Corporate social responsibility is a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with the stakeholders on a voluntary basis. Social responsibility of companies was defined as responsibility to consumers, workers, stakeholders and the community. The aim of social responsibility is to create higher standards of living, while preserving the profitability of the corporation.
Companies while creating profit should also be aware that they can contribute to sustainable
managing their operations in such a way as to enhance economic growth and increase competitiveness whilst ensuring environmental protection and promoting social responsibility, including consumer interest. Corporate Social Responsibility and Environmental Management provides a practical resource for the ever increasing number of organizations concerned about social and environmental responsibilities in the context of sustainable development. The author in this article evolved certain principles for the management of environment in relation to CSR.
Today the efforts and the energy of the world are being spent on increasing the organizational wealth. Increased competition and commercial pressure are combining with rising regulatory standards and consumer demand to create a whole new playing field for business. Traditional expectations of business are also changing. It is no longer enough to simply employ people to make profits and pay taxes. Thus, it clearly shows that the companies have their own motto of earning profits rather than protecting the environment. In this contemporary era, it has also been found that companies are also required to keep an eye on sustainable development which has been a core part of protecting our mother environment. The company must accept its obligation to be socially responsible and to work for the larger benefit of the community. Environmental protection is considered to be in public interest rather than private interest. It‘s the government which has adopted a principal responsibility of creating a safe environment and also has directed the companies to follow the regulations at par with the legislations framed by the government. The World Business Council for Sustainable Development (WBCSD) defines CSR as ―the commitment of business to contribute to sustainable economic development, working with employees, their families & the local communities.
India is endowed with abundant natural resources, human resources, environmental awareness,
technical personnel and legislations for environmental protection but still is unable to achieve environmental performance on a better scale. This might be due to lack of good governance and attitude of the common man who fails to understand the significance of sustainable development. Even most of the corporate would unwillingly adopt Environmental policies due to legislation and penalties. The answer to the basic question why corporate sector should focus on environment and its sustenance is controversial. But the pro-environment argument is that corporate sector is part of natural environment and community at large consumes goods and services provided by this environment.
It is true that a firm must make profits in order to survive. It is also true that without profit there is no firm and no corporate social activity. But it is not true that corporate Social Responsibility is
something that comes after profits are made and money deposited with the stockholders. Nor is it true that Corporate Social Responsibility is only for the big players, and smaller entrepreneurs have to wait till they break into the Big league. The question that needs to be answered is how to increase profits without damaging environment.
Meaning of the Corporate Social Responsibility–
CSR is a corporate act of giving back to the immediate and wider community in which organization carry out their business in a manner that is meaningful and valuable and relevant to the community. It‘s a way for the communities to reach out to their host communities by positively responding to them. It‘s the way of saying thank you to the environment in which they work and operate and a way of also showing a sense of belonging to the society at large
CSR is a ―concept whereby companies integrate social and environmental concerns in their business operations and interaction with their stakeholders on a voluntary basis. More often, its meaning is expressed in ―moralistic catchwords, as well as basic definition statements such as ―human dignity, equality, and the social good‖, although these definitions might themselves be unclear and subjective. Making corporations engage in good CSR policy is another advantage in adopting stakeholder theory. CSR can contribute to a number of social environmental and economic policy objectives.
Definition of Corporate Social Responsibility–
The World Business Council for Sustainable Development (WBCSD) defines CSR as “the
commitment of business to contribute to sustainable economic development, working with employees, their families & the local communities” According to the The Institute of Directors, UK, 2002 which defines “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 International Chamber of Commerce (ICC), declares that ―The role of business in an open market economy system is to create wealth for shareholders, employees, customers and society at large”. Profit is essential, not necessarily for itself, but for the survival in the long term of the company and for the employment it creates. The European Commission says no less when it declares that ― The principal function of a company is to create wealth, in producing goods and services demanded by the society, leaving thereby a profit for the owners and shareholders, while contributing to the well being of the society, in particular through a continuous process of employment creation but the companies― can meanwhile contribute to the social and environmental objective, while integrating the social responsibility as a strategic investment in the heart of their commercial strategy, in their management tools and in their activities.
The reasons for adopting the policies of CSR are discussed below:
A) Reputation Capital:
Reputation is something which cannot be gained in a day or week but it takes years to build the reputation of a company but only a few minutes to ruin it. It can be said to be an intangible asset which is tool during the financial crisis of a company. Further, if a company is having a good reputation it can gain the confidence of the shareholders, stake holders and which helps it in the long run. But if the goodwill and reputation of a company is lost everything is at loss. For eg. Satyam computers.
B) Brand Perception:
Various researches have come to a conclusion that people are more acquainted towards the brand and it also plays an important role. For.eg. TATA, BIRLA, RELIANCE, ITC (Class mate note
books) which is one of the highest selling note books and they contribute one rupee for rural
C) Transparency & Accountability:
It has to be seen in the present scenario that in a democratic country transparency & accountability are the pillars of democracy and this is applicable in case of companies also. By applying the principles of transparency & accountability towards the shareholders and stakeholders the company would have its name and fame to a greater extent and it helps the company‘s image also. It is to be noted here that a company which is transparent in its report will be favored by the society and the investors will spend in it to a greater extent. This will act as a good strategy for the company‘s future. Eg. TATA, RELIANCE etc.
D) Fair trade:
One of the parts of business strategy for the company is element of fair trade. This helps them to build good brand name in society. A company which is note engaged in fair practices will suffer losses in the long run. Eg. SATYAM COMPUTERS, ENRON etc.
E) Legislative provision under Companies (Amendment) Act 2013 Sec 135.
(1) Every company having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during any financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director.
(2) The Board’s report under sub-section (3) of section 134 shall disclose the composition of the
Corporate Social Responsibility Committee.
(3) The Corporate Social Responsibility Committee shall,—
(a) Formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall
indicate the activities to be undertaken by the company as specified in Schedule VII;
(b) Recommend the amount of expenditure to be incurred on the activities referred to in clause (a); and
(c) Monitor the Corporate Social Responsibility Policy of the company from time to time.
(4) The Board of every company referred to in sub-section (1) shall,—
(a) After taking into account the recommendations made by the Corporate Social Responsibility
Committee, approve the Corporate Social Responsibility Policy for the company and disclose contents of such Policy in its report and also place it on the company’s website, if any, in such manner as may be prescribed; and
(b) Ensure that the activities as are included in Corporate Social Responsibility Policy of the company are undertaken by the company.
(5) The Board of every company referred to in sub-section (1), shall ensure that the company spends, in every financial year, at least two per cent. of the average net profits of the company made during the three immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy:
Provided that the company shall give preference to the local area and areas around it where it
operates, for spending the amount earmarked for Corporate Social Responsibility activities:
Provided further that if the company fails to spend such amount, the Board shall, in its report made under clause (o) of sub-section (3) of section 134, specify the reasons for not spending the amount. Explanation.—For the purposes of this section ―average net profit‖ shall be calculated in accordance with the provisions of section 198.
The corporate Social Responsibility towards Environmental Management
The Corporate Environment Management (CEM) has become a hot topic of debate since a decade. Growing awareness for environmental conservation and greening of corporate strategies is showing up all over the world. Ryding (1992) equates environmental management with ―The management of Sustainable Development” while Welford (1995) defines environmental management specifically as one stage in society‘s progress towards sustainable development. A holistic approach by Buchholz (1998) projected CEM as the greening of manufacturing, Marketing strategy and Communication.
With the passage of time, the countries have adopted their own policies for protection of the
environment and the World Bank (i.e. IBRD) also came up with a new concept of Environmentalism whereby they developed a new theory known as the ―New Environmentalism Theory which aims at finding a ‘win win area’ so that the development and environment could go together. Through this new theory which is also construed as “Free Market Environmentalism”, the World Bank stresses on the need to correct the failures in regard to market policy and also calls upon the government to integrate fully the economic and environmental concerns into developmental process by stimulating environmentally sound market behavior.
Environmental Management principles are the part of overall management of corporate management which includes organizational structure, planning activities, responsibilities, practices, procedures, processes, and resources for developing, implementing, reviewing the environmental policy. Properly designed Environmental Management principles will provide the guidelines to organization for its environmental agenda. It helps to ensure that major environmental risks and liabilities are properly identified, minimized and managed. It helps to see that operations are conducted in compliance with environmental laws. It provides the framework within which an organization can pattern its environmental management practices. Principle based management system have the flexibility necessary to make changes according to changing conditions.
A) Commitment by top management-
It is first step to develop environmental management in the organizations. As a corporate
responsibility, it is necessary to top management & individuals to participate in environmental
activities, defining individual responsibilities and establishing the appropriate accountability
B) Planning & implementation–
An organization should plan the environmental activities & communicate it to the members of
organization and stakeholders. The planning should include-
a) Identification and Evaluation of environmental Impacts- the organization should assess the impact of corporate activities on environment by pollution, consumption of natural resources which affects the environment and try to minimize the same. Where there are threats of serious or irreversible damage to environment, lack of scientific certainty should not be used as s to environment for postponing cost effective measures to prevent environmental degradation. Organizations should apply environmentally responsible management practices to hazardous substances used in operations, including biological products, specifically with regard to the acquisition, handling, and storage, safety in use, transportation and disposal of such substances.
b) Environmental Objectives and targets- According to the Brundtland Report sustainability states that meeting needs of present generations without compromising the needs of future generations. To implement this principle it is necessary to establish environmental objectives, targets and priorities consistent with their environmental policies.
c) Legal and other compliance- Organization should comply with Environmental Impact assessment process & get the clearance certificate before commencement of any activity.
Organizations should seek cost-effective ways of reducing the input of raw materials, toxic substances, energy, water and other resources, and of reducing the generation of waste and noise associated with day-to-day operations.
d) Environmental Management program- To achieve all objectives and targets an organization should establish an environment program.
C) Awareness and motivation–
There is variety of means to increase staff awareness of environmental values and to motivate them, including business reports, the environmental policy, newsletters, training programs, award programs, procurement standards, environmental days, etc. Motivation of staff appears to be reinforced by measurement and reward. Organizations should improve the level of awareness regarding environmental and health benefits and risks of operational decisions and to encourage and recognize employee actions.
Audit in the organization is necessary to see that the environmental management principles are
followed or not. It is the way to monitor the implementation of management policies. Periodic audits should be conducted to determine whether the system has been properly implemented and maintained.
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