CORPORATE SOCIAL RESPONSIBILTY

For

Sustainable Business

CORPORATE SOCIAL RESPONSIBILTY

For

Sustainable Business

Dr R Ramakrishnan ramakrish54@gmail.com

For my research papers please visit www.ssrn.com/author=646193

Business and Society Relationship

Business is the collection of private, profit-oriented organizations.

Society is a broad group of people and other organizations, interest groups, a community, a nation. Business and society interrelate in a macroenvironment as stakeholders.

Business

Community

Consumers

Owners

Government

Employees

CSR CSR has been defined in several ways.

A good definition refers to a company's commitment to operating in an economically, socially and environmentally sustainable manner, while recognizing the interests of its stakeholders, including investors, customers, employees, business partners, local communities, the environment and society at large.

Four Dimensions of business strategy implied by CSR

The foundation of a responsible company is to be profitable, but not at any cost.

Society also demands the company obey the law,

Expects it to act in an ethical manner toward all stakeholders and

To be a good corporate citizen in the communities in which it lives and operates

1. Stakeholders are demanding it Customers/ Employees/ Investors/ NGO’s/ government

2. Increased Role of Business• Size/ influence of business vs. governments

3. Globalisation: New CSR issues• Diverse cultures/ norms/ jurisdictions• Need to achieve consistency globally

4. Complexity and risks• Increasing complexity, likelihood and significance of risk and wrongdoing• New laws and regulations• Greater influence of NGO’s and other stakeholders• Increased merger and acquisitions

5. Greater likelihood of discovery• 24 hour global news, media more aggressive• High speed info access and dissemination

6. Greater cost of misconduct• Fines, penalties, reputation damages• Growing interest on softer CSR issues- social and environmental

Growing Importance of CSR

CSR Components

CSR

WORKPLACE- Equal Opportunity - Working Hours- Staff Training and

Development - Health and Safety - Freedom of Association

and Human Rights- Bribery and Corruption

MARKETPLACE- Suppliers- Customers

COMMUNITY- Community

Investment (cash/in-kind/ volunteering)

- Community protection

ENVIRONMENT - Environmental

protection - Impact on air,

water, biodiversity etc

Leadership Commitment

Integration into business

• Engage with stakeholders

• Communicate CSR

Key Issues in CSR• Labour rights:

– child labour – forced labour – right to organise – safety and health

• Environmental conditions– water & air emissions– climate change

• Human rights– cooperation with paramilitary forces– complicity in extra-judicial killings

• Poverty Alleviation– job creation– public revenues– skills and technology

What does CSR mean in different regions?

USA

JAPAN

EUROPE

CHINA

INDIA.

Legal complianceEnvironmental

focusLess stakeholder

pressures

Risk Mgt/compliance

Philanthropy

Opening global economy

Export Driven

Philanthropy

Community development

Stakeholder approach

Anti standard

BUSINESS CASE?

AFRICA

Health & sanitation; Dvlt

Attracting investments

CSR

• Despite the lack of a single definition, by examining different definitions from around the world, it is clear that there are commonly held understandings about what constitutes CSR

• CSR is now a mainstream approach to business: “The movement for CSR has won the battle of ideas …CSR commands the attention of Executives Everywhere.” (Economist 2005)

HOW COMPANIES DEMONSTRATE THEIR COMMITMENT TO CSR

• Top-level involvement (CEO, Board of Directors)

• Policy statements

• Programs

• Staffing resources

• Signatories to voluntary standards

– Principles (UN Global Compact – www.unglobalcompact.org; Ceres

Principles – www.ceres.org; SA8000 – www.sa-intl.org)

– Reporting (Global Reporting Initiative – www.globalreporting.org)

“Every company harms the environmentEvery company harms the environment!” (Just as an individual does) Corporate Social Responsibility is thus only about two aspects:

1) Reducing the Negative Effects: Steps taken by a company to neutralise, minimise or offset the harmful effects caused by its processes and product-usage

2) Increasing the Positive Contributions: Further steps taken using its resources, core competence, skills, location and funds for the benefit of people and the environment

Easy everyday examples of social responsibility…

No Type of Organisation Examples of socially responsible activities

1 Movie Theatres / Multiplexes / Malls

-Screening of social message films-Special shows for underprivileged groups-Offering table space for NGOs -Adopting a nearby garden / open space and maintaining it

2 Petrol Pumps -Promoting accident awareness, pedestrian safety -Checking and offering fuel efficiency tips

3 Shops e.g.: Chemists

-Awareness posters of symptoms of different diseases-Collecting & donating old medicines to charitable hospitals-Offering discounted medicines for poor patients

4 Private Hospitals -Creating a Patients’ Information Centre & Library -Encouraging citizens to help accident victims by taking care of legal aspects of accidents / emergency cases

Easy everyday examples of social responsibility

No. Type of Organisation Examples of socially responsible activities

5 Private Schools & Colleges -Getting Alumni to institute scholarships & prizes -Offering space for training / classes / sports, etc.-Adopting a local garden

6 Housing Societies -Suggesting solutions for local problems to govt & media-Maintaining nearby public spaces, including footpaths-Offering space in society (garage, etc.) for use for training/classes. etc. and as a material collection centre

7 Hotels and Restaurants -Donating excess food responsibly -Composting food waste

8 Media (TV, print, radio) -Featuring profiles and achievements of NGOs / citizens -Spreading social service messages

TATA GroupBritanniaAmulNestleITC – Sunfeast & e-choupal

Examples

CSR at TATA GroupThe term 'corporate social responsibility' or sustainability is of relatively recent vintage. Not so the philosophy of social responsibility that underlines the Tata way of conducting its businesses, and the manner of its interactions with all the constituents that come under the canopy of corporate social responsibility. The multitude of initiatives the Tata Group has nurtured from its earliest days flows from a wellspring of voluntary, as opposed to obligatory commitment

Principles first

An implicit sense of ethical business conduct has been the cornerstone of the Tata way in the corporate governance sphere. On issues ranging from customer care and business excellence to financial propriety and more, explicit rules and regulations supplement the traditional values on which the Tata Group companies has been shaped.

A feel for peopleWith some 2,46,000 members in its diverse and widespread family, the Tata Group is more than just another employer. The Group's many pioneering initiatives to benefit and empower employees have few parallels anywhere in the world, and it has blended its traditional benevolence with evolving human resource methodologies to deliver a whole lot beyond mere jobs

Green at heart

The Tata ethos places a special emphasis on environmental and ecological issues. The Group's efforts to preserve and regenerate the environment find expression in the slew of projects and programmes in has undertaken in and around its facilities and operations.

Caring and sharingFrom health and education to livelihoods and women-children welfare, from tribal hamlets in Jharkhand and the rural outback of Gujarat to the high ranges of Kerala and disadvantaged villages in Andhra Pradesh — the community work being undertaken by the companies and trusts of the Tata Group touches a multitude of Indians across the land. Beyond purely social work, this support extends to individuals and institutions pursuing artistic and sporting excellence.

CSR at TATA Group……..

Bai Jerbai Wadia who single mindedly and commitedly set out to construct low cost baugs or housing colonies in Bombay for lower and middle-class Parsis.

Health care facilities was another area close her heart . With her inspiration, her sons Ness and Cusrow set about building much needed hospitals in Bombay.

The Sir Ness Wadia Foundation, a charitable trust set up in 1969. The trustees have disbursed funds to a broad spectrum of causes from scholarships for the disabled to drought relief in Bombay.

Their income was Rs1700 cr. Spent 3.4% on CSR. Net profit was Rs.150 cr. Karmayog CSR rating – 2/5

Principal CSR activity done in :- healthcare, disaster, general donations

BRITANNIA

AMUL is a three tier co-operative organization.

1st tier :- Co-operative society at the village, of which; milk producers are voluntary members. They purchase

milk form member & sell it to the district level co-operative.

2nd tier :- The district co-operative that processes milk into milk products, markets locally & sells surplus to the state co-operative for national & international marketing. There are 12 district co- operatives managed by a 15 member board elected by nominated representatives

or chairmen of the village co-operatives.

3rd tier :- The state level co-operative - the Gujarat Co-operative Milk Marketing Federation (GCMMF) responsible

for national and international marketing of milk and milk products produced and sold to it.

AMULANAND MILK UNION LTD

.

CSR-Sensitive Business Philosophy The first step towards discharging the CSR is the business

philosophy of the GCMMF. It is two-fold: one, to serve the interests of milk producers and second, to provide quality products to consumers as value for money. The milk producers are paid for their milk in accordance with market forces and realisation of value for their produce.

.

Earnings Of GCMMF Nurturing its primary members - the milk producers - is

the first mission of the GCMMF. Discharge of this responsibility is reflected in the manner in which the GCMMF conducts its business and shares its earnings.

The milk from the village co-operatives is purchased at an interim price. So as to maximize the earnings of the milk producers. The GCMMF changes the product profile during the fiscal and directs its sales and marketing activities towards those products that would bring in maximum returns.

Expenditure done on CSR by GCMMF(Gujarat Co-operative Milk Marketing Federation)

PROFITS:-

Profit of the GCMMF is very low.

The net profit (PADT) of the GCMMF during 2003-04 was Rs 7.31 crore against a turnover of Rs 2,947 crore, a meagre 0.25%. Further out of the net profit of Rs 7.31 crore, Rs 4 crore was given as share dividend to the co-operatives. To fulfil its corporate social responsibility towards its milk producers and co-operatives the GCMMF works on razor thin profits and retention of funds

Nestlé India has always focused on long term, sustainable and profitable growth and helped communities around its factories to improve their quality of life in a similar manner. Nestlé Agricultural Services has used the experience gained by Nestlé across the world to set up a system of direct and efficient contact with the farmers. Milk storage facilities have been set up close to the farmers. Veterinary services are provided free, and medicines provided at wholesale cost & helps them in procuring loans.

CSR-Safe Drinking Water

Water is a scarce resource.

Almost 200 million people do not have access to clean drinking water.

They are committed to improving the situation and believes that the first step is to create awareness in the communities around its factories.

A key Focus area of Nestle’s Corporate initiatives is to help provide Clean Drinking Water and educate children in schools to conserve this scarce resource.

Principal CSR activity done in :- health , community projects, infrastructure.

CSR-Education and Training

Nestlé create awareness about the right to education & encourages the communities around its factories to send their children to school. Their employees have developed a special play 'Let Us Go to School' for this purpose. It supports local schools, helps in the maintenance of public parks and green belts, facilitates blood donation camps and health awareness programs.All these initiatives strengthen the bond between Nestlé India and the community. Their LOGO says “GOOD FOOD GOOD LIFE” Their income was Rs2200 cr. Spent 4.4% on CSR. Net profit was Rs.250 cr.

ITC Ltd. - Sunfeast

ITC Limited – Foods Division announced the launch of the 'Sunfeast' range of high quality biscuits with offerings in Glucose, Marie and Cream segments at a function in Chennai on April 20, 2004.

The Company continued to intensify its footprint in the social sector by expanding to newer districts during the year. It continued to focus on the three main areas of interventions under ‘Mission Sunehra Kal’

(a) Natural resource management (b) Sustainable livelihoods (c) Community development, with focus on

primary education and health and sanitation. Their income was Rs8000 cr. Spent 16.0% on CSR.

Net profit was Rs.2000 cr.

The collaboration between ITC and the Government of AP for wasteland development under ‘Indira Kranti Patham’ was sustained during the year – 830 hectares of plantations were promoted through this public-private partnership.

In the area of environment, health and safety, ITC is moving towards achieving ‘zero solid waste’ status through recycling of all solid wastes. Recycling of waste in 2006-07 was 93% as compared to 2005-06 (78.7%)

Reduction in usage of plastic bags: School children were given practical lessons on the disadvantages of plastic bags and the adversities faced thereof.

Encourage butterfly gardens: A team of experts educated and introduced children to the concept of 'Butterfly Gardens', wherein special plants are grown whereby creating a natural habitat for butterflies to breed.

ITC’s e-Choupal’ • ‘e-Choupal’ also unshackles the potential of Indian farmer who has been

trapped in a vicious cycle of low risk taking ability > low investment > low productivity > weak market orientation > low value addition > low margin > low risk taking ability. This made him and Indian agribusiness sector globally uncompetitive, despite rich & abundant natural resources.

In cyclical natural systems, waste does not exist. Waste = Food.

6% ProductManufacturing

Process

Raw Materials

94% Waste

(Attributed to Paul Hawken, Factor 4, 1997)

80% of products discarded after single use

Material Flows

Linear Industrial Processes: Waste is created faster than it can be reconstituted to quality resources. Take-make-waste.It is estimated that 99% of the original materials used in the production of, or contained in, the goods made in the US become waste within 6 weeks of sale.

Being Sustainable is Often Just Being Efficient, Which Adds

Significant Economic Value

In(cost) Out

(revenue)

Waste (cost)

Basic Economics: What comes in must equal what goes out -reducing waste adds output or reduces input- thus adding revenue or cutting costs!

IndustrialProcess/Service

Sustainability Issues Affect Business Responsibility & Ethics:

• “Business cannot succeed in societies that fail. There is no future for successful business if the societies that surround it are not working. Governments and business must create partnerships to deliver essential societal services like energy, water, health care and infrastructure.”

- Bjorn Stigson, President, the World Business Council for Sustainable Development, 2008

GIFFORD PARK ASSOCIATES