Concept of CSR
The emerging concept of Corporate Social Responsibility (CSR) goes beyond charity and requires the company to act beyond its legal obligations and to integrate social, environmental and ethical concerns into its business process. Business has 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. Globalization makes the world smaller, and business, worldwide, is expanding like never before. Companies are expanding their operations and crossing geographical boundaries. In the current scheme of things, businesses are no longer expected to play their traditional role of mere profit making enterprises. The ever-increasing role of civil society has started to put pressure on companies to act in an economically, socially and environmentally sustainable way. Companies are facing increased pressure for transparency and accountability from their employees, customers, shareholders, media and civil society. These and a host of other such pressures have given rise to the concept of Corporate Social Responsibility (CSR).Business for Social Responsibility defines CSR as “achieving commercial success in ways that honor ethical values and respect people, communities, and the environment.
Corporates benefitting from CSR
Now, let’s delve into the benefits the corporations which implement CSR experience. Firstly, CSR improves public image of the organization, as it increases media coverage and online presence acting as a publicity stunt. Also, it extracts diverse funding options for the company. Research shows that a strong record of CSR improves customers’ attitude towards the company. If a customer likes the company, he or she will buy more products or services and will be less willing to change to another brand. A CSR program requires an open, outside oriented approach. The business must be in a constant dialogue with customers, suppliers, and other parties that affect the organization. Because of continuous interaction with other parties, the business will be the first to know about new business opportunities.
Implementation of Corporate Social Responsibility
In the last 20 years we have seen a tremendous increase in focus on corporate social responsibility. CSR refers to the responsibilities of enterprises for their impact on society. Addressing environmental issues, human rights and corruption are key elements of CSR (UN Global Compact 2014). By using CSR in the “right” way, companies can lower risk, reduce cost of capital access, improve customer and employee relationships, and contribute to innovation.
Companies are more concerned about being perceived as responsible and stakeholder engagement is an important step in this direction. Advice through cooperation with NGOs can be a good way to develop a CSR program. Instead of being a corporate “side activity,” CSR is becoming more a part of doing business, especially because of its potential positive effects when done the right way. The fact that CSR is becoming an integrated part of doing business, and included in companies’ long-term strategies, implies that it needs to be evaluated from a business point of view. Business in general can be measured in numerical figures like profit and loss, but the impact of CSR is more complicated to quantify. Some of the basic instincts that the government applies while measuring CSR is by setting benchmark and set targets, seek recognition for CSR best practice – eg in publications such as Index reports or responsible business awards use key performance indicators (KPIs) to measure your environmental performance
Legal norms on CSR in India
India with the new Companies Act (2013) has introduced several new provisions which change the face of Indian corporate business. One of the new provisions is Corporate Social Responsibility (CSR). The concept of CSR rests on the ideology of give and take. Companies take resources in the form of raw materials, human resources, etc from society. By performing CSR activities, the companies are giving something back to the society. The problem is that reported expenditure on CSR projects is not a good metric of societal welfare. These numbers overstate the effect of the law. It is not clear whether firms have really increased their CSR spending after the law compared to what they were spending voluntarily before the law, because CSR spending was not well reported historically. There is some evidence that while firms that were initially spending less than 2% increased their CSR activity, but those that were initially spending more than 2% reduced their CSR expenditure. Even to the extent that there has been a real increase in socially beneficial activities, the spending has not gone to democratically determined priorities, but rather to whatever the companies prefer to emphasize. Without a coercive enforcement mechanism, it is unlikely that the law will result in widespread compliance and real effectiveness.
A strong corporate social responsibility framework is essential to building and maintaining trust between the company and clients. It can strengthen ties, build alliances and foster strong working relationships with both existing and new clients. The profit motive can accelerate the transformation toward global sustainability, with civil society, governments, and multilateral agencies all playing crucial roles as collaborators. Emerging in its place are a new generation of corporations that actually solve social and environmental problems through their core strategies–and profit in the process. Corporate Social Responsibility is becoming a route through which businesses can help solve pressing societal problems, and we are re-imagining business as mission-driven.