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Tuesday, July 08, 2014

Corporate Social Responsibility

10.0     Objectives
10.1     Introduction
10.2     Definition
10.3     Concept of Social Responsibility
            10.3.1  Society& Community
            10.3.2  Social Audit
10.4     What is Corporate Social Responsibility?
            10.4.1  Corporate
            10.4.2  Company
            10.4.3  Organisation
10.5     Corporate Citizen
10.6     CSR and Business Organizations
            10.6.1  Business         
            10.6.2  CSR & business
10.7     Areas of Corporate Social Responsibility, the benefits of CSR
            10.7.1  Areas of CSR
            10.7.2  Benefits of CSR
10.8     Designing CSR Project
            10.8.1  CSR project
            10.8.2  CSR activities
10.9     Role of Public Relations
            10.9.1  PR & Social Responsibility
            10.9.2  Two themes
            10.9.3  Four fold Role of PR
10.10   Summary
10.11   Answers to self assessment questions
10.12   Model Examination Questions
10.13   Glossary
10.14   References


After studying this Unit, you will be able to:

·          Define who is a corporate citizen
·          Explain what is society & how a corporate citizen is responsible to the society
·          Describe the concept of social responsibility
·          Design a CSR project
·          Identify the role of public relations in discharging CSR


      Corporate Social Responsibility (CSR), variously called Corporate Conscience, Social Performance, and Sustainable Responsible Business/Responsible Business, is a form of corporate self-regulation integrated into a business model. CSR policy functions as a built-in, self-regulating mechanism whereby a business monitors and ensures its active compliance with the spirit of the law, ethical standards, and international norms. In some models, a firm's implementation of CSR goes beyond compliance and engages in "actions that appear to further some social good, beyond the interests of the firm and that which is required by law." CSR is a process with the aim to embrace responsibility for the company's actions and encourage a positive impact through its activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere.

      Jamshedji Tata, the pioneer of social responsibility in India said; “Wealth that comes from the people as far as possible must go back to the people”. It is against the background of this philosophy, the concept of corporate social responsibility began in India at Jamshedpur, Bihar where the Tatas built a township for the workers of the Tata Iron and Steel Company.

      The importance of Corporate Social Responsibility (CSR) has further increased because of changing corporate world. Everything from family life to ways of working in a corporation is changing. In consequence, every organisation has to confront with a global economy; a technological revolution, an information revolution and proliferation of sources of information; emergence of large companies with international business; mergers and acquisitions, and signs of increasing environmental damages. The changes have had an impact on ways of doing business. For instance, competition gets intensified when cheap goods produced by low-wage workers are imported into parts of the world where labour charges are high. Reputations are either strengthened or damaged as the information is flowing with lightening speed. As a result, the concept of corporate citizenship and corporate social responsibility is growing in the modern world.


      Corporate Social Responsibility means a company’s sense of responsibility towards the community and environment (both ecological and social) in which it operates. Companies are corporate citizens and the CSR is expressed (1) through their waste and pollution reduction processes, (2) by contributing educational and social programs, and (3) by earning adequate returns on the employed resources with ethical values.

      Corporate social responsibility is defined as “the process by which a corporation participates in the welfare of both internal and external community, enhancing its environment and well-being to the advantages of the organisation and the community concerned”. It also aims at building relationships with all types of public and increasing the reputation of the company. Actions, community services that do not have purely financial implications and those are demanded or expected of an organization by society at large, often concerning community welfare, ecological and social issues come under the corporate social responsibility.

Self assessment question – I

1. What is your understanding of Corporate Social Responsibility?


The social responsibility concept is based on the premise that business has greater impact on society than can be measured by profit or loss. As a participant in society, business should contribute to the human and constructive social policies that guide society. The concept of social responsibility is merely a first step towards social effectiveness of business. It is the underlying value which gives businessmen/corporate citizens a sound basis for social action. It is the philosophy which justifies business involvement in its social community, but philosophy by itself is incomplete. It must be followed by effective social action.

10.3.1    Society and Community

A society is an aggregate of people living together in a more or less ordered community. It is a community of people living in a particular region and having shared customs, laws, and organizations. Corporate citizen is a part of the society and is dependent upon. Similarly, a community is a group of people who reside in a specific locality, share government, and often have a common cultural and historical heritage.Though both appear to be similar; a few different communities together are addressed as one society.

10.3.2  Social Audit

The process of evaluating a firm's various operating procedures, code of conduct, and other factors to determine its effect on a society is regarded as social audit. The goal is to identify what, if any, actions of the firm have impacted the society in some way. A social audit may be initiated by a firm that is seeking to improve its cohesiveness or improve its image within the society. If the results are positive, they may be released to the public. For example, if a factory is believed to have a negative impact because of pollution, the company may have a social audit conducted to identify actions that actually benefit the society.

Self assessment question – II

1.      Explain the concept of social responsibility.

2.      What is meant by Society and Social audit?


Organizations function within the society. They survive and grow in the societal context. They primarily exist to satisfy societal needs. Organizations must act responsibly toward society.Social responsibility is concerned with what organizations ought to do. It refers to pursuit of goals that are in the interests of society. It implies safeguarding the interests of stakeholders. They can be investors, customers, employees, government and community. It demands commitment to the welfare of the society.Social responsibility can be looked at from three aspects are:
1.      Social Obligation: The social obligation of organization performs its functions efficiently. It should provide goods and services to society. Organizations should comply with legal provisions and social functions.
2.      Social Reaction: Social responsibility of organization is to react to social pressures. Organization creates social problems. There are social pressures on them to solve such problems. They should be reactive to prevailing social norms, values and expectations to discharge social responsibility. If the civil society makes a complaint about company’s engaging child labour, it must react and respond to the problem.
3.      Social Responsiveness: Social responsibility is one of the goals pursued by organizations. It is in their interest to be socially responsible. Organizations should be proactive to seek solutions to social concerns. They should prevent social problems. Social responsibility is in their long-term interests. It is the moral and right thing to do. Being proactive, the company will solve many problems.

10.4.1  Corporate

A corporation is a body formed and authorized by law to act as a single person, although constituted by one or more persons and legally owned with various rights and duties.  As such the corporation becomes a corporate citizen.  Business and community are inseparable.  They depend on each other for survival.  In fact, business organizations and the community have a symbiotic relationship with one thriving on the other.  It is in this context, corporate citizen has the responsibility to serve the cause of the society.

10.4.2  Company

A Company is a voluntary association formed and organized to carry on a business. Types of companies include sole proprietorship, partnership, limited liability, corporation, and public limited company. A company is a business organization in structure, where people work for only profits and pay taxes. They will use that money for improving their business and share the profits.

10.4.3  Organization

An organisation is a social unit of people that is structured and managed to meet a need or to pursue collective goals. All organizations have management structure that determines relationships between the different activities and the members and subdivides and assigns roles, responsibilities and authority to carry out different tasks.  Organizations are open systems – they affect and are affected by their societal environment. Corporate company and organisation are similar in nature in reaction to the practice of public relations.

Self assessment question – III  

1.      What are the three aspects of social responsibility? Cite examples.


      Who is a corporate citizen? A corporation/company is a corporate citizen. It is a legal entity registered under the law which assumes certain rights and duties like a citizen of the country. Involvement of a corporation in matters concerning to society as a whole is called corporate citizenship.

      Corporate citizenship is an idea, which has both practical and ethical dimensions. It suggests a two-way relationship between corporations and society which are oriented towards meeting community needs. In fact, business organisations and the community have a symbiotic relationship with one thriving on the other. It is in this context, corporate citizen has the responsibility to serve the cause of the society like a citizen of a Nation. Interest in corporate citizenship and social responsibility is growing as the role of corporate and its business in society increases. As in the case of an individual citizen, corporate citizen which has emerged from a corporation has similar legal and moral responsibilities towards the needs of the society.


      How does corporate social responsibility help organization? CSR, helps to greenwash the company’s image, to cover up negative impacts by saturating the media with positive images of the company’s CSR credentials. CSR enables business to claim progress despite the lack of evidence of verifiable change. Since much of the business case for CSR depends on corporation being seen to be socially responsible, CSR will continue to be little more than PR for as long as it is easier and cheaper to spin than change (Fauset 2006). Cutlip (2000) believes that CSR can be good for PR, stating that “much good can be credited to ethical public relations practice, and opportunities for serving the public interest abound”.

10.6.1   Business

Human beings are continuously engaged in some activity or other in order to satisfy their unlimited wants. Every day we come across the word business or businessman directly or indirectly. Business is an economic activity, which is related with continuous and regular production and distribution of goods and services for satisfying human wants. Lewis Henry defines business as “Human activity directed towards producing or acquiring wealth through buying and selling of goods”. Stephenson defines business as “The regular production or purchase and sale of goods undertaken with an objective of earning profit and acquiring wealth through the satisfaction of human wants”. Thus, the term business means continuous production and distribution of goods and services with the aim of earning profits.

10.6.2  CSR& Business

Corporate social responsibility is about the integration of social, environmental, and economic considerations into the decision-making structures and processes of business. It is about using innovation to find creative and value-added solutions to societal and environmental challenges. It is about engaging shareholders and other stakeholders and collaborating with them to more effectively manage potential risks and build credibility and trust in society. It is about not only complying with the law in a due diligent way but also about taking account of society’s needs and finding more effective ways to satisfy existing and anticipated demands in order to build more sustainable businesses. Like a citizen of India, a corporation becomes a corporate citizen to perform certain functions of corporate social responsibility.


      What are the areas covered under corporate social responsibility? It includes a wide range of activities, often far removed from the corporation’s economic function. The benefits of CSR too are manyfold ranging from employees’ good will to corporate image.The canvas is so large that there is need for coordinated action from the government, local and corporate bodies, NGOs and individuals. It encompasses several action oriented activities in the service of society.

10.7.1  Areas of CSR 
      CSR activities include, sponsorship of sport event or the arts, donations to charity and contribution in either cash or kind such as office facilities, equipment, professional advice, training, technology, gifts normally given towards public or voluntary-sector activities in the community in which the organisation operates. They also include: education, population control, removal of poverty, illiteracy and ignorance; combating corruption, ensuring free and fair elections; providing employment; pushing through reforms, eradicating communicable diseases and finding answers to problems pertaining to gender discrimination, child labour, mother and child health, HIV AIDS, energy conservation, etc.

10.7.2  Benefits of CSR

Why should companies consider corporate social responsibility? This is not about dropping coins in a kitty. Corporations which are active in this area say that corporate social responsibility makes a sense to them in the enhanced quality of relationships with their publics. They treat this as part of their corporate strategy. Business companies that make a public commitment to improve the welfare of the society claim that they have substantial company benefits covering competition, performance and recruitment as well as creation of enduring healthy communities. Ultimately, it is about delivering improved shareholder and debt-holder value, providing enhanced goods and services for customers, building trust and credibility in the society in which the business operates, and becoming more sustainable over the longer term. While there are different ways to frame the benefits because they are interrelated, they generally include the following:
 In other words, corporate social responsibility can bring benefits in the following areas:

1.      Improved workforce commitment and morale
2.      Greater customer goodwill and loyalty
3.      Better image and reputation in the society
4.      Enhanced features of the corporate brand
5.      Stronger financial performance and profitability through operational efficiency gains
6.      Improved relations with the investment community and better access to capital
7.      Enhanced employee relations that yield better results respecting recruitment, motivation, retention, learning and innovation and productivity
8.      Stronger relationships with communities and enhanced reputation to operate
9.      Community welfare of the society and in turn society’s help to the company

Self assessment question – IV

1.      What are the areas of CSR? Explain with examples.
2.      What are the mutual benefits from CSR to business and society?


            The term "corporate social responsibility" came into common use in the late 1960s and early 1970s after many multinational corporations formed the term stakeholder, meaning those on whom an organization's activities have an impact. It is used to describe corporate owners beyond shareholders. It brings the organisation and the community closer to gain goodwill. Therefore CSR is a part of corporate strategy as to build up relationships with all its stakeholders.

10.8.1  CSR Project

Companies arrive at the point of needing to design a CSR structure at various stages of their CSR strategy. Some companies already have dedicated CSR staff, but realized that they need a different structure to better coordinate and manage their growing CSR programs.Others have specialized staff working in one or more areas of CSR who are overburdened as the company’s CSR activities grow, and look for a structure that provides greater strategy and integration. Still others decide to develop a CSR structure as a reactive or proactive response to external pressures. Each company must design a project of social responsibility to implement the programme.

One of the most important points to be madeup-front is that there is no single universally accepted method for designing a CSR structure. This is definitely not a “one-size-fits-all”exercise: What works for one company may not work for another, and vice versa. What does work, though, is following a process that allows one to design a structure that aligns the company’s mission, size, sector, culture, business tructure, geographic locations, risk areas andlevel of CSR commitment.

Engaging in a process to develop the most appropriate CSR structure project for a company given its mission and level of commitment is important. Key steps for designing a CSR structure include:

1.      Identify key objectives of CSR project
2.      Describe the target audience in clear term
3.      Understand growth drivers.
4.      Identify key CSR issues.
5.      Identify and evaluate stakeholders’ needs.
6.      Identify functions that support CSR efforts.
7.      Analyze company systems, culture and any impending changes.
8.      Evaluate structural options.
9.      Develop a staffing plan.
10.  Create structure for cross-functional interaction.
11.  Assess process and framework for budget and resource allocation.
12.  Identify needs of local community or society including all stakeholders

10.8.2  CSR Activities

            What is good for the society is also good for the business. The following are the general activities of corporate social responsibility taken up by some reputed business organizations. ONGC, Rajahmundry unit in Andhra Pradesh has spent over Rs.65 crores on various socio-economic development activities such as construction of roads, bridges, vocational education for women, healthcare for the poor, construction of community halls and cycle shelters. The Hindustan Lever Ltd., has set up a dairy plant in the backward district of Etah in UP. SBI has undertaken several community services aimed at the welfare of general public like sponsoring health camps, distribution of wheel chairs to the physically challenged, adoption of sports persons etc.

Adoption of villages

            Major business houses like Fertilizer and Cement companies have adopted villages to introduce their new products for the benefit of farmers. The services they provide are roads, healthcare, drinking water etc. Public Sector Undertakings like BHEL adopted villages as part of their CSR.

Rural Development

            Since India lives in its villages, the Tatas have taken up their social responsibility in rural India by establishing Tata Steel Rural Development Society in 1979.  It had pioneered rural development programmes around its steel mill, Jamshedpur and also about 500 villages in Bihar, Orissa and Madhya Pradesh.  Tatas name is a bi-word for rural development.  Many corporates/business houses in India have started following Tatas, later.


            The Birlas among others, as part of their social responsibility, built famous temples all over the country for the benefit of devotees. While offering prayers, can devotees forget Birlas for their outstanding contribution to the growth of temples? They forget not. The Birlas built Venkateshwara temple in Hyderabad, which is popularly known as Birla Mandir.


            The Hindu, national daily in association with Hitachi Ltd., Tokyo offers scholarships for technical training in Japan for six months in the areas of digital media, power systems, industrial systems etc.

Community works

            The Telestra Corporation Ltd., Australia’s largest telecommunications company had motivated its employees to join a voluntary body along with family members to serve the cause of community.  A network of 10,000 registered employee volunteers help Telestra’s sponsorship programmes. They help in clean up Australia, national blood bank, community open day, support for children’s hospitals etc.

Self assessment question – V

1.      What is meant by a CSR project? Explain its key components.

2.      What are the various CSR activities?


            What is public relations? Public relations is the management of a two-way communication process between an organization and its publics to promote the corporate mission, services, products, reputation and gain public understanding

10.9.1    PR and Social Responsibility
      One of the objectives of corporate social responsibility is that having done good to the community, the corporation intends to improve its reputation as a responsible corporate citizen. The corporate contributions, undoubtedly, create good relations with employees, shareholders, consumers, community neighbours, media public, dealers, distributors, educators, the government, etc.

      As ethical standards towards society and the commitments to corporate social responsibility grow, public relations which is based on the principle of public interest and social purpose gains added importance to help the corporate world. “Do the Right Thing”. It is here the role of public relations that doing good or performing well by the organisation is reported to the community. Therefore, public relations means ‘P’ for ‘performing’ good and ‘R’ for ‘reporting’ which will build goodwill of key publics. Many corporations operate their corporate social responsibility programmes through their public relations/corporate communications departments. The community services activities of the State Bank of India are part of Public Relations Department.

10.9.2      Four – Fold Role of PR

      Public Relations has a fourfold role in the process of corporate social responsibility

1.      Identification of community needs and keep the management informed for inclusion in CSR programmes.
2.      Reporting to the community about the activities of the CSR so that people could make use of such programmes.
3.      Promoting of the corporation as socially responsible to the community
4.      Understanding the attitudinal changes of stakeholders and impact of the CSR to report to the management.
10.9.3    Two Themes
      Public relations literature in the West highlights two main themes with regard to corporate social responsibility and public relations. The first theme points out the relationship between the public relations function and society which clearly says that public relations in it has the social responsibility to serve the cause of the community and has a role to promote the public welfare and public good. The second theme argues that public relations performs the role of conscience keeper of the organisation and it has a moral obligation to promote the social responsibility programmes of the corporation.

      Public relations, in social responsibility, plays dual role. It communicates to the target audience about the programmes of social responsibility on the one hand and also identifies the community needs such as educational facilities, drinking water, medical facilities, etc. and brings such needs to the notice of management on the other hand. The second role enables the management to undertake corporate social responsibility programmes.

      Thus, there is a close link between corporate social responsibility and public relations function. The ideal role of public relations is often described as that of “a person in the middle”, between the corporation and the society without any scope of the possible conflict that might result in this role. In fact, the objective of public relations in a society is to harmonise an organisation with the social environment by communicating honestly, consistently and continuously to gain in return credibility, public goodwill, mutual understanding and mutual respect.

      The International Public Relations Association in a survey of eight countries (UK, USA, S. Africa, Brazil, Japan, Singapore, Switzerland & Australia) in 1977 which looked at the effects of globalisation on corporate communication observed “the most important task for public relations in future will be the maintenance and improvement of corporate social evaluation along with corporate communication based on company strategy”.

Self assessment question – VI

1.      What is the role of PR in discharging corporate social responsibility?

10.10     SUMMARY

            Corporate Social Responsibility seems largely dependent on the utilitarian theory, “the greatest happiness of the greatest number”, which benefits the donor as well as the beneficiary.  Sometimes corporate social responsibility is undertaken in crisis management like natural calamities, accidents etc. However, the corporate citizen is projected as a moral person who can do good in society to the benefit of both in the corporation and the public.  CSR casts a heavy role on public relations as a technique or tool of reputation management. When the focus of a corporation is on public welfare, then public relations naturally figures prominently.  All the programmes of welfare measures of a company are communicated to both internal and external public only through public relations.


Self assessment question – I

1.      “Wealth that comes from the people as far as possible must go back to the people”. This is the philosophy, philanthropy and the concept of corporate social responsibility in India. Corporate Social Responsibility is defined as the process by which a corporation participates in the welfare of both internal and external community, enhancing its environment and well being to the advantages of the organisation and the community concerned.
Self assessment question – II

1.      As a Corporate citizen and a participant in society should contribute to the human and constructive social policies that guide society.
2.      Society is a large social group consisting of a number of communities, measuring social purpose activities of an organisation is social audit.
Self assessment question – III

1.      Corporate Social Responsibility has three aspects (1) Social obligation (2) Social reaction and (3) Social responsiveness.

Self assessment question – IV

1.      The areas of social responsibility include education, removal of poverty and illiteracy, population control, training etc....
2.      Corporate social responsibility brings benefits to a company in three ways – enhancement of the value of corporate brand, greater customer goodwill and loyalty and improved commitment of workforce.

Self assessment question – V

1.      Corporate social responsibility project or structure identifies its objectives, social problem, staffing and action oriented activities to serve the cause of the society.
2.      Corporate social responsibility programmes intended for the benefit of community include: sponsorship of sports event, donations to charity, supply of technical equipment, training, public education, award of scholarships, measures for population control, eradicating communicable diseases, HIV AIDS, energy conservation etc

Self assessment question – VI

1.      Public Relations has to report to the community about the community welfare undertaken by a corporation.  When public relations is based on public interest, it has the responsibility to promote corporate social responsibility. Public Relations also identifies the community needs and brings to the notice of corporation for undertaking community welfare programmes.


I.                   Answer the following questions in about 30 lines each.

1.      What is the meaning and concept of Social Responsibility? How and why it is discharged by a Corporate?

2.      Why Society is important in doing business? What influences the society can exercise on business?

II.                Answer the following questions in about 30 lines each.

3.      What are the benefits of CSR? List out some general initiatives taken up under Corporate Social Responsibility by reputed firms?

4.      What is Corporate Social Responsibility? How does Public Relations promote social responsibility?


Business                                  =          Trading of goods, services or both to consumers
Citizen                                     =          An inhabitant of a city or town
Charity                                     =          Disposition of heart to think in favor of fellowmen                                                    A form of self-sacrifice          
Company                                 =          An association of persons for carrying on a
commercial or industrial enterprise
Community                              =          Individuals residing in a locality
Community needs                    =          Needs of the individuals residing in a locality
Community relations               =          Relations established with the individuals
Corporate                                 =          Formed or united or combined into a body
Corporate citizen                     =          A company’s role & responsibility towards society
Corporate philanthropy                        =          Company’s charity activity in the society
CSR                                         =          Corporate Social Responsibility/Ethical business
Enterprise                                =          An organisation involved in trade
Organisation                            =          A social entity that has a collective goal
Public Relations                       =          Practice of managing and sharing information with
Society                                     =          A large social group, bigger than community
Social Audit                             =          Measuring social and ethical performance
Social evaluation                     =          Measuring the social impact
Social Responsibility               =          Obligation towards the welfare of the society
Stakeholders                            =          Person or group having interest in organisation


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CV NarasimhaReddi Dr           Effective Public Relations & Media Strategy, Prentice Hall of India, New Delhi 2009
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-          Y. Babji