What is CSR?
The entirety of CSR can be discerned from the three words contained within its title phrase:
‘corporate,’ ‘social,’ and ‘responsibility.’ Therefore, in broad terms, CSR covers the responsibilities corporations (or other for-profit organizations) have to the societies within which they are based and operate.
More specifically, CSR involves a business identifying its stakeholder groups and incorporating their needs and values within the strategic and day-to-day decision-making process.
Therefore, a business’ ‘society’ within which it operates, which defines the number of
stakeholders to which the organization has a ‘responsibility,’ may be broad or narrow depending on the industry in which the firm operates and its perspective.
Other definitions of CSR:
The notion of companies looking beyond profits to their role in society is generally termed corporate social responsibility (CSR)
It refers to a company linking itself with ethical values, transparency, employee relations, compliance with legal requirements and overall respect for the communities in which they operate. It goes beyond the occasional community service action, however, as CSR is a corporate philosophy that drives strategic decision-making, partner selection, hiring practices and, ultimately, brand development. The social responsibility of business encompasses the economic, legal, ethical, and discretionary expectations that society has of organizations at a given point in time.Archie B. Carroll, 1979
CSR is about businesses and other organizations going beyond the legal obligations to manage the impact they have on the environment and society.
In particular, this could include how organizations interact with their employees, suppliers, customers and the communities in which they operate, as well as the extent they attempt to protect the environment.The Institute of Directors, UK, 2002
CSR is a means of analyzing the inter-dependent relationships that exist between businesses and
economic systems, and the communities within which they are based. CSR is a means of discussing the extent of any obligations a business has to its immediate society; a way of proposing policy ideas on how those obligations can be met; as well as a tool by which the benefits to a business for meeting those obligations can be identified.
CSR is also referred to as:
- ‘corporate’ or ‘business responsibility’
- ‘corporate’ or ‘business citizenship’
- ‘community relations’
- ‘social responsibility.’
Closely related concepts that are all contained with the total CSR perspective are:
- social and environmental auditing
- stakeholder theory
- business ethics
- environmental sustainability
- strategic philanthropy (cause-related marketing)
- corporate governance
Consistent definitions, labels and vocabulary have yet to be solidly established in the field.
Corporate Social Responsibility (CSR) is a commitment to integrate social and environmental concerns into a company’s business model.
CSR incorporates public and environmental interests into corporate decision-making.
Advocates of CSR believe that a corporation should not only be responsible to shareholders but also to the environment and company stakeholders. These stakeholders may include employees, customers, communities, and related groups that support the organization. Approaches to implementing CSR include community-based development, creating better business practices to manage risk, and philanthropy.
Economist Milton Friedman presented the classic objection to CSR in 1970. Friedman argued that the success of a free-market economy is founded on the idea that the only social responsibility of a business, provided it operates lawfully, is “to use its resources and engage in activities designed to increase its profits.” Friedman equated CSR to “spending someone else’s money for a general social interest.” Doing so, he argued, would be equivalent to imposing taxation (in the form of CSR policies) on shareholders. Such a political role is appropriate for a socialist government, not a corporation, according to Friedman.
Central to the CSR debate is the question of whose interests a corporation ought to serve. This question, known as the shareholder-stakeholder debate, puts anti-regulation economists like Friedman in opposition with those who believe companies should be bound by ethical and international norms (and not only laws) to protect the interests of all stakeholders.
CSR has gained importance in the last two decades due to a new phenomenon on called ethical consumerism — the practice of educated consumers purchasing only products they believe are made ethically.
As a consequence, many companies are now being pressured to adopt CSR strategies regardless of whether they genuinely care about social responsibility or not. (286)
Corporate social responsibility
Business is an economic activity; it is carried out to earn profits. But business organisations are involved in different actions which may not be part of their primary business objectives.
Corporate social responsibility is the firm’s obligation to take decisions and make actions that will contribute to the welfare of the society and interests of the organisation.
The decisions which are taken beyond the economic interest of the organisation are known as social responsibility. Businessmen spend money on various non-profit aspects such as transport, education, healthcare, developing gardens and parks for the wellness of employees and their families.
In some places organisations provide free medical facility to the poor patients, adopting villages, and sponsor games and sports at national and international level. Organisations take inputs from the society and produce products or services which are again delivered to the customers who are the part of the society. So the organisations need to be careful in protecting the natural resources and interests of the society. Thus while taking decisions; managers need to think beyond the organisational view to protecting the social interests.
Several organisations spend a huge amount of money on societal development and for environmental protection. Social responsibility is a voluntary effort on the part of the business to take various steps to satisfy the expectations of the different interest groups.
Some organisations are socially responsible by considering the following points>
The organisations perform activities towards the welfare of the society to earn goodwill and reputation for the business. The earnings of the business also depend on the public image of its activities which in turn attract the competent employees. Some customers prefer to buy products of a company that engages itself in various social welfare activities.
If an organisation pollutes the environment it shows the effect on the society. So the government imposes rules and regulations to avoid the pollution created by the factories. Organisations are taking the initiative to reduce the pollution by developing parks and other methods.
Survival and growth
Every business is a part of the society. So for its survival and growth, support from the society is very much essential. Business utilizes the resources like water, land, roads, and power, etc. so it should be the responsibility of every business organisation to spend a part of its profit for the welfare of the society.
Besides working in a healthy atmosphere and getting a good salary, employees also expect other facilities like transportation, education, accommodation, hospitals and training. The employers should try to fulfill the needs of the employees because employee satisfaction leads to more productivity and helps in the maximization of revenues. If a business spends time and money on training the employees then it will help in acquiring the competitive advantage.
Nowadays consumers are much aware of the products and services. They can fight against the harmful products. This has made it mandatory for the firms to protect the interest of the customers by producing quality products at the competitive prices.
Corporate social Responsibility towards different interest groups
The business organisations generally interact with various interest groups such as the owners, investors, employees, suppliers, competitors, customers, government, and society. In each and every business activity these interest groups are affected directly or indirectly and they are also called as stakeholders. Sometimes the responsibility towards the stakeholders is also called as Stakeholder’s Corporate Social Responsibility.
Corporate social Responsibility towards Owners
Owners are the persons who own the business and they are responsible for the profit or losses and they contribute the capital and bear the risks. The primary responsibility of the business towards its owners is to>
- Should run the business efficiently
- Proper utilization of capital and resources
- Timely repayment of on capital invested
Corporate social responsibility towards Investors
Investors provide the capital by way of investment, it is in the form of debentures, deposits and bonds etc. without investors companies may not be run successfully. The investors included in this category are banks, public and financial institutions. The responsibilities of the business towards its investors are,
- Providing assurance to their investment
- Paying interests timely to the investors
- Giving important updates to the investors
- Repayment of principle amount timely
Corporate social responsibility towards Employees
Business needs workers or employees to work for the organisation they put their efforts for the growth of the firm. It is the basic responsibility of the organisation to take care of the interest of the employees and to fulfill their needs. Employee satisfaction leads to the achievement of the organisational goals. The responsibilities of the organisation towards its employees or workers include, wages and salaries should be paid timely and regularly
- Providing proper welfare amenities and working conditions
- Providing better opportunities for the career prospects
- Providing Job security and social security
- Providing facilities like pension, provident fund, retirement benefits, and group insurance, etc
- Providing housing, canteen, transport, and creches etc
- Identifying and fulfilling training and developmental needs
Corporate social responsibility towards Suppliers
Suppliers are the persons who supply semi finished goods, finished goods, raw materials and other items required by the firms. Market demand conditions can only be fulfilled on the basis of the supply of the raw materials. So the suppliers are the part of the success of the business. Managers should always notice the importance of the suppliers. Certain suppliers are called as distributors because they supply finished products to the consumers. The responsibilities of business towards these suppliers are,
- Giving regular orders to purchase goods
- Dealing with fair terms and conditions
- Maintaining reasonable credit period
- Dues should be paid timely
Corporate social responsibilities towards Customers
Business can only be survived with the support of customers. The success of the business completely depends on the customer satisfaction and customer loyalty. Brand image comes from these two factors, so being responsible towards the customers not only benefits the customers but it maximizes the revenues and makes possible to get the market empire. The responsibility of business towards customers is,
- Products and services must fulfill the needs of the customers
- Qualitative Products and services must be delivered
- Regularity in supply of goods and services must be maintained
- Prices of the goods and services should be fixed reasonable and affordable
- Procedure, advantages and disadvantages of the product and the use of the products must be informed to the customers
- Organisations must provide after sales service
- Grievances of the customers must be settled quickly
- Fewer quality services, under weighing the product and adulteration must be avoided
Corporate social responsibility towards Competitors
Competitors always help the business in becoming more innovative and dynamic. But it is not that much easy to face a severe competition. Firms always try to overcome the competition by giving discounts, by using various advertisement strategies, and so on. To become better than their competitor’s firms sometimes may follow unfair practices like giving sales commissions to the agents, heavy discounts to the customers, false advertisements, bribing the competitor’s employees to know the business secrets etc. The responsibilities of business towards its competitors are
- Not to offer high sales commission to distributors and agents
- Not to offer heavy discounts to the customers
- False advertisements should not be given to defame the competitors
- Should not bribe the competitor’s employees to copy their products and services
Corporate social responsibility towards Government
Firms should follow the rules framed by the government. These guidelines are for the safety measures and for the benefit of the society. Responsibilities of the firms towards government are,
- Following the guidelines are given by the government
- Fees, duties and taxes should be paid regularly and honestly
- Should not follow the restrictive trade practices
- Firms should follow the pollution control norms
- Should not follow the corruption and other unlawful activities
Corporate social responsibility towards Society (!)
In almost all activities individuals, groups, organisations and families, etc interact with each other and dependent on each other. A relationship exists between them which may be direct or indirect. The increase in per capital income increases the value of the money and national income. With the increase in national income revenues of the business also increases. Thus it has certain responsibilities towards the society which may be as follows,
- Firms should help the weaker sections of the society
- Organisations should protect the social and cultural values
- Firms should generate the employment by extending their business
- Should protect the environment by taking proper measures
- Natural resources and wildlife should not be harmed
- Should provide assistance in the areas of research, education, medical sciences, and technology, etc
Different Views on Social Responsibility
Classical View (Milton Friedman)
The Classical view is supported by the world famous economist Milton Friedman. According to this traditional view, an organisation exists to produce quality goods and services to earn a reasonable profit and to provide employment. The economic model of social responsibility states that society will benefit more than the firm when the business produces and market innovative and profitable products. Generally, a shareholder invests in a firm to earn a return on their investment but not because of the firm is socially responsible.
Socio-economic view states that some managers believe that the firms are not only responsible towards the stakeholders but also to the customers, employees, suppliers, and the general public. Socio-Economic model discusses not only on the profits but also on the impact of the business decisions on the society.