Methods of Practicing CSR

INTRODUCTION

As the participation of enterprises in our daily lives in increasing, recognition of their impact on our socio-economic culture is also rising. It is clear that Corporate’s participation in socio-development activities cannot be undermined or ignored. To make them responsible for their role as a unit of society concept of Corporate Social responsibility (CSR) has evolved. It can be referred as compliance of social, economic and ecological responsibility of companies.[1]

Governments are also aware that nationally competitive advantages can be achieved by effective participation of business sector. At the same time, corporations have realized their role & responsibility towards society & its stakeholders. There are various mechanisms & guidelines which can be adopted by them to address the concerning social issues & for this they have indulged in studies, collaborations, dialogues etc to implement such policies that benefits both society as well as business itself.

MODELS OF CSR

It is important to understand the responsibilities & priorities of a Corporate entity to formulate an effective CSR strategy.[2] The responsibilities identified by Corporates play integral part in framing an effective CSR policy or scheme. Several CSR models have been formulated over the years for the purpose of designing and executing the CSR process and to enable its monitoring and control. These models are:

• Freidman’s Stockholder Model for CSR[3]

Freidman argued that that the only social responsibility of business is to increase its profit; and if an executive was to take on social responsibilities he would be in breach of his fiduciary duties. Thus, the only responsibility business is endowed with is to earn profits for its stockholders. It was popular at the time it came in picture but with years it was criticized due to limited scope of responsibility on Corporates, as they themselves are highly responsible on resources of society.

• Ackerman’s Model for CSR[4]

Ackerman focuses on internal policy goals & their relation to corporate responsibilities. According to him four stages are involved in effective CSR. Firstly, managers identify the most compressing social problems, & express their willingness to participate in solving those social problems. Secondly, intensive research on the identified problem is done by experts & their suggestions are made operational. Thirdly, the formulated policy is implemented & lastly, the implemented strategy is evaluated & the issues arising out of it are further addressed. Through this mode he asserts that the result-oriented, financially geared, decentralized pattern common to major corporations may drive them towards their social responsiveness.

• Carroll’s Pyramid Model for CSR[5]

According to Carroll, corporate is responsible to fulfil its obligations at four levels to qualify as a good corporate citizen-

1. Philanthropic Responsibilities: The top layer of pyramid represents the responsibility of businesses to return what they have gained from society. If its natural resources, & corporate is involved in increasing carbon footprints, then to balance the ecosystem, corporate must reduce pollution & formulate such CSR strategies, that would “give back” what it has taken from society.

1. Ethical Responsibilities: The second layer represents that corporates should adopt such policies that are “ethically” correct. Best interests of stakeholders should be kept in mind & actions avoiding harm to anyone should be ensured. If corporates need to go beyond law to protects its ethical responsibility, it is allowed to do so.

1. Legal Responsibilities: The third layer represents Corporate’s responsibility to obey laws. It should adhere to labor laws, competition laws, tax regulations, health & safety laws etc.  As not adherence can lead to several serious repercussions which are not beneficial for business.

1. Economic Responsibilities: The lowest level, yet the first responsibility of corporate represents obligation to generate profit for its stockholders.To survive in market for long-run, it has to generate certain economic benefits for society i.e., employment, profit, goods & services etc.

• Redman’s Environmental Integrity & Community Model

This model is based on the ideology that businesses have moral & environmental obligations that extent beyond financial limits. The environmental & socio-economic aspects of society are interconnected with Corporate’s own goals & objectives. Corporate’s contribution in environmental integrity & community benefits will benefit the corporate itself in the long run, hence, it should participate in CSR.

• Corporate Citizenship Model

Carroll tried to synthesize the concept of Corporate citizenship but with strategic progression in CSR, it has unlocked new horizons. When we endow the status of “citizenship” to a “corporate”, it is essentially endowed with certain rights & duties.[6] Further, it has to channelize these rights & duties in such method that it enables corporates to address needs of society at large & individual as unit, in a socially responsive manner.

• Stakeholders Model[7]

Edward Freeman propounded that Corporate owes responsibility to not only its stockholders but also to a wide range of other stakeholders including consumers, employees, government, society, environment etc. It focuses on those groups without which the organization will cease to exist. This model suggests that all the groups are interlinked & they share responsibility to ensure long-term survival of a Corporate. Hence, their needs & requirements should be addressed by corporates in efficient manner.

GUIDING PRINCIPLES 

• UN Global Compact (UNGC)

It is an initiative to encourage businesses across the globe to adopt sustainable and socially responsible policies, and to report on their implementation. The UN Global Compact is a principle-based framework for businesses, stating ten principles in the areas of human rights, labour, the environment and anti-corruption. Under this, companies are brought together with UN agencies, labour groups and civil society with two objectives: “Mainstream the ten principles in business activities around the world” and “Catalyse actions in support of broader UN goals, such as the Millennium Development Goals (MDGs). The ten principles of UNGC are pertaining to human rights, labour standards, environment & anti-corruption.

• UN Guiding Principles on Business and Human Rights/ Ruggie Framework

It lays down global standard for preventing and addressing the risk of adverse impacts on human rights linked to business activity. Its three pillars outline the state duty to protect human rights, corporate responsibility to respect human rights & access to remedy for victims of business-related abuses.

• ILO’s tripartite declaration of principles on multinational enterprises and social policy

The principles laid down in this universal instrument offer guidelines to Multinational enterprises, governments, employers’ and workers’ organizations in such areas as employment, training, conditions of work and life, and industrial relations. Its provisions are reinforced by certain international labour Conventions and recommendations which they organizations are urged to bear in mind and apply, to the greatest extent possible.

• Institute of Social and Ethical Accountability: Accountability’s AA1000 series of standards

The standards are developed through a multi-stakeholder consultation process which ensures they are written for not only those who may gain but also for those who might be affected. It lays down a framework to identify, prioritise and respond to its sustainability challenges.

• Social Accountability International (SAI): SA 8000 Standard

It is a non-governmental, international, multi-stakeholder organization dedicated to improve workplaces and communities by developing and implementing socially responsible standards & is based on management systems approach which states that companies must adopt in order to ensure that compliance with the standard is continuously reviewed.

• ISO 26000: Social responsibility

It was adopted to contribute to global sustainable development, by encouraging business and other organizations to practice social responsibility to improve their impacts on employees, natural environments and communities. It lays down seven principles & subject cores to focus on for ensuring socially responsible behaviour.

• OECD guidelines for Multinational Enterprises

It intends to promote the concept of sustainable development & create incentives for increasing direct investments in developing countries. These recommendations are based on ten principles involving disclosures, combating corruption, complying with laws etc.

• The SROI Network

It promotes quantitative approach to understanding and managing the impacts of a project, business, organisation, fund or policy. It is used to measure non-financial values i.e., environmental & social impact value, these values in turn form integral part of decision-making procedure for organizations.

• The LBG model

It is a global standard for measuring corporate community investment as it provides a platform to share experience, best practice and new ideas.

WAYS OF PRACTICING CSR

It primarily depends on the organization structure, nature of business, identification of responsibilities, etc. to recognize & implement a CSR policy. For practicing CSR it is important to formulate an effective strategy which generally includes these steps:

1. To set feasible & viable objectives in consonance with Organization’s own objective & goals;
2. Recognize issues concerning stakeholders;
3. Undertake study of issues & frame scheme based on expert suggestions, limitations & opportunities;
4. Communicate the policy to stakeholders & implement it;
5. Analyze the effects & address defects;
6. Keep track of all measurable costs & establish positive and pro-active relationships with other socially responsible companies.

Although, Schedule VII of Companies Act, 2013 provides for the list of CSR activities a Corporate can undertake. The Corporate can ensure its contribution to society by adopting any of the following methods:

• Respect for human rights: Human rights are crucial aspect of economic, social & environmental activities of Corporates.By ensuring diversity, non-discrimination, equal pay & labour rights at work-place, corporates can protect social aspects of human rights. Corporations can also integrate standards of International human rights. This will not only benefit the employees, customers etc but also help in growth of corporation’s economic & political impact.

• Promoting healthcare: Schedule VII provides for promotion of healthcare, sanitation, making clean water available & contribution towards government schemes for the same purposes. Corporates can reach out to self-help groups, NGOs’ which are working towards similar goals. This will widen the scope of impact area & increase financial aid.

• Protection of cultural heritage: Corporates can become powerful advocates for protecting cultural heritage & cultural property. Corporates can refuse to participate in any activities related to illicit trafficking, including online resale sites and questionable art auctions & become a vocal advocate, interacting with both governmental and non-governmental agencies that work on the behalf of culture. It can also provide financial aid to repair & restoration of damaged sites of cultural property, works of art, promotion & development of traditional arts & handicrafts.

• Sustainable development: Corporates are the biggest contributors in carbon emissions. Thus, it is responsible to safeguard ecological balance. It can opt for cleaner & sustainable ways to produce energy, ensure access to clean energy, participate in climate change initiatives & adopt zero-waste practices. It can implement & participate in international & national schemes & programs aimed at conservation of natural resources.

• Fair dealings & collaboration: Corporates can ensure their social contribution by not indulging in illegal or morally questionable activities. It should collaborate with those businesses which are also inclined & working towards fulfilling their social responsiveness requirements. This builds trust among stakeholders for the organization.

• Promoting interests of vulnerable groups of society: Corporates can take measures to promote women empowerment, setting up homes & shelters for women & orphans. They can also provide care facilities for senior citizen & children. It can also take measures for promoting welfare of armed forces veterans, war widows & their dependents. Further, it can work for upliftment of marginalised groups of society.

• Disaster management: Corporates can initiate relief programs or fund government sponsored/ individual groups which are carrying out relief programs. It can use its platform for supporting and building the knowledge, capacity and skills of the community through disaster management activities ranging from mitigation and preparedness to response and recovery. It can also ensure that existing and upcoming industrial assets and infrastructure are disaster-resistant is also the responsibility of the corporate sector.

• Education & sports activities: It can provide training to promote rural sports, nationally & internationally recognized sports. It can further indulge in construction, renovation, and maintenance of stadiums, gymnasiums, and rehabilitation centers. For education, it can undertake training & vocational programs. Consumer education & protections programs are also good ways to acknowledge social responsiveness.

1. Long term economic & social development: It can contribute towards development of slum areas, rural development projects & fund government agencies or NGOs engaged in such activities. Eradication of hunger & poverty are no more the obligations of government only.

• Enter into e-dialogue: To assess its progress & future requirements, it can enter into e-dialogue with stakeholders & get first hand feedback for its CSR activities. Companies have to address their concerns & implement a practical dialogue which is a learning experience for both company & its stakeholders. Through e-dialogue it can also create a platform to invite & promote stakeholders to influence the implementation of CSR policies.

EXAMPLES 

India is the first country in the world to mandate CSR via Section 135(1) of the Companies Act, 2013 which prescribes thresholds to identify companies which are required to constitute a CSR Committee – those, in the immediately preceding financial year of which: (i) net worth is Rs 500 Crore or more; or (ii) turnover is Rs 1000 Crore or more; or (iii) net profit amounts to Rs 500 Crore or more. Pursuant to which several companies have undertaken the task of social development. Some of them are:

• Tata Group

It has adopted six pillars to develop CSR strategy: adopting human life cycle approach, upstream & downstream linkages, philosophy of more from less for more, leveraging all stakeholders, measuring social capital & leveraging technology. It is working in women empowerment activities, rural community development, and other social welfare programs. In the field of education, it provides scholarships and endowments to numerous institutions. The group also undertakes healthcare projects & economic empowerment programs in agriculture, environment protection, sports scholarships, and infrastructure development.

• Ultratech Group

It focuses on sustainability, self-reliance & with self-help groups, it is continuously undertaking various social projects. Its CSR activities focus on healthcare and family welfare programs, education, infrastructure, environment, social welfare, and sustainable livelihood. It has also organized medical camps, immunization programs, sanitization programs, plantation drives, water conservation programs, industrial training, and organic farming programs.

• CONCLUSION

CSR is the need of our age. Corporates are obliged to ensure a healthy growth of not only themselves but also that of society which is accommodating its growth. CSR effects almost all the aspects of the human life be it social, ethical, economic or ecological. Corporate have to be socially responsible and they have to integrate their activities towards CSR. There are various ways which can be adopted after conducting proper research & study, but it is often noted that corporates are more inclined towards publicity of their good work which they either have not yet undertaken to the extent they claim they have or are just in black & white. This although builds a positive image among stakeholder but the underlying purpose of CSR is sacrificed. Hence, we as stakeholders need to ensure that the commitments offered are also fulfilled by them.

References:

[1] Poonam Lakra, (2014), Corporate Social Responsibility Effect on Human Right Standards and Sustainability and Csr Effect on Various Indian Corporate, IOSR Journal of Business and Management (IOSR-JBM), e-ISSN: 2278-487X, P-ISSN: 2319-7668. Volume 16, Issue 4. Ver. III, PP 96-101.

[2] Carroll, A. B. (2016). Carroll’s pyramid of CSR: taking another look. International Journal of Corporate Social Responsibility.

[3] Milton Friedman, “The Social Responsibility of Business is to Increase its Profits”, The New York Times Magazine, September 13, 1970.

[4] Robert W. Ackerman, (1975), The social challenge to Business, Cambridge, MA: Harvard University Press.

[5] Supra Note 2.

[6] Freyedon Ahmadi, Hassan Zarei Matin, Hassan Alvedari, Naser Tavreh (2013), Comprehensive model for Corporate Citizenship, Interdisciplinary Journal of Contemporary Research in Business, Vol. 4, No. 11.

[7] R. Edward Freeman, (1984), Strategic Management: A Stakeholder Approach.