CSR: Meaning and Concepts
Prof. Asiya Chaudhary
The emerging concept of Corporate Social Responsibility (CSR) goes beyond:
Charity……
Beyond company’s legal obligations………
It is to integrated social, environmental and ethical concerns into company’s business process.
Business has today, emerged as one of the most powerful institutions on the earth.
Some of the biggest companies in the world are in fact, bigger in size than some of the developing
countries of the world.
The list from Global Justice Now – an NGO – ranks the world’s top 100 global economic
entities.
Sixty-nine of the 100 are corporations, leaving room for just 31 countries on the list.
Examples:
State Grid is the world’s second largest business – by revenue – and 14th overall. It starts a run of three Chinese businesses, with China National Petroleum (15th) and Sinopec Group (16th) following. All three have greater revenue than the South
Korean government, with annual revenues of around $300bn.
Royal Dutch Shell follows (18th overall), coming in ahead of Mexico and Sweden, while Exxon Mobil, Volkswagen and Toyota Motor are all bigger than India’s state revenue.
Apple and BP complete the top 10, with revenues that exceed the government revenues of Switzerland, Norway and Russia.
It’s important to note the limitations of the comparison though. Government revenues generally represent a lower figure than GDP. For example, Russia’s government
revenues of $216 billion pale in comparison to their GDP of more than $1.3 trillion.
• Business for Social Responsibility defines CSR as “Achieving commercial success in ways that honour ethical values and respect people, communities, and the environment.”
• It means addressing the legal, ethical, commercial and other
expectations that society has for business and making decisions that fairly balance the claims of all key stakeholders.
• A widely quoted definition by the World Business Council for Sustainable Development states that “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”.
Business for Social Responsibility defines CSR as………
• “Achieving commercial success in ways that honour ethical values and respect people, communities,
and the environment.”
• It means addressing the legal, ethical, commercial and other expectations that society has for business and making decisions that fairly balance the claims of all key stakeholders.
• A widely quoted definition by the World Business Council for Sustainable Development states that
“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”.
The key components of CSR would therefore include the following:
(Source: http://www.ficci-sedf.org/csr.htm)
• Corporate Governance: Within the ambit of corporate governance, major issues are the accountability, transparency and conduct in conformity with the laws. Good corporate
governance policy would enable the company to
realize its corporate objectives, protect shareholder rights, meet legal requirements and create
transparency for all stakeholders.
• Business Ethics: Relates to value-based and ethical business practices. ‘Business ethics defines how a company integrates core values – such as honesty, trust, respect, and fairness – into its policies,
practices, and decision making. Business ethics also involves a company’s compliance with legal standards and adherence to internal rules and regulations.’
• Workplace and labour relations: Human resources are most important and critical to a company. Good CSR practices relating to workplace and labour
relations can help in improving the workplace in terms of health and safety, employee relations as well as result in a healthy balance between work
and non-work aspects of employees’ life. It can also make it easier to recruit employees and make them stay longer, thereby reducing the costs and
disruption of recruitment and retraining.
• Affirmative action/good practices: Equal opportunity employer, diversity of workforce that includes
people with disability, people from the local
community etc., gender policy, code of conduct/
guidelines on prevention of sexual harassment at workplace, prevention of HIV/AIDS at workplace, employee volunteering etc. are some of the good practices which reflect CSR practices of the
company.
• Supply Chain: The business process of the
company is not just limited to the operations internal to the company but to the entire supply chain
involved in goods and services. If anyone from the supply chain neglects social, environmental, human rights or other aspects, it may reflect badly on the
company and may ultimately affect business
heavily. Thus, company should use its strategic position to influence the entire supply chain to positively impact the stakeholders.
• Customers: The products and services of a
company are ultimately aimed at the customers.
The cost and quality of products may be of greatest concern to the customers but these are not the only aspects that the customers are concerned with.
With increased awareness and means of
communication, customer satisfaction and loyalty would depend on how the company has produced the goods and services, considering the social,
environmental, supply-chain and other such aspects.
• Environment: Merely meeting legal requirements in itself does not comprise CSR but it requires
company to engage in such a way that goes beyond mandatory requirements and delivers
environmental benefits. It would include, but not limited to, finding sustainable solutions for natural resources, reducing adverse impacts on
environment, reducing environment-risky pollutants/
emissions as well as producing environment- friendly goods.
• Community: A major stakeholder to the business is the community in which the company operates. The involvement of a company with the community
would depend upon its direct interaction with the
community and assessment of issues/risks faced by those living in the company surrounding areas. This helps in delivering a community-focused CSR
strategy – making positive changes to the lives of the people and improving the brand-image of the
company. Involvement with the community could be both direct & indirect – through funding and other
support for community projects implemented by local agencies.
Mandatory CSR under Companies Act, 2013:
• Corporate social-Responsibility (CSR) has been made
mandatory under Companies Act, 2013 passed in August
2013 which replaced the 57 years old Companies Act, 1956.
• As per section 135 of the Act every company having net worth of Rs 500 crore or more or turnover of Rs 1,000 crore or more or a net profit of Rs 5 crore or more during any financial year will have to spend, in every financial year regularly, at least 2 per cent of the average net profits of the company made
during the three immediately preceding years.
Activities to be Incorporated under CSR
The draft rules suggest the following activities to be included under CSR:
(i) Activities related to eradicating poverty and hunger;
(ii) Activities related to promotion of education;
(iii) Empowerment of women and promoting gender equality.
(iv) Reducing child mortality and improving material health;
(v) Combating human immune deficiency virus and control acquired immune deficiency syndrome, malaria and- other diseases;
(vi) Promoting employment enhancing vocational skills.
(vii) Ensuring environmental sustainability;
(viii) Undertaking social business projects;
(ix) Contributing towards Prime Minister’s National Relief Fund or any other fund set up and managed by either central
government or state government for socio-economic
development and relief purposes and also to the funds for the welfare of Scheduled Castes, Scheduled Tribes, other
backward classes, minorities and women; and
(x) Any other matter as may be prescribed time to time.
