Corporate Social Responsibly

And Global Economic Crisis

*Dr. C. M.JanardhananPillai **Dr.K.Dhamodharan

Abstract

There was a time when corporate social responsibility (CSR) was considered a luxury by
successful companies; it was a set of initiatives implemented when the company
was in rich green pastures and when it could easily afford a lot to the society. This
made the Companies “feel good” and they felt elevated that they had done
something out of the way for ethical, altruistic and branding purposes – but
definitely not as part of a company’s core strategy. This is not the case today
looking ahead; the world will never slide back to the state it was in before the
crisis struck. The rules of the game are changing, and the values of sustainability
and responsibility underpin these new rules. Corporate social responsibility is
nothing that is being done as a favor but is the core requirement of the time. In a
world of changing expectations, companies must account for the way they impact
the communities and environments where they operate CSR has become
mainstream, and looking ahead I suggest that adherence to the principles of CSR
is likely to become mandatory if companies are to be licensed to operate at all.
There is a role to be played by the Governanment, employers, trade unions and
NGOs.

In reality, the evidence of the past months suggests that commitment to CSR is neither
being reduced nor abandoned during this crisis – except in those cases of total
bankruptcy. Investors, consumers, employees and politicians will no longer accept the
level of greed, the lack of respect for the environment, and the appetite for short-term
gain that brought the crisis upon us. And implement this condition if they wish to
succeed. CSR policies can contribute to the sustainability of companies in times of global
economic crisis. Corporate social responsibility is the key condition for a continued
global market economy, and companies will need to accept and implement this condition
at any cost.

Key Words:- Core Strategy. Mandatory, Sustainability, Future generation

*Dr.M.Janardhanan Pillai is a Assistant Professor in Economics ,Alagappa Government

Arts College,Karaikudi

** Dr.K. Dhamodharan is Senior Building Inspector, N.L.C., Neyveli, Tamilnadu

 Corporate Social Responsibility And Global
Economic Crisis
1 2
Dr.M.Janardhanan Pillai Dr.K.Dhamodharan

Introduction
Corporate social responsibility (CSR), also known as corporate responsibility, corporate
citizenship, responsible business, sustainable responsible business (SRB), or corporate
social performance, is a form of corporate self-regulation integrated into a business
model. Ideally, CSR policy would function as a built-in, self-regulating mechanism
whereby business would monitor and ensure its adherence to law, ethical standards, and
international norms. Business would embrace responsibility for the impact of their
activities on the environment, consumers, employees, communities, stakeholders and all
other members of the public sphere. Furthermore, business would proactively promote
the public interest by encouraging community growth and development, and voluntarily
eliminating practices that harm the public sphere, regardless of legality. Essentially, CSR
is the deliberate inclusion of public interest into corporate decision-making, and the
honoring of a triple bottom line: People, Planet, Profit.

The practice of CSR is subject to much debate and criticism. Proponents argue that there
is a strong business case for CSR, in that corporations benefit in multiple ways by
operating with a perspective broader and longer than their own immediate, short-term
profits. Critics argue that CSR distracts from the fundamental economic role of
businesses; others argue that it is nothing more than superficial window-dressing; others
argue that it is an attempt to pre-empt the role of governments as a watchdog over
powerful multinational corporations.

Business ethics is one of the forms of applied ethics that examines ethical principles and
moral or ethical problems that can arise in a business environment. Business ethics can be
both a normative and a descriptive discipline. As a corporate practice and a career
specialization, the field is primarily normative. In academia, descriptive approaches are
also taken. The range and quantity of business ethical issues reflects the degree to which
business is perceived to be at odds with non-economic social valuesIn the increasingly
conscience-focused marketplaces of the 21st century, the demand for more ethical
business processes and actions (known as ethicism) is increasing. Simultaneously,

1
Dr.M.Janardhanan Pillai is a Assistant Professor in Economics ,Alagappa Government Arts
College,Karaikudi
2
Dr.K.Dhamodharan is a Senior Building Inspector, NLC Limited,Neyveli
pressure is applied on industry to improve business ethics through new public initiatives
and laws

Development of Corporate Social Responsibility

The term CSR came in to common use in the early 1970s although it was seldom
abbreviated. The term stakeholder, meaning those impacted by an organization's
activities, was used to describe corporate owners beyond shareholders as a result of an
influential book by R Freeman in 1984.

Whilst there is no recognized standard for CSR, public sector organizations adhere to the
Triple Bottom Line (TBL). It is widely accepted that CSR adheres to similar principles
but with no formal act of legislation.

Historically, interest in business ethics accelerated dramatically during the 1980s and
1990s, both within major corporations and within academia. For example, today most
major corporate websites lay emphasis on commitment to promoting non-economic
social values under a variety of headings (e.g. ethics codes, social responsibility charters).
In some cases, corporations have re-branded their core values in the light of business
ethical considerations (e.g. BP's "beyond petroleum" environmental tilt).

Corporate Social Responsibility and Global Economic Crisis

In recent years, corporate social responsibility (CSR) initiatives across North America,
Europe and Asia seems like an increasingly popular activity undertaken by companies.
An increasing number of multinational companies have established dedicated CSR units
and began reporting publicly on a range of socially responsible initiatives from
environmental sustainability and human rights to corporate philanthropy.

Up until a year ago, it would have been odd to question the viability and the substance of
CSR, given its widespread awareness and growing participation. Then, leading
investment bank Lehman Brothers, collapsed, turning what was previously a simmering
financial hiccup into a full-blown global economic crisis.

There are two viewpoints toward the survival of CSR. Optimists believe that economic
stringency might actually re-make the way corporations look at their socially responsible
programmes. Businesses might use these belt-tightening times to “differentiate
themselves from their ‘fair-weathered’ counterparts”. As the public mood veers towards
greater accountability, it is imperative that the commitment to corporate responsibility
remained strong.

Cynics, on the other hand, believe that the hard reality of recession will show CSR up as
an “increasingly empty and illusionary notion” and a “bold façade built on inadequate
foundations”. These see CSR as just a series of public relations exercises where cursory
charity ventures are promoted to paint a picture of responsible organizations working in a
world of caring capitalism.

CSR initiatives have actually been undertaken with good intentions and are beneficial to
society. They’ve engaged with community organizations, extended pro bono support,
provided volunteers and encouraged payroll giving, established matching programmes
and dollars-for-doers initiatives, served on board on not-for-profits. They’ve learnt to
build partnerships with community-based organizations that have been keen to gain their
financial support. Some of these have worked in areas where governments and their
bureaucracies have a history of failure.

Therefore, the real question to ask is not whether CSR is a good thing – it definitely is –
but whether it is perceived as valuable enough to survive sharp declines in business
profitability and shareholder value.

Until the current financial slump, business leaders have believed in the increasing
importance of CSR. The problem is finding a definitional clarity to the concept and
ensuring that its initiatives are an integral part of business’ operations rather than
superficial, symbolic gestures.

In 2008, in the third of its bi-annual global CEO studies, IBM surveyed 1,100 business
leaders in 40 different countries. Two-thirds of these executives viewed CSR as
increasingly important. They also admitted, however, to finding it hard to put into
practice.

Where CSR was initially seen as a defensive strategy designed to stave off regulatory
intervention, legal challenge, or to counter the media campaigns of consumer and
community activists, it is increasingly presented as a positive strategy, able to add value
to long-term corporate goals by adding comparative advantage to market competitors. It
has also been argued that business communities’ increasing embrace of global issues such
as climate change and human rights can help it regain the trust of consumers and
investors. Corporate social responsibility now espouses its mission in terms of an implicit
social contract between business and civil society,

However, he laments, there are still some people who think that CSR is merely about
giving stuff away. International Group Inc (AIG), the Bank of America (BOA) and
Citigroup. All these financial institutions – which have suffered huge losses, are being
kept alive by the US government with billions in bailout money.

Before the crisis hit, the list of programmes launched by these companies certainly look
impressive: Bank of America’s contributions to charities that were leaders in reducing
greenhouse gas emissions, and Citigroup’s school donations and environmentally-linked
loans, had so impressed investors that they did not question whether “these businesses
were actually doing their business”.
The problem is not that the community and environmental commitments of these
corporations have been unworthy. It is that the internal corporate behaviors revealed are
too often at odds with the goals of reputation and sustainability that are what is meant to
underpin CSR. At the very least, the core values and activities of some financial
companies did not reflect the CSR to which they were publicly committed.

Good banking practices of risk-assessment were compromised and remuneration at these

financial institutions rewarded short-term performance base on immediate paper profits
rather than on sustainable operation cash flows. This encouraged excessive risk-taking
behavior.

CSR generally recognizes that companies, to be good corporate citizens, need to do more
than obey the laws and regulations and meet statutory requirements. The difficulty is that
beyond that there are a whole plethora of ways to exhibit ethical standards, social concern
and environmental care. Consequently, different companies and different stakeholder
groups will emphasize different priorities.

Businesses need to believe that caring for employees, communities and the environment
is not only politically and ethically correct, but also make good business sense. Most
equated CSR with philanthropic activities such as corporate donations and volunteering
with one interviewee going so far as to say that Singapore companies tend to see CSR as
“donating money to charities and putting out a statement so that people know they have
done it”.

If CSR is not perceived as a benefit to business, then the view of companies and their
shareholders is likely to favors a reduction in its activities. “We need to see reputation
and sustainability not only in external programmes but also in the way the business
allocates its resources, manages risk, organizes remuneration structure, and the leadership
culture that it aspires to. It needs to be formed by an ethos of collaboration built upon the
negotiation of shared power objectives with a not-for-profit organization and social
enterprise that articulates and represents the community interest.

Managing the Social Dimension of the crisis through CSR

CSR is no more optional. It has become mandatory for organizations to make it part of
their core strategy. Companies expected to do the following:-

• Companies are expected to respect the rights of employees and create decent
working conditions.

• Companies to protect the environment and the climate. Public–private

partnerships will be invaluable in developing climate policies and new
technologies. We need to speed up the development of new, clean technologies
and ensure rapid deployment around the world.
 • Companies to engage in fighting corruption and increasing transparency.
Transparency about a company’s operations and their impacts on people and the
environment is in itself a kind of soft power. What happens in the open will be
dealt with, what is hidden may be ignored. We need soft, but firm, mechanisms
driving voluntary responsibility, and transparency is one such mechanism.

Requirements for social responsibility are highly relevant in public affairs and
administration as well. The Government does not only express what it expects of
companies and regulate them. It is an agent in its own right. If we expect companies to
act responsibly, we must consider our own responsibilities and promote coherent policies
in all areas. The Government aims for the public sector to be at the forefront when it
comes to socially responsible procurement, ownership and investment.

In 2004, ethical guidelines for the pension fund were established. Active ownership is
exercised, with an emphasis on corporate governance, child rights and corporate
environmental lobbying. In some cases, the fund’s ethical council recommends exclusion
of companies that violate the guidelines. Around 30 companies have been excluded from
the fund’s investment universe.

The core of corporate social responsibility is about respecting basic human rights,
providing decent working conditions, protecting the environment – our common future. It
is about refusing to accept these expectations are as valid in times of crisis as ever. We
cannot sacrifice human dignity in our effort to turn the economy around. Rather, we will
encourage business to look forward, to think the bold thoughts that show the path to the
future. Now may be the time to explore business opportunities in countries that have yet
to benefit fully from economic globalization. Now may be the time to adjust our
technology to the demands of sustainability that we know may be enforced in the years to
come. Now may be the time for business and governments to work on shaping a new
economy for future prosperity.

The Pull Towards CSR

Corporations are motivated to adopt CSR practices by several different factors.

Ethical consumerism

The rise in popularity of ethical consumerism over the last two decades can be linked to
the rise of CSR. As global population increases, so does the pressure on limited natural
resources required to meet rising consumer demand Industrialization in many developing
countries is booming as a result of technology and globalization. Consumers are
becoming more aware of the environmental and social implications of their day-to-day
consumer decisions and are beginning to make purchasing decisions related to their
environmental and ethical concerns. However, this practice is far from consistent or
universal.

Globalization and market forces

As corporations pursue growth through globalization, they have encountered new
challenges that impose limits to their growth and potential profits. Government
regulations, tariffs, environmental restrictions and varying standards of what constitutes
labour exploitation are problems that can cost organizations millions of dollars. Some
view ethical issues as simply a costly hindrance. Some companies use CSR
methodologies as a strategic tactic to gain public support for their presence in global
markets, helping them sustain a competitive advantage by using their social contributions
to provide a subconscious level of advertising.Global competition places particular
pressure on multinational corporations to examine not only their own labour practices,
but those of their entire supply chain, from a CSR perspective.

Social awareness and education

The role among corporate stakeholders to work collectively to pressure corporations is

changing. Shareholders and investors themselves, through socially responsible investing
are exerting pressure on corporations to behave responsibly. Non-governmental
organizations are also taking an increasing role, leveraging the power of the media and
the Internet to increase their scrutiny and collective activism around corporate behavior.
Through education and dialogue, the development of community in holding businesses
responsible for their actions is growing .

Ethics training

The rise of ethics training inside corporations, some of it required by government

regulation, is another driver credited with changing the behaviour and culture of
corporations. The aim of such training is to help employees make ethical decisions when
the answers are unclear. Humans are built with the capacity to cheat and manipulate, a
view taken from , hence the need for learning normative values and rules in human
behaviour The most direct benefit is reducing the likelihood of "dirty hands" fines and
damaged reputations for breaching laws or moral norms. Organizations also see
secondary benefit in increasing employee loyalty and pride in the organization.
Caterpillar and Best Buy are examples of organizations that have taken such steps

Laws and regulation

Another driver of CSR is the role of independent mediators, particularly the government,
in ensuring that corporations are prevented from harming the broader social good,
including people and the environment. CSR critics such as Governments should set the
agenda for social responsibility by the way of laws and regulation that will allow a
business to conduct themselves responsibly.

The issues surrounding government regulation pose several problems. Regulation in itself
is unable to cover every aspect in detail of a corporation's operations. This leads to
burdensome legal processes bogged down in interpretations of the law and debatable grey
areas General Electric is an example of a corporation that has failed to clean up the
Hudson River after contaminating it with organic pollutants. The company continues to
argue via the legal process on assignment of liability, while the cleanup remains stagnant.
The second issue is the financial burden that regulation can place on a nation's economy.
The Australian government took the position that signing the Kyoto Pact would have
caused more significant economic losses for Australia than for any other OECD nation
Critics of CSR also point out that organisations pay taxes to government to ensure that
society and the environment are not adversely affected by business activities.

Stakeholder priorities

Increasingly, corporations are motivated to become more socially responsible because

their most important stakeholders expect them to understand and address the social and
community issues that are relevant to them. Understanding what causes are important to
employees is usually the first priority because of the many interrelated business benefits
that can be derived from increased employee engagement (i.e. more loyalty, improved
recruitment, increased retention, higher productivity, and so on). Key external
stakeholders include customers, consumers, investors (particularly institutional investors,
regulators, academics, and the media).

Conclusion
Although critics concerned with corporate hypocrisy and insincerity generally suggest
that better governmental and international regulation and enforcement, rather than
voluntary measures, are necessary to ensure that companies behave in a socially
responsible.At the very least, CSR has been an umbrella for well-intentioned efforts of
corporate do-good. At best it has represented a fundamental shift in the way a business
looks at itself and interacts with the society within which it functions. Increasingly,
companies are becoming interested in processes that can add visibility to their CSR
policies and activities. One method that is gaining increasing popularity is the use of
well-grounded training programs, where CSR is a major issue, and business simulations
can play a part in this.

Looking ahead, the world will never slide back to the state it was in before the crisis
struck. The rules of the game are changing, and the values of sustainability and
responsibility underpin these new rules. Investors, consumers, employees and politicians
will no longer accept the level of greed, the lack of respect for the environment, and the
appetite for short-term gain that brought the crisis upon us. Corporate social
responsibility is the key condition for a continued global market economy, and
companies will need to accept and implement this condition if they are to keep their
license to operate in order to have the long term and worldwide sustainability.

BIBLIOGRAPHY
References:-
1. Corporate Governance by P.V. Sarma S. Rajam, Kanishka Publishers,
Distributors, New Delhi
2. Corporate Governance by Anthony Williams
3. Ethics and conduct of business by John R. Boatright
4. Corporate governance by Dr. S. Singh
Links
• www. oecd.org
• www. Encycogov.com