Corporate Social Responsibility and all that


By

Michelle Johnson
Management Consultant & Doctoral Scholar
Bharati Vidyapeeth University
Pune
 


Besides being a buzz word in management studies parlance, corporate social responsibility is a very important aspect of corporate reality. There is some amount of vagueness associated with CSR and so this short paper is aimed at putting the concept within a modern post WTO perspective. While there is no single, commonly accepted definition of Corporate Social Responsibility, or CSR, it generally refers to business decision-making linked to ethical values, compliance with legal requirements, and respect for people, communities, and the environment. For purposes of argument one could easily follow the US-UK tradition according to which CSR is defined as operating a business in a manner that meets or exceeds the ethical, legal, commercial and public expectations that society has of business. Leadership companies increasingly see CSR as more than a collection of discrete practices or occasional gestures, or initiatives motivated by marketing, public relations or other business benefits. Rather, it is viewed as a comprehensive set of policies, practices and programs that are integrated throughout business operations, and decision-making processes that are supported and rewarded by top management. It thus forms a part of the overall Strategic HR intervention on the one hand and Strategic Business initiatives on the other. Business Groups that have been practising it in India of almost a century now can be counted on fingertips. In a manner of speaking CSR is the public ethical face of the corporation and establishes the link between the business organisation and civil society which are mutually correlated.

Based on this author's research there is little doubt, however, that in the forthcoming years when market competition will drive capital towards getting centralised and concentrated the brand of a corporate entity will be known by its standards of ethics and governance. Ethics and governance are the pillars on which modern society rests. This has been their argument of Sadri and Jayashree have examined their proposition from several angles their textbook Business Ethics and Corporate Governance: towards organisational excellence (2008).

A thin line, however, divides the distinction between the business motive and the social role of an organisation. Giving scholarships to deserving students may be a business motive if the aim is to increase the company's public image. The situation is different if the aim of giving scholarships is to generally give back to society what the Company has taken from it. In the first case we see a business motive while in the second we see a social role. In the tradition of Thomas Hobbes, John Locke and Jean Jacques Rousseau there exists a social contract which is at once implicit and explicit and which governs the operation of business within a given community. Business is expected to generate wealth, create jobs and thus contribute to economic development. On this there is hardly any debate. Surplus is generated that assists the enhancement of the quality of human life. Innovation and creativity give the consumer in the more developed countries a chance to exercise a greater number of exercisable choices than that given to the consumers in less developed economies. Students who are conversant with the circular flow of income would be familiar with this fact. Hence we see that the link between society and business in indelible. But this business does not operate in a condition of autarky. It depends on society to provide the means of production on the one hand and spend money as a means of exchange on the consumption of goods and services on the other. In the process of wealth creation and employment generation a sufficient.

However, as time passes, the role of business in society also changes. Whereas two centuries or so ago business was expected to wage war at the behest of the monarch, (the East India Company) the expectations from it today are different. The role of some multinationals in the political coups that toppled Kwame Nkrumah in Ghana, Patrice Lumumba in the Congo, Olaf Palme in Sweden, and Salvador Allende in Chile have indeed given grounds for questioning whether their political interests stem from their business interests. Conversely, in the case of the ill-famed collusion between the British Monarchy and East India Company, business interests stemmed from political interests. Moreover, whereas they do not actually go to war any longer, politically motivated violence is not ruled out. Whereas these may well be aberrations the fact remains that business needs social stability to prosper. The police firing at striking workers in Sokoto-Rima River Basin Authority in Northern Nigeria in 1983 at the instance of the Italian multinational corporation are well documented, as was the ruthless suppression of workers in the Iva Valley massacre in the colonial era. As recently as August 2004 Mark Thatcher (the son of Lady Margaret Thatcher the former Prime Minister of UK) was accused of being associated with a plot to topple the legitimate government of South Africa (see page 13, Times of India, September 1, 2004). The fate of the Kashmiri Pundits, even today, thanks to a flawed policy by the founding fathers of modern India, similarly is nothing short of a political scandal albeit perpetuated to appease the minority vote bank, sections of which are acting more against the country's interest than for it. Social stability needs a legal system, a policing system, a banking system, and a government policy that enables the cost of borrowing to remain below the rate of return making investment worthwhile. Will the push and pull of nationalist forces prevent a commonwealth of nations from being founded? According to Tom Cannon (1994) Society grants two very special rights to business. These are potential immortality and limited liability. Business can justifiably take advantage of these rights if it fulfils its duties as a good corporate citizen. Economic development and an improved quality of human life are germane to the interests of business and industry. Hence from a rational economic point of view, it would help the long run interest of the corporation to be a good social citizen. This is what Corporate Social Responsibility is all about.

In taking up the question of Corporate Social Responsibility (SCR) it is very important to critically delve into the ends and means question to glean the real essence of the organisational policy towards civil society. Hence while Corporate Social Responsibility is a term that transcends the corporate world and is generic in nature so much so that it concerns every single type of organisation that has a social conscience, it is certainly not window dressing for an organisation to don a fašade of social respectability. This is a definitional aspect that the reader should bear in mind and not get cloistered with a corporate mindset such that Non Governmental Organisations (NGOs) are erroneously removed from the calculus of CSR.

Generally speaking, organisations have evolved to perform a number of functions in society and according to Tom Cannon (1994) these are:

(a) The economic and production tasks: manufacture and distribution of goods and services.
(b) The maintenance tasks: holding the society together.
(c) The adaptive functions: providing the means by which society responds to change.
(d) The managerial or political tasks: developing institutions and systems to identify and implement policy to meet societal expectations.

In their excellent paper entitled Corporate Social Responsibility And Building Local Infrastructure: [Some Views], the authors Sorab Sadri   Pravin Dange and Jayashree Sadri presented at the International Conference at Lal Bahadur Shastri Institute of Management in New Delhi on 6th November argued about the linkage between CSR and infrastructure building. This was a polemical paper based on the research experience of the authors in this field and sheds light on some critical positions taken from an academic perspective but which, nevertheless, have practical ramifications. It is divided into four parts viz. The first defines Corporate Social Responsibility and delineates its scope. The second deals with 'stakeholder management' as a central focus for CSR initiatives and an instrument for achieving CSR objectives. The third presents an overview of those aspects of local infrastructure that are relevant to the various stakeholders. The fourth part discuses the criticality of building local infrastructure and its strategic implication for business as a whole. The principle argument posited is that stakeholder management is central to CSR inter alia the financial performance and business sustainability of the organisation and local infrastructure is important to those stakeholders of the company who are important for the company from the saliency theory perspective. Following Vilfredo Pareto to make effective decisions we need to separate the vital few from the trivial many and the saliency theory helps us to do so and thus focuses the impact of the CSR initiative for maximum effect. In other words the paper discusses the building of local infrastructure as a critical issue in the light of the stakeholder saliency theory and argues that building local infrastructure potentially constitutes an important strategic CSR initiative. This cuts ice both ways: firstly, it helps the company to build a public perception that ultimately translates into profits and growth. And, secondly, it improves the quality of life of civil society in general bringing about sustainable developmental growth. In another erudite paper by R.P. Mohanty, S. Sadri and P. Dange presented a day earlier in New Delhi (5.11.07) using the basis for in his Key Note Address entitled Shifting Paradigms of Corporate Social Responsibility, R P Mohanty had argued that t he form and content of the capitalist world economy is fast evolving and we find capital being increasingly concentrated and centralised as the battle of market competition intensifies. Companies have to keep running just to stay in the same place so intense is the competition. One of the factors that make the critical difference between the companies is the public perception of a business's value systems that are best exhibited by initiatives in discharging its Corporate Social Responsibility (CSR). However, there is a great deal of ambivalence and uncertainty about what CSR really means as well as what drives businesses to pursue it. They have undertaken a detailed literature review to delineate the various positions taken in understanding and explaining the concept of CSR especially how business relates to society and vice versa. In the process, they have examined the conceptual evolution of CSR and explained some of its critical facets. Then they have tried to relate these facets to the objective social reality, as we perceive it and posited our definition of CSR giving both the reason and rationality of what we say and why we say so. They have found that there has been a shift in the paradigm with both the academia and the industry moving from the altruistic standpoint to the strategic standpoint on CSR interventions.

Whatever are the motivations behind a corporation going in for CSR the modern day variant of CSR is the concept of the triple bottom line. Whereas business ethics and corporate governance combine to generate the means to achieve organisational excellence, the real test is when this excellence is converted into business sustainability. And here CSR again has a major part to play, once again through the triple bottom line.

The triple bottom line (or "TBL", "3BL", or "People, Planet, Profit") captures an expanded spectrum of values and criteria for measuring organizational (and societal) success; economic, environmental and social. With the ratification of the UN ICLEI TBL standard for urban and community accounting in early 2007, this became the dominant approach to public sector full cost accounting. Similar UN standards apply to natural capital and human capital measurement to assist in measurements required by TBL, e.g. the ecoBudget standard for reporting ecological footprint. In the private sector, a commitment to corporate social responsibility implies a commitment to some form of TBL reporting. This is distinct from the more limited changes required to deal only with ecological issues and must be so appreciated.

In practical terms, triple bottom line accounting means expanding the traditional reporting framework to take into account environmental and social performance in addition to financial performance. The phrase was coined by John Elkington in 1994. It was later expanded and articulated in his 1998 book Cannibals with Forks: the Triple Bottom Line of 21st Century Business. Sustainability, itself, was first defined by the Brundtland Commission of the United Nations in 1987.

The concept of TBL demands that a company's responsibility be to 'stakeholders' rather than shareholders. In this case, 'stakeholders' refers to anyone who is influenced, either directly or indirectly, by the actions of the firm. According to the stakeholder theory, the business entity should be used as a vehicle for coordinating stakeholder interests, instead of maximising shareholder (owner) profit.

"People, Planet and Profit" are used to succinctly describe the triple bottom lines and the goal of sustainability. "People" (Human Capital) pertains to fair and beneficial business practices toward labor and the community and region in which a corporation conducts its business. A TBL company conceives a reciprocal social structure in which the well being of corporate, labor and other stakeholder interests are interdependent. A triple bottom line enterprise seeks to benefit many constituencies, not exploit or endanger any group of them. "Planet" (Natural Capital) refers to sustainable environmental practices. A TBL company endeavors to benefit the natural order as much as possible or at the least do no harm and curtail environmental impact. A TBL endeavor reduces its ecological footprint by, among other things, carefully managing its consumption of energy and non-renewables and reducing manufacturing waste as well as rendering waste less toxic before disposing of it in a safe and legal manner. "Cradle to grave" is uppermost in the thoughts of TBL manufacturing businesses which typically conduct a life cycle assessment of products to determine what the true environmental cost is from the growth and harvesting of raw materials to manufacture to distribution to eventual disposal by the end user. "Profit" is the bottom line shared by all commerce, conscientious or not. In the original concept, within a sustainability framework, the "profit" aspect needs to be seen as the economic benefit enjoyed by the host society. It is the lasting economic impact the organization has on its economic environment. This is often confused to be limited to the internal profit made by a company or organization. Therefore, a TBL approach cannot be interpreted as traditional corporate accounting plus social and environmental impact.

Gratitude with the usual disclaimers is extended to my Doctoral Guide.


 


Michelle Johnson
Management Consultant & Doctoral Scholar
Bharati Vidyapeeth University
Pune
 

Source: E-mail February 13, 2008

          

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