Important pointers on Corporate Social Responsibility

Corporate social responsibility: A marketing gimmick or a boon for the society???

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Corporate social responsibility (CSR, also called corporate consciencecorporate citizenshipsocial performance, or sustainable responsible business/ Responsible Business)  is a form of corporate self-regulation integrated into a business model. It is a process with the aim to embrace responsibility for the company’s actions and encourage a positive impact through its activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere who may also be considered as stakeholders.

It can also be reffered as a framework for measuring an organizations’ performance against economic, social and environmental parameters. Building a sustainable business which need healthy economies, markets and communities. It is recasted as “responsible business” with a set of voluntary guidelines for firms by the Indian Government. It tried to make it mandatory by making it a compulsion for companies to spend 2% of their profits on CSR. But due to strong criticism, it gave up effort and and made it mandatory for only a particular class of companies (with profit >5 crore)

Economic and Social Benefits :

Triple Bottom Line : People relate to fair and beneficial business practices towards labour, the community and region where corporation conducts its business. Planet refers to sustainable environmental practices. Harmful or destructive products such as weapons, toxic chemicals or batteries containing dangerous heavy metals are not produced by a Triple bottom line company..Profit is the economic value created by the organization after deducting the cost of all inputs.

Human Resources : Questions about a firm’s CSR policy are often asked by potential recruits during an interview, and having a comprehensive policy can give an advantage. The perception of a company among its staff can also be improved by CSR, particularly when staff can become involved through payroll giving, fundraising activities or community volunteering.

Risk Management 

Brand Management : In crowded marketplaces, companies strive for a unique selling proposition that can separate them from the competition in the minds of consumers. CSR can play a role in building customer loyalty based on distinctive ethical values.

Employee Engagement : 86% of the engaged employee are happy at work in such companies.Employee turnover reduces by 87%, improved performance by 27%.

Environmental Impact : The degradation of environment can be restricted to some extent by CSR.

Political Impact : The companies can influence the political views by supporting a definite cause. It can act as a platform for healthy revision of policies through ideas of working class.

Good Examples : ITC launching the e-choupal where the rural families get directly linked with large multi business conglomerate via the internet for procurement of agricultural products like wheat etc. Upto date marketing and agriculture information, thus they get fair prices.

6500 echoupals in operation. 🙂

Tata, Wipro, GE, Reliance are some companies heavily involved in CSR.

Research in Netherland states that people are ready to pay 10% more for a product or service from a CSR oriented company.

CSR basically helps in improving the image and brand value of a company which helps a great deal in improving the share prices of the same.

MISUSE OF CSR 

Sometimes it is used just as a “marketing gimmick” for the companies that are only interested in profits. Thus it is misused as a tool for “sales promotion”

Examples : For years the company British Petroleum was heavily involved in CSR activities by engaging in green activism and philanthropy, but on the other side it was continuously discharging it’s wastes in a river and thus ruining the bird and marine life as well as the livelihoods of fishermen and beach hotels. It then changed it’s name to “Beyond Petroleum” and BP China won the “The Most Responsible Enterprise”award. In 2005, a poorly maintained BP refinery exploded in Texas, killing 15 and injuring 180. In 2007, a BP pipeline, corroded through neglect, leaked 200,000 gallons of crude into the pristine Alaskan wilderness. The company paid a fine of $303 million to settle a charge that it had conspired to manipulate the price of propane gas.

All of us know about the company Satyam that was involved in a lot of CSR activities but under the garb of such activities the company was involved in unethical activities.

Countries that have implemented CSR

1) Denmark  was the 1st western country to mandate CSR in annual financial reports of companies.

2) Indonesia passed a law that required all public companies to issue CSR reports.

3) U.S based public companies have to regularly disclose climate related risks in their annual reports.

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