Corporate Social Responsibility

1. Corporate Social Responsibility

2. DEFINITIONS OF CSR It is a set of obligations to pursue those policies, to make those decisions, or to follow those lines of action which are desirable in terms of the objectives and values of our society. It is the overall relationship of the corporate with all of its stakeholders. Elements of social responsibility include investment in community outreach, employee relations, creation and maintenance of employment, environmental stewardship and financial performance.

3. Corporate Social ResponsibilityA Growing Agenda • External pressures for CSR continue to grow • Numerous organizations monitor, rank, and report social performance • The legal, business and reputation risks are great for companies engaging in practices deemed unacceptable

4. Prevailing Justifications for CSR • Moral Obligation • “Achieving commercial success in ways that honor ethical values” • Inadequate guidance to balance complex competing social and economic interests • Wide variability of personal values among managers and stakeholders • Sustainability • "Meeting the needs of the present without compromising future needs” • Most effective on environmental issues where improvements can yield immediate economic benefits • In other areas, intangible long term consequences provide a weak justification for short term costs

5. Prevailing Justifications for CSR(cont.) • License to Operate • “Building goodwill to secure the acquiescence of governments and stakeholders” • Licenses and approvals are necessary • But this approach cedes control of CSR agenda to external players that do not fully understand • the company’s competitive positioning, capabilities, and operations • Encourages short term, defensive, and disjointed responses to “the squeakiest wheel” of the moment • Reputation • “Enhancing reputation and brand with customers, investors, and employees” • Little evidence of sustained competitive advantage • Emphasizes the visible and popular rather than the social and business impact of corporate activities • The prevailing justifications focus on the tension between business and society rather than the interdependence • Generic rationales for CSR provide little specific guidance or priorities for company actions

6. CSR in Practice • Company practice on the social agenda leaves much room for improvement • – Reactive • – Unfocused • – Rankings oriented • – PR / Corporate image driven • CSR and community issues are treated as separate from the core business agenda • Limited measurable social impact or benefit to the business • With little business benefit, CSR initiatives are hard to sustain

7. Integrating Company and Community • There is an inevitable link between business and society • A healthy business depends on a healthy community to create demand for its products and provide a supportive business environment • A healthy society depends on competitive companies that can create jobs, support high wages, build wealth, buy local goods, and pay taxes • There is a long-term synergy between economic and social objectives

8. The Concept of Shared Value • Shared Value: Policies and practices that enhance the competitiveness of a company while simultaneously advancing economic and social conditions in the communities in which it operates • Find the points of convergence between economic and social objectives, not assumed tradeoffs or the need for redistribution • – These points of convergence are growing • Achieving shared value requires new thinking, new technologies, and new approaches to management • Shared value opportunities are even greater in developing countries • Shared value applies equally to NGOs and governments

9. Competitive Advantage and the Value Chain • Competing in any business involves performing a set of discrete activities, in which competitive advantage resides

10. The Value Chain and Shared Value • Many activities in the value chain touch social issues in the communities where a company operates. These social impacts can be positive or negative.

11. Competitiveness and the Business Environment

12. Creating Shared ValueWeaknesses in External Context • Every company operates in a competitive context that is inevitably affected by social and community conditions

13. Creating Shared ValuePrinciples • Businesses cannot solve all of society’s problems, nor bear the cost of doing so • Businesses must approach the social agenda proactively and strategically • Business must address society and social issues where they can add the most value • Select the social issues that are most tightly linked to a company’s business • Reconfigure the value chain to create shared value while reinforcing the company’s strategy • Improve the economic and social context that affects productivity and makes the business more sustainable • Build functioning clusters to create self-sustaining economic development

14. Creating Shared ValueNestlé • Nestle’s approach to working with small farmers exemplifies the symbiotic relationship between social progress and competitive advantage • In 1962, the company wanted to enter the India market, and it received government permission to build a dairy in the northern district of Moga • People were without electricity, transportation, telephone and medical care

15. Creating Shared ValueNestlé • A farmer typically owned less than five acres of poorly irrigated and infertile soil • Many kept a single buffalo cow that produced just enough milk for their own consumption • Nestle came to Moga to build a business, not to engage in CSR • But Nestle’s value chain, derived from the company’s origins in Switzerland, depended on establishing local source of milk from a large, diversified base of small farmers

16. Creating Shared ValueNestlé • Establishing that value chain in Moga required Nestle to transform the competitive context in ways that created tremendous shared value for both the company and the region • Nestle built refrigerated dairies as collection points for milk in each town • Medicines and nutritional supplements were provided for sick animals, and monthly training sessions were held for local farmers

17. Creating Shared ValueNestlé • With financing and technical assistance from Nestle, farmers began to dig previously unaffordable deep-bore wells • When Nestle’s milk factory first opened, only 180 local farmers supplied milk • Today, Nestle buy milk from more than 75,000 farmers in the region • The death rates of calves has dropped by 75%

18. Creating Shared ValueNestlé • Today, Moga has a significantly higher standard of living than other region in the vicinity • The increased purchasing power of local farmers has also greatly expanded the market for Nestle’s products • Nestle’s commitment to working with small farmers is central to its strategy • Its enables the company to obtain a stable supply of high quality commodities, without paying middle man

19. Creating Shared ValueNestlé • Nestle’s experience in setting up collection points, training farmers, and introducing better technology in Moga has been repeated in Brazil, Thailand, and a dozen other countries, including most recently in China

20. Coca Cola – a case • In the rain-starved Wada taluk of Thane district of Maharashtra were its bottling plant is located, Coca Cola has been harvesting rain water since 2003 to recharge ground water and has been supplying water to people in summer, in addition to instituting water supply schemes in some villages • All of these CSR efforts of the company have been integrated with its business strategy and have helped it to earn goodwill of village folks, apart from reducing absenteeism at the work place

21. Implementing Shared Value • Treat as a core business function • Partnership model • Collaboration with cluster institutions • Explicit goals and reporting

22. The Moral Purpose of Business • The most important thing a corporation can do for society is to • contribute to a prosperous economy • – Business has no need to be defensive about its role • However, corporations depend on a healthy society to sustain Competitiveness • Companies have the tools, capabilities, and resources to have a major impact on social issues • Each company should identify the particular set of societal problems that it is best equipped to help resolve, and from which will arise the greatest long term synergy with its business • Addressing these issues using the principles of shared value will lead to self-sustaining solutions • Businesses are invaluable strategic partners for NGO’s, government and other institutions to achieve society’s most cherished aims

23. Advantages of Corporate Social Responsibility • There are several advantages to corporations when they exhibit a sense of CSR and implement it, such as: • Improved financial performance • Enhanced brand image and reputation • Increased sales and customer loyalty • Increased ability to attract and retain employees • Reduced regulatory oversight • Innovation and learning • Risk management • Easier access to capital • Reduced operating costs

24. Steps to Corporate Social Responsibility The International Chamber of Commerce recommends the following nine steps to attain Corporate Social Responsibility: 1. Confirm CEO/Board commitment to prioritize responsible business conduct 2. State company purpose and agree on company values 3. Identify key stakeholders 4. Define business principles and policies

25. Steps to Corporate Social Responsibility(Contd.) 5. Establish implementation procedures and management systems 6. Benchmark against selected external codes and standards 7. Set up internal monitoring 8. Use language that everyone can understand 9. Set pragmatic and realistic objectives.

26. CSR and strategy: corporate social responsiveness • Corporate social responsiveness refers to the capacity of a corporation to respond to social pressures (Frederick 1994) • 4 ‘philosophies’ or strategies of social responsiveness (Carroll 1979) • Reaction • Defence • Accommodation • Proaction

27. EXTERNAL STANDARDS ON CSR • The Caux Round Table (CRT) • Organization for Economic Cooperation and Development (OECD) • United Nations Global Compact • Asian-Pacific Economic Cooperation (APEC) Business Code of Conduct • The Global Reporting Initiative (GRI)

28. EXTERNAL STANDARDS ON CSR • AA1000 Accountability • Social Accountability 8000 • Principles for Global Corporate Responsibility • The Global Sullivan Principles • The Keidanren Charter for Good Corporate Behaviour

29. INDIA ON THE ETHICAL/CSR MATRIX Indian corporations consider business ethics, compliance with regulatory requirements and consistency in value delivery as the three most important factors that impact their social reputation.

30. Many global survey has revealed that three of the most important factors that impact social reputation of corporation are : • Business ethics, • compliance with regulatory requirement and • consistency in value delivery • Only 12.4% of Indian companies pursue strategic philanthropy as compared to 48% of the multinational • Charity is pursued by 35% of India companies and 62% of multinationals

31. INDIA ON THE ETHICAL/CSR MATRIX (Contd.) • Wider adoption of CSR in Indian companies will be enabled by: • Provision of tax, duties and custom benefits. • Inclusion of CSR performance of promoters as a parameter in according fast track clearance to projects. • Decreased government interventions. • Development guidelines on estimation of socio-economic impacts.

32. Future of Indian CSR There is a clear need for • Transition from the present compliance centric approach to the new paradigm • Creation of an enabling environment and an array of support measures. • Business schools teaching CSR to facilitate this process • Industry associations to share experiences and reward best practice • Need to incorporate public policies into the Indian CSR. • International agencies to share cross-country experience.

33. Survey: India’s Companies Partnering with NGOs for CSR • Sixty seven per cent of India's domestic companies have chosen non-government organisations (NGOs) as partners to undertake their Corporate Social Responsibility (CSR) projects, • while 58 per cent prefer government departments for the spread of CSR obligations, • Results of a survey by the Associated Chambers of Commerce and Industry of India (Assocham).

34. The study added 37 percent of the firms had a well-structured foundation for implementing their CSR, • while 58 percent domestic companies had formed a separate department to implement CSR.

35. Twenty one percent of companies have come up with a separate CSR report, the survey found, • while only 8 per cent reported their CSR activities in their annual report.   • That's substantially lower than the rate for most international firms, the report noted.

36. "Some companies chose to narrow their focus on a few thematic areas, other companies took a broader view and undertook a large scope of areas to focus on," said the report.  • "Of the 24 cases analysed, it was found that there were as many as 16 companies focusing on 3-5 thematic areas, whereas four companies catered to 1-2 thematic areas of work and remaining stuck four to six or more thematic areas."

37. Govt Mulls Making CSR tradeable(18th Feb. 2010) • First Efforts should be to identify a method to quantify CSR activities, and then should debate the possibility of establishing a CSR exchange to deal in CSR credits • Need to integrate CSR as an ethical way of doing business and making profits • CSR is about the way we conduct our business, and not about keeping something apart for community welfare….if there is a business that is inherently destructive and unwholesome, a way has to be found to offset the negativity of that business”

38. “India needs not just growth, but inclusive growth and the corporate sector is increasingly concerned with and supportive of inclusive growth as much an economic imperative as it is socially desirable” FICCI president Harsh Pati Singhania said

39. Trading of CSR would be an incentive for companies to actively look at such programmes (D S Rawat, secretary general of Assocham) • There was a need to move CSR activities from the backburner of “Cheque book philanthropy” to mainstream business (Rajashree Birla, chairperson of FICCI Aditya Birla CSR centre for excellence

40. Institute of Chartered Accountants of India is working on a new set of rules on CSR, making it must for companies to report on social, environment and economic initiative