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REDISCOVERING CORPORATE SOCIAL RESPONSIBILITY

HOW IS ITS FACE & PACE EXPECTED TO CHANGE

M.Saravanan, Assistant Professor, PG Department of International Business

Sree Narayana Guru College, KG Chavadi, Coimbatore – 641 105

Email.: shravan.murugan@gmail.com Ph.No.: + 91 99434 37749

THE BUSINESS OF BUSINESS IS BUSINESS?

CORPORATE SOCIAL RESPONSIBILITY & PURPOSE OF A GLOBAL COMPANY

Businesses the world over don't exist in isolation, simply as a way of making money. Employees
depend on the business of the company; customers, suppliers and local community are all
affected by the organization and the work it does. The purpose of a global company is no longer
restricted “to create share-holder value” but “to provide even better goods and services in a way
that is profitable, ethical and respects the individuals, the environment and the community in
which it operates”.

In the limitations of both CSR and of the “business of business is business” thinking lies the
outlines of a new approach for business. Global companies have to find a way of satisfying the
demands of share-holders at the same time as meeting the needs of the society and the
environment. This means moving beyond the conventional, even the previously enlightened way
of thinking about their role. It means 'expanding the space' in which they operate through three
linked areas of action: -

1. Redefining Success - Companies need to go back to their statements of purpose, their


strategies and their business models and examine how closely these are aligned with the needs of
the society.
2. Embedding Values - Values need to be defined in words but tested in actions. Companies
should not just understand their individual "contracts" but manage them.
3. Creating Frameworks - Businesses need to introduce explicit processes to make sure that
social issues and emerging social forces are discussed at the highest levels as part of overall
strategic planning.

THE IMPACT OF CSR ON BUSINESS

Activities related to CSR programs have a positive impact on business economic performance,
and are not harmful to share-holders' values. CSR advocates believe there is a "business case" for
CSR and point to some positive outcomes that may arise when businesses opt for
"compassionate capitalism" and adopt a policy of Corporate Social Responsibility.

COMPANY BENEFITS

1. Improved financial performance


2. Lower operating costs
3. Enhanced brand image and reputation
4. Increased sales and customer loyalty
5. More ability to attract and retain employees
6. Workforce diversity
7. Greater productivity and quality
8. Reduced regulatory oversight
9. Access to capital
10. Product safety and decreased liability

SOCIETAL BENEFITS

1. Charitable contributions
2. Employee volunteer programmes
3. Corporate involvement in community education, employment and other programmes
4. Product safety and quality
ENVIRONMENTAL BENEFITS

1. Greater material recyclability


2. Better product durability and functionality
3. Integration of environmental management tools into business plans, including life-cycle assessment
and costing, environmental management standards, and eco-labeling
4. Greater use of renewable resources

AT THE MACRO LEVEL

The Development of CSR - A Typology

CSR is a developmental process, and as organizations mature, there will be changes in the
behavior and attitude towards both their stake-holders and their ideas concerning social
responsibility as well. The typology developed by David Crowther (2006) provides a useful
vehicle to consider the implications of CSR.

Calculating ROI on CSR - The Virtue Matrix

The Virtue Matrix constructed by Roger Martin is an effective tool to separate CSR-oriented
activities into four quadrants to help corporations think about the distinctly different aspects of
CSR.

The bottom two quadrants represent Civil Foundation - things that are already operative.
Bottom right quadrant is Compliance - laws and regulations a corporation must adhere to be an
acceptable corporate citizen, and the bottom left is Choice quadrant - socially responsible
activities in which other corporations are engaging that a given company has a choice to match
or eschew.

The top two quadrants represent the Frontier - activities not currently engaged in by anybody
but ones that have the potential of making the world a better place. Upper left quadrant is
Strategic frontier - corporation engages in social activities that are also economically viable or
attractive to it, and the upper right quadrant is Structural frontier - companies engaging in
activities that make the world a better place but uneconomic in the long run.

Developing Countries & CSR - The Pyramid

For CSR to be accepted by a conscientious business person, it should be framed in such a way
that the entire range of business responsibilities is embraced. It is suggested here that four kinds
of social responsibilities constitute total CSR: economic, legal, ethical and philanthropic.
Furthermore, these four categories or components of CSR might be depicted as a pyramid. To be
sure, all of these kinds of responsibilities have always existed to some extent or the other, but it
has only been in recent years that ethical and philanthropic functions have taken a significant
place.
Varieties of CSR

Successful managers usually do both at once: merely by running a profitable company, they are
likely to be advancing the public good as well. Somme of the business practices that are often
(perhaps misleadingly) labeled as CSR do fall into this category: they raise profits and advance
society's well-being at the same time. Examples include establishing a reputation for dealing
honestly with employees, suppliers and customers. This is the win-win kind of CSR-thee sort
that fails to impress much of civil society. Perhaps it would be better to call it simply "good
management".

Some kinds of CSR reduces profits but raises social welfare (this is what civil society likes best:
call it "borrowed virtue"). There is also CSR that raises profits but reduces social welfare
("pernicious CSR"), and CSR that reduces both profits and welfare (a polite name for which
might be "delusional CSR")
DEVELOPING HUMAN CAPITAL

1. Train and develop at all levels.


2. Encouraging wide-spread involvement.
3. Transferring knowledge

CONCLUSION

The 21st century is being called the knowledge era. The commoditization of technology and
technical job skills is ever-increasing. The high-valued assets of organizations often appear to be
intangible. What is it that sets one organization apart from others that offer similar or the same
service and product? It is the Human Capital assets the organization possesses. It is well
understood that people are the prime resource today. So, it follows that we have the best chance
of leveraging our investments if we build on this resource.

Many companies tend to think of business in absolute terms of assets and liabilities, profits and
losses, revenue and expenses. However, the fact is that without employees there is no business.
To make an organization environmental shock-proof, there is a need to make employees change-
proof. Employees can accept a shock, when they have support. Edward Lawyer says that there
are three major criteria, which, acting in concert, can create winning organizations, and they are
human capital, organizational capabilities, and core capabilities and core competencies. All have
a common thread in the sense that organizational capabilities, and core competencies, also,
require the right kind of human capital, because they largely depend upon the skills and talents of
individual employees in an organization.

Companies' intent on moving ahead with CSR initiatives do not lack options. The real challenge
is finding the right balance between social responsibility and share-holder value.
REFERENCES

1. KPMG International Survey of Corporate Responsibility Reporting, 2005


2. A Fleishman - Hillard / National Consumers League Study, May 2007
3. "Understanding Corporate Social Responsibility", Neena George and Jochim Lourduswamy,
2007
4. "The Development of Corporate Social Responsibility", Guler Aras and David Crowther, 2007
5. "Controversy Incorporated", David Cogman and Jeremy M. Oppenheim, Mckinsey Quarterly,
Number 4, 2002
6."Improving Board Performance in Emerging Markets", Dominic Barton and Simon C. Y.
Wong, Mckinsey Quarterly, 2006
7. "What is the Business of Business", Ian Davis, Mckinsey Quarterly, Number 3, 2005
8. "When Social Issues Become Strategic", Sheila M. J. Bonini, Lenny T. Mendonca, Jeremy M.
Oppenheim, Mckinsey Quarterly, Number 2, 2006
9."The Changing Face of Corporate Responsibility", Mathew Gitsham, The Ashbridge
Newsletter, Winter 2005/6
10. "The Biggest Contract", The Economist, May 26th, 2005
11."Serving the Community", The Economist, March 3rd, 2005
12."The Good Company", The Economist, January 20th, 2005
13."Corporate Social Responsibility - A Fledgling Movement Faces a Crucial Test", Robert A.
Senser, winter 2007