are becoming increasingly interested in business affairs, many companies are taking steps to ensure that their partners conduct themselves in a socially responsible manner. Some are introducing codes of conduct for their suppliers, to ensure that other companies' policies or practices do not tarnish their reputation. In India, over time, the expectations of the public has grown enormously with demands focusing on poverty alleviation, tackling unemployment, fighting inequality or forcing companies to take affirmative action.

 

    Lack of Community Participation in CSR Activities: There is a lack of interest of the local community in participating and contributing to CSR activities of companies. This is largely attributable to the fact that there exists little or no knowledge about CSR within the local communities as no serious efforts have been made to spread awareness about CSR and instill confidence in the local communities about such initiatives. The situation is further aggravated by a lack of communication between the company and the community at the grassroots.

 

    Need to Build Local Capacities: There is a need for capacity building of the local non-governmental organizations as there is serious dearth of trained and efficient organizations that can effectively contribute to the ongoing CSR activities initiated by companies. It is also reported that there is non-availability of well organized nongovernmental organizations in remote and rural areas that can assess and identify real needs of the community and work along with companies to ensure successful implementation of CSR activities. This also builds the case for investing in local communities by way of building their capacities to undertake development projects at local levels.

 

    Issues of Transparency: Lack of transparency is one of the key issues brought forth by the survey. There is an expression by the companies that there exists lack of transparency on the part of the local implementing agencies as they do not make adequate efforts to disclose information on their programs, audit issues, impact assessment and utilization of funds.

 

    Visibility Factor: The role of media in highlighting good cases of successful CSR initiatives is welcomed as it spreads good stories and sensitizes the local population about various ongoing CSR initiatives of companies. This apparent influence of gaining visibility and branding exercise often leads many nongovernmental organizations to involve themselves in event-based programs.

 

    Narrow Perception towards CSR Initiatives: Non-governmental organizations and Government agencies usually possess a narrow outlook towards the CSR initiatives of companies, often defining CSR initiatives more donor-driven than local in approach. As a result, they find it hard to decide whether they should participate in such activities at all in medium and long run.


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Articles

The Responsible . . ...

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Alarming call for Corporate on CSR 

 Violation of CSR Law


Written by Abinash Chandra Jha - On :30th january 2017 - Place : New Delhi

 

It was an early morning of January 30th 2017, while reading daily news papers, with a cup of tea. PM’s election rally, American President Trump’s opinion on some Muslim countries, Serena Williams wins 23rd Grand slam, Bhansali left Jaipur, practices of Indian cricket team for T 20 Nagpur match & many more. Everything seemed fine until one small news published in The Economics Times on “Over 530 cos may face action for CSR norm violations “made me upset. It had braced my fearful belief that many of the corporate are still not willing to accept the change of sustainability pathway and statutory compliance.


As per my knowledge & perceptions, majority of corporate are violating the norms of mandatory CSR. The news was published in one of the reputed National News Paper from PTI source, so there was no point of disbelief. Now I am of the opinion that the numbers may go high. The news says that Govt. informed Rajya Sabha that assessment of 7334 companies for CSR expenditure the violation of norms is one part; another dangerous part revealed 4195 companies had not incurred single rupee on CSR.


The news ringing the bell& reflects many things, such as many companies likely to face actions under the law; Govt. had issued notices to companies asking to furnish details under the act, Under the Act prosecution can be initiated against the erring companies, a final decision in this respect is yet to be taken, sources said. Meaning there by one can’t be at liberty to ignore their responsibility assured by the law.


I am not a critic, but as a CSR professional the above scenario had raised many questions in context to Corporate & Corporate social responsibility:-

  1. There are Companies who are yet to get enlightened about Law & CSR.
  2. There are Companies who deliberately avoid or evade the statutory requirements.
  3. There are Companies who still unaware of “business sustainability is dependent of societal growth”.
  4. Understanding that Companies have no choice except to go with mandatory expectation.
  5. Companies had not understood CSR - How? What? When? For whom?
  6. Acceptance of stakeholder’s expectations & statutory compliances needs commitments more than investment.

Therefore it is my advice “आत्म-चिंतन”& then “मंथन” that as a corporate how much Responsible, Accountable & Transparent we are? The law in context of CSR is very simple, self-explanatory, well-conceived and structured, flexible & of guiding nature, its nature is advisory instead of commanding, having an objective of sustainable business with societal growth.


Identify weaknesses, search means and mode to strengthen, enhance and build capacity of your CSR team for execution of your companies CSR mission, vision and policy in accordance to law.


The Govt. has given a guided framework through inclusion of CSR in the companies act with a high expectations, that the a very small fraction of their profit should be utilised as a catalyst for the sustainable growth of the society and in return of their investment, they get social licence to operate, earn respect, faith & trust of society, establish good brand image, retain quality employee, attract National as well International investors, edge over the sectoral competitiveness. By visualizing CSR in contexts of mandate  as well as beyond mandate,  that social responsibility of a corporate or business entity starts from the very first day of your business planning irrespective of your investment, profit & sectors. It is right time for Board, Directors, CEOs & especially green field Project heads to understand & appreciate the importance of CSR for business sustainability, impact on the socio-economy of the society and the environment to create long term values.


Sincere advice to all, in regard to mandatory CSR, do it from “Dil Se” as it is an opportunity to harness societal potentiality for sustainable business. The sturdy framework provisioned in the act directs you to invest in a way that gives inclusive social growth & change your face from profit earner to Nation builder.


Visualizing the present status of CSR in 3rd financial year of the implementation mandate ground reality is far from expectations, I don’t find much impact of CSR on the society at large.Visit states like Chhattisgarh, Orissa, Jharkhand, Maharashtra where good numbers of PSU’S and Private Companies concentration are, but they unable to reach in much needed areas of concern where they operate.


Yes there are problems& issues, I am confident that corporate commitment combined with their managerial efficiency can overcome or remove hurdles by taking these following steps:-

  1. Strategic planning of CSR effort & Investment.
  2. Change mind set, CSR is neither burden nor taxation.
  3. CSR workforce need to move from philanthropy to sustainability.
  4. Integrate key stakeholders in CSR activities.
  5. Make cross sector partnership, need based initiatives.
  6. Calculate & evaluate both tangible & non tangible impact.
  7. Do your SOWT analysis for better SROI.
  8. Anyone cannot do CSR effectively; it needs proper training, knowledge, capacity & commitment.
  9. Create strong structured frame work for implementation, monitoring, evaluation & reporting.
  10. Avoid practices of top to down theory, instead do project planning at ground level based on need, resources & opportunities.

Mind it, CSR is a pivotal tool to bridge the gap between companies & community leading towards business sustainability. I feel that in the name of CSR we have not come out of the glossy photographs, using it as liaison and relationship management tool, we satisfy our ego by participating in conclave, sponsored stage shows.


While concluding i would like to say that CSR is still at the bottom of corporate agenda, which needs to be kept at the top, 

it makes corporate responsible as a whole & specifically the Board.




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CSR and Indian scenario 

After its inclusion in The Companies Act 2013.

 
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Abinash Chandra Jha
Trainer
Mentor & Principal Consultant
ISSRC-CSR

Having work experience of three decades in social sector & the last decade exclusively for CSR, I was overwhelmed on inclusion of CSR in The Companies Act 2013, finally there was a proper framework with clear direction into existence which would help the Corporate to stream line their efforts, utilize their core competencies to contribute for Nation building process. A small contribution of Corporate with excellent managerial efficiencies could lead the socio economic development process with pace where return on investment will be societal growth. In general, the business sector should understand that, the community is an important & crucial stakeholder for their growth and sustainability. The Govt. of India & the Parliament realized the call of the time, that it was the right time to put foundation stone to establish strong corporate community relationship.


A country where more than 40% population is in the bracket of have-nots group and simultaneously 65% population below the age of 35, a young & vibrant India. It is the right time to harness this big pool of human capital for social transformation and economic development.


But what I feel is that, still there are majority of corporate either confused or unable to understand the need of the time or they do not have belief in triple bottom line concept, whether it is people, planet & profit or corporate, government & community.

 

After visualizing 2 years of development in the name of CSR, I would like to share my experience. It is not criticism of Corporate or agency. In fact it is an attempt to impress all those concerned with CSR about need of the time & essence of sec.135, schedule VII of The Companies Act 2013. Yes, my experience of three decades in social sector & CSR says that much talked 2% of the net profit cannot change the fate of the targeted population, this 2% is not even the 2% of total budget of the socio economic development programs of Govt. of India. But at the same time I am sure that this 2% coupled with corporate competency & managerial excellence can set examples to replicate, innovate a variety of interventions to transform the lives of millions, revive the faith & trust of community and establish harmony, cooperation along with change the myth that business does not mean only profit for promoters.

 

To my mind CSR cannot be restricted to a certain group of companies under the law, it is the process of giving back to society from where they get profit whether it is a big corporate or a small business entity, not in the form of charity but for sustainable socio economic development and business sustainability. We are aware that 2 drops eradicates polio to a great extent and importance of ORS to save life in many critical diseases. I am a bit disheartened that why corporate is not ready to treat CSR equal to HR, Marketing and Finance etc. The size of financing, human resources, technical inputs may be small, but if a sincere, honest, professional & integrated efforts are made it will give a tremendous result for the growth of the corporate not less than any other field.   

 

The challenge for CSR is its complexity due to its requirement of multi field knowledge and skill as in any business process. This starts with simple question marks “What”, “Why”, “When” “For Whom” and “How”?

 

Proactive investment & innovative solutions in socio economic issues in social sectors for the bottom of the pyramid requires a commitment by the CSR professionals. Much talked CSR spending of 2 per cent of average profits in last three years as per the Act is not at all a big issue for most of the Companies, challenges are how to appropriately channelize these funds, how to align CSR with business process, how to utilize core competencies by investing in social sector, maximizing resource utilization and get return on investment in the form of holistic development.

 

Investment with innovation in social sector to strengthen the growth of bottom of pyramid and protection of National culture along with environment requires well trained CSR professionals. Execution of Social Responsibility by the Corporate is very simple at one hand, but on the other hand it is too difficult for the corporate & its managers who are doing CSR for the first time or changing their mindset from charity to sustainability, it needs a different approach and a sound understanding of socio economic issues.

 

From mid 2013 & during whole of 2014 many educational institutions, consulting firms and established NGOs had conducted several training programs, seminars & workshops in a high profiled environment. These programs are generic, repetition and far from the basic requirement of Indian CSR. I consider these programs as events & not the training or capacity building program, which starts with some high ranked executives of public & private sector undertakings & ends with some cases or success story intended to project Brand image rather than any learning effect on participants. Yes these are good for advocacy of CSR. Moreover as far as participants are concerned, majority of them are of senior level but are they involve in CSR process at the ground level?

 

Effective CSR needs commitment of corporate, prudent use of resources, vision – policy - programs aligned with business process, a well developed framework and above all trained workforce. The corporate should create independent CSR department, they may recruit fresh professionals or an arrangement from within the existing employees. This CSR workforce needs to be trained according to the need, expectation, mandate & the global standard.

 

Today credible training plays a vital role as there is a lack of CSR professionals to deliver and lead the CSR as a business opportunity for social growth and business sustainability.  While selecting a training program, the In house training is preferred based on company’s requirement & business process. An In-house training program is more effective as it is an opportunity for corporate to visualize the impact on business and society in a better way and helps to increase their social index, achieve stakeholder’s expectation and corporate vision with cost effective and efficient implementation.

 

The contents of the training programs and its delivery is very important, it must be developed to help the workforce in implementation of the CSR. CSR training does not mean self-congratulatory speeches. Training is required on regular intervals based on need at different stages & phases of CSR implementation and management.

 

Training should be oriented towards grass root level employees and executives who work on the very ground to ensure efficient and effective execution of projects and programs to achieve the vision and mission of corporate and transform the vision into reality. They need to be trained with the latest updates and basic knowledge and principle of the Corporate Social Responsibility, their knowledge and dedication is the one thing which drives the projects and programs and when guided with effective training, it can have a very impactful result on the society.

 

In a country like India with diverse socio cultural & economic conditions, we need professionals having profound knowledge of the field gained through practice on the ground and solutions which are impactful when they meet the real world.

 

So the need of the hour is to train existing workforce from different stream in the field of Corporate Social Responsibility to play the key factor to drive smooth practice with latest updates and practices of the field, understand the problems and issues in order to identify & innovate solutions.

 

An effective training program gives confidence to the professionals to put their issues and objectives before the management and convince them about the ground requirement as well as expected outcome from it.

 

CSR workforce requires to understand the followings :

  • The concept and rationale for CSR & its relevance.
  • Basics of CSR & needs of your business.
  • Key social, economic & environmental issues.
  • Need Assessment.
  • Policies, Practices and Procedures.
  • National & International regulations.
  • Planning and Implementation of CSR program.
  • Identification of priority areas, Stakeholder & its engagement.
  • Project Preparation/ Implementation.
  • Monitoring and Evaluation of CSR programs.
  • Design and implementation of CSR policy.
  • Designing CSR initiative.
  • Impact Assessment / CSR Audit.
  • CSR reports for Organization.
  • Partnerships management.
  • Communication Planning & Management.

 

We hope India will cope with the transitional shortfalls & in future we will have a strong pool of CSR professional to carry out

the responsibility on their strong shoulders.

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Trade Mark @ Innovative Solutions for Socially Responsible Corporate - Corporate Social Responsibility  Consultant . All Rights Reserved.