Why Corporate Social Responsibility shall be compulsory?

Why Corporate Social Responsibility shall be compulsory?

The practice of CSR is much debated. There are various points of views as regards CSR. In fact many of these views are often contradictory and opposed to each other. A major school of thought says that there is a strong business case for CSR, in that corporations benefit in multiple ways in the long run if they properly follow the basic rules related to CSR. But juxtapose this with what the critics say. They argue that CSR distracts the corporate organizations from the fundamental economic role of businesses. Then there is a third view point saying that CSR is nothing more than some kind of superficial window-dressing. A radical view brings in some inherent motive to this entire exercise by saying that it is nothing but an attempt to pre-empt the role of governments vis-a-vis the powerful multinational corporations.

There are many reasons assigned for CSR becoming so important today. Firstly, in the increasingly conscience-focused marketplaces of today, the demand for more ethical business processes and actions is increasing, putting in more and more pressure on industry to improve business ethics through new public initiatives and laws. A CSR program can be an aid to recruitment and retention particularly within the competitive graduate student market because the newer generation of potential recruits are rather sensitive to a firm's CSR policy. CSR is also perceived as being related to managing risk because required CSR activities always send positive signals to regulators, courts, governments and media and help the corporation offset these legal and regulatory risks. Finally, CSR can also play a role in building customer loyalty based on distinctive ethical values, thus getting transformed into its unique selling proposition.

The other view opposing CSR says that corporation's prime purpose is to maximize returns to its shareholders, hence they are only responsible to these shareholders and not to society as a whole. Thus while they need to obey the laws of the land, they do not have any other obligation in the form of CSR to society at large. An equally vehement view opposing CSR says that it is fundamentally and inherently incongruent with the very nature and purpose of business, and is thus a hindrance to free trade. They argue that such kind of neo-liberalism is actually opposed to the well-being of society. They go further to declare that such policies are a hindrance to human freedom.

But the majority of individuals and organizations operate in between these extreme views. This includes most of the religious and cultural traditions.

At this point, I find it pertinent to state that all these viewpoints have come from the perspective of the corporate world. But today it is more important to look into the matter from the point of the view of the society and the government, the two externally placed stake-holders who often get sidelined by the corporate. In fact the time has come when these two stakeholders shall come forth and exert their needs and requirements in very clear terms with no uncertainty.

This is because the interests of the business groups will always be slanted, self centered and biased. To them the prime motive (and often the singular reason) for business would be profit, which they try to present as the interest of their primary stakeholders, viz. the shareholders. But the government and the society are much bigger and much more important entities than these small number of shareholders. Hence naturally each business needs to conform to the various corporate social responsibilities, including also the rules and regulations of the State where they are operating. It would only be the government and the society which can be a neutral observer and a fair judge to what exactly a corporate shall be expected to do and how a business needs to be carried out. This is because each business ultimately takes its resources from the society and from its external atmosphere and hence it needs to be completely responsible to the society. With changing times, when the resources are getting scarcer and the fine ecological balances are getting disturbed, making the entire atmosphere highly fragile, these needs and requirements just can nor be ignored at any cost. Any mishandling in this regards will be disastrous having its long-term effects on the ecology, the atmosphere and the society. Such a situation can no longer be tolerated, just for the cause of a few corporate interests. Thus, today the Corporate Social responsibility can no longer remain at the fringes as a form of corporate self-regulation integrated into a business model. But today, CSR would mean the “compulsory” integration of every corporate functioning with the social, ethical, legal and ecological responsibilities and liabilities associated with all such corporate functioning. No more optional and self-guided aspects of CSR but some kind of integrative, innate and forceful responsibility imposed on all these corporate is the need of the hour.

Amitabh Thakur, President, CSR(India), Lucknow

Defintion of Corporate Social Responsibility

The basic question about Corporate Social Responsibility (CSR) that is often debated is related to its definition itself.

CSR has been defined in different ways by different authorities, some of the more widely accepted ones being-

CSR is about how companies manage the business processes to produce an overall positive impact on society- Mallen Baker

CSR includes the economic, legal, ethical, and discretionary expectations that society has of organizations at a given point in time" Carroll and Buchholtz

Corporate Social Responsibility 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- Lord Holme and Richard Watts

Operating a business in a manner that meets or exceeds the ethical, legal, commercial and public expectations that society has of business- Business for Social Responsibility

A concept whereby companies decide voluntarily to contribute to a better society and a cleaner environment. A concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis- European Commission

Corporate social responsibility is a form of corporate self-regulation integrated into a business model. Ideally, CSR policy would function as a built-in, self-regulating mechanism whereby business would monitor and ensure its support to law, ethical standards, and international norms- Wikipedia

Thus we can see from the above that CSR is primarily concerned with the social responsibility of the Corporate. Without going into the facts here why there is an immense need for CSR today, I would strongly present the following definition of Corporate Social Responsibility-

Corporate Social Responsibility would mean the compulsory integration of every Corporate functioning with the social, ethical, legal and ecological responsibilities and liabilities associated with all such corporate functioning.

Amitabh Thakur, President, CSR(India), Lucknow

Why CSR (India)

'Corporate social responsibility (CSR), also known as corporate responsibility, or sustainable responsible business (SRB), or corporate social performance, is a form of corporate self-regulation integrated into a business model. Ideally, CSR policy would function as a built-in, self-regulating mechanism whereby business would monitor and ensure its support to law, ethical standards, and international/ national norms, so that CSR-focused businesses would proactively promote the public interest by encouraging community growth and development, and voluntarily eliminating practices that harm the public sphere, regardless of legality. Essentially, CSR is the deliberate inclusion of public interest into corporate decision-making.

Though the practice of CSR is much debated and criticized, we from IRDS strongly believe that there is a strong business case for CSR because corporations are getting a lot of profits and benefits out of the society and hence it naturally becomes their duty to pay the society back in some due form. IN fact, we extend the idea of CSR a bit further by saying that since CSR helps the companies and firms as much as the society but due to their short-term visions many of the Corporate are not being able to appreciate these benefits and hence it becomes the societal responsibility as well to duly enforce these Corporate to fulfill their responsibility of appropriate and proper inclusion of public interest into corporate decision-making to ensure long-term community growth and development in a holistic manner.

CSR in India has not come up in an encouraging manner. For various reasons, many Corporate are totally ignoring the concept of community growth and development. Thus as enlightened and socially concerned citizen of this Nation, it is our responsibility to make these Corporate aware of their responsibilities towards the society and to ensure that these Corporate actually perform their part of the service for the cause of public interest while fulfilling their prime motive of profitability.

IRDS makes this small beginning in the form of CSR India which would make all possible efforts to enforce the corporate world to follow the ISO 26000, the recognized international standard for CSR presently. They also need to follow the Triple Bottom Line (TBL). In practical terms, triple bottom line accounting means expanding the traditional reporting framework to take into account ecological and social performance in addition to financial performance. The concept of TBL demands that a company's responsibility lies with stakeholders rather than shareholders.. In this case, "stakeholders" refers to anyone who is influenced, either directly or indirectly, by the actions of the firm.

We all need to get ourselves acquainted with CSR in its broadest sense along with all the related concepts. There is also a need for all of us to contribute our little bits in ensuring that each Company and Firm finally adheres to these measures and takes CSR with complete sincerity in the widest possible way.

Amitabh Thakur
IPS,
IIM Lucknow
94155-34526