Corporate Social Responsibility: Ethics and Challenges In India

Transcription

1 Abstract Corporate Social Responsibility: Ethics and Challenges In India Ms. Vandana Gupta, Assistant professor, Department of Management, Kasturi Ram College of Higher Education Narela, Delhi. Affiliated by Guru Gobind Singh Indraprastha University Delhi. Mail id- Dr.Vikrant Agarwal, Associate Professor, Department of Management, Kasturi Ram College of Higher Education Narela, Delhi. Affiliated by Guru Gobind Singh Indraprastha University Delhi. Mail.id- Corporate Social Responsibility (CSR) is the responsibility of the corporate entity towards the society in consideration of the support given and sacrifices made by the society. The corporations exploit the natural resources of the country, cause incidental damage to environment and inconvenience to the people of the project area. Therefore, they have a responsibility towards the society to share a part of their profit. In India companies like TATA and Birla are practicing the Corporate Social Responsibility (CSR) for decades, long before CSR become a popular basis. CSR is in a very much budding stage. A lack of understanding, inadequately trained personnel, coverage, policy etc. further adds to the reach and effectiveness of CSR programs. Large no. of companies are undertaking these activities superficially and promoting/ highlighting the activities in Media. This article focuses on the finding & reviewing of the issues and challenges faced by CSR activities in India. Keywords: CSR, Corporate Social Responsibility, Societal Marketing, Central Public Sector Enterprises, incidental damage, Sustainable development. INTRODUCTION The concept of Corporate Social Responsibility (CSR) has been developing since the early 1970s. There is no single universally accepted definition of CSR, though there are some definitions given by certain authorities. CSR is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large. CSR is a term describing a company s obligation to be accountable to all of its stakeholders in all its operations and activities. Socially responsible companies consider the full scope of their impact on communities and the environment when making decisions, balancing the needs of stakeholders with their need to make profit. CSR is a concept whereby organizations serve the interests of society by taking responsibility for the impact of their activities on customers, employees, shareholders, communities and the environment in all aspects of their operations. In simple terms CSR may be described as the responsibility of a corporation towards the society in consideration of the support given and the sacrifices made by the society. It is also important to bear in mind that there are two separate drivers for CSR. One relates to public policy. Because the impacts of the business sector are so large, and with a potential to be either positive or negative, it is natural that governments and wider society take a close interest in what business does. This means that the expectations on businesses are rising; governments will be looking for ways to increase the positive contribution of business. The second driver is the business driver. Here, CSR considerations can be seen as both costs (e.g., of introducing new approaches) or benefits (e.g., of improving brand value, or introducing products that meet sustainability demands). The remainder of this guide addresses the second of these drivers. Since businesses play a pivotal role both in job and wealth creation in society and in the efficient use of natural capital, CSR is a central management > RJEBS: Volume: 02, Number: 06, April-2013 Page 102

2 concern. It positions companies to both proactively manage risks and take advantage of opportunities, especially with respect to their corporate reputation and the broad engagement of stakeholders. The latter can include shareholders, employees, customers, communities, suppliers, governments, nongovernmental organizations, international organizations and others affected by a company s activities. Above all, CSR is about sensitivity to context both societal and environmental and related performance. It is about moving beyond declared intentions to effective and observable actions and measurable societal impacts. Performance reporting is all part of transparent, accountable and, hence, credible corporate behavior. There is considerable potential for problems if stakeholders perceive that a firm is engaging in a public relations exercise and cannot demonstrate concrete actions that lead to real social and environmental benefits. Objectives: The paper is based on followings objectives: 1) To study the concept of CSR and its legal position in India. 2) To study the challenges for CSR in India. 3) To study the factors influencing of using CSR in India. 4) To study the companies using CSR in India. Methodology of the Paper: The study is based on secondary data. Secondary data had been and writings of various authors in the stream of industry, academician, and research. The Journals and books have been referred were described in the bibliography. IMPLEMENTING CORPORATE SOCIAL RESPONSIBILITY There is no one-size-fits-all method for pursuing a corporate social responsibility (CSR) approach. Each firm has unique characteristics and circumstances that will affect how it views its operational context and its defining social responsibilities. Each will vary in its awareness of CSR issues and how much work it has already done towards implementing a CSR approach. That said, there is considerable value in proceeding with CSR implementation in a systematic way in harmony with the firm s mission, and sensitive to its business culture, environment and risk profile, and operating conditions. Many firms are already engaged in customer, employee, community and environmental activities that can be excellent starting points for firm-wide CSR approaches. CSR can be phased in by focusing carefully on priorities in accordance with resource or time constraints. Alternatively, more comprehensive and systematic approaches can be pursued when resources and overall priorities permit or require. The bottom line is that CSR needs to be integrated into the firm s core decision making, strategy, management processes and activities, be it incrementally or comprehensively. LEGAL POSITION RELATING TO CORPORATE SOCIAL RESPONSIBILITY IN INDIA In India CSR is in a very much budding stage and there is no such specific Act, Rule or Regulation relating to CSR However, there are voluntary guidelines issued by the Ministry of Corporate Affairs and guidelines issued by Ministry of Public Enterprises and Ministry of Heavy Industries of the Government of India. A. Voluntary Guidelines by Ministry of Corporate Affairs The Fundamental Principle of guidelines says, Each business entity should formulate a CSR policy to guide its strategic planning and provide a roadmap for its CSR initiatives, which should be an integral part of overall business policy and aligned with its business goals. The policy should be framed with > RJEBS: Volume: 02, Number: 06, April-2013 Page 103

3 the participation of various level executives and should be approved by the Board. The Guidelines provide certain core elements of CSR Policy, namely Care for all Stakeholders, Ethical functioning, Respect for Workers' Rights and Welfare, Respect for Human Rights, Respect for Environment and Activities for Social and Inclusive Development Further the Guidelines provides for the implementation guidance for business and Industrial entities: 1. The CSR policy of the business entity should provide for an implementation strategy; 2. Companies should allocate specific amount in their budgets for CSR activities and 3. 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 websites, annual reports, and other communication media. B. Guideline for Corporate Social Responsibility for Central Public Sector Enterprises (CPSEs) by Ministry of Public Enterprises and Ministry of Heavy Industries This guideline on Corporate Social Responsibility (CSR) was issued by Ministry of Public Enterprises on 9th April 2010 The Salient Features of Guideline: 1. Planning of CSR Action Plan: The planning for Corporate Social Responsibility should start with the identification of the activities to be undertaken. Company specific Corporate Social Responsibility strategies should be developed that mandate the design of Corporate Social Responsibility Action Plan, with a shift from the casual approach to the project based accountability approach. Each of these plans should clearly specify requirements relating to baseline survey; activities to be undertaken, budgets allocated, time-lines prescribed, responsibilities and authorities defined and major results expected. 2. Implementation of CSR Action Plan: CSR initiatives of Central Public Sector Enterprises (CPSEs) should consider the following parameters for identification/selection of schemes/projects: a) The time-frame and periodic milestones should be finalized at the outset; b) CSR activities should help in building a positive image of the company in the public perception; c) CSR projects may be closely linked with the principles of sustainable development, ensure gender sensitivity, skill enhancement, entrepreneurship development and employment generation by co-creating value with local institutions/people; d) Public-Private Partnership between the Government and the Central Public Sector Enterprise could also be encouraged to leverage the strengths of the latter in Disaster management; e) CSR is to be implemented by Special Agencies and generally NOT by staff of the CPSE concerned and f) Activities related to Sustainable Development will form a significant element of the total initiatives of CSR. 3. National CSR Hub: The Department Of Public Enterprises, in conjunction with Standing Conference of Public Enterprises (SCOPE) and the CPSEs will create a National CSR Hub, which will undertake/facilitate the activities like Nation-wide compilation, documentation, and creation of database; Advocacy; Research; Conferences,Seminars, Workshops - both national and international etc. > RJEBS: Volume: 02, Number: 06, April-2013 Page 104

4 4. Monitoring Monitoring of the CSR projects is very crucial and needs to be a periodic activity of the Enterprise. The Boards of CPSEs should discuss the implementation of CSR activities in their Board meetings. CSR projects should also be evaluated by an independent external agency. C. Amendment in Companies Act The Companies Bill 2009, which is expected to be brought before India Parliament for consideration in the forthcoming Budget session, stipulates companies to earmark 2% of their annual profits for taking up CSR activities. Factors influences companies using CSR Many companies think that corporate social responsibility is a peripheral issue for their business and customer satisfaction more important for them. They imagine that customer satisfaction is now only about price and service, but they fail to point out on important changes that are taking place worldwide that could blow the business out of the water. The change is named as social responsibility which is an opportunity for the business. Some of the drivers pushing business towards CSR include: The Shrinking Role of Government In the past, governments have relied on legislation and regulation to deliver social and environmental objectives in the business sector. Shrinking government resources, coupled with a distrust of regulations, has led to the exploration of voluntary and non-regulatory initiatives instead. Demands for Greater Disclosure There is a growing demand for corporate disclosure from stakeholders, including customers, suppliers, employees, communities, investors, and activist organizations. Increased Customer Interest There is evidence that the ethical conduct of companies exerts a growing influence on the purchasing decisions of customers. In a recent survey, more than one in five consumers reported having either rewarded or punished companies based on their perceived social performance. Growing Investor Pressure Investors are changing the way they assess companies' performance, and are making decisions based on criteria that include ethical concerns. The Social Investment Forum reports that in the US in 1999, there was more than $2 trillion worth of assets invested in portfolios that used screens linked to the environment and social responsibility Competitive Labour Markets Employees are increasingly looking beyond paychecks and benefits, and seeking out employers whose Philosophies and operating practices match their own principles. In order to hire and retain skilled employees, companies are being forced to improve working conditions. > RJEBS: Volume: 02, Number: 06, April-2013 Page 105

5 Supplier Relations As stakeholders are becoming increasingly interested in business affairs, many companies are taking steps to ensure that their partners conduct themselves in a socially responsible manner. Some are introducing codes of conduct for their suppliers, to ensure that other companies' policies or practices do not tarnish their reputation. Positive outcomes of using CSR policy The concept of corporate social responsibility is now firmly rooted on the global business agenda. But in order to move from theory to concrete action, many obstacles need to be overcome. A key challenge facing business is the need for more reliable indicators of progress in the field of CSR, along with the dissemination of CSR strategies. Transparency and dialogue can help to make a business appear more trustworthy, and push up the standards of other organizations at the same time. Some of the positive outcomes that can arise when businesses adopt a policy of social responsibility include: 1) Company Benefits Improved financial performance; Lower operating costs; Enhanced brand image and reputation; Increased sales and customer loyalty; Greater productivity and quality; More ability to attract and retain employees; Reduced regulatory oversight; Access to capital; Workforce diversity; Product safety and decreased liability. 2) Benefits to the Community and the General Public Charitable contributions; Employee volunteer programs; Corporate involvement in community education, employment and homelessness programs; Product safety and quality. 3) Environmental Benefits Greater material recyclability; Better product durability and functionality; Greater use of renewable resources; Integration of environmental management tools into business plans, including life-cycle assessment and costing, environmental management standards, and eco-labeling. Challenges in INDIA In India, over time, the expectations of the public has grown enormously with demands focusing on poverty alleviation, tackling unemployment, fighting inequality or forcing companies to take affirmative action. The historical driver of CSR has been philanthropy or a sense of ethics. After the Second World War, a variety of national and international regulations arose through bodies such as the International Labor Organization (ILO) emphasizing the need for an active social policy for transnational companies (TNC s). This additional driver, international institutions, has relevance for > RJEBS: Volume: 02, Number: 06, April-2013 Page 106

6 India through the work of the ILO, the OECD, Socially Responsible Investment (SRI), the SA8000 Social Accountability scheme and through the work of the UN Commission on Human Rights which tackled the human rights responsibilities of TNC s. In India, some public sector companies can spend up to 5% of their profits on CSR activities. Pressure groups have been quite successful in inducing companies to fund CSR schemes, even to the point of using kidnapping as a tactic! Forms of CSR differ according to the country or region. In Europe, for example, notions of CSR probably developed out of the Church and a sense of ethics. In India, CSR has evolved to encompass employees, customers, stakeholders and notions of sustainable development or corporate citizenship. In transnational companies, the approach to CSR typically emerges from one of three elements including a decentralized strategy (which might examine human rights), a centralized strategy (which would be company-wide) or a globally integrated strategy (which would include Coca Cola or oil companies - where local actions can impinge globally).challenges for using CSR in front of companies as follows: Lack of Community Participation in CSR Activities: There is a lack of interest of the local community in participating and contributing to CSR activities of companies. This is largely attributable to the fact that there exists little or no knowledge about CSR within the local communities as no serious efforts have been made to spread awareness about CSR and instill confidence in the local communities about such initiatives. The situation is further aggravated by a lack of communication between the company and the community at the grassroots. Need to Build Local Capacities: There is a need for capacity building of the local non-governmental organizations as there is serious dearth of trained and efficient organizations that can effectively contribute to the ongoing CSR activities initiated by companies. This seriously compromises scaling up of CSR initiatives and subsequently limits the scope of such activities. Issues of Transparency: Lack of transparency is one of the key issues brought forth by the survey. There is an expression by the companies that there exists lack of transparency on the part of the local implementing agencies as they do not make adequate efforts to disclose information on their programs, audit issues, impact assessment and utilization of funds. This reported lack of transparency negatively impacts the process of trust building between companies and local communities, which is a key to the success of any CSR initiative at the local level. Non-availability of Well Organized Non-governmental Organizations: It is also reported that there is non-availability of well organized nongovernmental organizations in remote and rural areas that can assess and identify real needs of the community and work along with companies to ensure successful implementation of CSR activities. This also builds the case for investing in local communities by way of building their capacities to undertake development projects at local levels. Visibility Factor: The role of media in highlighting good cases of successful CSR initiatives is welcomed as it spreads good stories and sensitizes the local population about various ongoing CSR initiatives of companies. This apparent influence of gaining visibility and branding exercise often leads many nongovernmental organizations to involve themselves in event-based programs; in the process, they often miss out on meaningful grassroots interventions. Narrow Perception towards CSR Initiatives: Non-governmental organizations and Government agencies usually possess a narrow outlook towards the CSR initiatives of companies, often defining CSR initiatives more donor-driven than local in approach. As a result, they find it hard to decide whether they should participate in such activities at all in medium and long run. Non-availability of Clear CSR Guidelines: There are no clear cut statutory guidelines or policy directives to give a definitive direction to CSR initiatives of companies. It is found that the scale of > RJEBS: Volume: 02, Number: 06, April-2013 Page 107

7 CSR initiatives of companies should depend upon their business size and profile. In other words, the bigger the company, the bigger is its CSR program. Lack of Consensus on Implementing CSR Issues: There is a lack of consensus amongst local agencies regarding CSR projects. This lack of consensus often results in duplication of activities by corporate houses in areas of their intervention. This results in a competitive spirit between local implementing agencies rather than building collaborative approaches on issues. This factor limits company s abilities to undertake impact assessment of their initiatives from time to time. CORPORATE SOCIAL RESPONSIBILITY IN INDIA India has a large public sector with several huge corporations and companies operating in various sectors like petroleum, heavy industries, aviation, mining, steel, equipment manufacturing and shipping. The Indian public sector has had a long tradition of corporate social responsibility and the initiatives of corporations like the Oil and Natural Gas Corporation Ltd. (ONGC), Steel Authority of India Ltd (SAIL) and Gas Authority of India Ltd. (GAIL) have played an important role in the development of several backward regions of the country. Indian Airlines and Bharat Heavy Electronics Ltd (BHEL) have been widely acclaimed for their disaster management efforts. The National Mineral Development Corporation Ltd. (NMDC) has contributed a lot in building infrastructure like school buildings, roads, Anganwadi buildings and also providing ambulance and medical facilities in and around its operational area. Although CPSEs have started giving attention towards their social responsibility, the private sector has to go a long way in coming up to the expectations in the area of social responsibility. Indian companies following CSR Steel Authority of India Limited (SAIL): SAIL is the largest steel maker of India and amongst the top public sector enterprises in terms of turnover with the prestigious status of Maharatna. With this comes the responsibility of being a catalyst for positive change. Apart from the business of manufacturing steel, the objective of the company is to conduct business in ways that produce social, environmental and economic benefits to the communities in which it operates. One of SAIL s Core Values Concern for People also reflects the company s commitment towards society at large, which it endeavors to fulfill through wide-ranging and diversified initiatives and activities under Corporate Social Responsibility (CSR).For SAIL, CSR was an integral part of its operations ever since the establishment of its production units in remote locations of the country since the early 1950s. Tata Steel: Tata Steel s CSR initiatives have been recognized with many awards. Since 2006, the company has showcased an exceptional track record of receiving this coveted award initiated by the CII-ITC Centre of Excellence for Sustainable Development. Recently the Company has received the CNBC Asia s Corporate Social Responsibility Award at CNBC-TV 18 India Business Leader Awards (IBLA) and the corporate social responsibility award at the seventh edition of NDTV Profit Business Leadership Awards. In addition to this, Tata Steel has been recognized by other prestigious awards like Safety and Health Excellence Recognition Award 2010 by the World Steel Association, was adjudged as the winner in Corporate Social Responsibility at the Procurement Leaders Forum and honored with the Rashtriya Khel Protsahan Puruskar for the second consecutive year in Other esteemed awards include the CSR Excellence Award 2010 by ASSOCHAM, National CSR Committee and CSR Organizing Committee; the Business world-ficci-sedf Corporate Social Responsibility Award 2009; the Best Corporate Social Responsibility Practice Award at the 6th Social and Corporate Governance Awards 2010 by the Bombay Stock Exchange. Dabur: Dabur s CSR initiatives are driven through Sustainable Development Society or SUNDESH, an outcome of the vision of Dabur India Ltd founder Dr. S.K Burman. Sustainable Development > RJEBS: Volume: 02, Number: 06, April-2013 Page 108

8 Society (SUNDESH) is sworn to the mission of ensuring overall socio-economic development of the rural & urban poor on a sustainable basis, through different participatory and need-based initiatives. It aims to reach out to the weaker and more vulnerable sections. CONCLUSION There is a need to promote a drive in Government Companies towards greater accountability on Corporate Social Responsibility (CSR). In order to attain the social objectives, there is a need for framing a CSR Policy in every company, as given under voluntary guidelines by Ministry of Corporate Affairs, for prioritization of activities for social spending and allocation of separate funds for this purpose. Moreover, to have an impact of the CSR spending and utilization of allocated budget, there should be a system of periodical monitoring and reporting to the Board of Directors as given in guidelines by Ministry of Heavy Industries and The Companies Bill 2009, which is expected to be brought before Parliament for consideration in the forthcoming Budget session. CSR is regarded as an important business issue of Indian companies irrespective of size, sector, and business goal. Therefore, CSR activity has to play a positive impact not only on development of community but also on their business Promotions. REFERENCES Kotler, Philip and Nancy Lee.,(2005) Corporate Social Responsibility: Doing the Most Good for Your Company and Your Cause, John Wiley and Sons, Mathur, (2005) Corporate Governance And Business Ethics: Text And Cases, McMillan India, Ltd. corruption/407860/. (2009). CORPORATE SOCIAL RESPONSIBILITY VOLUNTARY GUIDELINES. India Corporate Week, December 14-21, 2009, Ministry of Corporate Affairs, Government of India. (2009). CORPORATE SOCIAL RESPONSIBILITY VOLUNTARY GUIDELINES. India Corporate Week. Ministry of Corporate Affairs, Government of India. Dr. Suri Sehgal, Chairman & Founder Institute of Rural Research & Development (IRRAD) Gurgaon. Professor Leo Burke, Associate Dean and Director, Executive Education, Notre Dame University, Indian Brand Equity Foundation, ACCSR s State of CSR in Australia Annual Review 2010/11. Trust and Corporate Social responsibility: Lessons from India by Ashwani Singla, Chief Executive Officer, & Prema Sagar, Founder & Principal, Genesis Public Relations Pvt. Ltd. Business Line, Business Daily from THE HINDU group of publications, Wednesday, Jun 23, EurAsia Bulletin Volume 10 No. 11&12 Nov-December > RJEBS: Volume: 02, Number: 06, April-2013 Page 109

9 Corporate Social Responsibility Practices in India, Times Foundation, the corporate social responsibility wing of the Bennett, Coleman & CO. Ltd. Cappelli, H. Singh, J. Singh, & M. Useem, The India Way, Academy of Management Perspectives, 24, 2, May 2010, page CSR in India: Some Theory and Practice in Wall Street Journal dated Thursday, April 23, Ministry of Environment and Forest, (2003) Charter on Corporate Responsibility for Environmental Protection. Organisation for Economic Co-operation and Development, (2008), OECD Guidelines for Multinational Enterprises. Surinder Kumar, (2009). CSR: A Condition Precedent for Appropriate Response in Case of Industrial Disaster, Proceedings of International Conference on CSR and Industrial Disasters, Bhopal, India. > RJEBS: Volume: 02, Number: 06, April-2013 Page 110