The issues facing corporate social responsibility

Corporate Social Responsibility is a universal concept that represents the good, desirable business behaviour. It transmit to what extent it is judge “morally or ethically” good for CSR. Corporate Social Responsibility is a standard of corporate behaviour which is socially broad in its behaviour(Carroll,1999).Corporate Social Responsibility is also define as the company`s Voluntary/discretionary relationship with its societal and community stakeholders(Woddock,2004).In other words Corporate Social Responsibility is a commitment to improve social well being through proper judgment of business practices and contribution of corporate resources(Nanc Lee and Philip Kotler, 2005).

Introduction:

Its is a concept where organisations consider the interests of the society by having the knowledge and responsibility of the force of their activities on customers, employees, shareholders, communities and the environment in all aspects of their operations(D Wood, 1991).

This requirement is seen to extend beyond the legal responsibility to comply with legislation and sees organizations freely taking more steps to enhance the quality of life for their employees and their families on the other side they are also doing community and society work in large scale.

Growth and Analysis of Corporate Social Responsibility :

Business ethics is that form of Applied ethics that examines the ethical progress and principles of any business that can arise unfortunately in a business.

In this 21st century businesses are getting more and more advance as by adapting the Corporate Social Responsibility in their business and its is increasing day by day hence providing more ethical businesses processes. All together, more force is applied on industries for bringing improvement in there business ethics through there new public laws (e.g Higher road tax for vehicles that produces higher-emission on roads). Business ethics has both normative and descriptive effect. As a commercial practice and a career specialization, the field is primarily normative. In academia descriptive approaches are also taken.

The Business progress and work done shows range and quantity of business ethical issues describes the ways in which business is professed to be at non positive value with non-economic social principles.

For Example :

Now a days a lot of commercial and non commercial websites rely on commitment for promoting non-economical social principles under the range of headings like ethics codes, social responsibility charters. In some cases organisation and corporations again consider there main values and principles in the view of business ethical considerations. e.g BP`s “beyond petroleum” environment angle.Corporations reconsider their core values in view of business ethical considerations like BP’s “beyond petroleum” environmental angle. Corporate Social Responsibility become common in 1970s but is was really condensed.

Marks & Spencer is also using Corporate Social Responsibility in the community with the help of building a trade network with the community by providing sold fair pricing in purchases.

Corporate Social Responsibility Risk in Implementing :

Risk management is the main element of any business that involves risk strategies. Reputations that take years to build up can be washed out in hours through activities such as fraud scandals activities. These occurrences can also draw unwanted attention from governments, courts etc. Developing a pure culture of doing the correct thing at the right time in the corporation can limit these risks.

Difference Between Brand :

In fully jam-packed marketplaces companies do there best for a unique selling objective which separate them from competitive minds. Corporate Social Responsibility can play a vital role in developing consumer satisfaction based on their ethical values( Paluszek, John (April 6-7,2005). Some big brands like The Body Shop and American Apparel (Dr. Tantillo`s Marketing Doctor Blog, March 28 2008) have build on ethical values. Service organisations can also take benefit from developing there reputation for there honour and best practice, so all the businesses have to have responsible for their environment.

Corporate Social Responsibility Effects

Negative Effects of Corporate Social Responsibility:

Corporate social responsibility (CSR) or commercial citizenship entails companies behaving in a socially liable manner, and dealing with other business corporation which also do the same . As the public sector and businesses are getting aware of Corporate Social Responsibility CSR, they take care of taking corporate social responsibility into consideration when planning for future out comes to become a socially responsible, otherwise the business has to face wrong feedback in the shape of company getting effected .

Effects of Corporate Social Responsibility on Public :

Companies that are appeared to be socially responsible by showing environment saving or environmental sustainability & on the same side doing immoral , illegal socially irresponsible activity in a terrific message for the stake holders and the consumers and investors. This type of activity effect the credibility and image of the company and damage its image in the market.

Bad Effects of Corporate Social Responsibility:

Corporate social responsibility (CSR) or commercial citizenship entails companies behaving in a socially liable manner, and dealing with other business corporation which also do the same . As the public sector and businesses are getting aware of Corporate Social Responsibility, they take care of taking corporate social responsibility into consideration when planning for future out comes to become a socially responsible, otherwise the business has to face wrong feedback in the shape of company getting effected .

Negative Effects of Corporate Social Responsibility on Publicity :

Companies that are appeared to be socially responsible by showing environment saving or environmental sustainability & on the same side doing immoral , illegal socially irresponsible activity in a terrific message for the stake holders and the consumers and investors. This type of activity effect the credibility and image of the company and damage its image in the market.

For Example:

Bad implementation of Corporate Social Responsibility can ruin the image of the company like Enron the Texan energy company. Its a natural gas company, in the year 2001 it got collapsed under a huge debt as at previously it was the largest accounting firm. Enron was the best at corporate patronage and has given in millions in charity to different charity organizations and also won awards for its corporate social responsibility work, but in year 2001 Enron got collapsed miserably because of bad debt and the main person responsible for this cause who made this giant fraud was Jeffrey Skilling and he got jailed for 24 years for this .The articles about Enron stated the backlash for its activity(Adam Lashinsky, New York Times, November 2001).

Legal Troubles Lead by Bad Corporate Social Responsibility:

Companies and businesses that are involve in wrong irresponsible social activities also pay a high price for its activities.

The best example for this is the Exxon Valdez tanker incident in Prince William Sound, near the coast of Alaska on March 24 1989 is the most memorable incident in corporate social responsibility, as this incident had created a bad image of the company by spilling 11 million gallons of crude oil in Prince William Sound and damaging the wildlife and fishing industry as a result Exxon Valdez has to pay $4.84 billion for clearing them selves from this Scandal( National Oceanic and Atmospheric Administration (NOAA, March 24 1989)

Long Term Effects of Wrong CSR on Brand and Its Reputation

Building a brand is a long term effort which takes years to build up but by a single mistake done my wrong corporate social responsibility strategy can ruin companies reputation & its image, it can never be able to shake off the ill effects bad corporate social responsibility that has on the brand and reputation.

The report developed on corporate social responsibility by Tsinghua University indicates that in the Fast Moving Consumer Goods (FMCG) describes that after taking interviews form 68% of the consumers said that they will not buy products of those companies who has bad corporate social responsibility performance. This practice is also same in automotive companies with 62.9% of costumers saying that they will not buy automobiles from companies with bad CSR performance(Tsinghua University).

As there is a relationship between Corporate Social Responsibility performance in the eyes of consumers and the effect it has on the strength of a company`s brand that it will do little good to the company then, to hurt its already build brand with poor choice in corporate social responsibility

Risk in implementing Corporate Social Responsibility :

Managing risk is the main part of many corporate strategies. Reputations that take

decades to build up can be cleaned out in hours through incidents such as corruption scandals

or environmental activities. These occurrences can also draw unwanted attention from

regulators, governments, courts etc. Building a genuine culture of ‘doing the right

thing’ within a corporation can offset these risks(Kytle Beth, Paramveer Singh, 2005, Corporate Social Responsibility as Risk Management A Model for Multinationals).

Corporate Social Responsibility from a Business Point of view :

Its is very obvious that in Businesses that are running today have Corporate Social Responsibility is tangled in many multinational organizations planning process. The reasons that work behind social responsibility towards human & environmental responsibilities is still unknown as weather they are based on genuine interest or on hidden motives. Organizations are basically entities that are developing and manufacturing products to make profits to gratify there shareholders (Prof Malloy 1959). As Milton Friedman believes, there is no place for Social responsibility as a business function. However a business still comprises people

those posses both the humanistic and naturalistic view points. The humanistic view is that

a deteriorating environment and planet is of no relevance in sustaining human life let

alone a business. The naturalistic view is where we draw the line between exploiting our

natural resources and destroying our fauna and flora for the sake of profiteering and

sustainability (Grace and Cohen 2005,144). The need to create an ideal scenario that is

“praetor efficient” may be the main reasons such mediators are there to adjudicate.

Influence from the population, government and competitors are possible forces that can

destabilize an organization should its motives or unethical processes become clear. Legal

structures in place, are created to ensure international borders are not left exposed to

multimillion dollar organizations’ self interest. Stringent laws and penalties are governed

by legal bodies such as the International Court of Justice that are capable of sanctioning

non abiding organizations (ICJ 2007).

CSR has been an issue of some debate. There are some people who claim that Corporate

Social Responsibility cherry-picks the good activities a company is involved with and

ignores the others, thus ‘greenwashing’ their image as a socially or environmentally

responsible company. There are some other people who argue that it inhibits free markets.

Borderline Organization Motive :

CSR will attribute other business motives, which the companies would dispute.

For example, some believe that CSR programmes are often undertaken in an effort to

distract the public from the ethical questions posed by their core operations. Some that

have been accused of this motivation include British American Tobacco (BAT),(Friends of the Earth, 2005) which produces major CSR reports and the petroleum giant BP which is well known for its high achievements in advertising profile advertising promotion on environmental awareness as part of it operations.

Opponent who believe that CSR is self interested:

The dispute is that the reason corporations put in place social projects is for the commercial benefit they see in raising their reputation with the public or with government. They suggest a number of reasons why self-interested corporations, solely seeking to maximize profits are unable to advance the interests of society as a whole. They would point to examples where companies have spent a lot of time promoting CSR policies and commitment to Sustainable Development on the one hand, whilst damaging revelations about business practices emerge on the other. For example the McDonald’s Corporation has been criticized by CSR campaigners for unethical business practices, and was the subject of a decision by Justice Roger Bell in the McLibel case (which upheld some of these claims, regarding mistreatment of workers, misleading advertising, and

unnecessary cruelty to animals). Similarly Shell has a much publicized CSR policy and was a pioneer in triple bottom line reporting, but was involved in 2004(Shell, 2004) in a scandal over the misreporting of its oil reserves which seriously damaged its reputation and led to charges of hypocrisy. Since this has happened the Shell Foundation has become involved in many projects across the world, including a partnership with Marks and Spencer (UK) in three flower and fruit growing communities across Africa. These arguments usually suggest that stronger governments and international laws rather than intentional measures are necessary to ensure that companies behave in a socially responsible manner.

Other views from this perspective include:

Corporations really care little for the welfare of workers or the environment, and given

the opportunity will move production to sweatshops in less well regulated countries.

Companies do not pay the full costs of their impact. For example the costs of cleaning

pollution often fall on society in general. As a result profits of corporations are enhanced

at the expense of social or ecological welfare.

Benefits of Corporate Social Responsibility:

Social responsibility of a business refers to what the business does, over and above the

statutory requirement, for the benefit of the society. The term corporate citizenship is also

commonly used to refer to the moral obligations of the business to the society. This

implies that just as individuals, corporates are also integral part of the society and their

behaviour shall be guided by certain social norms. The operations of business enterprises

affect a wide spectrum. The resources they make use of are limited to those of the

proprietors and the impact of their operations is felt also by many a people who are in no

way connected with the enterprise.

Benefit of Corporate Social Responsibility in Businesses:

If the corporation or business want to be socially responsible it is not necessary that good business tactics make the business good in its practices. CSR has some effects that directly relates to economics of the company, they are customers, public relations, shareholders and employees. If it is applied into the business plan, Corporate Social Responsibility has some benefit which relates to companies.

Getting the right to operate by stakeholders:

Some industries like mining industries requires a licence to operate because of some allegations of environmental factors that are to be get by certain authorities and as well as from the community, because there operation can effect the community near by .If this requirement is not fulfilled then they have to face some concequences in operating the industry.

Brand value and its reputation:

Business values are important company`s social, ethical and environmental performance because of its globalization, mobility and advancement in customers and suppliers ideas in the competitive market, to develop themselves to compete with the competitors, by keeping in mind that Brand name is also growing and getting importance, as the main worth of any company is its brand name .

Enhanced efficiency in Operations:

Corporate Social Responsibility plays a vital role in corporate sector with result in enhancing the efficiency in the operations of the company, e.g improving the efficiency in energy and natural resources, reducing the waste like proper handling of waste materials. Better recruitment improves the business and its life style, that will result in less absentees from office and increase the employees performance which result in company`s saving for example companies that provide relaxing and free from stress environment to its employees will result in employee performance enhancement and increase in production line. There is a study conducted by some of the large employers (Medstat Group, American Productivity and quality Center, 2009) got and idea that if health services can be provided to employees of the company then their productivity and efficiency will increase towards that company and will decrease the amount employees getting absentees from work and production.

Customer Satisfaction and Sales:

A research was done on corporate social responsibility regarding sale and customer satisfaction done by Millennium Poll(Millennium Poll, Dec 1999)that it interviewed approx 25000 people from near 23 countries which want to contribute to the society rather than only making profits by business have to first impress in need and wants of the customers by giving them quality, price, taste, and appearance and availability of their required product or services.

To Attract and Preserve the quality of Employees performance:

A research done by a UK consulting firm Stanton Marris (Stanton Marris, research) from top most employees of 24 well known companies shows that employers status and reputation is very important when an individual accepts a job offer, and nearly six percent of employees suggest that company`s commitment is more important while looking for job in any field as a skill worker these are the essential part of job search.

Market and product development with corporate social responsibility:

Cooperation with the help of local communities couture’s products and services in the local markets. Like IBM Cooperation it’s a giant in its field, I had partnership with the community which produced six new products for the market and got nearly 15 applications for patent in year 2000(IBM Corporation, 2000).

CSR as a conflict between Shareholders:

In Corporate social Responsibility there are two type of share holders one is insiders who are connected with the firm and completely rely on firm`s conditions and the other type of share holders are institutions or small investors which are not connected or rely on any other party. Affiliated owners are those who`s identity and reputation is related and linked with the firm, while on the other hand non affiliated owners are those who hold the shares of the firm but their holding did not effect the portfolio and also not to the firm. If the benefits are considered then insiders affiliated shareholders gain a great benefit from the firm high corporate social responsibility, they bear the cost from being associated with for and shown to be irresponsible.

Insider group consist of two major subgroups that are managers and non managers. It is very difficult to understand that which group will gain more by having socially responsible firm, but it is said that both the insider groups care for the firms rating and performance.

For example, consider the following three individuals: Steven Jobs, the CEO of Apple Computer, Warren Buffet, a large blockholder and a director of The Coca-Cola Company, and Roy Disney, a director of The Walt Disney Company. We argue first that all three of these individuals (Jobs = a manager; Buffet and Disney =non-managers) are strongly affiliated with their corresponding firm, and further, that these individuals should gain from the fact that their firms have a high CSR rating more than a 5 diversified shareholder such as Fidelity, whose reputation is not affected by the social rating of one single firm in its portfolio.

In what follows, we explore how this potential conflict may be affected by different attributes

of the firm, namely, a firm’s ownership and capital structure. In addition, we discuss

how free cash flow and other governance issues may affect the conflict.

Corporate Social Responsibility Examples:

BG INDIA LTD

Natural gas is becoming the fuel of choice in a world increasingly concerned with the

environmental impact of its energy consumption and India is no exception. Demand for

natural gas in India is expected to more than double over the next two decades, rising to

13,700 million standard cubic feet per day (mmscfd) by 2025

With its natural gas industry expertise, BG India is well placed to make a significant

contribution to the country’s future energy needs.

1995: Formation of Mahanagar Gas Ltd: joint venture with the Gas Authority of India Ltd

(GAIL)

1997 : BG acquires majority interest in Gujarat Gas Company Limited

2000 : GGCL commissions 73 km Hazira-Ankleshwar transmission pipeline

2002 : BG acquires 30% interest in Panna, Mukta and Tapti fields

BG India’s exploration and production assets include a 30 per cent interest in the Taptigas field and the Panna/Mukta oil and gas fields. Significant investment is planned forfurther development in the fields.

BG India has a 65.12 per cent controlling stake in Gujarat Gas Company Limited, which supplies natural gas to the cities of Ankleshwar, Bharuch and Surat in south Gujarat. BGIndia also has a 49.75 per cent stake in Mahanagar Gas Limited, which is developing anatural gas distribution system in Mumbai. Both companies deliver piped natural gas todomestic, commercial and industrial customers as well as compressed natural gas (CNG)for natural gas vehicles.

BG India is part of BG Group, a leading international energy company that has expertise

across the spectrum of the natural gas chain.

India is one of BG Group’s six core geographic areas of operation. BG India is

responsible for managing and developing the upstream and downstream interests of the

Group in the country. BG India has been patron of St Teresa’s Special School, Santa

Cruz, which is for differently challenged children. The company provides support for

training materials.

According to the information provided by the administration people at St Teresa’s Special

School, BG India provided financial support to the school once and that was almost two

years ago. Since then, there has been no contact regarding this subject on their part. When

asked about the policies to approach the company for donations and other voluntary

forms of support, the staff member informed us that the company delays the matter for a

couple of months every time they do so.

The company claims that Corporate Responsibility (CR) remains a top priority at BG

India, based on a recognition that the company has a duty to act responsibly both towards

its employees and the wider community in which it operates.

BG India mainly contributes to society in several ways: delivering gas to markets;

providing energy and infrastructure to support development; creating and sustaining jobs

in local economies; and through taxes and duties paid. These benefits are enhanced by the

company’s CR strategy, which not only ensures that it behaves in a socially responsible

manner, but also makes a positive and meaningful contribution to community

development.

Tata Tea

Tata Tea has launched a unique Presently Tata Tea is running its campaign on motivating Indians to vote in elections. It

has launched a website to help voters in registering them into voter list

Dr. Reddy’s Foundation

This foundation is Founded by Dr. K Anji Reddy in 1996 and it is involved in promoting PPP models connecting life, learning and livelihood and it defines the real causes of poverty improvement. It helps to empower people to support there livelihoods and responding to the society.Dr. Reddy’s is one pharmaceutical company that has evolved from a social initiation

backdrop into a corporate giant. CSR rating agency – Karmayoga states that Dr. Reddy’s

& Lupin Laboratories are the only two pharmaceutical companies that are making

genuine efforts for the society.

The company continuously tries to meet society’s expectations by developing innovative

medicines that enable people to live longer and healthier lives . To facilitate policy development, implementation and communication, a cross-functional team was

established at the beginning of 2002 to ensure a comprehensive and coordinated

approach. The team is made up of representatives from the key business areas who ensure

that policies are in place and mechanisms exist for their implementation and monitoring.

They also contribute to reporting progress through this report and in other ways, for

example through conference presentations and on company’s website.

CONCLUSION

A business with fewer stakeholders to satisfy, their greatest concern appears to be their

customers and their own ability to satisfy the demand for products effectively.

Businesses are demonstrating that well managed corporate responsibility actually

supports business objectives, especially amongst large corporate where improved

compliance, reputation and relationships has been shown to increase shareholder value

and profitability. For privately held businesses, the pressure to act can stem from the

demands of the supply chain, with large multinationals increasingly demanding that

suppliers conform to ethical business practices.Incorporating corporate responsibility

into a business’s core strategy can also enhance its attractiveness as an employer.