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Introduction

The Sanskrit saying ‘Atithi Devo Bhava’ means- ‘the one who comes to you for being served, should be taken to be as God’, is considered as the highest order of responsibility, be it to individuals or to the society. Thus the phase Social Responsibility has its roots in Indian context. This Phrase has long been in use with growth of industries and corporate.

It not only reflects the ‘passage of time’ in its impact and transformation, but its meaning and understanding has been affected by the growth of society, nations and changes in their appreciation of cultural heritage and background. Globalization has influenced trade all over the world; companies have looked for new opportunities in doing business outside their home country. In recent years Corporate Social Responsibility (CSR) has gained growing recognition as a new and emerging form of governance in business. It is already established in a global context, with international reference standards set by the United Nations, Organization for Economic Co-operation and Development (OECD) guidelines and International Labor Organization (ILO) conventions.

Broadly speaking, CSR has three key components:

  • the basic values, ethics, policies, and practices of a company’s business;
  • the voluntary contributions made by a company to community development;
  • The management of environmental and social issues within the value chain by the company and its business partners—from the acquisition and production of raw materials, through the welfare of staff, to product sale, use, and disposal.

 

Corporate Social Responsibility- Definitions

“A good company delivers excellent products and services, and a great company does all that and strives to make the world a better place.” – William Ford Jr., Chairman, Ford Motor Co.

 

By European Union “CSR is a concept that an Enterprise is accountable for its impact on all relevant Stakeholders. It is a continuing commitment by Business to behave fairly and responsibly 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”.

By Michael Hopkins “CSR is concerned with treating the Stakeholders of the Firm Ethically or in a socially responsible manner. Consequently, behaving socially responsibly will increase the human development of Stakeholders both within and outside the Corporation”.

Professor A. Quartz of Luxembourg University defined Corporate Social Responsibility as “a concept whereby companies voluntarily decide to respect and protect the interest of a broad range of stakeholders and to contribute to a cleaner environment and a better society through active interaction”.

The World Bank Committee for Sustainable Development (WBCSD) “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”.

After looking into the aforementioned definitions one can say that Corporate Social Responsibility (hereinafter referred to as CSR) is basically a concept whereby companies decide voluntarily to contribute to a better society and a cleaner environment. Corporate social responsibility is represented by the contributions undertaken by companies to society through its business activities and its social investment. After the careful perusal of the aforementioned definition it is clear that CSR is also connected with the concept of sustainable development in the company’s level.

Firstly, let us now discuss what do we meant by Sustainable development.  Generally, we define it as, ‘development that meets the needs of the present generation without compromising the ability of the future generation to meet their own needs’. There is a considerable overlap, interaction and interrelation between the CSR and Sustainable Development. The concept of CSR has a ‘triple bottom line’ approach that considers the economic, social and environmental aspects of corporate activity. Thus CSR demands businesses to manage the economic, social and environmental impacts of their operations to maximize the benefits and minimize the downsides. Through an effective CSR programme companies can improve access to capital, sharpen decision-making and reduce risk, enhance brand image, uncover previously hidden commercial opportunities, including new markets, reduce costs, attract, retain and motivate employees.

 

Approaches to CSR

There are two basic approaches to CSR: Traditional Approach and Modern Approach

Traditional Approach, Under the traditional/classical operation of the corporate   enterprises, society’s basic demands upon the business were to produce goods and   services efficiently and the responsibility of business enterprises was to use resources and engage in activities designed to increase profits and size of enterprises.

The Modern Approach, New social pressures have changed the objectives of business enterprises. There is growing public demand for corporate involvement in solving many social practices so that social responsibility becomes a standard by which business practices are evaluated. It is opined that business houses should formulate financial goals for the shareholders and social goals like pollution abatement, minority employment and related corporate activities.

 

Corporate Social Responsibility in India

“Corporate Social Responsibility Practices in India sets a realistic agenda of grassroots development through alliances and partnerships with sustainable development approaches. At the heart of solution lies intrinsic coming together of all stakeholders in shaping up a distinct route for an equitable and just social order….”

Indu Jain, Chairman, The Times of India Group, New Delhi

CSR in India is in a very nascent stage. It is still one of the least understood initiatives in the Indian development sector. A lack of understanding, inadequately trained personnel, non availability of authentic data and specific information on the kinds of CSR activities, coverage, policy etc. further adds to the reach and effectiveness of CSR programs.

But the situation is now changing. Corporate houses are realizing that what is good for workers – their community, health, and environment is also good for the business.

 

CSR Philosophies in India

Model FOCUS CHAMPIONS
ETHICAL Voluntarily commitment by companies to public welfare M K Gandhi
STATIST State ownership and legal requirements determine corporate responsibilities Jawaharlal Nehru
LIBERAL Corporate responsibilities limited to private owners(Shareholders) Milton Friedman
STAKEHOLDER Companies respond to the needs of Stakeholders- Customers, employees, communities etc. R Edward Freeman

 

Some Cases of CSR Initiatives in India

1)    Reliance Industries Ltd.

Reliance Industries Ltd. launched a countrywide initiative known as “Project Drishti”, to restore the eye-sights of visually challenged Indians from the economically weaker sections of the society.

 

2)    Hero MotoCorp

Hero MotoCorp takes considerable pride in its stakeholder relationships, especially ones developed at the grassroots. The Company believes it has managed to bring an economically and socially backward region in Dharuhera, Haryana, into the national economic mainstream.

 

3)    Infosys Technology Limited

Infosys promoted, in 1996, the Infosys Foundation as a not-for-profit trust to which it contributes up to 1% PAT every year. Additionally, the Education and Research Department (E&R) at Infosys also works with employee volunteers on community development projects.

 

4)    ITC Limited

ITC partnered the Indian farmer for close to a century. It is now engaged in elevating this partnership to a new paradigm by leveraging information technology through its trailblazing ‘e-Choupal’ initiative. ITC is significantly widening its farmer partnerships to embrace a host of value-adding activities viz. creating livelihoods by helping poor tribes make their wastelands productive, investing in rainwater harvesting to bring irrigation to parched dry lands, empowering rural women by helping them evolve into entrepreneurs, and providing infrastructural support to make schools an exciting platform for village children.

 

5)    ‘LABS’ of Dr. Reddy’s Labs

Dr. Reddy’s lab started ‘LABS’ (Livelihood Advancement Business School) in the year 1999. It trains the underprivileged youngsters, even street children for livelihood earnings in the job areas i.e. technology, healthcare, hospitality, finance and marketing issues. It involves four types of volunteers viz Student volunteer mentors, Faculty volunteer mentors, Network mentors and Resource mentors.

In a newly emerged global market as the competition is very intense and the customers are very sophisticated, companies must ensure social responsibility in order to secure fundamental relationships that fuel business growth.

 

Instances of violation of CSR Principles

  1. Bhopal Gas Tragedy, the Bhopal disaster also known as Bhopal Gas Tragedy was one of the world’s worst industrial catastrophes. It occurred on the night of December 2–3, 1984 at the Union Carbide India Limited (UCIL) pesticide plant in Bhopal, Madhya Pradesh, India. A leak of methyl isocyanate gas and other chemicals from the plant resulted in the exposure of hundreds of thousands of people. Estimates vary on the death toll. The official immediate death toll was 2,259 and the government of Madhya Pradesh has confirmed a total of 3,787 deaths related to the gas release. Others estimate 3,000 died within weeks and another 8,000 have since died from gas-related diseases. A government affidavit in 2006 stated the leak caused 558,125 injuries including 38,478 temporary partial and approximately 3,900 severely and permanently disabling injuries.
    UCIL was the Indian subsidiary of Union Carbide Corporation (UCC). In 2001 the US-based gigantic Dow Chemical purchased Union Carbide, thereby acquiring its assets and liabilities. However it has been steadfastly refusing to clean up the site, provide safe drinking water or compensate the victims, or even disclose the composition of the gas leak, Dow Chemical, like UCIL earlier, claims that it has no liability of the past. The Dow Chemical Company, with annual sales of $28 billion, says in its web site: it is “committed to the principles of Sustainable Development and its approximately 50,000 employees seek to balance economic, environmental and social responsibilities.”

  2. Cadbury, In October 2003, a Cadbury stockiest in Mumbai detected worms in Cadbury’s Dairy Milk chocolate. Then the Commissioner of Food and Drug Administration of Maharashtra examined the sealed Dairy Milk packs and found worms in them. He immediately ordered the seizure of all Cadbury’s Dairy Milk chocolates from the company’s factory in Talegaon near Pune. This attracted lots of criticism from consumer activists on lack of appropriate laws on storage. They also demanded immediate government action against Cadbury. Another factor brought to light was that the chocolates were delivered by three wheelers, which did not have refrigeration facility for appropriate transit maintenance of the product.

  3. Unilever Global Company, In the year 2001 the Unilever Company has dumped 300 metric tons of mercury at Kodaikanal located at South India. As a contrast to the above activity the Unilever website states, “We are committed to conducting our operations with integrity and with respect for the interests of our stakeholders….. We are also committed to making continuous improvements in the management of our environmental impacts and to working towards our longer term goal of developing a sustainable business.”
    In order to tackle above situations a new initiative has taken by Government of India, that is CREP, or “The Corporate Responsibility for Environmental Protection” initiated by the Indian government recently this year in 2003, is a case in point. A guideline for a set of non-mandatory norms for 17 polluting industrial sectors has been set but there is no real pressure for implementation or internalization. An ethical being which claims to respect the earth cannot have discontinuities in its practices. Ethical practices have to place in an integrity framework, and that implies at the very least a lack of multiple ways of ‘being.’ This can be no different for individuals as for companies. Contrast to the above news the Unilever website states “All Unilever companies must comply with local laws and adopt the same standards for occupational health and safety, consumer safety and environmental care.”

The above cases show that emerging markets might have loose laws which protect the interests of the local population. However it is in the best interest of the corporations to take care of the welfare of the local community. The adverse publicity caused by the protests and media coverage brings out high degree of negative public response for the product safety of the company.

 

International Scenario:

Hinkley groundwater Contamination
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Pacific Gas & Electric operates a compressor station in the town of Hinkley in the Mojave Desert of California in the United States for natural gas transmission pipelines. The natural gas has to be re-compressed approximately every 350 miles (560 km), and the station uses large cooling towers to cool the compressors. The water used in these cooling towers contained hexavalent chromium to prevent rust in the machinery. Since the water was stored between uses in unlined ponds, it ultimately severely contaminated the groundwater in the town. The wastewater dissolved the hexavalent chromium from the cooling towers and was discharged to unlined ponds at the site. Some of the wastewater percolated into the groundwater, affecting an area near the plant approximately two miles long and nearly a mile wide. PG&E had alerted the townsfolk earlier about the chromium but said that it was nothing to worry about, saying that chromium was in many multivitamins. While trivalent chromium does exist naturally in many fruits and vegetables, hexavalent chromium can be toxic. When inhaled, it can damage the lining of the nose and throat and irritate the lungs. Studies of workers in chromium processing factories have shown that hexavalent chromium is a known human carcinogen due to chronic inhalation exposures. When swallowed, it can upset the gastrointestinal tract and damage the liver and kidneys; however, evidence suggests hexavalent chromium does not cause cancer when ingested, most likely because it is rapidly converted to the trivalent form after entering the stomach.

People and domestic animals in the town of Hinkley, California started getting sick and some died. Since residents depended on the local groundwater supply for all their needs, were the illnesses somehow related to PG&E’s Gas Compressor Station located nearby?
Steps PG&E took to evade their responsibility-

  • Whereas the fact was that hexavalent chromium was toxic and a known cancer-causing chemical. When swallowed, it upset the gastrointestinal tract and damaged the liver and kidneys permanently. PG&E records revealed that the company knew about it all. Yet they preferred to evade their responsibility towards the residents.
  • One official even “represented that he and his children would gladly drink their well water.”    As a result, the people of Hinkley who lived in the path of the contaminated plume continued to use the groundwater and remained on their property where they continued to be exposed to dangerous levels of a cancer-causing chemical.

PG&E told the residents to, “…avoid drinking your well water, but it is safe to use for all other domestic purposes such as bathing and watering animals and plants.” It is difficult to comprehend how anyone could have made such a statement in light of the facts.
After many arguments the case was finally led to arbitration with maximum damages of $400 million. After the first 40 people received about $110 million, PG&E reassessed its position and decided it was a bad idea. The case was settled in 1996 for $333 million, the largest settlement ever paid in a direct-action lawsuit in U.S. history.

Chernobyl nuclear power plant in Ukraine
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The April 1986 disaster at the Chernobyl nuclear power plant in Ukraine was the product of a flawed Soviet reactor design coupled with serious mistakes made by the plant operators. It was a direct consequence of Cold War isolation and the resulting lack of any safety culture. The resulting steam explosion and fires released at least 5% of the radioactive reactor core into the atmosphere and downwind.

 

Two Chernobyl plant workers died on the night of the accident, and a further 28 people died within a few weeks as a result of acute radiation poisoning.

Acute radiation syndrome (ARS) was originally diagnosed in 237 people on-site and involved with the clean-up and it was later confirmed in 134 cases. Nobody off-site suffered from acute radiation effects although a large proportion of childhood thyroid cancers diagnosed since the accident is likely to be due to intake of radioactive iodine fallout. Furthermore, large areas of Belarus, Ukraine, and Russia and beyond were contaminated in varying degrees.

Progressive closure of the Chernobyl plant:

Chernobyl Unit 4 is now enclosed in a large concrete shelter which was erected quickly (by October 1986) to allow continuing operation of the other reactors at the plant. However, the structure is neither strong nor durable. Some 200 tons of highly radioactive material remains deep within it, and this poses an environmental hazard until it is better contained. A New Safe Confinement structure is due to be completed in 2014. In the last two decades there has been some resettlement of the areas evacuated in 1986 and subsequently. Recently the main resettlement project has been in Belarus.

 

Do Corporates have a responsibility towards society?

As we know that the traditional role of a corporation is to generate income, to employ people and to earn profit. Therefore traditional goals of corporation have been profits, sales and wealth maximization. Now, profit is still the main motive of the corporation but it is not the sole motive as the role of contemporary corporations has been to serve the society at large, since it uses societal resources, namely man power and raw material. Since a company operates within the society, it affects the society. Therefore there is a need to regulate the corporate power to get optimum societal benefits. Justice P. N. Bhagwati has aptly remarked in this connection that maximization of social welfare should be the legitimate goal of a company. Originally, a company has been considered an artificial person, though having a legal entity apart from its members, yet could not enjoy rights like human beings. But with the advent of organic theory, a company or corporation is considered a living organism, is entitled to rights and also liable for duties, and the same has been declared by the Apex Court time and again. The corporation is viewed as a central institution within a dynamic economy. The term social responsibility emphasizes the intimacy of the relationship between the corporation and society. It is not a philosophy, but a goal. This goal is accepted by business in response to demands of the society for an improved standard of living. It means that business should oversee the operation of an economic system that fulfils the expectations of the public at large.

VARIOUS RESPONSIBILITIES OF CORPORATES

 

Responsibility towards itself-

It is the duty of each corporate entity to do business and stay in the business. It has to work towards growth, expansion and stability and thus earn enough profits. If the corporation is to achieve social and economic ends, it has to give enough importance to the efficiency factor.

Responsibility towards shareholders-

The main responsibility of corporate entity is to secure and safeguard the shareholders’ investment and endeavour to provide a reasonable return on their money. At the same time, a careful balance must be maintained between the long term needs of business enterprises and a need to pay current dividends. If the corporation behaves in a manner which is prejudicial to the interest of the shareholders, then the shareholders are free to take action against the corporation.

Responsibility towards state-

It has undoubtedly been settled that the business sector is the major source of income in every economy, whether capitalist or socialist. Thus, out of the profit available, the state is entitled to a definite to definite share as per the income tax laws and this commitment has therefore to be performed at priority.

Responsibility towards consumers-

The company should maintain high quality standards at reasonable prices. It is the consumer who decides the fate of every business institution. Therefore it is imperative for every corporate entity to fulfill its contractual obligations to its customers.

 

Conclusion

CSR is not new to India; companies like TATA and BIRLA have been imbibing the case for social good in their operations for decades long before CSR become a popular cause. Inspite of having such life size successful examples, CSR in India is in a very nascent stage. It is still one of the least understood initiatives in the Indian development sector. It is followed by a handful of public companies as dictated by the very basis of their existence, and by a few private companies with international shareholding as this is the practice followed by them in their respective foreign country. Thus the situation is far from perfect as the emphasis is not on social good but rather on a policy that needs to be implemented.

But organizations are coming to realize the bottom-line benefits of incorporating sustainability into their DNA. It’s beneficial for attraction and retention and it’s the right thing to do. HR is a key organizational leader and can take the lead or partner with other executives to work cross-functionally to integrate CSR objectives into how business gets conducted. HR practitioners can act as translators of the organization’s CSR commitment vertically and horizontally across departments. To guarantee the supply of responsible and ethical goods, it is especially important to implement a nationwide system of CSR standards.

I think that today, more so than ever, corporate responsibility is the best strategic as well as financial path that most businesses can follow. For most businesses there are both compelling reasons to be responsible and compelling statistics that validate that responsible businesses do better according to traditional financial metrics.

By accepting responsibility, we take effective steps toward our goal: an inclusive human society on a habitable planet, a society that works for all humans and for all nonhumans. By accepting responsibility, we move closer to creating a world that works for all.”

                                                                    Sharif M. Abdullah

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