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- UNIT 4

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What is CSR?
CSR is a concept that frequently overlaps with similar approaches such as corporate
sustainability, corporate sustainable development, corporate responsibility, and corporate
citizenship. While CSR does not have a universal definition, many see it as the private sector's
way of integrating the economic, social, and environmental imperatives of their activities. As
such, CSR closely resembles the business pursuit of sustainable development and the triple
bottom line. In addition to integration into corporate structures and processes, CSR also
frequently involves creating innovative and proactive solutions to societal and environmental
challenges, as well as collaborating with both internal and external stakeholders to improve CSR
performance.
Definition
According to the guidelines on Corporate Social Responsibility (CSR) designed by the National
Empowerment Foundation (NEF), Corporate Social Responsibility (CSR) is the concept
whereby companies act to balance their own economic growth with the sustainable social and
environmental development of their areas of operation. A company performing highly in CSR is
one that goes beyond compliance with the legal framework to actively pursue positive impacts
on local communities and its environmental footprint

The Responsibilities of Corporate Social Responsibility

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. But it has only
been in recent years that ethical and philanthropic functions have taken a significant place. Each
of these four categories deserves closer consideration.
Economic Responsibilities
Historically, business organizations were created as economic entities designed to provide goods
and services to societal members. The profit motive was established as the primary incentive for
entrepreneurship. Before it was anything else, business organization was the basic economic unit
in our society. As such, its principal role was to produce goods and services that consumers

needed and wanted and to make an acceptable profit in the process. At some point the idea of the
profit motive got transformed into a notion of maximum profits, and this has been an enduring
value ever since. All other business responsibilities are predicated upon the economic
responsibility of the firm, because without it the others become moot considerations.
Legal Responsibilities
Society has not only sanctioned business to operate according to the profit motive; at the same
time business is expected to comply with the laws and regulations promulgated by governments
as the ground rules under which business must operate. As a partial fulfillment of the "social
contract" between business and society firms are expected to pursue their economic missions
within the framework of the law. Legal responsibilities reflect a view of "codified ethics" in the
sense that they embody basic notions of fair operations as established by our lawmakers. They
are depicted as the next layer on the pyramid to portray their historical development, but they are
appropriately seen as coexisting with economic responsibilities as fundamental precepts of the
free enterprise system.
Ethical Responsibilities
In summary, the total corporate social responsibility of business entails the simultaneous
fulfillment of the firm's economic, legal, ethical, and philanthropic responsibilities. Stated in
more pragmatic and managerial terms, the CSR firm should strive to make a profit, obey the law,
be ethical, and be a good corporate citizen.
Philanthropic Responsibilities
Philanthropy encompasses those corporate actions that are in response to societys expectation
that businesses be good corporate citizens. This includes actively engaging in acts or programs to
promote human welfare or goodwill. Examples of philanthropy include business contributions to
financial resources or executive time, such as contributions to the arts, education, or the
community. A loaned-executive program that provides leadership for a communitys United Way
campaign is one illustration of philanthropy.
The pyramid of corporate social responsibility is depicted below. It portrays the four components
of CSR, beginning with the basic building block notion that economic performance undergirds
all else. At the same time, business is expected to obey the law because the law is society's
codification of acceptable and unacceptable behavior. Next is business's responsibility to be
ethical. At its most fundamental level, this is the obligation to do what is right, just, and fair, and
to avoid or minimize harm to stakeholders (employees, consumers, the environment, and others).
Finally, business is expected to be a good corporate citizen. This is captured in the philanthropic
responsibility, wherein business is expected to contribute financial and human resources to the
community and to improve the quality of life

History of CSR
The CSR concept evolution started with the concerns related to the damage created by business
on environment and society at large by way of activities linked to their business operation.
Businesses are expected to clean up the mess they have generated to the environment. Until the
1980s CSR was considered same as corporate philanthropy. The current CSR concept started
formulating in early 80s. In 1980s and1990s events like Shell spoiling the environment and
violating the human rights in Nigeria, started a new wave of criticism which triggered a
completely different thinking on CSR and hence many CSR definitions emerged during this
period. Customer expectations and demand for clean and green companies have led to a
number of benchmarks and guidelines, such as the Sullivan Principles, the UN Global Compact
etc. Hence, CSR has continued to evolve rapidly over the last thirty years and companies now all
over the world are expected to engage in CSR activities to be recognized as a socially
responsible company that not only looks after the interests of itself but also after the interests of
the society
The Interest Group (Stakeholders)
Corporations are motivated to involve stakeholders in their decision-making and to address
societal challenges because today's stakeholders are increasingly aware of the importance and
impact of corporate decisions upon society and the environment. The stakeholders can reward or
punish corporations. Thus, Corporate Social Responsibility requires the identification of various
interest groups, which may affect the functioning of a business organization and may also be
affected by its functioning. Normally various groups associated with a business organization are
shareholders, workers, customers, creditors, suppliers, government and society in general.

Shareholders:
The first responsibility of the management is to protect the interest of shareholders. The interests
of majority of shareholders and large minority of shareholders are generally well protected
through either direct participation in the management actions or they have real power to
intervene, if necessary. They should be informed about the functioning of the organization
adequately and timely. Therefore, management has a responsibility to provide proper safeguard
to the money invested by shareholders.
Workers:
Workers have direct interest in an organization because by working there, they satisfy their
needs. Thus, it is the managements responsibility to protect the interest of workers in the
organization. This can be done by the management in the following ways:

Management should treat workers as another wheel of the cart

Management should develop administrative process in such a way that promotes

cooperative endeavor between employers and employees.

The management should adopt a progressive labor policy based on recognition of genuine
trade union rights participation of workers in management, creating a sense of
belongingness, improving their living and working conditions.

Management should pay fair and reasonable wages and other financial benefits to
workers.

Customers:
Management owes a primary obligation to give a fair deal to the customers. This can be done in
the following ways:

Customers should be charged a fair and reasonable price.

The supply of goods and services should be of uniform standard and of reasonable
quality.
Management should not indulge in profiteering, hoarding, or creating artificial scarcity..
Management should not mislead the customers by false, misleading and exaggerated
advertisements.

Creditors, Suppliers and Others:

They affect the organization in various ways. Therefore, the management is responsible to fulfill
its obligations towards them. This can be done in the following ways.
Management should create healthy and cooperative inter business relationship between
different businesses.
Management should provide accurate and relevant information to creditors and suppliers.
Payments of price of materials, interest on borrowings, other charges should be prompt.
Government.
It is very closely related with the business system of the country. It provides various facilities for
the development of business. Government, no doubt, exercises control over business, but these
controls are meant for overall development of business. Management can discharge its
obligation to government by,
Management should be a law-abiding citizen-Management should pay taxes and other
dues fully, timely &honestly.
It should not corrupt government workers and public servants and the democratic process
It should not buy political favors by any means
Society.
Organizations exist within a social system and get facilities from the system. Therefore, they owe
obligations to the society as a whole. This can be done by,
Management should maintain fair business policies and practices.
It should play a proper role in civic affairs
It should provide and promote general amenities and help in creating better living
conditions in general.
Corporate Social Responsibility if the backbone of sustainability inthe long run.
CSR is not a cosmetic; it must be rooted in our values. It must make a difference to the
way we do business.
Six Reasons Companies Should Embrace
Corporate social responsibility (CSR) is not going to solve the worlds problems. That said, CSR
is a way for companies to benefit themselves while also benefiting society.
1) Innovation :
In the context of CSR, innovation is a huge benefit to a company and society.

For example, Geoff McDonald, who is the Unilever Global VP for HR, Marketing,
Communications and Sustainability. Using the lens of sustainability as McDonald described it,
Unilever was able to innovate new products such as a hair conditioner that uses less water.
Without sustainability, the companys research and development efforts possibly wouldnt have
led to such a product.
http://www.csreurope.org/news.php?type=&action=show_news&news_id=4584
2) Cost savings :
One of the easiest places for a company to start engaging in sustainability is to use it as a way to
cut costs. Whether its using less packaging or less energy, these savings add up quickly. For
example, General Mills is on a path to reduce its energy savings by 20% by 2015. According to
its 2011 CSR report, after installing energy monitoring meters on several pieces of equipment at
its Covington, Ga. plant, the company saved $600,000.
http://www.generalmills.com/Responsibility/Environment/energy.aspx
3) Brand differentiation:
In the past, brand differentiation was one of the primary reasons companies embraced CSR.
Companies such as Timberland were able to find their voice and incorporate the companys
values into their business model. However, as CSR has become more commonplace, using it to
differentiate your brand is getting harder to do.
For example, the Cola Wars is one of the longest running rivalries in business. Coke and Pepsi
are constantly looking to grab as much market share as they can from each other. Yet they are
both adopting similar, although slightly different, approaches to CSR. Both Pepsi and Coke are
pursuing strategies of zero net water usage. Both companies offer water bottles made from
sustainable packaging as well. In the end, although neither company is necessarily going to see
strong differentiation benefits, it is visible that the diminishing returns on brand differentiation
as a sign that CSR is taking hold and is not just a fad.
4) Customer engagement:
Whats the point of doing CSR if no one knows about it? For the past few years, Walmart has
established itself as a leader on environmental efforts. Yes, you read that correctly, Walmart is a
leader in environmentalism. In 2008, Walmart ran an ad campaign designed to raise awareness
about the environment and the product choices consumers could make. Using CSR can help you
engage with your customers in new ways. Since the message is about something good, it can
often be an easier way to talk to your customers. This is an underused tool for business-tobusiness company communication.

5)Employee engagement
Along similar lines, if your own employees dont know whats going on within your
organization, youre missing an opportunity. Companies like Sara Lee created a cross-functional,
global Sustainability Working Team to help create a strategy for sustainability. At a more grass
roots level, the Solo Cup Company created the Sustainability Action Network to activate
employees in community service focused on the companys CSR priorities.

Develop a CSR Strategy

What is a CSR strategy?
The CSR assessment generates a base of information the firm can use to develop a CSR strategy.
A CSR strategy is a road map for moving ahead on CSR issues. It sets the firm's direction and
scope over the long term with regard to CSR, allowing the firm to be successful by using its
resources within its unique environment to meet market needs and fulfill stakeholder
expectations. A good CSR strategy identifies the following:

overall direction for where the firm wishes to go in its CSR work
a basic approach for proceeding

specific priority areas

Immediate next steps.

Different firms may be at different stages of awareness of and work on CSR, which will dictate
the contents of the strategy, some may decide to adopt a "minimum necessary" stance. Others
may wish to make strategic forays into particular areas.
Why have a CSR strategy?
There is a well-known expression that if you do not know where you are going, there is very
little chance you are ever going to get there. This is as true with respect to CSR as it is with any
other business approach. Following a CSR strategy helps to ensure that a firm builds, maintains
and continually strengthens its identity and its market.
How to develop a CSR strategy
The following five steps comprise a suggested way to develop a CSR strategy.
1. Build support with senior management and employees
2. Research what others are doing

3. Prepare a matrix of proposed CSR actions

4. Develop options for proceeding and the business case for them
5. Decide on direction, approach and focus areas
There is no magic to this. The steps could be done in a different order or be called by different
names, but taking them all will increase the likelihood of the firm having a systematic and
realizable CSR strategy.
It is clear that a CSR strategy is unlikely to succeed when it is not based on a clear understanding
of the firm's values, when it fails to take advantage of the ideas of those who might provide
assistance, and when it does not approach issues systematically, building on strengths and
addressing weaknesses.
1. Build support with senior management and employees
Without the backing of a firm's leadership, CSR strategies have little chance of success.
The first step in developing a CSR strategy is thus for the leadership team to report back to
senior management (and, ultimately, the board of directors) about the key findings of the
assessment and to gauge interest in moving ahead. Quite likely, the assessment will have
indicated that several aspects of current operations are vulnerable to external criticism, or that
there appear to be real opportunities for synergies or new products in certain areas. The
assessment could also have found that current decision making on CSR issues is uncoordinated
or that there is considerable interest in specific CSR issues or pressure from certain key
stakeholders in these areas.
It is important for the leadership team to continue to work to build support among employees,
given the key role they will ultimately play in CSR implementation.
2. Research what others are doing
Although it is possible for the CSR leadership team, working with other members of the firm, to
develop a CSR approach entirely on its own, there is considerable value in drawing on the
experience and expertise of others. Three useful sources of information are other firms, industry
associations and CSR specialist organizations.
If the leadership team finds that companies are emphasizing different CSR activities, it could
examine the similarities and differences between the company and these firms. Examining the
vision, values and policy statements of leading competitors, along with their codes, new CSRrelated product lines or approaches, and any initiatives or programs in which they participate, can
be very useful. Assessing the benefits, costs, immediate outcomes, resource implications and
changes to current practices necessary for the firm to adopt similar approaches may also provide
helpful information.

3. Prepare a matrix of proposed CSR actions

With this background it should be possible to create a matrix of proposed CSR actions, possibly
set out by environmental, social and economic aspects, although there may be some overlap. The
leadership team can plot current and possible CSR activities, processes, products and impacts on
the matrix, cross-referencing them against the firm's current activities and structure to see how
well they fit.

Example of matrix of proposed CSR actions

Environmental activity

Economic
activity
Social
activity
(e.g.
quality
assurance,
(e.g. workers, communities)
customer satisfaction)

Current

Current

Proposed

Registered Kyoto
Processes to
ISO emission
14001*
reductions?

Certified
OHSAS*

Products
/services

Some
Could
products use
products be None
Environcertified
to present
mental
Energy Star?
Choice logo

Impacts

Internal
Internal
Supply chain
impact
impact
/community
assessment
assessment
impacts?
undertaken
undertaken

Responsibility
centre

Environmental
Deptartment

Affairs Human
Department

Proposed

Current

SA8000*
to or Fair Labor Registerd
Association ISI9001*
(FLA)

Proposed
Integrated
to managment
systems
(IMS)?

Possible
Use of ISO
SA
8000
Keep abreast
at
9001 logo on
or
FLA
of ISO work
company
product
on IMS?
letterhead
certification
Internal
Supply chain/
impact
community
assessment
impacts?
undertaken

Supply chain/
community
impacts?

Resources Manager, Quality/Customer

Satisfaction

4. Develop options for proceeding and the business case for them
Two options for proceeding at this point are to take an incremental approach to CSR or to decide
on a more comprehensive change in direction. The evolution of the Responsible Care program of
the Canadian Chemical Producers' Association is a good example of the former. This program
started with a broad set of principles but now includes detailed codes, conformity assessment,
public reporting and involvement of community and non-governmental organization
representatives.

Ethical Dilemma
Ethical dilemmas, also known as a moral dilemmas, are situations in which there are two
choices to be made, neither of which resolves the situation in an ethically acceptable fashion. In
such cases, societal and personal ethical guidelines can provide no satisfactory outcome for the
chooser.
Ethical dilemmas assume that the chooser will abide by societal norms, such as codes of law or
religious teachings, in order to make the choice ethically impossible.
Knowing how to best resolve difficult moral and ethical dilemmas is never easy especially when
any choice violates the societal and ethical standards by which we have been taught to govern
our lives.
What Causes an Ethical Dilemma in Conducting Business?
Pressure from Management
Each company's culture is different, but some companies stress profits and results above all else.
In these environments, management may turn a blind eye to ethical breaches if a worker
produces results, given the firm's mentality of "the end justifies the means." Whistle-blowers
may be reluctant to come forward for fear of being regarded as untrustworthy and not a team
player. Therefore, ethical dilemmas can arise when people feel pressured to do immoral things to
please their bosses or when they feel that they can't point out their coworkers' or superiors' bad
behaviors.
Ambition and Discrimination
Individual workers may be under financial pressure or simply hunger for recognition. If they
can't get the rewards they seek through accepted channels, they may be desperate enough to do
something unethical, such as falsifying numbers or taking credit for another person's work to get
ahead. Though diversity is an important part of business, some people may not be comfortable
with people from different backgrounds and possibly be reluctant to treat them fairly. This kind
of discrimination is not only unethical but illegal and still remains common.

Negotiation Tactics
While these factors can cause ethical dilemmas for workers within their own companies, doing
business with other firms can also present opportunities for breaches. Pressure to get the very
best deal or price from another business can cause some workers to negotiate in bad faith or lie to
get a concession. Negotiators may also try to bribe their way to a good deal. While this is illegal
in the U.S., it still sometimes happens; in other nations, it is more common, and sometimes even
expected, which can put negotiators in a difficult position.
Solutions
These ethical dilemmas can be difficult for workers to grapple with, especially if they don't know
what the company's official guidelines are. Therefore, it is in an organization's best interest to
provide ethical training to its employees, to help them identify unethical behavior and give them
tools with which to comply. Every company should have an ethical policy that spells out its
penalties for infractions. Moreover, management must lead by example, showing that the
company takes ethics seriously and that violators will be punished according to the organization's
policies, including possible suspension or termination.
How to Resolve Ethical Dilemmas in the Workplace
Employees make decisions at all levels of a company, whether at the top, on the front line or
anywhere in between. Every employee in an organization is exposed to the risk of facing an
ethical dilemma at some point, and some ethical decisions can be more challenging to fully
understand than others. Knowing how to resolve ethical dilemmas in the workplace can
increase your decision-making effectiveness while keeping you and your company on the
right side of the law and public sentiment.
Step 1
Consult your company's code of ethics for formal guidance. This simple act may be able to
resolve your dilemma immediately, depending on how comprehensive and specific your
company's ethics statement is. Your code of ethics can provide a backdrop on which to weigh the
pros and cons of business decisions, giving you a clearer picture of which decision is more in
line with the company's ethical commitments.
Step 2
Share your dilemma with your supervisor to take advantage of her experience. Front-line
employees can face a number of ethical dilemmas in their jobs, such as deciding whether to give
out a refund that does not specifically adhere to company policies or whether to report suspicions
of internal theft which cannot be proven. Taking ethical questions to supervisors can keep
employees out of trouble in addition to resolving conflicts.

Step 3
Discuss your dilemma with other executives if you are at the top of your organization.
Executives and company owners make some of the farthest-reaching decisions in any
organization, adding weight and additional challenges to ethical dilemmas. As an executive, it is
important to show your competence at solving problems on your own, but there is nothing wrong
with asking for help from time to time. Other executive team members should appreciate your
commitment to making the right decision and should be able to provide unique insights into your
problem.
Step 4
Speak with peers and colleagues from other companies if you can do so without divulging
company secrets. If you are a sole proprietor, you may not have any other top-level managers to
consult with. Seek out someone you trust from a business networking group, a previous
employer or your college years to gain insight from others. Consider speaking with friends from
diverse cultural backgrounds to gain an even wider range of insights.
Step 5
Read past news articles about other companies faced with your specific dilemma. Determine how
others have dealt with your challenge before and take note of the outcome of their decisions.
News outlets like to cover certain large company decisions, such as laying off workers,
endorsing political candidates and bending accounting rules, which can have ethical impacts in
society. Reading what happened to others after making their decisions can give you a glimpse
into what to expect if you make a similar decision.
Common Types of Ethical Issues within Organizations
Health and Safety
One area of ethical consideration for employers is how to balance expense control with the
health and safety interests of employees. Manufacturing plants and other workplaces where
employees use dangerous equipment or engage in physically demanding work should have
strong safety standards that not only meet federal requirements, but that also make eliminating
accidents a priority. Even standard office workplaces pose health risks to employees who are
asked to sit or stand all day. Unfortunately, certain organizations opt to cut corners on safety
controls, equipment and training to save money. This is both unethical and potentially damaging
in the long run if major accidents occur.
Technology
Advancements in technology and the growth of the Internet in the early 21st century have
produced a slew of ethical dilemmas for companies. Company leaders have to balance the
privacy and freedom of workers while also maintaining standards that require that company
technology use is for legitimate business purposes. Certain companies go so far as to monitor all

online use and email communication from employee computers and work accounts. A company
may have this right, but its leaders need to understand the potential concern about privacy and
autonomy among employees.
Transparency
Prominent business and accounting scandals have made it imperative that companies operate
with openness and transparency. For public corporations, this includes honest, accurate and
complete reporting on mandated financial accounting reports. For large and small businesses,
transparency includes communicating messages, including marketing messages, that aren't open
to misinterpretation and that clearly represent the intentions of the company and its messages.
Being caught in a lie or avoiding full disclosure may cause irreparable harm to small businesses.
Fair Working Conditions
Companies are generally expected to provide fair working conditions for their employees in the
business environment, but being responsible with employee treatment typically means higher
labor costs and resource utilization. Fair pay and benefits for work are more obvious elements of
a fair workplace. Another important element is provision of a nondiscriminatory work
environment, which again may have costs involved for diversity management and training.