Corporate Social Responsibility - How Smart A Choice!

Abstract: 

Problem Statement -This paper analyses the choice of using the concept of ‘Corporate Social Responsibility'(CSR) for benefiting both business and society at the same time. It is our submission that the hypothesis that led to synthesis of CSR viz ‘taking up social responsibility resulting in real business benefit’ has proved correct to which time stands as a testimony.

It is possible to see the synthesis of idea regarding corporate social responsibility for centuries all over the globe. From Bowen who deserves the appellation of the Father of Corporate Social Responsibility [i] to transitioned themes and alternative concepts of CSR, all barriers to this notion have only come to weaken and so has the number of its critics. On the other hand, though there were some companies imbibing the case of social good since long, Corporate Social Responsibility has had only recently captured the need of its  incorporation into the corporate system. It is surprising that even though survey concludes that CSR can deliver real business benefits very few corporate have made significant progress in implementing the strategy in their organisation. But so far so good, the question arises as to what constitutes CSR?

Part- I: SYNTHESIS OF THE CONCEPT OF CSR

The hypothesis that underlies this synthesis is that a good company delivers excellent products and services, and a great company does all that and strives to make the world a better place resulting in a win-win situation. However the purpose of this study will be served if we review the historical development of this concept.

The modern era of social responsibility begins from 1950s. Bowen set forth an initial definition of the social responsibilities as “It refers to the obligations of businessmen to pursue those policies, to make those decisions, or to follow those lines of action which are desirable in terms of the objectives and values of our society”[ii] and Davis of the same era state forth his definition of social responsibility in an article by arguing that it refers to “businessmen’s decisions and actions taken for reasons at least partially beyond the firm’s direct economic or technical interest.”[iii] The 1970s literatures were ushered in with understanding of the term in the same vein as the definitions presented during the 1960s and earlier as stated by Heald.[iv] In 1980, Thomas M. Jones entered the CSR discussion with an interesting perspective. First, he defined CSR: Corporate social responsibility is the notion that corporations have an obligation to constituent groups in society other than stockholders and beyond that prescribed by law and union contract. Two facets of this definition are critical. First, the obligation must be voluntarily adopted; behaviour influenced by the coercive forces of law or union contract is not voluntary. Second, the obligation is a broad one, extending beyond the traditional duty to shareholders to other societal groups such as customers, employees, suppliers, and neighbouring communities.[v] Very few unique contributions to the definition of CSR occurred in the 1990s. More than anything else, the CSR concept served as the base point, building block, or point-of-departure for other related concepts and themes, many of which embraced CSR-thinking and were quite compatible with it. CSP, stakeholder theory, business ethics theory, and corporate citizenship were the major themes that took centre stage in the 1990s.

Part- II: CSR PROVIDING A LINK BETWEEN BUSINESS AND SOCIETY

Thus there is no succinct definition of social responsibility construct, yet it’s crystal clear as to what it constitutes. Firstly, it comprises of the basic values, ethics, policies, and practices of a company’s business. Secondly, it consists of the voluntary contributions made by a company to community development and thirdly it constitutes the management of environmental and social issues within the value chain by the company and its business partners from the acquisition and production of raw materials, to the welfare of staff, production, sale, use, and disposal. Thus, on careful perusal of the synthesis one can see that it is corporate contribution towards a better society and cleaner environment.

The concept of CSR has a ‘triple bottom line’ approach that considers the economic, social and environmental aspects of corporate activity. Taking the classical view of CSR Social responsibility states that businesses carry out social programs to add profits to their organization. However, the modern approach of social responsibility assumes that the prime motivation of the business firm is utility maximization; the enterprise seeks multiple goals rather than only maximum profits like pollution abatement, minority employment and related corporate activities benefiting the society.

Part- III: CHANGES BROUGHT FORTH- PARADIGMATIC PERFORMANCES

After tracing the history behind the concept of the CSR now the question of paramount is to analyze as to how the society is accommodating it. There are few instances where an attempt has been made by the corporate to put social-economic development of society on fast-track.

Reliance Industries Ltd. launched a countrywide initiative known as “Project Drishti”, to restore the eye-sights of visually challenged Indians from the economically weaker sections of the society. This project, started by one of India’s corporate giants has brightened up the lives of over 5000 people so far.[vi] Infosys promoted, in 1996, the Infosys Foundation as a not-for-profit trust to which it contributes up to 1% PAT every year. Additionally, the Education and Research Department (E&R) at Infosys also works with employee volunteers on community development projects.

Organizations like Bharath Petroleum Corporation Limited, Maruti Suzuki India Limited, and Hindustan Unilever Limited, adopt villages where they focus on holistic development. They provide better medical and sanitation facilities, build schools and houses, and help the villagers become self-reliant by teaching them vocational and business skills. On the other hand GlaxoSmithKline Pharmaceuticals’ CSR programs primarily focus on health and healthy living. They work in tribal villages where they provide medical check-up and treatment, health camps and health awareness programs. They also provide money, medicines and equipment to non-profit organizations that work towards improving health and education in under-served communities.[vii]

Corporate like the Tata Group, the Aditya Birla Group, and Indian Oil Corporation, to name a few, have been involved in serving the community ever since their inception. Many other organizations have been doing their part for the society through donations and charity events.

Part- IV: CSR A MERE EYEWASH- BRAZEN DEFIANCE OF CSR

Bhopal Gas Tragedy [viii], ‘A Case of corporate manslaughter’ held on night of December 2–3, 1984, was the worst industrial accident on record occurred in Bhopal. A leak of methyl isocyanate gas and other chemicals from the plant resulted in the exposure of hundreds of thousands of people. The accident is exceptional, not because of the high number of human causality or long term ill effects on the health of the residents of that area, but because this accident raised questions regarding code of conduct for corporation. The fragmented nature of the current legal regime that regulates corporate activity has failed thoroughly.

Cadbury [ix], In October 2003, a Cadbury stockiest in Mumbai detected worms in Cadbury’s Dairy Milk chocolate. Then the Commissioner of Food and Drug Administration of Maharashtra examined the sealed Dairy Milk packs and found worms in them. He immediately ordered the seizure of all Cadbury’s Dairy Milk chocolates from the company’s factory in Talegaon near Pune. This attracted lots of criticism from consumer activists on lack of appropriate laws on storage. They also demanded immediate government action against Cadbury. Another factor brought to light was that the chocolates were delivered by three wheelers, which did not have refrigeration facility for appropriate transit maintenance of the product.

The holocaustic effect of the violation of CSR has been witnessed at an international scenario as well. In the case of Hinkley vs. PG&E[x] the settlement awarded to the plaintiff is largest in direct-action suit in United States History which was $333 million. PG&E used hexavalent chromium in their compressor plants and all their holding plants had led to groundwater contamination. Hexavalent chromium is a known human carcinogen due to chronic inhalation exposures. When swallowed, it upset the gastrointestinal tract and damages the liver and kidneys. People and domestic animals in the town of Hinkley, California started getting sick and some died.

Chernobyl nuclear power plant in Ukraine, the April 1986 disaster[xi] at the Chernobyl nuclear power plant in Ukraine was the product of a flawed Soviet reactor design coupled with serious mistakes made by the plant operators. It was a direct consequence of Cold War isolation and the resulting lack of any safety culture. The resulting steam explosion and fires released at least 5% of the radioactive reactor core into the atmosphere and downwind. Two Chernobyl plant workers died on the night of the accident, and a further 28 people died within a few weeks as a result of acute radiation poisoning. Acute radiation syndrome was originally diagnosed in 237 people on-site.

Part- V: MAKING CSR MANDATORY: THE SKEPTICISM EXIST

In India this concept is at a very nebulous and nascent state. However it is largely hortatory and recommendatory in nature ascorporate responsibility is the best strategic as well as financial path that most businesses can follow. Nonetheless, the gap between rhetoric and reality in the implementation of CSR has narrowed with passage of time. The Indian government has attempted to broaden the scope and jurisdiction of this principle by trying to make it mandatory for companies to spend at least 2% of net profits on CSR.[xii] Facing strong criticism, it gave up the effort and made the spending voluntary. But the debate continues.

Different opinions have been advanced. According to one group the proposition advanced is that despite of having noble intent nothing concrete has been done to convert CSR into reality. No systematic measures has been undertaken to make it realise its goals. The other group throws criticism to it stating different alternatives like, this should not be mandated but be made voluntary with proper disclosure or a new business-model be adopted which should measure social return with financial return. Some believe that shareholders ultimately own the company thus they need to have the say in the matter.

THE WAY AHEAD

This skepticism has all reasons to hold ground and there is absolutely no reason why this skepticism should not be given rest by clearly setting our priorities and finding an answer to this question, rather than letting it hang in doldrums. The need of the time is to view the proposition with a broader lens. To whichever side the balance tilts, it must clear the vagueness existing in regard to CSR.