The social responsibility of a Company is known as Corporate Social Responsibility (CSR). The concept of corporate social responsibility is based on the idea that not only public policy but companies, too, should take responsibility for social issues. In more recent approaches, CSR is seen as a concept in which companies voluntarily integrate social and environmental concerns into their business operations and into the interaction with their stakeholders. The idea of being a socially responsible company means doing more than comply with the law when investing in human resources and the environment1. In general terms, the CSR approach seeks to motivate companies to assume responsibility for problems and challenges that used to be addressed by state regulation. Despite various attempts at an unambiguous description of CSR, the concept still lacks a uniform definition.
CSR is understood as “the commitment of business to contribute to sustainable economic development by working with employers, their families, the local community and society at large to improve their quality of life, in ways that are both good for business and good for development. A widely quoted definition by the World Business Council for Sustainable Development state 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”. Thus, the meaning of CSR has two-fold. On one hand, it exhibits the ethical behavior that an organization exhibits towards its internal and external stakeholders. On the other hand, it denotes the responsibility of an organization towards the environment and society in which it operates. CSR is regarded as vehicle through which companies give something back to the society. It involves providing innovative solutions to societal and environmental challenges. But the challenge for development professional and business community is to identify CSR priorities and the areas of interventions which are meaningful in the context of rural development sector.
Social responsibility is important for every business. Economic criteria alone cannot justify the existence of business organisations. Social, moral and ethical aspects of business decisions are as important as economic aspects to judge the success of a business. A socially responsible firm not only meets the needs of the society but also creates long-term and sustainable market for its products. For long time in the past, profit maximisation was the sole business objective but this view no more holds good. If companies want to survive and maintain growth in the market, if they want to become market leaders, they have to sacrifice part of the profits in favour of groups other than owners.
This outlook of business recognises the concept of social responsibility. It entails business organisation’s obligations to look after the interests of society beyond their economic interests. Traditionally, providing goods and services to society, maximising corporate profits and creating job opportunities were viewed as social responsibilities of business. Today, the focus has changed from economic aspects to social aspects of the business decisions. Business organisations help to solve a broad range of social problems like poverty, crime, pollution etc. They are expected to raise the level of education, create job opportunities, uplift the minority and weaker sections of society. Managers have begun to realise that they owe responsibility to society as they owe to business enterprises.
“Social responsibility is an organisation’s obligation to benefit society in ways that transcend the primary business objective of maximising profit.” “Social responsibility refers to the obligation of an organisation to seek actions that protect and improve the welfare of society along with its own interests.”
“Social responsibility is the implied, enforced or felt obligation of managers, acting in their official capacities to serve or protect the interest of groups other than themselves,” “CSR is the continuing commitment by the 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.”
CSR should be core concern for all companies and part of each company’s operations. CSR focuses on three dimensions of value creation; profit, people and planet. Companies should make efforts to promote CSR throughout the value-creation chain that they are a part of. They should take responsibility for the social, economic and ecological consequences of their actions and also engage in dialogues with those who are involved in these dimensions.
Dialogues with stakeholders help them identify the social and environmental impacts of their actions. Companies should frame policies and objectives on the basis of these dialogues. CSR encompasses organisation’s commitment to behave in an economically and environmentally sustainable manner, while honoring interests of direct stakeholders.
MEANING, NATURE & SCOPE OF COMPANY SOCIAL RESPONSIBILITY
A socially responsible firm should not work solely for-profit maximization but should also seek the welfare of different sections of the society. Social responsibility of business refers to its obligations to take those decisions and perform those actions which are acceptable in terms of the objectives and values of the society. “Social responsibility is to pursue those policies, to make those decisions, or to follow those lines of action which are desirable in terms of the objectives and values of our society.” —Howard D. Bowen
“Corporate Social Responsibility is a management concept whereby companies integrate social and environmental concerns in their business operations and interactions with their stakeholders.” —United Nations Industrial Development Organisation (UNIDO)
“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 World Business Council for Sustainable Development (WBCSD).
The essential elements of CSR may be presented thus:
i. CSR is a moral obligation to conduct operations ethically.
ii. It strikes a happy balance between economic, ethical and social issues.
iii. It demands every business to conduct the show in the best interests of society at large.
iv. Businesses must make profits, but that cannot be at the cost of customers.
v. It is a voluntary effort undertaken by every business that goes beyond what has been dictated by law.
vi. It is, in short, a company’s sense of responsibility towards the community and environment in which it operates. Now-a-days, the term is extended to include philanthropy (love of humanity) and volunteering (actions undertaken without seeking any gain).
The term Social Responsibility of Business reflects the impact of a corporation’s activities on society. This embodies the performance of its economic function and other actions taken to contribute to the quality of life. These activities may extend beyond meeting the letter of law due to the pressures of competition or the requirements of contracts.
‘Corporate Social Responsibility of a business is operating in a manner which meets or excels the ethical, legal, commercial and public expectations that a society has from the business.’ The term corporate social responsibility refers to the concept of business being accountable to how it manages the impact of its processes on stakeholders on a voluntary basis.
The NAA Committee (1977) has identified four major areas of social performance- community development, human resources, physical resources and environmental contribution, and product or service contributions. The responsibility of business itself indicates the desire to ensure the optimum use of resources, development and expansion, operation and management, promotion of research environment, and environmental management etc.
Since corporates have to draw on the community in which they operate for all resources, they also have obligations to their multiple stakeholders. Stakeholders are defined as those who get affected by corporate policies and practices. It is acknowledged fact that business has not just financial accountability but also has the social and environmental responsibility. It is generally known as the triple bottom-line of good governance. The licenses to operate in the societies trust that an organisation will work in the best interest of the society. Society itself is increasingly being critical about the operating norms in the industry. Business cannot be seen as aggravating the problems of the merger, poverty, and depletion of natural resources or inequities.
Entry barriers, adverse judgment from judiciaries or earlier, business was expected to serve the purpose of its stockholders as a creator of financial wealth. But now business is assigned to fulfill the expectations of different stakeholders like consumers, employees, shareholders, society, community, environment and government etc.
This area involves the environmental aspects of production, covering pollution control in the conduct of business operations, prevention or repair of damage to the environment resulting from processing of natural resources and the conservation of natural resources. Corporate social objectives are to found in the abatement of the negative external social effects of industrial production, and in adopting more efficient technologies to minimize the use of irreplaceable resources and the reduction of waste.
This area covers conservation of energy in the conduct of business operations and increasing the energy efficiency of the company’s products.
(iii) Fair Business Practices:
This area concerns the relationship of the company to special interest groups. In particular it deals with Employment of minorities, Advancement of minorities, Employment of women, Advancement of women, Employment of other special interest groups, Support for minority business, and Socially responsible practices abroad.
(iv) Human Resources:
This area concerns the impact of organizational activities on the people who constitute the human resources of the organization. These activities includes, Recruiting practice, Training programmes, Experience building-job rotation, Job enrichment, Wage and salary levels, Fringe benefit plans, Congruence of employee and organizational goals, Mutual trust and confidence, Job security, stability of workforce, layoff and recall practices, Transfer and promotion policies, and Occupational health.
(v) Community Involvement:
This area involves community activities, health-related activities, education and the arts and other community activity disclosures.
This area concerns the qualitative aspects of the products, for example their utility, life-durability, safety and serviceability, as well as their effect on pollution. Moreover, it includes customer satisfaction, truthfulness in advertising, completeness and clarity of labeling and packaging. Many of these considerations are already important from a marketing point of view. It is clear, however, that the social responsibility aspect of the product contribution extends beyond what is advantageous from a marketing angle.
SIGNIFICANCE AND IMPORTANCE OF SOCIAL RESPONSIBILITY
It is in the long-term interest of the business to discharge its social obligations by serving different interest groups such as employees, consumers, government and citizens. Wise business persons know that unless they serve the society by fulfilling its needs, they will not be able to climb the success ladder. Working for the society, stakeholders and government helps an organization in establishing a strong public image. On the other hand, a company with vested selfish interests may get ignored by the society.
Indebted to Society:
A company uses the resources of the society for its functioning. Hence, it becomes obligatory for it to pay back its dues by serving the society. Company should tend to the needs of the society and use its resources for community welfare. This practice ultimately helps the organization in establishing itself on the strong foundation of a pleased society and a cooperative labour force.
Business persons are endowed with a lot of social power. They have the potential to change the destiny of the population by collectively deciding for the country on crucial issues such as rate of economic progress, distribution of income among different income groups etc. Ideally, business persons should take up social responsibilities in proportion to their social power. If the company misuses its social powers for selfish motives, the society can intervene via government controls and other laws. Therefore, it is morally right for a business to embrace its social obligations and discharge them loyally.
A company devoted towards fulfilling its social responsibilities is regarded highly by the society. Good rapport with employees, suppliers, customers and government helps in building a favourable public image of the company. Moreover, a socially responsible organization is considered trustworthy by the shareholders and investors.
These days, employees and customers are more informed about their rights. While consumers expect the seller to abide by the fair-trade practices, workers want fair wages and other employee benefits. If the expectations of these interest groups are not met, they may resort to either anti-social activities or seek help from trade unions and consumer courts. This will lead to industrial turmoil and unrest within the society which is harmful for proper functioning of the business.
To Avoid Government Intervention:
If a business organization fails to acknowledge and perform its social duties, it is bound to lose its freedom and flexibility in the long-run. The Consumer Protection Act and other legislations passed by the government safeguard the interest of the customers against business persons indulging in black-marketing, adulteration, hoarding and many other illegal trade practices. Since, government intervention is not welcomed by business enterprises, social duties should be voluntarily carried out by all the organizations to avoid such situations.
Law and Order:
A peaceful society is congenial to the expansion of business. Unable to withstand exploitation by the business enterprises, the weaker sections can rebel and take the law and order in their hands. As a result, the survival of the business can be threatened.
A company possesses resources such as finance and talent pool to help bail out troubled masses out of social issues like poverty, dowry, unemployment and illiteracy by organizing special campaigns and programs. Additionally, business houses can assist the government in solving many other issues like lack of foreign exchange etc. Moreover, a company increase pollution by releasing untreated sewage into the environment. Thus, it is a moral obligation of the company to render its services in tackling these issues.
India has a rich legacy of business values passed down by the legendary and morally upright business owners like Ratan Tata, Azim Premji, etc. Only those business persons who sincerely abide by the canon of business will get the privilege of being honored by the citizens and the government. Hence, the business should aim to promote equal opportunity and maintain healthy inter-personal relations with all the stakeholders such as customers, employees to carve a niche for itself as a honest enterprise.
The great socio-political leader Mahatma Gandhi propounded the philosophy that owners of wealth and property should hold and use the wealth for the welfare of the society. Therefore, company owners should operate the business not only for their own benefit, but also for the prosperity of the society. According to Keith Davis, since business has the resources to resolve the mounting social problems, it should try and assume the social responsibilities.
A growing body of evidence has identified a company’s role in its community as a factor in increasing profitability, promoting company image, reducing costs, and elevating employee morale and customer loyalty, among other benefits.
Interesting aspect of social responsibility in the modern era is that, being socially responsible is not a matter of choice to a very large extent. It has become a business compulsion. Behaving in a socially responsible manner gives business benefits to organizations. It may involve costs in short run but has proved beneficial in the long run. For companies operating on a multinational basis, community involvement can be helpful in supporting efforts to enter new markets, attract potential employees, and establish or strengthen the reputation of the company, its brand and products.
Corporate social responsibility (CSR) is a self-regulating business model that helps a company be socially accountable—to itself, its stakeholders, and the public. By practicing corporate social responsibility, also called corporate citizenship, companies can be conscious of the kind of impact they are having on all aspects of society, including economic, social, and environmental. To engage in CSR means that, in the ordinary course of business, a company is operating in ways that enhance society and the environment, instead of contributing negatively to them. Corporate social responsibility is a broad concept that can take many forms depending on the company and industry. Through CSR programs, philanthropy, and volunteer efforts, businesses can benefit society while boosting their brands.
As important as CSR is for the community, it is equally valuable for a company. CSR activities can help forge a stronger bond between employees and corporations, boost morale and help both employees and employers feel more connected with the world around them. For a company to be socially responsible, it first needs to be accountable to itself and its shareholders. Often, companies that adopt CSR programs have grown their business to the point where they can give back to society. Thus, CSR is primarily a strategy of large corporations. Also, the more visible and successful a corporation is, the more responsibility it has to set standards of ethical behavior for its peers, competition, and industry.