CSR - a mantra for Corporate Sustainability


By

Shivi Jawalia
Lecturer
Xavier Institute of Management and Entrepreneurship
Bangalore
 


Introduction

The world is obsessed with Rapid change, Change which is very well manifested by Toffler in 'Future   shock' & Sumantra Ghoshal & Gita Piramal in 'Managing Rapid Change'. All new ideas, novel thoughts which involves heavy cost & time becomes irrelevant in short span ,leaving Companies to struggle in bloody 'Red Ocean' to manage their bottom lines .This poses a threat to Corporate Survival & raises question on its Sustainability. The unique solution to this problem has been suggested by Kim in the form of breaking out bloody competition (Red Ocean) by creating uncontested market space that makes the competition irrelevant (Blue Ocean).

One such Blue Ocean could be conceptualized as framing the business around Corporate Social Responsibility. In the saturated marketplace of today there are increasingly less factors to differentiate oneself from the competition. Responsibility is a key differentiating factor that can be sustained in the longer term. Companies who do not take account of the increasing importance of responsibility may not survive, in much the same way as those who fail to innovate. CSR is about Corporate sustainability making sure that the company stays in business for a long time to come. CSR is fast becoming the latest weapon in the marketer's ammunition. And modern day businesses are finding it increasingly valuable as a business practice and also a way to enhance how they are perceived by stakeholders. The idea of corporate sustainability vests in sustainable society. Healthy society ultimately creates expanding demands for business where more human needs are met and aspirations grow.

The panacea for organizations to emerge as islands of excellence in the ocean of mediocrity (institution building) lies in sustainability. Business has to be responsible in order to be sustainable. Gone are those days when corporate excellence was considered as synonym of shareholder's value only; in today's scenario it should be looked at much greater canvas that includes social costs and benefits as well There are five major stakeholders of modern corporations- Society, Partners, Investors, Customers & Employees; hence the acronym S.P.I.C.E, ('Firms Of Endearment- Prof. Raj Sisodia, Dr. Jag Seth & David Wolfe).

Responsibility is crucial to the success of business. Companies need to make profits, and that is a forgone conclusion but what is new to the business are the questions being raised: At what cost can it make profits? Companies must assess their net impact on society by taking into account interdependence of various components of their business model.

Why Corporates?

Like it or not the responsibility for ensuring a sustainable world falls largely on the shoulders of the world's enterprises, the economic engines of the future. (Stuart Hart, Kenan Flagler Business school).

As Companies  grow in size & scope they must also think of themselves as partners with government in solving major societal problems in a way that is consistent with their own competencies as business.

Dunphy states that Corporations forfeit their right to exist if the debase human life, act with contempt for the community, plunder & pollute the planet.

Sustainability& CSR

Corporate Sustainability can be defined as meeting the needs of the firm's direct & indirect stakeholders (shareholders, employee, clients, etc.) t without compromising its ability to meet the needs of future stakeholders as well.

The central Question to be answered in this century is whether the current model of the Corporations needs to be modified to contribute to the continuing health of the Planet, the survival of humans& other species, the development of just & humane society& the creation of work that brings dignity & self fulfillment to those understanding it.

Strategic proactivity moves the firm further along the sustainability path by making sustainability an important part of the firm's business strategy which helps in providing competitive advantage.

CSR is a concept whereby companies integrate social & environmental concerns in their business        operations & in their interaction with their stakeholders on a voluntary basis.

CSR activities is not new, they have already more than 100 years history. Originally CSR came from charity principle or nobles oblige. This means some firms or some rich people, that afford to help community or others because of their profits or richness, did CSR activities by which firms and rich people do not earn the money, but only spend one. Earlier CSR was restricted to check writing activity, where the approach is that Corporation is doing extra efforts on the cost of its bottom line. .It could also be seen as socially responsible initiatives by renowned personalities such as Mahatma Gandhi, B.R Ambedkar who engaged in activities varying from poverty, untouchability & the upliftment of women among others. What distinguishes today understanding of CSR from the initiatives of the past , the attempt to linking it more strategically to business goals with a long term objective to position themselves as more responsible & ethical corporate Citizens who are closely linked to the social ecosystem .This means that CSR is a business approach , which meets stakeholder's expectations and   the principle's of continuous improvement & innovation by accommodating it in their business strategies.CSR today is not about how company spend the money it make but about how corporates makes the money they  spend ; Doing CSR activities enable us to earn the money. This is proved through existence of SRI socially responsible investment market. SRI market extends so rapidly and so many people invest SRI funds. Investments of SRI funds mean that not only people support CSR activities of firms, but also they could expect return. CSR intend to do social and environmental activities and SRI finances CSR activities .Associated with this is the concept of Triple Bottom Line (TBL). It is assumed that TBL legitimates CSR activities and SRI.  Includes not only social, environmental perspectives, but also economical perspective. TBL is missing link among CSR activities and actual business. TBL also supports and strengthens CSR activities in theoretical aspect.

In the early 1990s business leaders were increasingly using the term eco-efficiency to explain sustainable development, focusing on the cost savings that can come from well designed energy and wider environmental programmes in industry. The triple bottom line (People, Planet, Profits) was to help business people see a bigger picture, where value is created or destroyed – in multiple dimensions, among them economic, social & environmental.  But the new dimension of' Triple Bottom Line' by 'Elkington' redefines the CSR which could be seen from wider perspective and instead of doing extra it becomes an integral part of Organization's strategy by getting embedded in its value chain.


                                                     Fig.1 Triple Bottom Line

A new approach to Economics has developed in recent years to deal with the fact that traditional economics has largely taken the ecological & social environment for granted. This approach recognizes that economics must take natural capital (ecosystems) & social capital (relationship between people) into account.

CSR from the lens of corporate strategy,

While CSR is not meant to be presented as the panacea to all that ails the world or global business, it is increasingly being viewed as a viable component of overall business strategy, along with marketing, branding, research. A new approach towards CSR could be strategic corporate social responsibility: a business strategy that is integrated with core business objectives and core competencies to create business value and positive social/environmental value, and is embedded in day-to-day business culture and operations. To be effective, CSR must be aligned with two things:

* Core business objectives of the firm
* Core competencies of the firm

In order to have a lasting impact on society and on the business, companies must align philanthropy to the core strategy of the business closer the alignment the easier it is to consistently support the efforts.CSR has the potential to shape the strategic content for the companies and can exploit long term opportunities& issues.

The clear vision of CSR needs to be embedded within and reflect the core values of the firm, and linked to the mission, vision and values of the organisation. And this core vision needs to openly recognize that CSR is core to creating not only social or environmental value, but that it is core to creating business value as well.

Process of CSR Management (Case of Toshiba)

1. Establishment of CSR Vision

It is necessary to decide upon the CSR vision based on the uniqueness and environment of a firm. That is because a concrete measure is not clearly performed even if it builds the structure of CSR. Moreover, it responds to the enterprise characteristic which the firm is developing, or the business environment placed. It becomes the process which finds out the original theme which complements a weak point by it taking advantage of a strong point.

The Basic Commitment of the Toshiba Group and the Group slogan,-"Committed to People, Committed to the Future. Toshiba."- , is the concrete expression of both their relationships with stakeholders and their business activities. The first step of CSR activity was discriminating the role in the society of Toshiba from electronics in the light of the participation to energy.

By the technical innovation in these fields, it is doing its best in the Toshiba group in order to complete the mission. Based on the Toshiba group standard of the act revised in January, 2004, since it is the company which contributes to better global environment and contributes to society and which should respect, it is carrying out CSR activity. And Toshiba signed the U.N. global compact which covers a human right, labor, and environment as a global firm.

2. Stakeholder Relations

In order to build a CSR strategy based on change of a stakeholders' action, it is necessary to grasp periodically the consciousness of a stockholder, a customer, an employee, and a customer, and change of a sense of values. For that purpose, a dialog with a stakeholder is an effective means. This is it not only hearing the opinion of a stakeholder, but making use of in management.

In Toshiba , communication with a stakeholder recognizes it as indispensable. Therefore, it is raising reliance through communication with a customer, a stockholder, an employee, and a community.

3. Plan-Do-Check-Action Management

In order to connect CSR to continuous development, it is necessary to take in an element to business at CSR. It cannot demonstrate an effect, if it cannot be reflected in management even if it recognizes the vision of CSR, and a demand of a stakeholder. It is required for practice of CSR to build the structure of PDCA.

In Toshiba , it has realized CSR management using PDCA. In Toshiba, the management top is performing the commitment. Moreover, after the administrator of each section decides the plan of activity, it develops it in the form of all the members' participation.

4. Establishment of CSR Department

The business for achieving CSR is construction of a management system. The whole

Organization design also about CSR is called for like the existing management system. As making an organization, installation of the officer specializing in CSR is indispensable. It builds the CSR committee which crosses a function and its post for this officer at the top. There are also many places which take charge of CSR as extension of activity of an environmental department or a philanthropy department at present. CSR is positioned as corporate strategy.

Therefore, if it is not the lateral organization centering on its post with impelling force, such as the management planning department, it is difficult to make it permeate effective in the company(Tanimoto,2004).

In Toshiba, it recognizes the importance of CSR anew against the background of progress of enterprise globalization, and a rise of the request from society. It positions CSR into corporate management and is advancing systematically. And it established CSR headquarters newly as an organization president under the direct control in July, 2003, and fixed whole company promotion organization. It held the CSR promotion committee which it constitutes from officers including the CSR division manager. It has decided the direction of the activity by the statement of principles and important matter of whole company CSR activity into the whole group. The risk-compliance committee and the committee of each activity by earth environment meeting were positioned by the basis of the CSR promotion committee, and it has determined the plan and action plan of each activity as it. It is reporting promotion of CSR activity to board of directors periodically.

5. Reporting System

CSR management starts in the vision and organization design which tackle CSR. It builds organization based on this direction, and develops activity. By building the organization of CSR, leading to improvement in performance is important. It sets up the target of the performance as an organization. And it carries out the monitoring of whether it is performed. It uses this as an index of monitoring. It is necessary to report as an index which shows the result of activity to a stakeholder. It is important to perform corporate activity which is responsible to society, and to achieve accountability to a stakeholder.

In Toshiba, it utilizes the tool of a CSR homepage, a CSR report, public relations, and an advertisement, and is carrying out information disclosure. Also in SRI ranking investigation or the questionnaire, CSR headquarters corresponds. In SRI evaluation, it is selected by world superior 300 brands of Dow Jones Sustainability Index (DJSI) for three consecutive years. Moreover, in ranking of Oekom Company of Germany, it ranked second in the computer industry in the world.

One of the ways to ensure CSR is part and parcel of the way a business operates is to ensure the skills and attitudes for responsible business practice are embedded across every single area and function. For example, a range of leading companies around the world, including many in the energy sector, have combined CSR issues with a strong performance culture by making non-financial goals up to one-third of their appraisal and reward structures.

Firms must be unabashedly unapologetic about that CSR should be treated, and managed, as a core business strategy just as are the strategies of marketing, research & development, capital expenditures, and talent management.

As companies move from left to right on the value curve, greater returns are realized as CSR becomes more integrated into core business strategy.

This can be manifested through the imported model of IBM.


                                                        Fig.2 CSR Value curve

As evident from the figure, CSR adds value to the company when it moves up beginning from the legal compliance to adding philanthropy to adding company's code of conduct to measuring cost efficiency to ultimate growth in the form of new markets.

Finally, companies should develop clear performance metrics, or key performance indicators, to measure the impact of their CSR strategies. These metrics should be both internal
 metrics like reputation improvements, gains in market share, brand perception, increased sales, decreased operational expenditures, and employee satisfaction, as well as externally focused on society and the environment. If there are no performance metrics in place, there will be no way to prove that the strategy was effective and it will not be sustainable.

CSR can be much more than just a cost, constraint, or charitable deed. Approached strategically, it generates opportunity, innovation, and competitive advantage for corporations—while solving pressing social problems.

Porter and Kramer in their article Strategy and Society: The Link between Competitive Advantage and Corporate Social Responsibility advise pioneering innovations in your offerings and operations that create distinctive value for your company and society. Take Toyota. The company's early response to public concern about auto emissions gave rise to the hybrid-engine Prius. The Prius has not only significantly reduced pollutants; it's given Toyota an enviable lead over rivals in hybrid technology.

The Idea in Practice

To practice strategic CSR:

1.
Identify points of intersection between your company and society.

In what ways does your organization affect society? For example, do you provide safe working conditions and reasonable wages? Do your operations create environmental hazards?

How does society affect your competitiveness? For instance, do countries where you operate protect  intellectual property? Supply enough talented workers? Encourage outside investors?

• The competitiveness of companies depends heavily on such things as:

¥ Improving skill levels
¥ Safe working conditions
¥ A sense of equal opportunity
¥ Low levels of pollution
¥ A transparent, corruption-free business environment
¥ Trusted rule of law

• The health of a society depends on such things as:

¥ Companies that can create wealth
¥ Productive workers
¥ Sustainable and efficient use of natural resources
¥ Low levels of pollution and environmental degradation
¥ Participation in the economy open to all citizens

2. Select social issues to address. Given your company's and society's impact on each other, how might you address social needs in ways that create shared value—a meaningful benefit for society that also adds to your company's bottom line? They could be divided as:

Generic Social Issues

Social issues that are not significantly impacted by the company's operations, nor materially affect its long term competitiveness.

Value Chain Impacts

Social issues that are significantly impacted by the company's activities in the ordinary course of business.

Competitive Context

Social issues in the company's external environment that affect the underlying drivers of competitiveness in the locations where the company operates.Example: By addressing the AIDS pandemic in Africa, a mining company such as Anglo American would not only improve the standard of living on that continent; it would also improve the productivity of the African labor force on which its success depends.

3. Mount a small number of initiatives that generate large and distinctive benefits for society and your company.

Example: To enter the Indian market, Nestle needed to establish local sources of milk from a large, diversified base of small farmers. It received government permission to build a dairy in the district of Moga. But in Moga, farmers were impoverished, failed crops led to a high death rate in calves, and lack of refrigeration prevented farmers from shipping milk or keeping it fresh. Nestle built refrigerated dairies as milk collection points in each Moga town and sent its trucks to the dairies to collect the milk. With the trucks went veterinarians, nutritionists, agronomists, and quality assurance experts. Farmers learned that milk quality hinged on adequate feed crop irrigation. With financing and technical assistance from Nestle, farmers dug deep-bore wells. The consequent improved irrigation reduced calves' death rate 75%, increased milk production 50-fold, and allowed Nestle to pay higher prices to farmers than those set by the government.

With steady revenues, farmers could now obtain credit. Moga's standard of living improved: More homes had electricity and telephones; more towns established primary, secondary, and high schools; and Moga had five times the number of doctors as neighboring regions. Meanwhile, Nestle gained a stable supply of high-quality commodities—without having to pay middlemen—and saw demand for its products increase in India.




                                                       Fig.3 The CSR Value Chain


             Fig. 5 Achieving Superior Performance Operational Effectiveness is Not Strategy

Competitive Advantage Depends on Constructing a Unique Value Chain that Lowers Costs or Better Serves a Particular Customer Niche

Lowering costs

Nestlé's Milk District

• Moga region in India was in severe poverty.

• Local milk supply was hampered by small infertile farms, droughts, animal disease, and lack of technology to collect, transport, refrigerate, and pasteurize milk

• Over 40 years the company developed an infrastructure through technology transfer and investment.

– The company established local dairies in 650 villages, collecting milk from 75,000 farmers

– Collection infrastructure was accompanied by veterinarians, nutritionists, agronomists, and quality assurance experts

• Nestlé gained a low cost and steady local supply for a basic commodity – core to its global strategy

• Residents of Moga gained improved income, nutrition, schools, medical care, technology, and a higher overall standard of living

Better serving a customer niche

Whole Foods Grocery Stores

• Targeted toward consumers concerned about healthy food and environmental issues

• Stores carry local and organic produce, baked items use unbromated and unbleached flour

• Buyers screen out over 100 unhealthy ingredients, purchase fair trade commodities,

• Meats are from animals raised without antibiotics or hormones,

• Green store construction, environmentally safe cleaning products, garbage hauled to compost centers in biofueled trucks, wind energy credits offset electricity usage

• Philanthropy directed to Animal Compassion Foundation to promote more humane treatment of farm animals

• Every aspect of the value chain is tied to the company's competitive positioning

Firms should, however, seek causes and social/environmental strategies for which they

own part of the solution.CSR should be followed as it provides a fit to companies existing area of Operation or related to its Core Competence. A misfit between Company's Core Competence and CSR'll add to its cost.

The classic case is, for example, an automotive c ompany to deeply support and exert resources on breast cancer or cancer research. There is no argument that these are eminently worthy causes with significant needs, but there is not a clear linkage between making and selling cars to breasts or cancer research. Automotive companies know cars, transportation engineering, and design, and perhaps alternatively-fuelled vehicles and the global and environmental challenges around gasoline dependency are more fitting to the firm's core competencies and business objectives of selling more cars. They may well be in a better market position if they focus on more strategically aligned causes.

Benefits of adopting CSR to business

Corporate reputation and enhanced brand image- In today's media invaded world, Corporate reputation is fast becoming the second most important driver of customer demand, only after the perception of the quality of a company's products or services. Creating effective CSR programmes will not only help protect reputation in times of difficulty – they will contribute directly to building sustainable businesses. Good organizational performance in relation to CSR can build reputation while poor performance can damage brand value. Among other things, a good reputation affords resource companies their social license to operate and improves relations with regulators, which help them obtain the required permits for their operations with fewer hold-ups. It also helps attract good employees in what is often a tight labor market. Companies such as Tata, Camelot, 3M and Foneback have all shown how they won a reputation for integrity, created new and innovative market opportunities and protected vulnerable customers. Waitrose has shown us how working with suppliers to raise social and environmental standards in its supply chain helps manage risks over which it would otherwise have little direct control.

Marks & Spencer recently topped Management Today's 'Britain's Most Admired Companies' list and has been Business in the Community's company of the year twice. Led by Business in the Community's chairman, Sir Stuart Rose, Marks & Spencer is a prime example of a company with strong corporate values driven from the top and carried out by the overall management.

Shell's recovery from its confrontation with Greenpeace over disposal plans for the Brent Spar offshore installation unit is a noted example. Shell learnt a valuable lesson from this reputation disaster. It used the experience to begin building one of the most extensive stakeholder dialogue programmes, including setting up 'Tell Shell' website forums on environmental issues for members of the public to vent their steam. The company now publishes an annual, non-financial, Shell Report which documents the actions it has taken to meet its economic, environmental and social responsibilities. This even includes listing reported cases of bribery.

In 1989, as an experiment, B&Q opened a store in Macclesfield staffed entirely by individuals over 50. Initial concerns regarding the more physical aspects of the job and working with computerized systems did not materialize. An independent survey, conducted two years later, showed that in nearly every respect – customer service, short-term absenteeism, staff turnover and sales – the Macclesfield store's staff outperformed other stores. B&Q then adjusted its recruitment policies on a store-wide basis to attract and retain older workers.

After analyzing the costs and potential benefits, B&Q decided to expand the programme to the entire company. It worked with a national disability group to create a staff training programme. Today, each store develops relationships with local disability groups and has a store champion who works on disability issues

Earn and maintain social license to operate- For resource companies, reputation as a good corporate citizen determines its social license to operate and expand. Failing to obtain community support or attracting the ire of the non-governmental community can increase costs by holding up approvals in lengthy public hearings. Cominco notes that its efforts to build trust and relations with communities living near in its Pend Oreille mine development reduced the level of conflict to "just about zero". A nearby mine, that failed to invest in developing relations with its local communities and non-governmental organizations saw its project challenged in court, even after permits had been issued by the relevant regulatory authorities. The company in question invested seven years and $30 million in a mine that never opened. In Gulf Oil Corporation when an ocean-going tanker blew-up at crude oil storage depot at Bantry Bay in south-west Ireland – killing 50 people.

For the first few days, the hundreds of reporters who turned up at Bantry Bay focused on the accident itself. Later, in a bid to keep the "story going", they toured the local community asking about people's feelings towards Gulf Oil. Surely the community wanted the company to be thrown out for good? Thanks to the CSR programme (in those days termed a "corporate citizenship" programme had been running for years prior to the tragedy, reporters encountered only support for the company – in spite of local families having been tragically bereaved. Fortunately, they had sufficient credit in their reputation bank to help overcome this potential additional source of reputation-bashing publicity.

Establish or improve reputation with investors, bond agencies and banks—There is a small but growing trend in the investment community to use environmental and social performance factors to evaluate a company's suitability for investment. According to Matthew Kiernan, executive managing director of Innovest Strategic Advisors, this is because "a company's environmental and social performance is an increasingly potent proxy and leading indicator" for three typically under-weighted drivers critical to future profitability potential: corporate agility or adaptability; durability of a firm's competitive advantage; and the quality of its strategic management. In addition to institutional investors, individual investors are using environmental and social criteria to guide their investment decisions. Banks and insurers are also beginning to look at a company's environmental and social performance and activities to determine risks and liabilities. Companies that can demonstrate they are acting to reduce environmental and social risks and future liabilities can benefit from enhanced credit worthiness and lower premiums. Teck Cominco believes that, in the future, leading companies with best practices in CSR will have more opportunities than their competitors in terms of access to capital, resources, project opportunities and markets. According to Home Depot's executive vice president of human resources, CSR helps the company in its four goals of being: the neighbor of choice; the retailer of choice; the investment of choice and the employer of choice.

Reduce and manage business risks—Managing risk in an increasingly complex market with greater stakeholder scrutiny of corporate activities is becoming essential to business success. Companies are starting to realize that failing to invest the time and resources in understanding stakeholder expectations and address their concerns upfront can increase risks to business such as project delays or cancellations, public relations disasters, and damaged reputations. Recognizing the power of communities and municipalities, Canadian Pacific Railway (CPR) has launched a process to reengage communities at the local level to resolve disputes related to the proximity of residential and commercial neighborhoods to pre-existing rail lines. This is helping avoid the intervention of courts and the imposition of government regulations which can add to the costs of doing business. CPR notes the experience of a major rail company that has had to put on hold its plans to open an intermodal terminal, perhaps indefinitely, for failing to engage communities effectively. Teck Cominco's reputation for building successful partnerships with the communities near its mines has helped it avoid the fate of others who have had time spend large amounts of resources and time dealing with communities and other groups that challenge their right to operate, even to the point where these projects become no longer financially viable.

Employee morale and productivity—Many corporations agree that their CSR programs contribute to increased employee morale and motivation and these, in turn, translate into greater productivity. Syncrude observed that its good employment practices and safety record demonstrate to employees that the company cares, and this improves labor productivity. Team Depot, the employee volunteer program that is part of Home Depot's larger corporate donations program, helps reinforce the teamwork culture that is a signature of the company's success as a retailer, and gives individuals the opportunity to demonstrate skills such as leadership that they might not otherwise have a chance to in their day-to-day duties. Van City has conducted survey work that has shown that its values and corporate culture resonate very strongly with staff. This has advantages in attracting and maintaining good people, keeping them loyal and motivated, all of which translate into better service to their clientele.

Attract and maintain employees—There is growing evidence that companies with strong CSR or sustainability reputations often find it easier to recruit and retain high quality employees in tight labor markets. A 1999 study by the World Resources Institute (WRI) and the Initiative for Social Innovation Through Business (ISIB) entitled Beyond Pinstripes Preparing MBAs for Social and Environmental Stewardship found that graduates of MBA programs look at corporate values in addition to other criteria (such as salaries, job responsibilities, etc) in determining where to work. The Teck Cominco and Syncrude case studies support this view. They note that CSR appears to be growing in importance as a factor that influences individual choices of where to work. Syncrude notes that its CSR activities help it deal with potential labor shortages in a market that is becoming increasingly competitive as new capital projects worth $50 billion come on line in the next 15 years. A reputation as a good place to work is also making it easier to attract people to move to a relatively remote region of the country and work in what is perceived to be a relatively dangerous industry. Starbucks employee turnover is less than a third compared to norms of Retail Food Industry, This is attributed to Starbucks Socially Responsible practices like violence Prevention & violence victim assistance programmes & its support to small coffee   growing farmers.

Competition for access to resources—A good track record for managing social and environmental performance and a demonstrated willingness to work with stakeholders to address their concerns can enhance the success of bids when competing with others for access to resources such as energy, minerals and forests.. Teck Cominco believes that increasingly companies with good reputations will have more opportunities than their competitors in terms of access to resources and project opportunities. The company's good reputation for negotiating and honoring agreements with indigenous groups and communities where they are ensured a share of the benefits (in terms of jobs, royalties, etc) has helped it access mineral rights in new areas. Weyerhaeuser attributes the timely and uneventful acquisition of Macmillan Bloedel in part to the reputation it had earned through its CSR commitment and programs.

Body shop is good example in this context. Body shop contracts suppliers who protect rules which are very severe and pay reasonable price for productions. Price standards are not set up by standards of product country, but by Body shop. Normally prices are higher than in other transactions, but these activities make customers trust Body shop and customers support these activities. This strategy that Body shop sets up own rule and does business following own rules is connected with core competence of Body shop and leads to competitive advantage. Though Body shop is not so big, but its presence is certain.

Customer satisfaction

The majority of companies interviewed felt that their investment in CSR pays off in improved access to markets, including customer loyalty, security in existing markets and attractiveness in new markets.  Surveys have shown that most of consumers favor socially responsible companies and products, (Cone/Roper, 1993, RSW, 1996). One third of Americans say that after price and quality, a company's responsible business practices are the most important factor in deciding whether or not to buy a brand, and if price and quality are equal, they are more likely to switch to a brand which had a cause related marketing benefit.

One survey shows that people shopping in Walmart in U.S.A feel guilty because by shopping there they feel that they are endorsing the exploitation of workers & suppliers. It shows that consumers have evolved to the state of Self Actualization but Company still operates on the physiological level.

Although Honda Civic cleared the American environmental standards which were very severe (Clean air act of 1970, so called Muskie's law), its sale point was not environmental, but it found a new segment, so called small car market in U.S. and its fuel-efficient engine was also good point to attract customers. In 1990s, some firms carried out environmental protection as a strategy. Toyota Prius is good example. Toyota Prius are sold very well and still now. This success is very important to think CSR activities, because this success factors are not only its fuel-efficient engine (hybrid engine system; using electric power and gas), not also this car stimulates the customer who has interested in environmental and/or has environmental consciousness

Corporate values: "the right thing to do"

The majority of companies interviewed identified CSR as being the "right thing to do". In a number of cases, CSR was very much a part of the corporate identity. Husky Injection Molding sees itself as a leader in its industry and wants to maintain this position. Being a good corporate citizen is also a part of the personal values of the company's president and CEO Robert Schad. At Home Depot, corporate social responsibility has its origins in the values of its co-founders who came from modest backgrounds and believed that a company should give back to the communities that support it. For Van City, CSR is strongly rooted in its origins as a cooperative committed to working for the sustainable development of communities. The roots of Weyerhaeuser's corporate culture extend back to the values of the founding families (Frederick Weyerhaeuser being the most prominent). A strong internal driver for the company from the outset was to build a good reputation as its name reflected personally on the family who founded the company.

Meet changing stakeholder expectations

An important driver for many companies is the expanding definition of who constitutes a stakeholder and the changing nature of their expectations. Over the last decade, the definition of "stakeholder" has expanded beyond the traditional stakeholder group of governments, shareholders and employees to include environmental organizations, social activists, communities, suppliers, and other special interest groups. This expanded group of stakeholders has become more global in its reach and has a better understanding of business than ever before. More and more, stakeholders want not only to be informed of business's activities and performance, but also to be involved in setting social and environmental performance objectives. Van City has made understanding the expectations of its stakeholders and incorporating these views into governance and business planning processes the focus of its CSR work. Changing expectations are a key driver that is encouraging Teck Cominco and others in the mining industry to rethink how they do business. They are under pressure to demonstrate their relevance to society and their capacity to respect and protect values that are important to society.

Cost savings/improve the bottom line

While few studies have been able to conclusively draw a positive correlation between an integrated approach to CSR and bottom-line performance, there are many examples of the business benefits that results from individual program areas that constitute CSR.

Demonstrating cost savings is another means to engender sustained support. Companies are finding that many CSR initiatives, including those that reduce energy consumption or benefit the environment, help reduce overall cost structures or increase productivity.

Ravi Prasad, Executive Director Himalaya Global Holdings Ltd. describes that his business model is based on the principles of empowerment and sustainability. By sourcing herbs from marginal and small farmers at a fair price, they are contributing to their economic empowerment. Moreover by linking this initiative with the business, they can guarantee its long term sustainability.GE is the company that has done spectacularly well in the past couple of years, through its ecomagination initiative.GE announced that in second year of the initiatives , revenues have doubled from $17 bn to $50 bn.

Improved relations with stakeholders / dispute resolution / issues management

Most companies cite improved relations with stakeholders as an outcome of their CSR activities. When stakeholders see that companies are open to hearing their concerns and working with them to address them, trust is built which is invaluable to resolving disputes and issues. CPR's work to re-establish channels of communication with municipalities and communities is helping build the trust that will allow them to move from a situation where disputes are resolved through the courts at a cost to all involved, to a more collaborative approach where these can be addressed and resolved outside the courts. Often this approach leads to innovative solutions that might not have been thought of otherwise.

Provide valuable input to strategic planning, as well as a better understanding of sustainability issues facing the company

A number of companies noted that stakeholder engagement was important to understanding sustainability issues. Van City uses the Accountability 1000 standard, an international process for accountability, auditing and reporting which emphasizes stakeholder engagement as a means for aligning corporate values and activities with stakeholder expectations. By following the process, VanCity developed its Statement of Values and Commitments (SoVaC), the policy framework that guides the credit union's business decisions. SoVaC is then used as the basis for its social audit and reporting processes which feed into business planning cycles to drive improvement in the organization's CSR performance. In this way, VanCity incorporates the views of its stakeholders in its decision-making processes. Dupont Canada believes that collaborating with external resources (NGOs, community groups, government, etc.) will help them better understand sustainability issues and stakeholder expectations of their company. 

Strategic Branding

A distinctive CSR profile serves as a strategic branding tool in differentiating from competitors. For Starbucks it's way of doing business everyday, Starbucks success is contributed to its connection with coffee growing communities for the farmers & families, they develop ethical sourcing practices, develop high standards of excellence to the purchasing, roasting & fresh delivery of coffee, thus creates tough entry barriers.

Reaching to new untapped Market & Innovation

One very important function that CSR- led strategy can perform is reaching out to a new market, which would or could have been hitherto untapped-the Bottom Of the Pyramid (BOP).if good CSR practices embedded in organizational processes. Help to provide such a value proposition to the customer, business could thrive & not languish. Low income markets present a prodigious opportunity for the world's wealthiest companies- to seek their fortunes and bring prosperity to the aspiring poor Indian rural market is one of the largest BOP in the world.

Innovative stance by companies to cater to this BOP are:

ITC –E- Choupal & Choupal Sagar E-Choupal

E-choupal provides real time information & customized knowledge by enhancing the ability of farmers to take decisions& align their farm output with market demand & secure quality & productivity.Choupal Sagar :Rural Mall s one of the first organized retail effort in the rural area.

DCM Sriram Consolidated Ltd. (DSCL) Hariyali Bazaars

Quality Agri-Inputs
Financial Services
Farm Output Services
Other Products and Services

Godrej Agro vet Ltd -'Godrej Aadhaar' These outlets offer rural households, the basic food, grocery, and apparel, footwear to furniture, kitchenware and home appliances to value-added services including banking, postal services and pharmacy.

HLL-Rural marketing Initiatives

Project Bharat

Project Millenium

Project Shakti 
empowering the rural women by providing a sustainable micro enterprise opportunity                 to them in order to improve rural living standards through health & hygiene awareness.

AMUL-DISK (Dairy Information system Kiosk) Project This model removes the irrationalities of the traditional model where the processing & marketing was done by the middlemen, leading to major diversion of profit to the hard earned labor of the farmer.

HPCL: A large no. of low cost retail pumps in the remote areas branded 'Hamara Pump' are reaching the quality fuel & service right at the door steps of rural population; also acting as single point location to avail agri- inputs and farm finances.

LPG SBU: it introduced at more than 1500 locations-HP Rasoi Ghar concept which is essentially meant for village communities who do not have access to the cheap fuel.

Unique ways of Practicing CSR

Unlike past when CSR work has been largely restricted to donating towards causes such as children's education, women's upliftment and building basic amenities for communities. Now, many companies are going a step further by using their core business competencies in creating services/ products for sustaining community empowerment.

Eco design: An international concept developed by the World Business Council for Sustainable Development (WBCSD) at the Rio Summit, eco design is the culmination of a holistic, conscious & proactive approach. It consists in designing a product or services so as to minimize its impact on environment. Eco design applies at every stage in a product's life: raw material extraction, production, packaging, distribution, use, recovery, recycling, etc.

Rink Design Partnership is in the process of designing a LEED-certified student union building for the University of North Florida and the school has committed to building green for all future construction. Many companies follow basic LEED guidelines to implement sustainable strategies in the workplace. Companies often begin with certain elements such as carpet manufactured from recyclable materials, energy-efficient lighting and paint with low volatile organic compound content, Wilson said. Reducing the number of walls in an office space can let in more natural light, thus saving in energy consumption and costs.

Green Buildings: Retail stores in particular have much to gain from going green. Studies have linked the skylights that are a feature of green retail spaces to increased sales numbers; products located under skylit areas sell better than products located in non-skylit areas of the store. Retailers were among the first adopters of LEED, recognizing the need to green their spaces in order to convey their corporate values to their customers. Wipro, Philips & Cisco, Nike do follow these kind of designs.

PNC-American Bank Green building makes good economic sense to PNC Financial Services, Group, Inc. PNC is the first U.S. bank to apply "green" building standards to all of its newly constructed or renovated retail banking locations. PNC's nationally recognized commitment to environmentally friendly business practices has enabled it to lower costs, increase efficiency and productivity as well as improve the health and vitality of the communities where people live, work and play.

Customers are very receptive to the open and airy environment, complemented by other features such as a concierge desk and internet café, to help them bank with ease and confidence. Employees are more satisfied with their daily work environments, they retain their jobs longer and there is less absenteeism among workers.

Some environmentally friendly features of PNC bank branches include:

* Construction materials purchased within 500 miles of the site to minimize transportation pollution¥ Use of "deconstructed" materials¥

* Recycled construction materials include carpet, hard surface flooring, ceiling tile, Ceramic tile, sustainable seating fabric and furniture panels¥

* Enhancement of indoor air quality with CO2 monitoring and humidification systems¥

* Use of indigenous plants and landscaping materials that are sustainable without irrigation¥

* Employee bike rack for employees and customers

* Branch location close to public transportation

Using Alternative sources of Energy

Smart Papers Building Cogeneration Plant

Cogeneration is "the simultaneous production of power/electricity, hot water, and/or steam from one fuel. The cogeneration plant will use yard waste, industrial wood, and fiber waste combined with steam to generate 40 megawatts of power.

SMART Papers is the first North American premium papermaker to begin the process of becoming truly 100% carbon neutral and fossil fuel free in its papermaking production," said Smart Papers Chairman Tim Needham. "This is a major environmental advance in papermaking-we have set a new standard for environmentally responsible printing papers."

Recreational Equipment Inc., better known as R.E.I announced on May 15 that it will install photovoltaic solar panels in 10 percent of its stores. The stores chosen are located throughout California. The solar panels will generate about 1.1 million kilowatt hours of electricity, and prevent 880 metric tons of carbon dioxide emissions. Photovoltaic panels can generate around 35 percent of each store's electricity needs.

Training the Trainers Free of Cost

"Empowering for myself and others. Learned a tremendous amount without forcing myself to learn". very well explains "Training the Trainers", Wadhwani Foundation, a not-for-profit organization (a CSR initiative), established to accelerate entrepreneurship in emerging economies, launched the National Entrepreneurship Network (NEN), a network of entrepreneurial development centers, located within leading academic institutions in India.  The Foundation sees entrepreneurs as critical drivers of economic growth, and entrepreneurship as an important tool for self-improvement. NEN is the Foundation's initiative to inspire, educate and support new entrepreneurs. Over the next five to ten years, NEN will grow into a network of 50 entrepreneurial development centers across India. The Entrepreneurship Educators Course (EEC) is a rigorous foundation course in designing, developing and teaching comprehensive entrepreneurship programs for undergraduate and graduate students of various backgrounds. All faculty members of NEN member institutes are eligible for the Course. The cost of the Course is Rs. 80,000 per participant. However, full scholarships are available from the Wadhwani Foundation for eligible participants.

CSR in Indian Companies

Aditi Technologies chose to do `pro bono' work by partnering Grameen Foundation USA in developing `Mifos', software that facilitates better management of micro-finance institutions (MFIs). Eighteen months later `Mifos' was built, robust enough to adapt to any MFI across the world. Today, MFIs such as Grameen Koota in Bangalore and Enda in Tunisia implement `Mifos'. Together, they will address over 1.20 lakh clients.

When Keggfarms, a New Delhi-based company that is engaged in genetic research, development and breeding of poultry, custom bred a new bird, it decided to share the information with poultry farmers in nearby areas. For, the bird not only gave better yield, but was also cheaper to maintain compared to the backyard chicken. Farmers were given samples of the bird and trained to breed it. In the last five years, the bird, called `Kuroiler', has increased the income of about seven lakh rural households by about Rs 300 crore. This model of social entrepreneurship was included in the Harvard Business School curriculum this January.

ITC, known for its extensive CSR work related to environment conservation, recently started training farmers in building micro water conservation sheds. It funded only 75 per cent of the project cost for each such initiative, thus encouraging farmers to think of innovative financing options for their projects.

The Mysore-based N.R. Group, makers of the Cycle brand of agarbathis, had for long run a school for blind girls in the city. But last year, it chose to use its business expertise to do something more meaningful.

Training tribal women in jobs such as bamboo splitting, agarbathi rolling and packing, the company today is able to engage about 25,000 women, who produce about 250 tonnes of raw agarbathis a month, which can be bought by any agarbathi company. The project plans to cover three lakh women this year and currently spans the Southern states, Gujarat, Bihar and Madhya Pradesh.

It is common for hospitals to organise free health check-ups, but one rarely hears of specialty medical camps. Fortis Hospital, Noida, not only organizes such camps but also offers free consultation and discounts on treatment for ailments in areas such as cardiology, nephrology, orthopaedics, neurology, gastroenterology, pediatrics, gynecology and internal medicine. Hosted regularly in New Delhi, Moradabad, Muzaffarnagar, Bulandshahar and Meerut, the company is expanding these camps to other cities.

The benefits of CSR work often get narrowed down to rural areas. Not so, at Bharat Matrimony. All physically challenged users of the Web site are given 50 - 100 per cent discount on the membership fee.

In 2003, the company held a free matrimony meet for the physically challenged in Mumbai, which would have otherwise cost between Rs 500 and Rs 750 a candidate. Buoyed by the positive response, the company plans to hold a second free meet in New Delhi in June. "Over the years, they have extended these discounts to other underprivileged candidates based on their socio-economic status. About 20,000 candidates have used discounted services," says Uday Zokarkar, Business Head, Bharat Matrimony.

Conclusion

In India roots of CSR penetrates deep into the social strata, it has been conceptualized in the form of Shubh Labh "Spiritually guided materialism" which shows that profits should have ethical orientation ;here shubh refers to concern for surroundings which could well be achieved through working on principle of Harm Minimization.  CSR approach could also be visualized in the Gandhian ideas of Trusteeship i.e. a person more than his share of wealth acts as a trustee for that, it focuses on voluntary grants by the corporates. Long before the formal model of CSR comes into existence JRD Tata made colonies for workers. Now the nature of CSR got changed as the old saying goes" You don't give a poor man fish, you teach him how to fish". True CSR is not charity at all, rather it requires building a sustainable business model that is not based on exploitation of any kind. Gone are the days when organizations were known from their results/ outcomes. In an era where organizations are becoming brands unto themselves, Indian companies such as Infosys, Tatas , Hindustan Petroleum & Amul or global behemoths like starbucks, Body shop, Ikea, Toyota & many others are earning the respect of the people owing to their way of doing business. The increased acceptance of CSR, both as a way of doing business & what it does to the overall bottom line, in a way mirror of the times we live in.

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Shivi Jawalia
Lecturer
Xavier Institute of Management and Entrepreneurship
Bangalore
 

Source: E-mail October 20, 2010

          

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