LESSON - 10: Corporate Social Responsibility
B A (JMC) (3-YDC),
SEMESTER SYSTEM
SEMESTER –IV
SEC III: PUBLIC
RELATIONS AND EVENT MANAGEMENT
Unit -1: PUBLIC RELATIONS
LESSON - 10: Corporate Social Responsibility
Objectives:
Learn about the need for corporate social responsibility
Define the concept
of corporate citizenship
Understand the
importance of community relations
Explain global
competitive marketing environment
Analyze the role
of corporate public relations and social responsibility.
Introduction:
Corporate Social Responsibility (CSR) is giving back to the Society. It is a concept with many interpretations and typical economic, social and environmental dimensions. It has been promoted among businesses, governments and other stakeholders. The roots of CSR lie in philanthropic activities such as donations, charity, relief work etc of corporations. Now the concepts such as corporate citizenship, strategic philanthropy, shared value, corporate sustainability, business responsibility, ethical business etc are associated with it. Although responsible companies had already existed for more than a century before, the term Corporate Social Responsibility was officially coined in 1953 by American economist Howard Bowen in his publication “Social Responsibilities of the Businessman”. As such, Bowen is often referred to as the father of Corporate Social Responsibility. Corporate Citizenship, Community relations and Social Audit are the important forces that shaped up today’s CSR concept.
Amendments
to the Companies Act 2013 makes CSR mandatory for all companies with a
specified turnover and a specified net profit. The companies will have to spend
at least two percent of their three years’ average profit every year on CSR.
In the context of growing importance of CSR, apart from the profit and loss of companies, the contribution of corporates to the society’s communities is seriously considered in the evaluation of performance of companies over the years. The mass media also play an important role in disseminating information about CSR activities of companies. CSR programmes help society as well as business organisations.
Corporate
Social Responsibility – Meaning
Corporate Social Responsibility (CSR) in simple is
any action that a company takes to give back to the Society. It is the idea
that a company should be a good neighbour and think about how its actions will
affect the environment and people. The responsibilities of a corporate are
broadly (1) environmental responsibility (2) ethical responsibility (3)
philanthropic responsibility and (4) economic responsibility.
CSR is a self-regulating business model that helps
a company be socially accountable to itself, its stakeholders and the public.
By practicing CSR, companies can be conscious of the kind of impact they are
having on all aspects of society, including economic, social, and
environmental.
Engaging in CSR means that, in the ordinary course of business, a company is operating in ways that enhance society and the environment instead of contributing negatively to them.
Corporate
Social Responsibility - Definitions
According
to the United Nationals Industrial Development Organisation, “Corporate social
responsibility is a management concept whereby companies integrate social and
environmental concerns in their business operations and the interactions with
their stakeholders”
Bowen defined CSR as “a set of
obligations of businessmen to pursue their policies to make their decisions or
to follow their lines of action which are desirable in terms of the objectives
and values of society.”
Davis defined that “CSR refers
to the firm’s consideration of and response to issues beyond the narrow
economic, technical and legal requirements of the firm.”
ILO (International Labour
Organisation) redefined CSR as “a way that enterprises consider the impact of
their operations on society and CSR principles are integrated in enterprises’
internal processes and interactions with stakeholders on a voluntary basis.”
EC (European Commission)
defined CSR as “the responsibility of enterprises for their impacts on society
which indicates that enterprises should have a process in place to integrate
CSR agenda into their operations and core strategies in close cooperation with
stakeholders.”
World
Business Council for Sustainable Development explained CSR as “a balance of
return on financial, natural and social capitals, particularly suggesting the
integration of CSR reporting into the annual report.”
What is
CSR
As already said, in simple, CSR is “giving back to the society”. CSR is described as a company’s efforts to improve the society in some way. This is an integral part of the business strategy and corporate identity. It aims at the all-round social, cultural and economic development of both their workforce and community. In order to have a cordial and a give-and-take relationship with the workforce and community as well, the corporate bodies have proposed that instead of striving only for larger returns to its shareholders, as a responsible enterprise should take into account the interests of employees, suppliers, dealers, local communities and the nation as a whole. They realised that the CSR could help build and sustain the morale of the work force and also attract them to retain with the firms. The corporate bodies also realised that the CSR with its goodwill and corporate’s image could help them to solve any problem which couldn’t be solved even by the government regulations. In India, Jamshedji Tata, is considered to be the pioneer of CSR. About 100 years back itself, he described the CSR as “Wealth that comes from the people as far as possible must go back to the people”. It is against this background of this philosophy, the Tata group of companies have established the Tata Council for community initiatives and taken up many community works. They have built a big township at Jamshedpur in Bihar. Similarly, the Aditya Birla Group, ONGC, IOCL, NTPC, BHEL, HCL and Mahindra & Mahindra and many other major corporates have initiated several CSR projects in their area of operation to help serve the community.
Corporate
Citizenship
A corporate organisation is a corporate citizen. As in the case of an individual citizen, corporate citizen has similar legal and moral responsibilities towards the needs of the Society. Corporate citizenship is therefore about the contribution that a corporation makes to the Society through its core business activities. Corporate citizenship is a recognition that a business, corporation has social, cultural and environmental responsibility towards the community. It is an idea which has both practical and ethical dimensions. It suggests a two-way relationship between the corporation and the society which are focused towards meeting community needs. In fact, business organisations and the community have a relationship with one thriving on the other.
Community Relations
Community relations play an important role in
building up a good PR image, because Community is a neighbour. Whether a
neighbour is good or bad is dependent upon the relationships that one
maintains. It is always desirable to have a friendly neighborhood. The very
nature of operations of business organisations whether they are in public sector
or private sector make them community-oriented. In the case of public sector,
one of its objectives is to set up industrial units in backward areas to
subserve the cause of developing them. In the case of private sector, the
government encourages the setting up of new units in notified backward areas
with subsidies and incentives. Thus both public and private sectors show a
definite propensity towards backward areas. As the industrial units come up,
they improve the life styles of the community by fulfilling several of their
needs.
Social Audit
If the accounts of a company were audited by a firm
of Chartered Accountants and certified to be in order, the activities of the
company shall have to be audited also by the Society in which it is operating.
Social Audit means that anything what an organisation does is open for scrutiny
by the Society at large. In other words, the activities of an organisation must
be compatible with that of the Society and cannot transgress social limits.
Society is not an amorphous entity. Society, like community consists of
individuals. Whatever that is compatible with individuals’ interest becomes
socially relevant and working within those social parameters, fulfilling social
norms and withstanding scrutiny by the society can broadly be explained as
social audit. Passing the social audit test means the Corporate got the
acceptance of the Society.
PR for Corporates
There
are several areas where public relations can be of immense use in Corporates. Those
areas are:
1. Industrial public relations
2. Customer public relations
3. Employee relations
4. Stockholder/shareholder relations
5. Public relations in sales promotion
6. Government and Legislature relations
7. Trade relations
8. Community relations
9. Corporate Social Responsibility
Sam
Black in his book ‘Practical Public Relations’ mentioned two objectives of
Corporate PR (1) To establish contact and maintain relations with all the
concerned publics and (2) To promote the Organization’s products and services.
The public Sector while competing with private sector has to fulfil a social need and also offer ideal conditions of work and welfare of employees as also the communities connected. Its commitment to discharge its public obligation and social good makes it difficult to run it purely on commercial lines. Thus losses to some extent are endemic in the very nature of the public sector which has to undertake public utility services, production of items of strategic importance etc. The public sector PR strives to project not only the individual public sector organisations concerned but also the philosophy behind the establishment of public sector undertakings. As public relations tends to flow over the whole gamut of business and industry, it has a notable part to play in all its spheres in private sector too. The conservative economist Milton Friedman in his article ‘a social responsibility of business’ published in New York Times in 1970 has argued that the task and responsibility of business is to increase profits and that it has no business to spend shareholders’ money on social problems. But Peterson & Post extended the responsibility to the organization’s concerns with the consequences of its own activities on others. Thus they included items like pollution, product hazards or discrimination in employment in CSR. In fact, law makes it obligatory on the part of the company to erect pollution preventing apparatus or effluent treatment plants at its cost and makes it liable for production of substandard or hazardous products. Keith Davis and Robert Blamestorm in their book ‘Business and Society’ not only upheld the aforesaid two kinds of social obligations but also wanted the company to help solve general social problems which are not connected with the organisations. Almost all corporations accept their social responsibility, today.
Need for CSR
As already discussed, Community Relations and
Social Audit are the two important aspects that Corporates will ensure
compliance. Corporates believe that the CSR enhances their relationships with
their stakeholders. Therefore, CSR has become a part of corporate strategy
because CSR can bring a visible change in the following areas
- It
enhances public image. CSR helps improve good relations with the
corporate’s publics both internal and external. The corporate philanthropy
and commitment to the social cause would increase the chances of getting
favourable image in the eyes of the stake holders.
- It
increases media coverage. With strong and good CSR
programmes, the corporate unit gets the chances of positive media
coverage. The local media extends outright support for the good CSR
activities of a company that benefits community at large. It also helps to
maintain good media relationship, which would benefit any company in the
long run.
- It
boosts employee relations. CSR helps attract and
retain honest, valuable, hardworking and productive employees. The
employees feel proud and appreciate their company’s dedicated CSR policy.
Good employees’ relations also help enhance the image of the company.
- It
attracts & retains investors. Investors continue to
support companies that demonstrate commitment to social causes and that
impact the lives of others.
- It serves
as a source of revenue. CSR initiatives help as a source of revenue
for non-profit organisations.
Thus the CSR initiatives helping the business houses in several ways to grow and win the goodwill and loyalty of the publics, besides enhanced features of the corporate brand, improve employees’ commitment and boost up their morale etc
CSR in
India
India has a rich tradition of CSR charity and
philanthropy. Culture, religion, family values and industrialization had an
influential effect on CSR in India. If you look at the development of CSR in
India, it has gone through four phases. They are:
Phase I – Pre industrialisation period: In the pre-industrialisation period, which lasted till 1850, wealthy merchants helped the society by providing them food, shelter particularly during cyclones, famines or epidemics. They also shared their wealth by setting up places of worship for various religions. However, after the colonial rule since 1850, the approach towards CSR has changed. The industrial families of the 19th century such as Tata, Godrej, Bajaj, Modi, Birla, Singhania have generously contributed to the community in the areas of their operation.
Phase II
– During the independence movement: In this period Mahatma Gandhi has introduced the
concept of “trusteeship”, and appealed to all the industrial leaders to help
the common man in the Society as part of philanthropy. Gandhi said “I desire to
end capitalism almost, if not quite, as much as the most advanced socialist.
But our methods differ. My theory of trusteeship is no make-shift, certainly no
camouflage. I am confident that it will survive all other theories”. This has
helped considerably for the socio-economic development of the Indian Society.
Phase III
– After the Independence: In this period the Public sector units were
encouraged rather than private sector. The public sector units’ activity is
limited to certain extent towards its community development. This led to shift
of expectation from the public to the private sector and their active
involvement in the socio-economic development of the country became absolutely
necessary.
Phase IV – After 1980: During this phase, the Indian companies started an integrated and sustainable CSR strategy. Since 1990, with the introduction of the globalization, privatisation and economic liberalisation, many corporate units in private and public sectors have been involved voluntarily in serving the community in their own way. Many corporate units through their CSR activities are in competition to maximise their overall impact on the Society and stakeholders.
CSR & Business Organisations
Why
any business organisation shall consider CSR?
This is not about giving freebies to somebody. Business organisations
often say that CSR has helped them in many ways to have cordial relations with
the stakeholders in the area of their operations. The business organisations
that are implementing the CSR successfully feel that they are getting
substantial benefits from their competitors globally. They say that their
business organisations have good employee relations and sustainable healthy
society to work in. Thus, the CSR reaps benefit in three areas namely: -
1. Getting good image for the business organisation
2. Getting good customer relations, goodwill and loyalty
3. Improved workforce commitment, good employees’
relationship and morale boost up,
Activities permitted under CSR
As per schedule VII of Companies Act, 2013 the following are the permitted activities.
|
|
Activity relating to |
|
|
Category I |
|
1 |
Eradicating hunger, poverty and malnutrition |
|
2 |
Promoting healthcare, including preventive health care |
|
3 |
Sanitation including contribution to Swatch Bharat Kosh set up by the
Central Govt for the promotion of sanitation |
|
4 |
Making available safe drinking water |
|
|
Category II |
|
1 |
Promoting education and employment enhancing vocational skills,
especially among children, women, elderly and the differently abled and
livelihood enhancement projects |
|
|
Category III |
|
1 |
Promoting gender equality |
|
2 |
Empowering women |
|
3 |
Setting up homes and hostels for women and orphans |
|
4 |
Setting up old age homes, daycare centers and such other facilities
for senior citizens |
|
5 |
Measures for reducing inequalities faced by socially and economically
backward groups |
|
|
Category IV |
|
1 |
Ensuring environmental sustainability |
|
2 |
Ecological balance |
|
3 |
Protection of flora and fauna |
|
4 |
Animal welfare |
|
5 |
Agroforestry |
|
6 |
Conservation of natural resources |
|
7 |
Maintaining quality of soil, air and water including contribution to
the clean Ganga Fund set up by Central Govt for the rejuvenation of river
Ganga |
|
|
Category V |
|
1 |
Protection of national heritage, art and culture |
|
2 |
Restoration of buildings and sites of historical importance and works
of art |
|
3 |
Setting up public libraries |
|
4 |
Promotion and development of traditional arts and handicrafts |
|
|
Category VI |
|
1 |
Measures for the benefit of armed forces veterans |
|
2 |
War Widows |
|
3 |
Their dependents |
|
|
Category VII |
|
1 |
Training to promote rural sports |
|
2 |
Nationally recognized sports |
|
3 |
Paralympic sports |
|
4 |
Olympic sports |
|
|
Category VIII |
|
1 |
Contribution to Prime
Ministers National Relief Fund |
|
2 |
Any other fund setup
by the Central Govt or socio economic development and relief and welfare of
the SCs and STs and BCs |
|
3 |
For Minorities |
|
4 |
For Women |
CSR and Employees
For brand image of an organisation, employees play a key role in CSR activities. Employees would act as brand ambassadors for the company. They provide a most powerful communications channel with all the communities, consumers, financial groups, Govt and other stakeholders. What they say about their company and its offerings could definitely have a great impact on company’s brand equity than any major advertising campaign. If the employees convince and understand the core value of the programme, then they would communicate to all concerned accurately and correctly. The better informed the employees, are the more effective they are at communicating about the organization’s CSR activities. This is also an opportunity for employees to feel a greater sense of involvement and identification with CSR initiatives of the corporates.
Public Relations & CSR
There is a close link between CSR and PR. Corporate image is more important for any business organisation and PR is the best weapon to handle the image problem. PR affects everyone in the community. Doing good and getting credit for the effort is the PR. It chiefly concerns human relations and it is a two-way process. It aims at the building up of clear, correct, true impression of an organisation. PR stands between the Corporation and the Society and it is often described as that of a “a person in the middle” and bridges the communication gap. PR in CSR plays a dual role. PR communicates to the target audience about the CSR programmes on one hand and identifies the different community needs and requirements like need of education facilities, drinking water, medical and health facilities and so on and bring it to the notice of the management on the other hand. The latter role of PR helps the management to make up sustainable CSR programmes. It is the responsibility of the Public Relations and Corporate Communications Department of a company to guide and assist the Management in implementation of CSR activities.
Benefits of Corporate Social
Responsibility
An
organization’s relationship with its community is very important as it supplies
its workforce and meets its essential services like power, water supply etc.
Without public acceptance, no corporate unit can realize its full potential.
The goodwill of the people who live in the vicinity of an organisation is
essential and must be earned. In fact, there is a strong relationship between a
corporate organisation and the community. Hence the need to maintain community
relations and the necessity to pass the social audit.
Benefits to the Society: The benefits of CSR to the Society are (1) organize
cultural programmes (2) sponsor musical nights (3) sponsor sports and games,
train budding sports talent (4) planting of new saplings, arrange tree guards
during rainy season (5) free eye check-up camps (6) free cataract operations
and supply spectacles to old and the needy (7) free diabetic, dental, AIDS/HIV,
cancer detecting camps (8) seminars, symposia on many social awareness
campaigns (9) conduct or sponsor art exhibitions (10) sponsor free food packets
and gifts in orphanages/hospitals to mark May day/Independence Day (11) Supply
woolen blankets to old age homes (12) set up cool drinking water facility in
bus shelters (13) institution of awards, scholarships and (14) starting of
educational institutions, hospitals, etc., CSR prescriptions are meant to
develop the Society and help in transferring excess capital from the haves to
have-nots via the above specified activities.
Benefits to the Corporates: CSR generates direct and indirect business benefits
and advantages to the corporates. They are: (1) increased employee loyalty and
their retention (2) attracts and retain investors (3) gaining legitimacy and
access to markets (4) less litigation (5) increased quality of products and
services (6) boost favorable public image and reputation (7) enhance brand
value (8) less volatile stock value (9) avoiding state regulation (10)
increased customer loyalty (11) helps to maintain good media relations etc.
Summary
The need and importance of CSR has increased manifold because of changing corporate world. Corporations have accepted the importance of CSR that it enhances their relationships with their stakeholders. As such the CSR has become a part of their corporate strategy. CSR helps attract and retain honest, valuable, hardworking and productive employees. The employees feel proud and appreciate their company’s dedicated CSR policy. Good employees’ relationship helps enhance the image of the company. The business organisations that are implementing the CSR successfully feel that they are getting substantial benefits from their competitors globally. They say that their business organisations have good employee relations and sustainable healthy society to work in. The community at large and the corporate organisations have symbiotic relationship. One depends on the other. The community provides to a corporate organisation the required land, workforce, water, transport facilities, electricity and so on. Similarly, corporate organisations provide to the community like capital investment, ample employment opportunities to the local talent, new facilities and products, education, sports and games, common basic amenities like roads, water, sanitation, health facilities etc. Thus the community and the corporate organisations look to each other for support and sustenance. Nurturing of this relationship is the job of a Public Relations Officer or Corporate Communications Manager of the organisation.
FAQs
1. What is the need and importance of CSR?
2. Explain the concept of Corporate Citizenship
3. Why community relations and social audit are important
for Corporates?
4. Discuss the role of employees in CSR.
5. Describe various benefits of CSR.
Model Answers
1. The need for CSR can be understood in terms of long-term impact, fulfilling the obligation to the environment and being accountable and responsible toward the surroundings. Building a sound CSR strategy helps organizations bond with their customers. They’re more likely to be trusted when customers believe they want to do good. Ethics and business should go hand in hand. Turning a profit or securing an investment isn’t the end-all of a business operation. How a corporate integrate itself into society is very important. Now more than ever, there is a growing importance for companies to ramp up their focus on social responsibility. "Social responsibility," in simple terms, means a business’s obligation to pursue achievable and good long-term goals for its people and the world at large.
3. Community relations is an excellent means of attracting new customers and growing business. For a company to be successful, it must develop a relationship with the community in which it operates. To see results, the relationship must be beneficial for all parties involved. Ideally, companies aim to strike a balance between profitability and social responsibility. A social audit is an internal examination of how a particular business is affecting society. The audit helps companies to determine if they're meeting their objectives, which may include measurable goals and benchmarks. A social audit serves as a way for a business to see if the actions being taken are being positively or negatively received and relates that information to the company’s overall public image.
4. Employees are the assets beyond balance sheet figures. Employees play an important role when integrating a CSR emphasis to the core business. They are the ones who carry out the daily business, meaning that companies’ emphasis on environmental and social issues cannot be fully integrated without their participation and support. Employees are thus in a position to support a company’s strategic outcome. Increasingly, employees are recognized as important enactors and contributors to CSR activities, making their engagement a critical consideration of internal stakeholder management.
5. There are benefits to the Society and benefits to the Organisation. (1) Infrastructure and various facilities to the community (2) Less burden on the Government (3) Stronger brand image and recognition (4) Boosts Company’s reputation, (5) Bolster public trust (6) Adds value to firms by establishing and maintaining a good corporate reputation and/or brand equity. (7) Boosts employee morale and engagement, increased customer loyalty and sales (8) Provides media opportunities to publicize the organisation (9) Greater sustainability etc
Multiple Choice Questions
1.
__________ is referred to as father of
Corporate Society Responsibility
a.
John D
Rockfeller
b.
Andrew
Carnegie
c.
Howard
R Bowen
d.
Jamshedji
Tata
2.
In
India __________ Act governs Corporate Social Responsibility.
a. The Income Tax Act 1961
b. The Companies Act 2013
c. Indian Trusts Act 1882
d. The Societies Registration Act 1860
3.
CSR
simply means ________
a.
Taking help from Society
b. Commercial service
c. Social service
d. Giving back to Society
4.
Activities of CSR have been listed in _________
categories.
a.
Twelve
b.
Six
c.
Eight
d.
Nine
5. It is
the responsibility of ______ Department to guide and assist the management in
implementing CSR activities
a. Finance
b. Public Relations & Corporate Communications
c. Production & Marketing
d. Transport
Keys to Multiple Choice Questions: 1. (c) 2. (b) 3. (d) 4. (c) 5. (b)
Glossary:
Ethical:
pertaining to right or wrong in conduct, decent, principled.
Stakeholders:
Any group of investors, shareholders, participants etc.
Philanthropy:
Charity, compassion or patronage
Investors:
Depositors, financiers, stockholders, stakeholders etc.
Community:
Body
of individuals with common interests, living in a particular area.
Social
Audit: Process
of evaluating a firm’s operating procedures and acceptance by the Society.
Corporate Citizenship: Like citizens, Corporates too have responsibilities towards the society.
Key words: Corporate, Community, Society, Employees, CSR, PSU, Social Audit
Y Babji
