CORPORATE SOCIAL RESPONSIBILITY: INTEGRATING CSR WITH BUSINESS VALUE

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CORPORATE SOCIAL RESPONSIBILITY: INTEGRATING CSR WI TH BUSINESS VALUE

ANUJA ROY, YAGBALA KAPI & NUPUR SIDH

Institute of Technology and Science, Mohan Nagar, Ghaziabad

ABSTRACT

Globalization today has brought along with it unmatched challenges and opportunities as well. Indian businesses

turning global now need to take a leadership role in the challenges of time. In this scenario, businesses need to align

environmental and ethical responsibilities into their governance thereby ensuring long term success, competitiveness,

sustainability and value. Undoubtedly businesses are an integral part of society, and play an active role in contributing to

healthy ecosystems, improve the manner in which institutions understand and engage their communities, as well as how

they explore, view, and challenge barriers, thereby leading to good governance. During recent years many frameworks

have been developed to align business management with environmental and ethical practices- one such is Corporate Social

Responsibility (CSR).

This paper is an endeavor to associate CSR with business value.

Objectives of the Study

• Broad Overview of CSR

• Legal Guidelines Under Companies Bill 2012

• CSR - As a marketing strategy

• CSR in a nascent stage in India

• Integrating CSR with business value

• Conclusion and Future Strategy

Research Methodology

The present paper is divided into five sections based on SECONDARY DATA taken from newspapers, books,

reputed journals and websites. This paper is subdivided into various sections as per the objectives.

KEYWORDS : Corporate Social Responsibility, Business Value, Sustainable Development, Social Responsibility, Value

Based Management, Act of Philanthropy, Charitable Causes, Social Concern, Stakeholders’ Interests, Systematic

Implementation

INTRODUCTION

Broad Overview of CSR

The CSR concept came into existence in 1953 when it became an educational topic in HR Bowen’s “Social

Responsibilities of the Business”. Ever since then, there has been ongoing debate with regards to the concept and

International Journal of Business Management & Research (IJBMR) ISSN(P): 2249-6920; ISSN(E): 2249-8036 Vol. 4, Issue 4, Aug 2014, 1-10 © TJPRC Pvt. Ltd.

2 Anuja Roy, Yagbala Kapi & Nupur Sidh

Impact Factor (JCC): 4.9926 Index Copernicus Value (ICV): 3.0

implementation of the same. One of the most important definitions is from the World Bank Group, stating, “Corporate

social responsibility is the commitment of businesses to contribute to sustainable economic development by working with

employees, their families, the local community and society at large, to improve their lives in ways that are good for

business and for development “.

Every business organization should frame a CSR policy to guide its strategic planning and provide a guideline for

its CSR initiatives, which should be an essential part of overall business policy and in accordance with its business goals.

Furthermore, the policy should be framed with the involvement of various level executives and should be approved by the

Management.

Essential Fundamentals

The CSR policy should generally cover the following:

Care for All Stakeholders

The organization should regard the interests of, and show responsiveness towards shareholders, employees,

customers, suppliers, society at large etc. and create worth for everyone.

Ethical Functioning

Ethics, Transparency and Accountability should be the practice. Companies should not involve in business

practices that are abusive, unfair or by any means dishonest.

Respect for Workers' Rights and Welfare

A safe and hygienic environment should be provided to employees. Necessary trainings for enhancement of skill

development should be provided to employees. An effective grievance redressal system should be in place. Child or forced

labour should be abolished.

Respect for Human Rights

Companies should regard and respect human rights for all and should not support human rights abuses neither by

them or any other third party.

Respect for Environment

Necessary measures should be taken by organizations to check and prevent pollution; recycle and reduce waste.

Natural resources should be managed in a sustainable manner thereby ensuring maximum utilization of resources like land

and water, Efficient production methods to be adopted in order to handle the challenges of climate. Organizations should

by and large promote efficient use of energy and technologies that are eco friendly.

Activities for Social and Inclusive Development

In accordance with their core competency and business interest, companies should carry out activities for

economic and social development of communities and geographical areas - in the area of education, skill building for

livelihood of people, health, cultural and social welfare etc., particularly targeting the underprivileged sections of society.

Corporate Social Responsibility: Integrating CSR with Business Value 3


How CSR Policy Should be Implemented?

The CSR policy of the firm should provide for an execution strategy which should include identification of

projects/activities, setting measurable physical targets within a particular time period and monitoring. Companies may

partner with local authorities, business associations and civil society/non-government organizations. They may influence

the supply chain for CSR initiative and motivate employees for voluntary effort for social development. They may develop

a system of need and impact assessment while undertaking CSR activities in a particular area.

• Companies should allocate specific amount in their budgets for CSR activities. This amount may be related to

profits after tax, cost of planned CSR activities or any other suitable parameter.

• To share experiences and network with other organizations the company should engage with well established and

recognized programs/platforms which encourage responsible business practices and CSR activities. This would

help companies to improve on their CSR strategies and effectively project the image of being socially responsible.

• The companies should disseminate information on CSR policy, activities and progress in a structured manner to

all their stakeholders and the public at large through their website, annual reports, and other communication

media.

Corporate Social Responsibility Voluntary Guidelines 2012

In order to assist the businesses to adopt responsible governance practices, the Ministry of Corporate

Affairs has prepared a set of voluntary guidelines which indicate some of the core elements that businesses need to

focus on while conducting their affairs. These guidelines have been prepared after taking into account the governance

challenges faced in our country as well as the expectations of the society. The valuable suggestions received from trade and

industry chambers, experts and other stakeholders along with the internationally prevalent and practiced guidelines,

norms and standards in the area of Corporate Social Responsibility have also been taken into account while

drafting these guidelines.

Provision for CSR in Companies Bill 2012

The Companies Bill, 2012 incorporates a provision of CSR under Clause 135 which states that every company

having net worth Rs. 500 crore or more, or a turnover of Rs. 1000 crore or more or a net profit of rupees five crore or more

during any financial year, shall constitute a CSR Committee of the Board consisting of three or more Directors,

including at least one Independent Director, to recommend activities for discharging corporate social responsibilities

in such a manner that the company would spend at least 2 per cent of its average net profits of the previous three years on

specified CSR activities. It is proposed to have detailed rules after passing of Companies Bill 2012 by Rajya Sabha to give

effect to this provision.

According to Schedule-VII of Companies Bill, 2012 the following activities can be included by companies in

their CSR Policies: -

• Eradicating extreme hunger and poverty;

• Promotion of education;



• Promoting gender equality and empowering women;

• Reducing child mortality and improving maternal health;

• Combating human immunodeficiency virus, acquired immune deficiency syndrome, malaria and other diseases;

• Ensuring environmental sustainability;

• Employment enhancing vocational skills;

• Social business projects;

• Contribution to the Prime Minister’s National Relief Fund or any other fund set by the Central Government or the

State Governments for socio-economic development

CSR – As a Marketing Strategy

In today’s scenario businesses to sustain in the long run must go beyond competitive benchmarking and best

practices. Professor Michael Porter (Harvard Business School) proposes, strategy is about choosing a competitive

positioning—doing things differently from competitors in a way that lowers costs or better serves a particular set of

customer needs. This approach can easily be broadened to include a company’s relationship to society, as it invests in

identifying and developing innovations that have a positive social impact and at the same time strengthen the company’s

competitiveness. In other words, the more closely tied a social issue is to the company’s business and vision, the greater is

the chance to leverage the company’s resources and capabilities to benefit society as well as itself.

Shifting from ad hoc and fragmented CSR initiatives to a strategic mind-set emphasizing selection, action, and social and

business impact will require dramatically different thinking for many corporations. There are four steps that allow

companies to take a strategic approach to CSR:

• Integrated Business Modeling and Stakeholder Analysis: The business is modeled so to highlight all relevant

stakeholders, their relationships, and their possible impact on the company’s operations and strategies in the short

and long terms.

• Evaluation of Company Positioning with Respect to its Stakeholders: Threats and opportunities coming from

each stakeholder group are analyzed and compared with the company’s capabilities.

• Strategic Options Generation and Evaluation: Options for managing the company’s value proposition to each

stakeholder group are generated and evaluated qualitatively and quantitatively.

• Investment Monitoring Panel: The chosen strategy implementation is detailed in a set of performance indicators

to be used for tracking and following-up on investments returns, both tangible and intangible.

CSR in a Nascent Stage in India

Even though there are signs of more sophisticated and strategic approaches to CSR, many firms are at a stage

where CSR is mainly evolving around marketing, public relations or simply a corporate philanthropy. As per records,

maintained by the Center for Monitoring the Indian Economy (CMIE), 5152 companies are listed as on January 31, 2013.

However from this exhaustive list only few companies are known to undertake CSR activities. The obvious question that



arises is the level of CSR commitment shown by other firms? The possibilities are a) some firms may be actively

undertaking CSR initiatives but are not getting adequate media mileage or else b) few profit making companies are still not

spending on CSR. In the first case, recent regulations have made it mandatory for companies to declare the CSR spending.

In the second case, the regulation forces them to think and act on the concept. It implies that firms should allot a certain

percentage of their earnings and also participate in CSR initiatives. It has been seen that in the recent past women and

children have been the key focus of such initiatives.

Integrating CSR with Business Value

In the business context, value is generated either by doing business with a particular company through sheer

economic logic (e.g., financial stability, low-cost position, technological superiority), ie, termed as hard power and by

attracting stakeholders to the company allowing the company to gain influence—either through a seductive brand, a heroic

mission, or its willingness to be a genuine part of the community which is termed as soft power. Even though the former is

crucial in enduring success, the latter is equally important for sustainenance. For instance, consumers do not simply

purchase the technically superior or cheapest products they buy brands that offer emotional or aspirational connections as

well.

Hence, how should companies attract, convince, and influence the various stakeholders in their

business—customers; employees; shareholders; government officials; and broader civil society, including NGOs, unions,

and community groups—to align goals and drive business success and value? Exhibit 1, highlights four dimensions and

one common platform to achieve business value.

Technology and Innovation Leaders

For many companies, technology and innovation are at the core of their soft power. These leaders do more than

simply offer superior products; they leverage their innovation capabilities to build further strength. This can take the form

of enhanced branding, a superior ability to attract key talent, and an active role in shaping industry standards and future

research directions.

Management and Leadership Mystique

Companies such as GE, Apple, and Toyota have built their soft power in part on a management and leadership

mystique. The basis can be a distinctive management process, for example, the “Toyota Way” of manufacturing and GE’s

application of Six Sigma methodologies. Soft power can also arise from the character of the company’s leader. One good

example is Steve Jobs at Apple, whose track record and persona have successfully reinvigorated that company’s internal

effectiveness and consumer appeal.

Responsible and Influential Citizen

Increasingly, companies realizing their full potential of soft power are staking out positions as good citizens in the

public arena. One example mentioned previously is the case of Toyota and its hybrid car Prius. Toyota, long a management

innovator, moved rapidly to position itself as an environmentally friendly auto company with the promotion of Prius, at a

time when U.S. manufacturers had shown little interest.



Customer Aspiration and Inspiration

Many leading soft power companies are able to connect with and inspire customers around the world by appealing

to their self-image and dreams. The very act of owning the product becomes aspirational. For example, when Apple

launched the iPod, MP3 players had been marketed already for several years, but it was the iPod that became a must-have

icon—reinvigorating the Apple brand in a way that extended beyond the iPod to the Mac computer.

Values-Based Management and Leadership

This is the common platform underscoring the four previous elements. Global attractors develop a culture and

leadership style that is effective in aligning, inspiring, and engaging employees around the world from many diverse

cultures and backgrounds with different aspirations.

Thus the key to generating business value is based on a deep understanding of what the stakeholders value and

how the company can fulfill those needs – by way of a aspirational brand, a heroic mission, a distinctive talent

development approach, or a willingness to be a genuine part of the community.

Notable CSR Initiative Taken by Some Companies

Corporate social responsibility (CSR) is emerging as a new field in the management research. In India, many

firms have taken the initiatives of CSR practices which have met with varying needs of the society. During the recent

times, Indian companies have more clearly understood the inter linkage between CSR and long term business sustenance.

The following are the CSR initiatives taken by both public sector and private sector companies:

Ashok Leyland

Operates a FunBus in Chennai and New Delhi. This bus, equipped with a hydraulic lift, takes differently abled

children and those from orphanages and corporation primary schools on a day’s picnic. The company also runs AIDS

awareness and prevention programmes in its Hosur factories for about 3.5 lakh drivers.

Axis Bank

The Axis Bank Foundation runs Balwadis which are learning places for children living in large urban slum

clusters. It also conducts skill development programmes (PREMA and Yuva Parivartan) in motor driving, welding, mobile

repairing, tailoring etc, for the youth in backward districts.



Bharat Petroleum Corporation

Its rain water harvesting project Boond, in association with the Oil Industries Development Board, selects

draught-stricken villages to turn them from „water-scarce to water-positive‟. Some of BPCL‟s other social programmes

include adoption of villages, prevention and care for HIV/AIDS and rural health care.

Hindalco Industries

Its CSR activities are concentrated in 692 villages and 12 urban slums, where it reaches out to about 26 lakh

people. It has constructed check dams, ponds and bore wells to provide safe drinking water. In education, it awards

scholarships to students from the rural schools it support. Its other interests include women‟s empowerment and health

care, in which it treats patients in hospitals, runs medical camps and operates rural mobile medical van services.

Indian Oil Corporation

It runs the Indian Oil Foundation (IOF), a non-profit trust, which works for the preservation and promotion of the

country‟s heritage. IOCL also offers 150 sports scholarships every year to promising youngsters. Some of its other

initiatives lie in the domains of clean drinking water, education, hospitals and health care.

Infosys

The Infosys Science Foundation, set up in 2009, gives away the annual Infosys Prize to honour outstanding

achievements in the fields of science and engineering. The company supports causes in health care, culture and rural

development. In an interesting initiative undertaken by it, 100 school teachers in Karnataka, who were suffering from

arthritis, underwent free surgery as a part of a week-long programme.

Mahindra & Mahindra

Nanhi Kali, a programme run by the KC Mahindra Education Trust, supports education of over 75,000

underprivileged girls. The trust has awarded grants and scholarships to 83,245 students so far. In vocational training, the

Mahindra Pride School provides livelihood training to youth from socially and economically disadvantaged communities.

M&M also works for causes related to environment, health care, sports and culture.

Oil & Natural Gas Corporation

It offers community-based health care services in rural areas through 30 Mobile Medicare Units (MMUs). The

ONGC-Eastern Swamp Deer Conservation Project works to protect the rare species of Easter Swamp Deer at the

Kaziranga National Park in Assam. ONGC also supports education and women empowerment.

Tata Consultancy Services

Its Computer Based Functional Literacy (CBFL) initiative for providing adult literacy has already benefitted

1.2 lakh people. The programme is available in nine Indian languages. Besides adult education, TCS also works in the

areas of skill development, health care and agriculture.



Tata Steel

It comes out with the Human Development Index (HDI), a composite index of health, education and income

levels, to assess the impact of its work in rural areas. Health care is one of its main concerns. The Tata Steel Rural

Development Society aims to improve agricultural productivity and raise farmers’ standard of living.

“India’s Top Companies Based on

Net Sales for the Financial Year 2012 and Their Spending on CSR”

Annexure 1

CONCLUSIONS & FUTURE RESEARCH AREA

In the global arena, CSR has gained prominence. However in an emerging market like India, there is vast scope

for further implementation of the initiative or drive. The implementation part would result from two factors a) as per the

law, a compulsory 2%investment in CSR and b) increased sensitivity of firms towards CSR activities. This in turn will lead

to generating business value in the long run.

Future research work could focus on the following key areas such as:

• Studies could look at customer and stakeholder perception of CSR with regard to the activities of large firms in

this domain.

• Empirical work could be undertaken where the emphasis would be to understand the relationship between the

firm’s market value and its investment in CSR.

• Studies ascertaining the role of top management and their vision for CSR involvement aligned with business

projections of the firm.

This could provide a new research avenue and several interesting management insights could be gleaned for the

CSR perspective.



REFERENCES

1. Corporate Governance: Principles, Policies and Practices, Pearson Education – A.C. Fernando,

ISBN 81-7758-565-7

2. CSR: Building Brand and Linking Corporate Strategy with Philanthropy, Vol 5, No 2, July – December 2012,

BVIMR Management, ISSN No – 0976-0431, RNI No : DELENG/2007/25437

3. Corporate Governance – Bob Tricker, ISBN No: 9780-0-19-958246-4

4. Journal Of Management & Entrepreneurship, ISSN – 2229-5348, October – December 2013, Vol 6, Issue 4

5. Gyan Management, vol 7, Issue 2 ( Jul- Dec 2013)

6. Management centre for human values, Indian Institute of Mgmt, Calcutta, ISSN 0971-6858

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