Corporate Social Responsibility (CSR): An Unique Business Strategy in Achieving Organizations' Excellence


By

P. Aranganathan
Assistant Professor
Department of MBA
MIET Engineering College
Trichy
 


ABSTRACT:

Corporate Social Responsibility (CSR) is the voluntary role and contribution of the business community towards a better social and environmental development, apart from their investment to organizational development. Usually CSR concentrates on the activities that typically address the aspects of a firm's behaviour (including its policies and practices) with respect to such key elements as; health and safety, environmental protection, human rights, human resource management practices, corporate governance, community development, consumer protection, labour protection, supplier relations, business ethics, and stakeholder rights. Businesses across the world are so obsessed with the immediacy of results that they cannot sight the vast opportunity that discharging of social responsibility holds for the long term sustainability of the organizations. Hence CSR is being implemented in the Indian organizations in one or more of the following ways such as reactive strategy, an image building exercise, for improving operational efficiency, and a source of competitive advantage, etc to ensure business development. In this article the author tries to bring the insights of CSR as an important business strategy to ensure business development.

Key words: Corporate Social Responsibility, corporate governance, environmental protection, global warming, non-renewable resources, etc.

INTRODUCTION

In the current globalized business world, there exist large multinational as well as small local business organizations. Irrespective of the nature of business organizations, they should be ethically bound to their stakeholders, such as customers, owners/investors, government, suppliers and competitors in order to ensure good will, which in turn assure maximum business growth rates. Organizations follow different strategies to ensure their ethics in order to achieve goodwill among their stakeholders. One of such strategies used is Corporate Social Responsibility (CSR). CSR consists of a wide-range activities and programs that improve the organization's social, environmental and local economic impact, their influence on society, social cohesion and human rights, and fair trade. Particularly CSR greatly focus on environmental protection and the well being of employees, the community and civil society in general, both now and in the future through which the organizations assure good will among their stake holders.

CORPORATE SOCIAL RESPONSIBILITY

Corporate Social Responsibility (CSR) is the voluntary role and contribution of the business community towards a better social and environmental development, apart from their investment to organizational development. CSR is generally seen as the business contribution to sustainable development which has been defined as "development that meets the needs of the present without compromising the ability of future generations to meet their own needs", and is generally understood as focusing on how to achieve the integration of economic, environmental, and social imperatives.

According to Canadian Centre of philanthropy, "CSR is a set of management practices that ensure the company minimizes the negative impacts of its operations on the society while maximizing its positive impacts."

Nowadays business firms had started realizing importance of CSR as a tool for dominating the competitive scenario prevailing in the national as well as international market, for customer retention, and sustainable growth.  Such firms also focus on customer-driven excellence in terms of high quality products and services at the same time providing value for money, treating employees and partners as valuable assets, agility, innovation in products and services, social responsibility, and to develop environmental friendly techniques of production, design, recycle industrial waste- products and conserve natural resources, forest conservation, and customer solutions for Sustainable Business Practices. The Business Organizations affect the Employees, Customers, suppliers, shareholders, the local community and the environment in various ways. Corporate social responsibility (CSR) allows business organizations to develop responsible attitude toward the society and the environment and to behave ethically and contribute to economic development of the nations.

Corporate sector has a major role to play in a developing country like ours. However majority of the companies have a limited or myopic approach to corporate social responsibility. CSR is about improving the general living standards of the community, raising educational standards and creating a positive impact on society. Usually CSR concentrates on the activities that typically address the aspects of a firm's behaviour (including its policies and practices) with respect to such key elements as; health and safety, environmental protection, human rights, human resource management practices, corporate governance, community development, consumer protection, labour protection, supplier relations, business ethics, and stakeholder rights.

Nowadays firms have started using CSR as a strategy to focus on new opportunities and respond to interrelated economic, societal and environmental demands in the marketplace. Many firms believe that this focus provides a clear competitive advantage and stimulates corporate innovation and creativity. A more strategic approach to CSR can help the organizations to grow their business, make a bigger impact on the issues, and help ensure long-term viability and a stellar corporate reputation. In times of increased risk, shifting roles and responsibilities the firms can make use of the CSR strategy.

Stakeholders are also increasingly aware of the importance and impact of corporate decisions upon society and the environment and hence most of the corporations are involving their stakeholders in their decision-making and addressing societal challenges .The stakeholders are given the opportunity to reward or punish the corporations. Hence corporations can be motivated to change their corporate behavior in response to the business situations, where they can follow CSR approach in order to satisfy their stakeholders.

Companies can adopt the CSR strategies to assure some long –term benefits. They are

  • Creating and maintaining a high reputation for the organization
  • Securing and maintaining strong relationships with stakeholders
  • Creating better, safer and more stimulating work culture
  • Increasing employees' commitment
  • Improving the efficiency of the business management
  • Increase the financial performance and profitability of the company
  • Protecting from boycott actions; making access to funding easier
  • Benefits from fiscal advantages and administrative facilitation.

DRIVERS OF CORPORATE SOCIAL RESPONSIBILITY

The following are the drivers of corporate social responsibility:

Employees and shareholders: Some business organizations indulge in corruption, stealing of Intellectual Property Rights, financial scams and scandals or producing environmentally hazardous products for the customers. Instead they have to build goodwill and trust among the customers and shareholders. Building an ethically responsible culture in organizations can reduce the chances of employees indulging on unfair practices within the organization by emphasizing on professionalism, transparency, socially responsible investments, effective communication, employee participation, fairness, and promotions, adequate compensation and personal development.

Brand equity: Customers associate a brand with a promise and built on deep relationships with consumers. Its value to consumers is that it provides emotional as wells as functional aspects and reduces the risk, saves time and provides reassurance on value for money. Predictable results are the promise of a brand. Corporate Social Responsibility can play a major role in building customer loyalty based on ethical values practiced in the organizations. Brand loyalty can be strengthened through: increasing continuity of purchase via such techniques as "frequent purchaser" programs, "members clubs", "continuity promotions", that create identification between the users of a brand and its users.

Ethical marketing practices and social awareness: Rapid industrialization in many developing countries has now opened avenues for International Trade. These policies should cover distributor relations, advertising standards, customer's service, pricing, product development and general ethical standards. Now in this global scenario, companies need to apply high standards of ethics and morality when making corporate decisions. Due to increasing awareness among customers regarding the malpractices in the market, the consumers are now more conscious about their rights.

The environment consciousness:

Many organizations had started realizing the importance of environmental protection, as they are directly or indirectly contributing towards environmental protection. There are many issues regarding the environmental protection and particularly the issues which require immediate attention involve:

  • Climate change
  • Water conservation
  • Air emission
  • E-waste

Many organizations like Tata, Infosys, Federal Express, Mahindra and Mahindra, NTPC Ltd, TNPL Ltd, etc are involved in several initiatives that help to protect the environment including greenhouse gas reduction, renewable energy and noise reduction, recycling and using alternative fuels in its own transportation fleet.

Energy conservation and global warming: Agriculture in our country had significantly faced its downturn due to the climate changes which were primarily caused by burning of coal, oil and other fossil fuels. The world produces more carbon dioxide and other gases which are responsible for man made global warming. Hence it becomes very important to identify new fuels which may cause comparatively less pollution. Many companies are on their way to identify new non-renewable resources to ensure energy conservation as well a step to control the global warming.

Responsibility towards the government: All the Business Organizations have to comply with the general law applicable in every country. Management policies, strategies, mission, should be in accordance to the rules and regulations of the legal environment and should follow fair trade practices. Organizations should pay taxes and other dues and discourage bribery, corruption, and biases in the departments.

CSR AS A BUSINESS STRATEGY

A visible attention must be paid towards social and environmental consequences of business rather than aiming at mere profit maximization. Most of the companies consider Social concern and business as two independent responsibilities. But many companies lose focus of how social responsibility could have been integrated with the long term business outcomes. Businesses across the world are so obsessed with the immediacy of results that they cannot sight the vast opportunity that discharging of social responsibility holds for the long term sustainability of the organizations. As a result, based on the maturity of strategic thinking in the company, CSR is being implemented in one or more of the following ways as shown here:

  • CSR as reactive strategy
  • CSR as an image building exercise
  • CSR for improving operational efficiency
  • CSR as a source of competitive advantage

CSR as Reactive strategy

Generally many companies use CSR as a reactive strategy for recovering from lost fortunes of the company by gaining the confidence of the communities in which they operate. But now companies have started adopting a "proactive approach" in case of CSR by estimating and analyzing the cost of not discharging the social responsibility and as a result they practice the minimum to pull on and thus minimizing their spending on this account. CSR is viewed by these companies as a cost and compulsion. This approach only obscures a business from identifying the real potential CSR holds with respect to their core business. 

CSR as Image building exercise

Today many companies view CSR as an opportunity for building their corporate image. Companies announce their plans for various kinds of social philanthropic activities in order to draw the attention of media and general public. In case a company develops a systematic and deliberate approach for maintaining the focus on social welfare activities, this will not only enhance its image in the immediate future but also help the company in building a positive reputation of societal concern. This will definitely help the company in its future business forays in the region.

CSR for improved operating efficiency

Some companies take care of environment and society for the reason that it not only helps in operating with in the environmental norms set by statutory authorities but also reducing their costs by improving operating efficiency. If the companies are operating barely with in the norms set by statutory authorities then they are said to be in compliance mode. When companies deliberately plan and move beyond the compliance mode, the organization needs to integrate CSR and its business goals, which results in improved productivity or operational efficiency and better environmental conditions that fosters better living conditions for future generations.

CSR as Source of competitive advantage

The major challenge for any type of industry today is to identify the social issues that drive its competitiveness both now and in the future. Hence the business managers must first believe that social concern or CSR will be a source for business opportunities and competitive advantage. This integration then would pave way for all round sustainability and growth. In the due course of time, the issues relating to climate change and social responsibility in the area of operations will be critical factors for survival of businesses. Thus CSR has the potential to change the way business conducted through out the world.

CONCLUSION

Most of the companies through out the world had accepted that business is not just for making money and this is evident through their involvement in various community developmental activities. Many Business firms had realized the importance of using business ethics as a tool for retaining customers and increasing its market share by highlighting the initiatives it has taken for providing a clean environment for the society. Also some companies started using the CSR as a strategy which aims at mutual development of company and the community simultaneously.

BIBLIOGRAPHY

Corporate Social Responsibility in India - An Empirical Research by Bernadette Dsilva

http://www.alagse.com

http:www.bdsglobal.com

http:www.bsr.org/csrresources

http:www.eldis.org

http:www.societyandbusiness.gov.uk

http:www.state.gov

http:www.takinitglobal.org

http:www.wfap.org/csr

Joshua Karliner, The Corporate Planet: Ecology and Politics in the Age of Globalization, (Sierra Club Books, 1997).

Orlitzky, M, Schmidt, F & Rynes, S 2003, 'corporate social and financial performance: A meta analysis', Organization Studies, vol 24.

PJC, Parliamentary Joint Committee on Corporations and Financial Services 2006, corporate responsibility: Managing risk and creating value, June, Canberra.

Sanjay K.Agarwal, Corporate Social Responsibility in India, Sage Publications Pvt. Ltd. New Delhi

Schlesinger, L. and Heskett, J. (1991) "Breaking the cycle of failure in service", Sloan Management Review, spring.
 


P. Aranganathan
Assistant Professor
Department of MBA
MIET Engineering College
Trichy
 

Source: E-mail February 23, 2010

          

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