Corporate Social Responsibility has grown from mere debate to concrete actions on the part of Indian companies. While many are still vacillating between to do or not to do, numerous corporate are willing to give back to society
Every organization has an impact on the society and the environment through its operations, products and services. Also through its interaction with the key stakeholder groups including employees, customers or clients, investors, suppliers and the local community. There was a point in time when emphasis was given to the purely economic aspects of any activity being carried out. But now, issues like environment, ethics and society are given equal emphasis by India Inc.
At the same time, it stands true that it will take a while for many organizations to equate Corporate Social Responsibility (CSR) with value creation. It’s a continuing debate that can continue for as long as one wants. The proponents as well as the critics of CSR are unyielding. The good news is, things are taking a turn for the better.
A growing number of commercial profit makers, who are adding to corporate trash everyday, accept that they can and should manage their social and environmental impacts in ways that benefit both the organization and the wider society. According to N. R. Murthy, non-executive chairman and chief mentor of IT firm Infosys, “Corporate Social Responsibility is really about ensuring that the company can grow on a sustainable basis, while ensuring fairness to all stakeholders”.
Corporate India has done it in different forms. A cement factory in Southern Gujarat planted numerous seedlings atop its chimneys to reduce pollution. This was decades ago. CSR has turned a whole new leaf since. The latest entrants to India Inc., IT companies are also hopping onto the virtuous model. Cincom Systems, for instance, runs an iMAD program with an NGO named Society for Rural Urban & Tribal Initiative (SRUTI).
Talking about iMAD, or I Made a Difference, Cincom director Pantulu Avasarala says, “This association will help both organizations to work closely for the betterment of the society and sustain community empowerment. We accentuate the power of helping others internal or external to the company”. As part of this initiative, Cincom has already donated 15 computers to schools operated by SRUTI for underprivileged children living in slums and backward areas.
According to a study released by Oracle Corporation and the Economist Intelligence Unit, 85 percent of executives and investors rank corporate responsibility as a central consideration in investment decisions. This trend, it said, is being driven by factors like the erosion of trust in large corporations, the globalization of business, the corporate-governance movement, the rise in importance of socially responsible funds and sheer competitive pressures. The last factor, however, does not necessarily imply that firms emphasizing Corporate Responsibility will beat the competition.
CSR brings about intangible benefits such as brand value and greater investor confidence. But one cannot measure what benefits it adds to the balance sheet. On the contrary, there are costs associated with CSR that can very well be calculated. Reports say that a full-fledged Corporate Responsibility program at a large multinational can cost tens of millions of dollars, or as much as 2% of total revenue.
It is often believed that evolved economies have moved the more polluted industries to parts of the world where environmental and social standards are less stringent. Simultaneously, enthusiastic supporters of free markets debate that an organization should not turn away from its primary goal which is responsibility to shareholders and so they should not be thinking of wider good but should think only about their profits.
In his book Capitalism and Freedom, Friedman argues that, “there is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”
Critics feel that advocates of CSR are wrong in implying that there is something shameful about companies making profits. They feel the conviction that redemption lies only in these companies also being a moral “corporate citizen”, is incorrect. They propound that CSR moves companies away from their primary aim of making profits, throwing global capitalism out of gear with increased regulation and sundry costs to eventually burden stakeholders worldwide.
Corporate Responsibility is difficult to pin down in a company’s growth cycle, more so because it costs a bomb and there don’t seem any immediate returns. This could also explain why the most important stakeholders, after customers, are the traditionally important employees and shareholders.
With no real studies conducted on CSR, it is also difficult to notify exactly what standards a company should follow and how far they should go beyond the laws to claim beneficiaries to the society. What we really mean by “responsibility” is still under debate. There lies the biggest problem. It’s at the discretion of companies what they want to do and how they want to go about this intangible mode of value creation. Or if they care to venture there at all.
The punch of the debate is that the negative effects industries have on the environment we breathe in cannot be denied. It is true that they are constantly depleting natural resources and contributing to environmental hazards like pollution and global warming. Fossil fuels are said to contribute to global warming, and there is both governmental and societal pressure on corporations to adhere to stricter environmental standards. It might as well that they give back to the environment in some form. Fortunately, there is no denying that CSR has become an important issue facing the global business community and one that promises to grow in importance over the coming years.
While it is fair to say that unnecessary intrusion into a corporate’s working can harm the benefits it accrues to society by means of wealth creation, it is also true that companies need to return something as an entity by itself. Companies have long been criticized for the disruption they cause to the environment. It is time they value what they have and give back to society, some bit in return
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