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one of the recent natural disasters to hit India, Tsunami,
the devastation and misery caused by the sudden, massive
inundations of the Indian Ocean touched all. The devastation
was huge and millions of people around the world spontaneously
made huge donations in order to make immediate relief
possible. Not only did private individuals put their
hands into their pockets, but also many corporations
and governments made donations on a very large scale.
What was remarkable is how quickly so much aid has been
made available. This was the fund that brought tsunami
affected areas back on their feet. That was Corporate
Social Responsibility in action. In so many other ways
one gets to see CSR in practice---environment friendly
projects, constructing schools, encouraging education---
just some of the ways that organizations are giving
back to the community, a part of their profits in a
manner that the community benefits.
In comparison to individual efforts and even just government
effort is not enough to bring changes at a pace that
it is actually needed. Fortunately, with the popularity
of CSR, more and more companies now perform in non-financial
arenas such as human rights, business ethics, environmental
policies, corporate contributions, community development,
corporate governance, and workplace issues. Now, social
and environmental performances are considered side by
side with financial performance. From local economic
development concerns to international human rights policies,
companies are being held accountable for their actions
and their impact. Companies are also more transparent
in disclosing and communicating their policies and practices
as these impact employees, communities, and the environment.
The belief among the companies is that every aspect
of a corporation’s CSR should be linked to corporate
strategy by connecting it as tightly as possible to
the company’s unique capabilities and competitive
context. Infosys is an interesting example of this new-age
CSR. The company is utilising its core competence in
the area of technology to bring larger good to the community.
As a part of this strategy, the company, along with
Microsoft, launched a new program in 1998-99, called
Computers@Classrooms. As part of this initiative, Infosys
has donated 1185 computers to 435 institutions across
India. Most importantly, Infosys is working closely
with the government to conceptualise innovative ideas
that has resulted in the Government of India bringing
out three different plans aimed at eradicating poverty
through information technology. We also have the ITC
group whose socio-forestry initiative is an excellent
paradigm where CSR and business have created harmonious
associations. Every company has a cause that is closer
to its heart.
For example, the Aditya Birla group today is involved
deeply in issues related to vocational training, education
(has 35 odd schools), leprosy eradication, widow remarriage
and orphanages. Some companies, not all, are realising
the sense in linking corporate strategy with philanthropy.
In order to work out a comprehensive plan for its not-for-profit
initiatives, the Tata group has instituted the Tata
Council for Community Initiatives — a central
body that acts as a facilitator for the entire group’s
social initiatives. While the Tata group companies may
continue to provide health services, education and other
tangible benefits, its focus is more on building self-reliant
communities, and working towards sustainable livelihoods.
For this the company intends to involve volunteers from
within the group who will be project leaders. They will
be responsible for measuring human impact on a five-point
scale of human excellence. Their purpose is to improve
the quality of lives of the people at all times. We
need to encourage such projects. Most villages in India
need basic infrastructures like schools, medical facilities,
vocational centers, parks, computer centers, counseling
centers for employment. This needs the cooperation of
NGO’s, government organizations and corporations
that can together create complete and empowered villages.
With the involvement of more and more companies, a sense
of competition would arise as they would eventually
vie for honors that would create a win-win situation
for all.
Besides them, there are
several groups and companies that undertake quite a
bit of charitable work but as a matter of policy do
not divulge the kind and extent of amount spent on such
activities. Mahindra & Mahindra is one such company,
and even though the figure against its name shows Rs
1.3 crore, this is just the amount available under the
head donations in its annual report and contributes
much more in reality. Its activities include the K.C.
Mahindra Education Trust, which promotes education at
various levels and Nanhi Kali, a programme aimed at
helping the underprivileged girl child at the Mahindra
Foundation. Similarly Nandan Nilekani who is known for
donating freely to his alma mater, IIT, but then again
the exact amount donated is not known. There far many
such examples where corporates and philanthropy are
CSR has moved from being a public relations tool or
a feel-good factor to a key parameter to keep companies
open and transparent. It now no longer stands in isolation
but has become a part of good Corporate Governance policies.
The reality today is that companies are taking the issues
of ‘reputational risk’ very seriously and
it is no longer seen as an option. Most CSR models are
based on the principle that goodwill earned from the
stakeholders leads to benefits to the corporation. Which
in turn enables the corporation to further enhance stakeholder
value.
The oft quoted concept of triple bottom line reporting
of CSR suggests that there are three separate and distinct
bottom lines - each of equivalent standing. It is believed
that in the context of sustainable development, it's
impossible to consider the economic dimension in isolation
from the social or the environmental, and vice versa.
To be a truly sustainable organization, in the broadest
definition of its terms, an organization must perform
well across all three dimensions.
While 'Sustainability: The Triple Bottom Line' as a
term may have a contemporary ring to it, the spirit
underlying it has been relevant through the ages. In
1987, the World Commission on Environment and Development
(established by a resolution of UN General Assembly)
defined sustainability as "Development which meets
the needs of the present without compromising the ability
of future generations to meet their own needs".
It also popularized the use of this term for resource
renewability, desired business plan and a progressive
way of doing things.
In this age of globalisation, corporations and business
enterprises are no longer confined to the traditional
boundaries of the nation-state. One of the key characteristics
of globalisation is the spread of the market and the
change in the mode of production. The centralised mode
of production has given way to a highly decentralised
mode of production spread across the world.
In the last 20 years, multinational corporations have
played a key role in defining markets and influencing
the behaviour of a large number of consumers. The rules
of corporate governance have changed too and there has
been a range of reactions to this change. On the one
hand globalisation and liberalisation have provided
a great opportunity for corporations to be globally
competitive by expanding their production-base and market
share. On the other hand, the same situation poses a
great challenge to the sustainability and viability
of such mega-businesses, particularly in the context
of the emerging discontent against multinational corporations
in different parts of the world. Labourers, marginalised
consumers, environmental activists and social activists
have protested against the unprecedented predominance
of multinational corporations.
The ongoing revolution
in communication technology and the effectiveness of
knowledge-based economies has created a new model of
business and corporate governance. A growing awareness
about the need for ecological sustainability and the
New Economy framework, with an unprecedented stress
on communication and image merchandising, have paved
the way for a new generation of business leaders concerned
about the responses of the community and the sustainability
of the environment. It is in this context that we need
to understand the new trends in corporate social responsibility.
There are three emerging
perspectives that inform corporate social responsibility:
One, a business perspective that recognises the importance
of 'reputation capital' for capturing and sustaining
markets. Seen thus, corporate social responsibility
is basically a new business strategy to reduce investment
risks and maximise profits by taking all the key stake-holders
into confidence. The proponents of this perspective
often include corporate social responsibility in their
advertising and social marketing initiatives.
The second is an eco-social
perspective. The proponents of this perspective are
the new generation of corporations and the new-economy
entrepreneurs who created a tremendous amount of wealth
in a relatively short span of time. They recognise the
fact that social and environmental stability and sustainability
are two important prerequisites for the sustainability
of the market in the long run. They also recognize the
fact that increasing poverty can lead to social and
political instability. Such socio-political instability
can, in turn, be detrimental to business, which operates
from a variety of socio-political and cultural backgrounds.
Seen from the eco-social perspective, corporate social
responsibility is both a value and a strategy to ensuring
the sustainability of business. It is a value because
it stresses the fact that business and markets are essentially
aimed at the well-being of society. It is a strategy
because it helps to reduce social tensions and facilitate
markets.
For the new generation
of corporate leaders, optimisation of profits is the
key, rather than the maximisation of profit. Hence there
is a shift from accountability to shareholders to accountability
to stakeholders (including employees, consumers and
affected communities). There is a growing realisation
that long-term business success can only be achieved
by companies that recognise that the economy is an "open
subsystem of the earth's ecosystem, which is finite,
non-growing and materially closed".
There is a third and
growing perspective that shapes the new principles and
practice of corporate social responsibility. This is
a rights-based perspective on corporate responsibility.
This perspective stresses that consumers, employees,
affected communities and shareholders have a right to
know about corporations and their business. Corporations
are private initiatives, true, but increasingly they
are becoming public institutions whose survival depends
on the consumers who buy their products and shareholders
who invest in their stocks. This perspective stresses
accountability, transparency and social and environmental
investment as the key aspects of corporate social responsibility.
Corporate social responsibility
is qualitatively different from the traditional concept
of corporate philanthropy. It acknowledges the debt
that the corporation owes to the community within which
it operates, as a stakeholder in corporate activity.
It also defines the business corporation's partnership
with social action groups in providing financial and
other resources to support development plans, especially
among disadvantaged communities. The emerging perspective
on corporate social responsibility focuses on responsibility
towards stakeholders (shareholders, employees, management,
consumers and community) rather than on maximisation
of profit for shareholders. There is also more stress
on long-term sustainability of business and environment
and the distribution of well-being.
There is an increasing recognition of
the triple-bottomline: People, Planet and Profit.
The triple-bottomline stresses the following:
1. The stakeholders in a business are not just the company's
shareholders
2. Sustainable development and economic sustainability
3. Corporate profits to be analysed in conjunction with
social prosperity
In the traditional paradigm,
most corporate bodies viewed CSR as the extension of
a financial input for a humanitarian cause. However,
the contemporary context is more complex: "A company
that undertakes activities aimed at communities (be
they philanthropic, social investment or commercial
initiatives) but does not comply with business basics
cannot be termed socially responsible.
Corporate Social Responsibility
is increasingly becoming an important aspect of corporate
behavior. Corporate contribution to society, environment
and business when guided by enlightened self-interest
improves quality of life for all. Effective corporate
responsibility requires a good level of commitment from
the entire organisation and especially the top management
who can ensure that not is CSR practiced but also practiced
well.
To create synergy, leaders from corporates, international
agencies and Governments should come together to discuss
the contribution businesses can make. And like Nelson
Mandela once said, “Without question, businesses
must respond for its own good, and what is good for
them is invariably good for the community.”
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