A Report on CSR in MNC’s

Rahul PrasannaKumar (5081245)

4/23/2015

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Table of Content

Sl No. Contents Page No.

1. Executive Summary 3

2. Introduction

2.1. Definition of Corporate Social Responsibility

2.2. Objectives of Corporate Social Responsibility

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3. Principles of Corporate Social Responsibility 5

4. CSR Practices in MNC’s 6

5. Approaches to Implementing CSR 8

6. Challenges in Introducing CSR Scheme 9

7. Findings and Recommendation 11

8. Conclusion 12

9. Bibliography 13

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1. Executive Summary

This study explains about the concept of Corporate Social Responsibility in MNC’s and how it

affects the overall functioning of the organization when implementing them. Amongst the

numerous changes that have taken place in the business world since the nineties, the ascent of the

Corporate Social Responsibility (CSR) agenda is unquestionably noteworthy.

Firstly, a detailed description on the principles of CSR has been laid down which has been

structuring these corporate houses on how and what type of CSR activity would be more feasible

and acceptable for them to choose. This report have also shed some light in defining the CSR

concept in terms of applied in MNC’s and described in brief the various roles being played by

the CSR activity which have transformed the basic agenda of MNC’s in generating profits to be

socially responsible towards the society and itself. As CSR is a recent concept, there has not been

an abundant research made on this which have resulted in making the CSR concept confined

within the big MNC’s and other corporations. Small and intermediary firms are not still aware

of this concept in most of the countries.

The report have also done a centralized study on the approaches in implementing a CSR scheme

in MNC’s and the ongoing factors that contribute in applying a CSR scheme among the MNC’s.

Within this context the report examines the crucial challenges; both internal and external being

faced by the MNC’s in implementing a CSR scheme and their results.

Towards the end, the report states the necessary findings and observations which have been

backed up with some recommendations in clarifying them. Implementing a CSR scheme does

not always involves huge cost. There are many ways and practices through which a feasible CSR

approach can be developed based according to the size and functions of the MNC’s

Throughout the report different real life examples among the MNC’s throughout the global

economy has been illustrated in order to understand the concept deeply. The report concludes

with the various recommendations and benefits that the MNC’s gain by implementing a CSR

scheme both financially and socially.

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2. Introduction

2.1. Definition of Corporate Social Responsibility (CSR)

Corporate Social Responsibility is concerned with treating the partners of an organization or

establishment morally or in a responsible manner. ‘Ethically or responsible' implies treating key

partners in a way esteemed adequate as indicated by universal standards. Social incorporates

monetary and environmental responsibility. Partners exist both inside a firm and outside “The

more extensive point of social obligation is to make increasingly elevated ways of life, while

protecting the gainfulness of the partnership or the integrity of the organization, for people both

within and outside these entities. CSR is a process to achieve sustainable development in

societies” (Michael Hopkins 1998).

A comprehensive CSR program includes stakeholder analysis, thorough methodology plan that

incorporates work environment, marketplace, societal, and environmental dimensions, activation

programs, and measuring and reporting. In simpler terms it is about:

Understanding the setting and issues within which you work, settling on the best choices

you can, and continually advancing your role (perspective).

Maintaining the hunger to improve as an organization (leadership).

Making the structure/systems to guarantee you have the proposed effect (management).

Leveraging exercises to convey worth to the organization (communication).

2.2. Objectives of Corporate Social Responsibility

“Although some of the popular authors focuses on how consideration of social or environmental

concerns contribute to the financial position of the business” (Friedman 1970; Johnson 2006;

Porter and Kramer 2006). Whilst these may bring about positive results for society, the primary

objective is to protect the organization. “A late survey of the business case writing stressed CSR

as making worth for business in four ways:

Reducing costs and risk,

Creating competitive advantage,

Building reputation and legitimacy, and

Generating win–win–win outcomes” (Kurucz et al. 2008).

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Thus, the fundamental center is on utilizing CSR to make esteem as characterized by the

prevailing business logic, such as enhanced focused positioning or profitability.

As we are aware today, organizations are focusing more on environmental and social

responsibility as a strategic objective. The conditions of a faster, flatter and a networked world is

changing the way business conducts its activities giving rise towards a sustainable approach.

Organizations have realized that their long term benefit is purely tied to the well-being of the

society and the environment in which they live. There is a growing concern that CSR is being

part of integrated corporate strategy for generating new revenue streams and controlling costs.

According to Alessia D'Amato, et al. (2009) some of the main roles of CSR include –

The Ethical role serves to prevent irreconcilable circumstances between acquiring

corporate benefits and keeping up the respectability of the company and the goods and

services it produces.

The Legal role serves to support transparency in a company's business practices and

financial reporting.

The Societal role coordinates to regard and put resources into the groups in which the

company operates.

The Ecological role focuses on respecting the immediate environment in which the

company operates and the company's effect on the global environment.

3. Principles of Corporate Social Responsibility

Because of the uncertainty encompassing the CSR activity it is hard to characterize CSR and to

be sure about any such action. It is hence basic to have the capacity to recognize such movement

and the following are the three essential standards which together embody all CSR activity.

These are,

Sustainability

Accountability

Transparency

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However the MNC’s are equipped based on the following principles of CSR-

Legal Compliance Principle: The enterprise shall conform with and see all relevant, local,

worldwide, composed, proclaimed, and effected laws and regulations, as per fixed,

particular procedures.

Adherence to Customary International Laws Principle: The enterprise should stick to

worldwide and administrative agreements, official regulations, statements, pledges,

decisions, and rules, when setting its approaches and practices pertinent to Social

Responsibility.

Respect for Human lefts Principle: The enterprise shall execute approaches and rehearses

which will respect existent human lefts in the Universal Declaration of Human lefts.

Respecting Related Stakeholders lefts Principle: The enterprise shall recognize and

acknowledge the assorted qualities of related partners lefts and interests, and the

differences of the major and minor enterprise’s exercises and items, among different

components which may influence such related partners.

Transparency Principle: The enterprise shall obviously, precisely, and exhaustively

declare its policy, choices, and exercises, including known and potential consequences on

environment and society. In addition, such data might be accessible to affected persons or

the individuals likely to be influenced really by the enterprise.

4. CSR Practices in MNC’s

Some of the widely practiced CSR activities in MNC’s throughout the global economy are listed

below-

Local community support: MNCs are supporting the local communities through

sponsorship of sports events, tree plantation drives, health awareness campaigns,

consumer awareness campaigns, social infrastructure and computer education. The basic

structure of this factor suggests that MNCs pay attention to the needs of the people

surrounding their business entity. Thus, it can be concluded that the emphasis of MNC’s

is on improvement of living standard of local community through health improvement,

education, sports and up gradation of local social infrastructure.

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One of the greatest example for this would be the case of ‘Coca-Cola’ Company in

Africa Since 2002, in organization with its packaging accomplices, they have been

implementing a system to handle HIV/AIDS in its working environments across the

continent. With a clear and formal HIV/AIDS arrangement set up, the organization

perceives that HIV/AIDS is a general public-health crisis and recognizes the part of the

work environment in constraining the spread and impacts of the epidemic. Today this

project is one of the biggest of its kind in Africa, covering around 60,000 'Coca-Cola'

system workers and in addition their life partners and youngsters.

Environmental marketing: This factor comprises of three variables namely employee

training programs, quality control measures and recycling of waste products. It indicates

that MNCs take care of the host countries' environment and proving themselves as a good

corporate citizen. MNC’s are very much conscious about their responsibilities towards

pollution control and other ecological issues in the host countries and have taken

initiatives to address them. Different training programs for employees to make them

responsible towards environment can further contribute to environmental marketing.

The best example for environmental marketing would be the case of ‘Virgin Atlantic’.

When the aviation industry was criticized for generating green house gasses and

contributing to global warming, On February 24, 2008, Virgin Atlantic turned into the

first business flight administrator to fly a plane somewhat controlled by biofuels. A

Boeing 747 flew more than 200 miles from London to Amsterdam, with one of its four

motors blazing a mix of 20 percent coconut and babassu oils blended with standard

petroleum-based jet fuel which turned biofuels as an approach to fortify rural

advancement, make employments, and save foreign exchange.

Sustainable development: This factor suggests that MNC’s are taking care of the natural

resources of the host country. MNC’s discharged social responsibilities by preserving

natural resources, pollution control, and cleanliness aimed at the long term sustainability.

Thus, it can be inferred that sustainability, a CSR Principle, is not only followed by the

host companies but also by their counterparts from abroad.

Empowerment: Empowerment emerged as another important CSR practices comprising

of generation of employment for disabled, women empowerment, scholarship for needy

students, and help to victims of natural calamities. This factor addresses the efforts of

MNC’s towards the betterment of the weaker sections of society so that they can be

brought back to the main stream. In developing countries like India, the above stated

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section of society is underprivileged and need assistance from other institutions, besides

government. MNC’s seem to be discharging this responsibility distinctively than their

Indian counterparts, thus helping the Government to uplift the needy section of society.

Transparency and accountability: The positive loadings on this factor highlight that the

variables namely, ethical business practices and social audit share most of their variances,

hence, co-vary to each other. The basic structure of this factor suggests that MNC’s are

adopting the principles of Transparency and Accountability through ethical business

practices and social audit thereby ensuring the interests of all stakeholders.

It’s also observed that the MNC’s have been adopting themselves and their CSR activities to the

prevailing business environment of host countries.

5. Approaches to Implementing CSR

The primary intention of this report concentrates on distinguishing why CSR begins with

organization like MNC's and how it can be very much implemented. To ascertain how CSR is

implemented in organizations, some research uses a developmental framework to show change

in awareness, strategy, and action over time, and posts stages of CSR from elementary to

transforming ( Mirvis & Googins, 2006). Jackson and Nelson (2004) take to a greater extent a

how-to approach, offering a principle- based system for mastering what they call the "new rules

of the game. Illustrations of standards incorporate harnessing innovation for the general

population great, putting individuals at the middle and spreading economic opportunity.

A percentage of the elements for progressing duty towards CSR can be obtained from either

monetary leisure activity toward oneself (i.e., a solid business case) or from ethical grounding

(i.e., the moral importance of sustainable development). Building the business case for CSR,

Husted and Allen (2007) points out much of the effort were focused on CSR in an attempt to

demonstrate that positive CSR can be linked to improved financial performance. A decent

illustration of the differentiation between CSR as business case and CSR as moral issue is

accounted for by Hartman, Rubin, and Dhanda (2007) wherein the article exhibits that U.S.

organizations legitimize CSR utilizing financial aspects or main concern terms and contentions

in their interchanges, though European Union organizations depend all the more vigorously on

dialect or the speculations of citizenship, corporate accountability and moral commitment.

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Results show that U.S. organizations concentrate more heavily on budgetary supports, though

European Union organizations combine both financial and sustainability components in

supporting their CSR.

6. Challenges in Introducing a CSR Scheme

Associations like MNC's typically confronts numerous difficulties and restrictions while

executing a CSR plan. These as a rule relate either to political issues or to authoritative level

concerns and are frequently installed in culture. The complexity of working in a worldwide

society puts new demands on organizations and their authority. As the roles and obligations of

government are being redefined and the limits in the middle of business and government get to

be less clear, the studies demonstrates that business pioneers are confronting an overwhelming

exhibit of difficulties. In the new age of CSR, the needs of the stakeholders, consumers,

employees, national as well as international regulators, watchdogs, NGOs, and activist groups

have to be satisfied (Hatcher, 2002).

Some of the key challenges included in implementing a CSR system incorporate -

Lack of Community Participation in CSR Activities: There is an absence of enthusiasm

within the local community in taking an interest and adding to CSR activities of

organizations. This is to a great extent owing to the way that there exists almost no

information about CSR inside the local community as no genuine endeavors have been

made to spread awareness about CSR and infuse trust in the local communities about

such activities. The circumstance is further damaged by a lack of correspondence

between the organization and the group at the grassroots.

Need to Build Local Capacities: There is a requirement for capacity building of the local

non-administrative organizations as there is not kidding deficiency of prepared and

proficient associations that can viably add to the continuous CSR exercises started by

organizations. This genuinely bargains scaling up of CSR activities and therefore

confines the extent of such exercises.

Issues of Transparency: Lack of transparency is one of the key issues yielded by the

survey. There is an outflow by the organizations that there exists Lack of transparency

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from the nearby actualizing offices as they don't try satisfactory endeavors to uncover

data on their projects, review issues, sway evaluation and usage of stores. This reported

Lack of transparency adversely affects the methodology of trust building in the middle of

organizations and neighborhood groups, which is a key to the accomplishment of any

CSR activity at the nearby level.

Non-availability of Well Organized Non-governmental Organizations: It is also noted

that there is non-accessibility of very much composed non-governmental organizations in

remote and rural zones that can evaluate and distinguish genuine needs of the group and

work alongside organizations to guarantee effective execution of CSR exercises. This

likewise fabricates the case for putting resources into neighborhood groups by method for

building their abilities to embrace advancement ventures at nearby levels.

Visibility Factor: The part of media in highlighting great instances of fruitful CSR

activities is invited as it spreads great stories and sharpens the general population about

different continuous CSR activities of organizations. This obvious impact of picking up

perceivability and marking practice frequently leads numerous non-governmental

organizations to include themselves in event-based programs in the process they regularly

pass up a great opportunity for important grassroots interventions.

Narrow Perception towards CSR Initiatives: Non-governmental organizations and

Government organizations typically have a restricted viewpoint towards the CSR

activities of organizations, frequently characterizing CSR activities more donor driven

than local in methodology. Thus, they think that it difficult to choose whether they ought

to take an interest in such exercises at all in medium and long run.

Non-availability of Clear CSR Guidelines: There are no obvious statutory rules or policy

directives to give a conclusive bearing to CSR activities of organizations. It is discovered

that the size of CSR activities of organizations ought to rely on their business size and

profile. As such, the greater the organization, the greater is its CSR program.

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7. Findings and Recommendations

It is observed that there is a requirement for creation of awareness about CSR amongst

the overall public to make CSR activities more successful. This awareness era can be

taken up by different partners including the media to highlight the great work done by

corporate houses here. This will realize compelling changes in the methodology and

disposition of people in general towards CSR activities embraced by corporate houses.

The exertion and usage done by one organization will likewise inspire other corporate

houses to join the group and assume a viable part in addressing issues, for example,

access to education, health care and livelihood opportunities for countless around the

world through their inventive CSR practices. Hence, the social equity motivation of the

day would be satisfied all the more meaningfully.

It is watched that just medium and huge corporate houses including MNC's at their

headquarter level are included in CSR exercises, that too in chosen geographical zones.

To address the issue of contacting more extensive geographical ranges, the involvement

of backup association in the CSR space will be key as it will reflect and impact the

general corporate picture and seat imprint made by the MNC's. It is prescribed that a

battle ought to be propelled to both spread awareness on CSR issues amongst the general

population and additionally to include these backups to take part all the more effectively

in CSR initiatives.

This was precisely what happened with' NIKE' in the nineties. It indicated how the labour

standard issues of its backup plant in South East Asia harmed the organization's

worldwide picture. Nike truth be told paid its laborers in those plants as per neighborhood

traditions and practices which was extremely poor. Confronted with a developing

kickback against its work and ecological practices, Nike swung to item stewardship

techniques to recoup its reputation and protect its entitlement to work by sanctioning an

overall checking system for all agreement processing plants, utilizing both inner and

third-party auditors.

Not each CSR plan includes an immense expense. A portion of the fundamental CSR

exercises like waste isolation, watching the level of job satisfaction of representatives,

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contributing a little divide of the pay of workers to instruct poor is another case of

indulging in low cost CSR activities.

8. Conclusion

• The idea of corporate social obligation is presently solidly established on the worldwide

business plan. Be that as it may, with a specific end goal to move from standards to solid

activity, numerous obstacles need to be overcome. A key test confronting business is the

requirement for more dependable markers of advancement in the field of CSR, alongside the

dispersal of CSR procedures. A portion of the positive results that can emerge when

organizations embrace a strategy of social responsibility incorporate:

The organisation as a financial entity will have positive results in improved finance, larger sales

and productivity. In the long run the organisation will also be able to retain its employees also

minimize the problems of work force diversity and through its attractive and innovative

practices. In terms of borrowing capital, it will have more and easy access to large funds by

creating an enhanced reputation and bench mark.

Whereas the general public and the society as an important stake holder in the CSR approach

will gain through the charity, community education and other donation programs offered from

these MNC’s. One of the main benefits derived from the CSR strategy would be assurance of

qualitative and standard products as the corporations would see the consumers as an important

stake holder rather than mere buyers. Also the organisations being socially responsible will also

indulge in eco-friendly practices such as eco-labeling, implementing life-cycle assessment and

costing and various quality standards for products.

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http://www.ssif.gov.jo/EN/EN/CorporateSocialResponsibility/CSRGuide/CorporateS

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The Nike example is drawn from Daniel Litvin, Empires of Profit: Commerce,

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