Business Ethics Fundamentals

Corporate Social Responsibility

1To whom Business Organizations are responsible????? Primary Stakeholders

Secondary StakeholdersRelations between a business firm and its primary stakeholdersBusiness firm(Managers)Wholesalers(Retailers)CreditorsSuppliersCustomersShareholdersEmployees(Unions)InvestcapitalLendmoneySellmaterialsBuy productsDistributeproductsSelllaborRelations between a business firm and some of its other (secondary) stakeholdersBusiness Firm(Managers)TheGeneralPublicBusinessSupport GroupsGovernmentsSocialActivistGroupsMediaCentral/Stateand LocalGovernmentsLocal CommunitiesRegulation,taxesFriendly,hostileSocialdemandsImage,publicityAdvice,researchPositive,negativeopinionJobs,environmentPerspectives of Corporate Social Responsibility There are three perspectives on corporate social responsibility:Business perspective: business responsibility is to make profit within legal rules; employment & delivery of commodities is in itself social responsibility Eco-social perspective: business use resources, earn profits from it & situated within a society Rights-based perspective: obligatory for business

Meaning of CSRBy the term Corporate Social Responsibility (CSR) what is generally understood is that business has an obligation to society that extends beyond its obligation to its shareholders or owners. DEFINITIONS OF CSRIt is the overall relationship of the corporate with all of its stakeholders. Social responsibility: investment in community outreach, employee relations, creation and maintenance of employment, environmental stewardship and financial performance. The concept of corporate social performance includes a business organisationsPrinciples of social responsibility.Process of social responsiveness, andPolicies, programmes, and observable outcomes as they relate to the firms societal relationships.

Social Responsibilities of Business Archie B Carroll

Social Responsibility Debate: Arguments in AgainstIn Friedmans view business has only one social responsibility and that is to maximize the profits of its owners. His very famous statement says it all, The business of business is business.

Distorts allocation of Resources

Business lacks training in social issues, and lacks social skills necessary to carry out social programs.

Social policy is the jurisdiction of governments, not business

Corporations have too much power

United Nations reported that the worlds three richest people-Bill Gates of Microsoft, the Sultan of Brunei and the Walton family of the Wall Mart retail chain were worth more than the combined GDP of the worlds 34 poorest nations.

With great power and size comes great responsibility.

Social Responsibility Debate: Arguments in Favor Social Responsibility Debate: Arguments in Favor Accountability to Society In a democratic society any kind of enterprise exists for the sake of society. Corporations Debt to Society A corporation has to behave as a good citizen as it draws its resources from society. The corporation has to donate generously towards causes of public welfare and must get itself directly involved in social welfare programmes. How Does CSR benefit Business???

ReputationLoyal Employees& CustomersLess Law SuitsLess Media HarassmentAccess to Capital ImprovesImproves ProductivityCommunity GoodwillBetter EnvironmentThere are several advantages to corporations when they exhibit a sense of CSR and implement it, such as:Enhanced brand image and reputation Increased sales and customer loyaltyIncreased ability to attract and retain employeesReduced regulatory oversight Risk management Easier access to capitalAdvantages of Corporate Social ResponsibilityDIFFERENCEGOODCOMPANY

Excellent Products &ServicesGREATCOMPANY

Excellent Products/services&Makes the world a better placeDevelopments of CSR in India First Phase :Merchant charity Dates back to Vedic period Religious and social ethics

Relief in natural disasters

Dharam Shalas

Drinking waterMODELS FOR IMPLEMENTATION OF CSR Model Emphasis Proponent Ethical Voluntary commitment by companies to public welfare; Org as trusteeMahatma Gandhi Statist State ownership and legal requirements determine corporate responsibilities Jawaharlal Nehru Liberal Corporate responsibilities limited to shareholders Milton Friedman Stakeholder Companies respond to the needs of stakeholders for economic, social & environmental responsibilityR. Edward Freeman Four Models of CSR Developments of CSR in India Second Phase Trusteeship

Social responsibility was brought into communitys consciousness goes principally to business leaders like JRD Tata, Ramakrishna Bajaj, Arvind Mafatlal, Kasturbhai Lalbhai.

Vinoba Bhave on whom Gandhijis mantle had fallen wanted businessmen to interest themselves in humanitarian, educational and other beneficial social activities and consider business as a social mission while promoting the trusteeship of wealth theory of Gandhiji whereby owners and workers were co-trustees of business for society. Developments of CSR in IndiaThird Phase Declaration of social responsibility

Organized Conferences on responsibilities of business

Setting up of Fair Trade Practices Association by Tata, Bajaj and others

Developments of CSR in IndiaFourth Phase Managerial Trusteeship

1970s & later realization that continued profitability depended on involvement towards development of society

Importance of ethical business practices and concern for the environment in which the business operates was also recognized. Developments of CSR in IndiaFifth Phase

Corporate citizenship Realization that if social development is neglected, business cannot prosper.Government alone cannot handle all social issues.

Traditional drivers for CSRValues

Strategy

Public Pressure

Present Drivers for CSRCorporate Social Performance Stakeholder ManagementCorporate Environment ManagementConsumer PressureRisk Management and SustainabilityBusiness EthicsAttracting employeesPersonal Values

Significant Drivers of CSR

CSR report card3 basic principles to measure the impact of CSR activities:Sustainability: linkage between use of resources & their regeneration Accountability: responsibility for the affects of actions on society, environment (stakeholders)Transparency: reporting the impact of actions/decisions to stakeholders3 important factors that Indian corporations consider business ethics (shift to holistic approach), compliance with regulatory requirements (shift towards self-articulated guidelines & structured systems) and consistency in value delivery (shift towards an identity that is based on economic gains through ethical means, sustainability, protect stakeholder driven approach) INDIA ON THE ETHICAL/CSR MATRIX Wider adoption of CSR in Indian companies will be enabled by:Provision of tax, duties and custom benefits.Inclusion of CSR performance as a parameter in fast tracking clearance to projects.Development guidelines on estimation of socio-economic impacts.INDIA ON THE ETHICAL/CSR MATRIX (Contd.)Steps to implement CSRMainstreaming CSR vision in Articles of AssociationDevelop a written policy CSR and make it available in the public domainAssessment of internal environmentIdentification of drivers and barriers to changeAssessment of core competencies of the companyBuilding in the strategic business caseAssessment of external environmentLegal Context & Development ContextIdentification & prioritization of the opportunities for corporate collaborationPutting CSR policy in the public domainThe systematic implementation of CSR means:The adoption of strong organizational values and norms that are appropriate towards a variety of stakeholders.

The continuous generation of intelligence about stakeholder issues, along with positive responses to these issues.Implementation of CSRThe International Chamber of Commerce recommends the following steps to attain Corporate Social Responsibility: 1. Confirm CEO & Board commitment to prioritize responsible business conduct 2. State company purpose and agree on company values 3. Identify key stakeholders4. Define business principles and policiesSteps to Corporate Social Responsibility5. Establish implementation procedures and management systems6. Benchmark against selected external codes and standards7. Set up internal monitoring8. Use language that everyone can understand

Steps to Corporate Social Responsibility(Contd.)

1) Protecting and promoting stakeholders Interests.a) To Consumers and Communityb) Social Responsibilities of Business Towards Employees c) To Owners and Inter-Business Establishments2) Promotion of Common Welfare Programmes3) Philanthropy Understanding Social Responsibility of Business 4)Good Corporate Governance5)Render Social Service 6)Abiding by Rules and Regulations 7)Creation of Wealth Ensure Ecological Balance9) Supplement State Efforts Understanding Social Responsibility of Business (Contd.)Increased interest in CSR has led to numerous world-wide standards :Standards provide guidelines to report on social, environmental & economic performance.Examples include: AA1000 Accountability, Social Accountability 8000, OECD guidelinesEXTERNAL STANDARDS ON CSR Ten Principles: The Global CompactHuman rights1.Businesses should support and respect the protection of internationally proclaimed human rights; and2.Make sure that they are not complicit in human rights abuses.

Labor standards3.Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining;4.The elimination of all forms of forced and compulsory labor;5.The effective abolition of child labor; and6.The elimination of discrimination in respect of employment and occupation.Ten Principles: The Global CompactEnvironment7.Business should support a precautionary approach to environmental challenges;8.Undertake initiatives to promote greater environmental responsibility; and9.Encourage the development and diffusion of environmentally friendly technologies.

Anti-Corruption10.Business should work against all forms of corruption, including extortion and bribery.

Key Elements in Definition of CSRCorporations have responsibilities that go beyond the production of goods and services at a profit.

These responsibilities involve helping to solve important social problems. especially those they have helped create.

Corporations have a broader constituency than stockholders alone.

Corporations have impacts that go beyond simple marketplace transactions.

Corporations serve wider range of human values than can be captured by a sole focus on economic values. Definition of CSRCSR means operating a business in a manner that meets or exceeds the ethical, legal, commercial and public expectations that the society has of business.

The World Business Council for Sustainable Development defines CSR as: 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.

Chart20.420.30.640.3

% of CompaniesWhy do it???

Sheet1India72%South Korea52%Thailand42%Singapore38%Malaysia32%Philippines30%Indonesia24%

Sheet10.720.520.420.380.320.30.24

Level of CSR ActivityCSR in Asian Countries

Sheet2Image Building42%Employee Moral30%Philanthrophy64%Ethics30%

Sheet2

% of CompaniesWhy do it???

Sheet3