Session xiv : SOCIAL

RESPONSIBILITY IN BUSINESS
OPERATIONS
 OBJECTIVE
• Define CSR
• Describe argument for and against CSR
• Describe environmentalism as a special
component of CSR
Corporate social responsibility (CSR

• Corporate social responsibility

(CSR) can refer to a wide range of
actions that businesses may take - from
donating to charity to ethical trading.
• One primary focus of CSR is the
environment.
What is environmental CSR

Environmental CSR aims to reduce any

damaging effects on the environment from
your business processes.
• energy use
• water use
• waste management
• recycling
• emissions
• eco-friendly office and business travel policies
How to reduce your environmental impact

• Create products that can be recycled

• Optimise your product life cycle
• Source responsibly (eg using recycled materials
and sustainable timber)
• Reduce packaging
• Buy locally to save fuel costs
• Create an efficient (and fuel-efficient)
distribution network
• Work with environmentally conscious suppliers
and distributors
 What is environmental CSR

• Corporate social responsibility is a business model

by which companies make a concerted effort to
operate in ways that enhance rather than degrade
society and the environment.
• CSR helps both improve various aspects of society
as well as promote a positive brand image of
companies.
• Corporate responsibility programs are also a great
way to raise morale in the workplace.1
 What is environmental CSR

CSRs are often broken into four categories:

• Environmental impacts
• Ethical responsibility
• Philanthropic endeavors
• Financial responsibilities.
• Some examples of companies that strive to be
leaders in CSR include Starbucks and Ben &
Jerry's.2
 Corporate social responsibility
• Corporate social responsibility (CSR) is a self-
regulating business model that helps a
company be socially accountable to itself, its
stakeholders, and the public.
• By practicing corporate social responsibility,
also called corporate citizenship, companies
can be conscious of the kind of impact they
are having on all aspects of society, including
economic, social, and environmental.
 Corporate social responsibility
• To engage in CSR means that, in the ordinary course of
business, a company is operating in ways that
enhance society and the environment instead of
contributing negatively to them.
 Understanding Corporate Social Responsibility (CSR)

• Corporate social responsibility is a broad

concept that can take many forms depending
on the company and industry. Through CSR
programs, charity, and volunteer efforts,
businesses can benefit society while boosting
their brands.
 Understanding Corporate Social Responsibility (CSR)

• For a company to be socially responsible, it

first needs to be accountable to itself and its
shareholders.
• Companies that adopt CSR programs have
often grown their business to the point where
they can give back to society.
Understanding Corporate Social Responsibility (CSR)

• Thus, CSR is typically a strategy that's

implemented by large corporations.
• After all, the more visible and successful a
corporation is, the more responsibility it has
to set standards of ethical behavior for its
peers, competition, and industry.
 Types of Corporate Social Responsibility

Environmental Responsibility
• Environmental responsibility is the pillar of
corporate social responsibility rooted in preserving
mother nature.
• Through optimal operations and support of
related causes, a company can ensure it leaves
natural resources better than before its operations.
• Companies often pursue environmental
stewardship through:
 Environmental Responsibility

• Reducing pollution, waste, natural resource

consumption, and emissions through its
manufacturing process.
• Recycling goods and materials throughout its
processes including promoting re-use
practices with its customers
 Environmental Responsibility

• Offsetting negative impacts by replenishing natural

resources or supporting causes that can help neutralize
the company's impact.
• For example, a manufacturer that deforests trees may
commit to planting the same amount or more.
• Distributing goods consciously by choosing methods that
have the least impact on emissions and pollution.
• Creating product lines that enhance these values. For
example, a company that offers a gas lawnmower may
design an electric lawnmower.
 Ethical Responsibility

• Ethical responsibility is the pillar of corporate

social responsibility rooted in acting in a fair,
ethical manner
• Companies often set their own standards,
though external forces or demands by clients
may shape ethical goals.
• Instances of ethical responsibility include:
 Ethical Responsibility
• This includes fair employment consideration
for all individuals regardless of personal
differences.
• Expansion of vendor use to utilize different
suppliers of different races, genders, Veteran
statuses, or economic statuses.
 Ethical Responsibility
• Honest disclosure of operating concerns to
investors in a timely and respectful manner.
• Though not always mandated, a company
may choose to manage its relationship with
external stakeholders beyond what is legally
required.
 Ethical Responsibility
• Fair treatment across all types of customers
regardless of age, race, culture, or sexual
orientation.
• Positive treatment of all employees including
favorable pay and benefits in excess of mandated
minimums
 Philanthropic Responsibility

• Philanthropic responsibility is the pillar of

corporate social responsibility that
challenges how a company acts and how it
contributes to society.
• In its simplest form, philanthropic
responsibility refers to how a company
spends its resources to make the world a
better place. This includes:
 Philanthropic Responsibility
• Whether a company donates profit to charities or
causes it believes in.
• Whether a company only enters into transactions
with suppliers or vendors that align with the
company philanthropically.
• Whether a company supports employee
philanthropic endeavors through time off or
matching contributions.
• Whether a company sponsors fundraising events or
has a presence in the community for related events.
 Financial Responsibility

• Financial responsibility is the pillar of corporate

social responsibility that ties together the three
areas above.
• A company make plans to be more
environmentally, ethically, and philanthropically
focused; however, the company must back these
plans through financial investments of
programs, donations, or product research.
• This includes spending on:
 Financial Responsibility

• Research or new products that encourage

sustainability.
• Recruiting different types of talent to ensure a
diverse workforce.
• Initiatives that train employees on DEI, social
awareness, or environmental concerns.
 Financial Responsibility

• Processes that might be more expensive but

yield greater CSR results.
• Ensuring transparent and timely financial
reporting including external audits.
Benefits of Corporate Social Responsibility

• As important as CSR is for the community, it

is equally valuable for a company.
• CSR activities can help forge a stronger bond
between employees and corporations, boost
morale, and aid both employees and
employers in feeling more connected to the
world around them.
 Benefits of Corporate Social
Responsibility
• Aside from the positive impacts to the planet,
here are some additional reasons businesses
pursue corporate social responsibility.
Brand Recognition

• According to a study published in the Journal of

Consumer Psychology, consumers are more likely to act
favorably towards a company that has acted to benefit its
customers as opposed to companies that have
demonstrated an ability to delivery quality products.3
• Customers are increasingly becoming more aware of the
impacts companies can have on their community, and
many now base purchasing decisions on the CSR aspect
of a business.
• As a company engages more in CSR, they are more likely
to receive favorable brand recognition.
Investor Relations

• n a study by Boston Consulting Group,

companies that are considered leaders in
environmental, social, or governance matters
had an 11% valuation premium over their
competitors.4 For companies looking to get
an edge and outperform the market, enacting
CSR strategies tends to positively impact how
investors feel about an organization and how
they view the worth of the company.
 Employee Engagement

• In yet another study by professionals from Texas

A&M, Temple, and the University of Minnesota, it
would found that CSR-related values that align
firms and employees serve as non-financial job
benefits that strengthen employee retention.5
• Works are more likely to stick around a company
that they believe in.
• This in turn reduces employee turnover,
disgruntled workers, and the
total cost of a new employee.
 Risk Mitigation

• Consider adverse activities such as discrimination

against employee groups, disregard for natural
resources, or unethical use of company funds.
• This type of activity is more likely to lead to
lawsuits, litigation, or legal proceeds where the
company may be negatively impacted financially
and be captured in headline news.
• By adhering to CSR practices, companies can
mitigate risk by avoiding troubling situations and
complying with favorable activities.
Arguments in favors of CSR

• Protect the interests of

stakeholders:
• Labour force is united into unions which
demand protection of their rights from
business enterprises.
• To get the support of workers, it has
become necessary for organisations to
discharge responsibility towards their
employees
 2. Long-run survival
• Business organizations are powerful
institutions of the society.
• Their acceptance by the society will be
denied if they ignore social problems.
• To avoid self-destruction in the long-run,
business enterprises assume social
responsibility
 3.Self-enlightenment
• With increase in the level of education and
understanding of businesses that they are
the creations of society, they are motivated
to work for the cause of social good.
• Managers create public expectations by
voluntarily setting and following standards
of moral and social responsibility.
 Self-enlightenment
• They ensure paying taxes to the
Government, dividends to shareholders,
fair wages to workers, quality goods to
consumers and so on.
• Rather than legislative interference being
the cause of social responsibility, firms
assume social responsibility on their own.
4. Avoids government regulation

• Non-conformance to social norms may

attract legislative restrictions.
• Government directly influences the
organizations through regulations that
dictate what they should do and what not.
• Various agencies monitor business
activities.
Avoids government regulation
• For example, Central Pollution Control Board
takes care of issues related to environmental
pollution, Securities and Exchange Board of India
considers issues related to investor protection,
Employees State Insurance Corporation
promotes issues related to employees’ health etc.
• Organizations that violate these regulations are
levied fines and penalties.
• To avoid such interventions, organisations have
risen to the cause of social concerns.
 5. Resources
• Business organisations have enormous
resources which can be partly used for solving
social problems.
• Businesses are the creation of society and
must work in the best interest of society, both
economically and socially.
 6. Professionalisation
• Management is moving towards
professionalism which is contributing to social
orientation of business.
• Increasing professionalism is causing
managers to have formal management
education and qualifications.
• Managers specialise in planning, organizing,
leading and controlling through their
knowledge and subscribe to the code of ethics
established by a recognized body
 Professionalisation
• The ethics of profession bind managers to
social values and growing concern for society.
• Thus, there is increasing awareness of social
responsibility.
• To grow in the environment of dynamism
and challenge, business concern does not
decide whether or not to discharge social
responsibilities but decides how much social
responsibility to discharge
Arguments against CSR:

Business is an economic activity:

• It is argued by the opponents of social
responsibility that basic function of a business
enterprise is to look into economic viability of its
operations.
• It is for the Government to look after interests of
the society.
• The prime responsibility of assuming social
responsibility should, therefore, be of the
Government and not of the business enterprises.
Quantification of social benefits:
• What measures social responsibility and to what
extent should a business enterprise be engaged
in it, what amount of resources should be
committed to the social values, whose interest
should hold priority over others (shareholders
should be preferred over suppliers or vice versa)
and numerous other questions are open to
subjective considerations, which make social
responsibility a difficult task to be assumed.
Cost-benefit analysis:
• Any social-benefit programme where
initial costs exceed the benefits may not be
taken up by enterprises even in the short-
run.
Lack of skill and competence: Professionally
qualified managers may not have the
aptitude to solve the social problems.
Transfer of social costs:
• The costs are passed to consumers by increasing
prices of goods and services.
• If managers maintain the level of prices, the
social costs may be reflected in reduction of
wages.
• If wages are stabilized, profits would be reduced,
which will lower dividends to the shareholders. Low
profits will reduce managers’ desire to further
engage in corporate social responsibility
Debate over CSR

• After considering the arguments in

favour and against the concept of
CSR, some points are still left
unanswered. These are:
 Debate over CSR
Operational definition of CSR:
• The traditional view on CSR provided no
information on business concerns about social
values.
• The modern approach also provides no clear
guidelines to managers. Business executives follow
their own values and interests about social
expectations.
• Actual meaning of CSR is, however, difficult to
determine.
 Debate over CSR
No view of competitive corporate environment
• Every business operates in the larger business system. It
cannot come out of that system and transformation of
society within the existing parameters of business
system seems to be illusory.
• Business power is not unified and, therefore, even if
they wish, they cannot fully meet the needs of the
society.
• Redirecting resources towards needs of the society can
perhaps be possible if government rewrites rules under
which business corporations will operate.
 Debate over CSR
Limited ability:
• The proponents of CSR assume that business
units have unlimited ability to fulfill social
desires. However, it is not so.
• Business firms have limited ability to respond
to social changes.
• Social actions will increase the costs and prices,
which will place these firms at a competitive
disadvantage in relation to firms who are not
socially responsive.
 Debate over CSR
Lack of uniformity in business policies:
• Solving social problems is not feasible in competitive
business environment unless all firms follow the same
policy.
• Government can intermediate and make all
competitors pursue the same policy on social problems.
• Government is in fact, framing standards for
businesses to follow with respect to physical
environment, occupational safety and health, equal
opportunity, consumer concerns
 Debate over CSR
Moral responsibility
• Business firms feel that they have economic
responsibility to produce goods and
services.
• Their economic responsibilities justify
their reason for existence.
• Why should business organisations have
moral responsibilities? What are the moral
justifications for the same?
 Environmentalism as part of CSR
• Environmentalism is a movement and
ideology that aims to reduce the impact of
human activities on the earth and its various
inhabitants.
• The movement has evolved to build
resilience towards the effects of global
climate change, in order to build a society
capable of adapting to a rapidly changing
earth and finding sustainable ways to live in
 Environmentalism as part of CSR
• Civic environmentalism adopts a global, regional
and local role of advocacy, awareness and
education through participation and collective
action.
• The countries and people that have done the
least to contribute to climate change are the
ones that will be most affected by its devastating
effects-- and we see this already everywhere
around the world and in the USA as well.
 Environmentalism as part of CSR
• Environmentalism seeks to preserve the
air and water we all depend upon; as well
as conserve and protect entire ecosystems
compromising of animals, plants, and
humans found in different habitats
throughout our planet.
 Environmentalism as part of CSR
• Along with preserving natural elements, this
movement primarily seeks to protect the Earth's
resources that humanity requires for survival and
development.
• The most pressing issue of our global society today
is climate change. This includes the issues of air and
water pollution, water scarcity, food insecurity,
deforestation, rising sea levels, loss of species and
habitat biodiversity, and loss of indigenous
environmental knowledge and traditions.
Environmentalism as part of CSR

• Civic environmentalism is a regional,

local, or individual response to
environmental issues.
• It is a type of social action where citizens
cooperate and work together to solve
environmental problems as a means to
improve the communities they live and
work in.
 Environmentalism as part of CSR
• The ultimate goal of civic environmentalism is
to ensure a sustainable community or
movement through collective participation.
• In this case, sustainability can be defined as a
lifestyle made up of decisions that protect the
natural environment and drive social and
technological innovation to solve
environmental problems.
 Environmentalism as part of CSR
• These lifestyle decisions are intended to
preserve the ability of future generations
to achieve the same quality of life.
Environmentalism as part of CSR
Environmentalism as part of CSR
Key