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Corporate social responsibility

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Corporate social responsibility

  2. 2. Corporate Social Responsibility: What is it?  Goal: Corporate Social Responsibility (CSR) is a widely defined concept that explores the responsibilities of business towards society  In terms of: the environment; employees 'and neighbours and consumers. This responsibility lies outside of the financial responsibilities that Companies have towards shareholders and other investors
  3. 3. What is it? Cont…..  CSR is also linked to the idea of social and environmental sustainability; how businesses should act to ensure that their business contributes to a future where the environment is protected and people's basic human rights are protected, both in the short and long term. Business' role as creators of wealth for society can contribute but the wealth must be achieved in a sustainable way.
  5. 5. ENVIRONMENT  Responsibility not to pollute where they operate  Responsibility to make products which do not damage the environment throughout their life cycle  Responsibility to improve the sustainability of all their operations
  6. 6. EMPLOYEES  Guaranteeing the right of association for all employees  Guaranteeing the freedom to form trade unions without interference  Guaranteeing the right to collective bargaining.  Providing training.  Ensuring the health and safety of employees  Ensuring that child labour is not used in their business
  7. 7. NEIGHBOURS AND CONSUMERS  Monitoring to ensure that all operations have a positive impact upon the local community .  Actively seeking the views of those affected by business operations .  Ensuring that products are not detrimental to the interests of consumers
  8. 8. Other Issues CONSUMER RIGHTS: Companies have responsibilities to all of those who purchase their products, regarding the safety of the product and its fitness for use
  9. 9. Other Issues HUMAN RIGHTS :Companies have responsibilities to ensure that their operations never negatively influence human rights, for example by ensuring that security personnel are properly trained and held accountable
  10. 10. Other Issues GOVERNMENTAL RELATIONS : Many companies hire public relations firms to lobby governments. The tactics employed should be open, accountable and transparent
  11. 11. Other Issues CORPORATE GOVERNANCE : As recent scandals have shown, the extent to which companies' boards CAN govern and regulate the companies' activities is crucial for their legitimacy and reputation
  12. 12. Examples - Human Rights and Business TotalFinaElf and Premier Oil are accused of complicity in gross human rights abuses in Myanmar/ Burma. Soldiers retained by the companies to protect the oil pipeline allegedly force civilians to carry heavy supplies, during which time they are frequently beaten and left for dead. ", demonstrating the companies' complicity in this use of forced labour.
  13. 13. Example - Environment and Business In 1984 Union Carbide's production factory in Bhopal India let out a cloud of poisonous gas that killed thousands of people. Since then they have failed to make full compensation to the victims and the tens of thousands of people who still suffer from the effects of the poisoning. According to Greenpeace, the area of the factory remains contaminated to this day and still poses a health risk. Attempts to hold Union Carbide and senior executives accountable have not been successful, with Union Carbide representatives and directors often failing to attend hearings. The Indian Government has also controversially diluted the charges against Union Carbide
  14. 14. Example -Consumer Issues and Business Over the 20th Century doubts have been growing about the nutritional value of infant formula feed for babies in place of breastfeeding. In the early 1970s several NGOs started campaigns which raised the profile of the issues substantially, most prominently being campaigns which focused upon Nestle's role in the developing world. In 1981, an international code on the marketing of breast milk substitutes was adopted by the World Health Assembly (of the WHO). It is still disputed whether Nestle acts according to the code, despite the fact that UNICEF estimates that 1.5 million lives could be saved each year if every child were breastfed for the first six months. This example shows how business' operations can have significant impacts on those who consume their products.
  15. 15. What you get to develop through this paper.  Should businesses' responsibilities be limited to profits for their shareholders?  How responsible are businesses for the non-financial effects of their operations?  How far should this responsibility extend to subsidiary companies, sub-contractors and suppliers?  How should companies balance their role as generators of wealth against their non-financial responsibilities?  How much responsibility do businesses have for the society in which we live
  16. 16. Syllabus Coverage What is CSR? Brief History of CSR The importance and benefits of CSR in contemporary business world CSR in the Textile and Apparel industry. Origin of vendor code of conduct in Textile and Apparel industry Important Multi stake holder initiatives for CSR in Apparel Industry. The issues and challenges related to the Indian Apparel industry as regards codes of conduct Projects - - Best practices case studies - CSR Auditing: its role and auditing techniques
  17. 17. Corporate social responsibility is necessarily an evolving term that does not have a standard definition or a fully recognized set of specific criteria. With the understanding that businesses play a key role on job and wealth creation in society, CSR is generally understood to be the way a company achieves a balance or integration of economic, environmental, and social imperatives while at the same time addressing shareholder and stakeholder expectations.
  18. 18. While business compliance with laws and regulations on social, environmental and economic objectives set the official level of CSR performance, CSR is often understood as involving the private sector commitments and activities that extend beyond this foundation of compliance with laws.
  19. 19. From a progressive business perspective, CSR usually involves focusing on new opportunities as a way to respond to interrelated economic, societal and environmental demands in the marketplace. Many firms believe that this focus provides a clear competitive advantage and stimulates corporate innovation
  20. 20. CSR is generally seen as the business contribution to sustainable development which has been defined as "development that meets the needs of the present without compromising the ability of future generations to meet their own needs", and is generally understood as focusing on how to achieve the integration of economic, environmental, and social imperatives. CSR also overlaps and often is synonymous with many features of other related concepts such as corporate sustainability, corporate accountability, corporate responsibility, corporate citizenship, corporate stewardship, etc..
  21. 21. CSR commitments and activities typically address aspects of a firm's behaviour (including its policies and practices) with respect to such key elements as; health and safety, environmental protection, human rights, human resource management practices, corporate governance, community development, and consumer protection, labour protection, supplier relations, business ethics, and stakeholder rights
  22. 22. Corporations are motivated to involve stakeholders in their decision-making and to address societal challenges because today's stakeholders are increasingly aware of the importance and impact of corporate decisions upon society and the environment. The stakeholders can reward or punish corporations. Corporations can be motivated to change their corporate behaviour in response to the business case which a CSR approach potentially promises. This includes:  stronger financial performance and profitability (e.g. through eco-efficiency),  improved accountability to and assessments from the investment community,  enhanced employee commitment,  decreased vulnerability through stronger relationships with communities, and  improved reputation and branding
  23. 23. 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.
  24. 24.  Corporate social responsibility is essentially a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis. This means not only fulfilling legal expectations, but also going beyond compliance and investing in human capital, the environment and relations with stakeholders.  The development of CSR reflects the growing expectations of the community and stakeholders of the evolving role of companies in society and the response of companies to growing environmental, social and economic pressures. Through voluntary commitment to CSR, companies are hoping to send a positive signal of their behavior to their various stakeholders (employees, shareholders, investors, consumers, regulators and NGOs) and in so doing make an investment in their future and help to increase profitability
  25. 25. Many driving forces are fostering the evolution of corporate social responsibility:  new concerns and expectations from citizens, consumers, public authorities and investors in the context of globalization and large scale industrial change;  social criteria are increasingly influencing the investment decisions of individuals and institutions both as consumers and as investors;  increased concern about the damage caused by economic activity to the environment;  transparency of business activities brought about by the media and modern information and communication technologies.
  26. 26. It is a multi-faceted concept. It involves corporate philanthropy and corporate-citizen social contracts. These are implicit contracts between citizens and the corporates, which promulgate that corporates exist for citizens and come with expectations. The expectations are that corporates conduct themselves in an ethical manner, follow laws and have end goal of betterment for the society. Some view CSR as voluntary activity but ultimately someday it has to be quantified in law.
  27. 27. Corporate Social Responsibility is a strategy and a culture!
  28. 28. The history of CSR The debate about corporate social responsibility (CSR) began in the early 20th century, as concerns about large corporations and their power came to the fore. Two broad principles—charity and stewardship—have help to shape thinking about CSR.
  29. 29. Ida Tarbell’s 1904 work The History of the Standard Oil Company helped lead to the Supreme Court’s decision to break up the company on antitrust grounds. Similarly, Upton Sinclair’s 1906 book The Jungle led to the passage of the Pure Food and Drugs Act and the Meat Inspection Act by Congress.
  30. 30. Early “muckrakers” Ida Tarbell and Upton Sinclair.
  31. 31. Arguments for CSR The arguments for CSR tend to focus on the relationship between power and responsibility, the need for good stakeholder relations, and business’ desire to forestall government regulation. (The notion of “enlightened self-interest” also fits in here.)
  32. 32. Arguments against CSR The arguments against CSR tend to focus on the economic function of business (to make products, not to solve social problems that are the responsibility of individuals, society, and the government),
  33. 33. Achieving balance Businesses need to balance economic, legal, and social responsibilities in order to achieve long-run success. More generally, there is often a relationship between good social and good financial performance.
  34. 34. Further, firms that are seen as acting illegitimately are likely to face difficult relations with employees, governments, communities, and consumers—which all have direct impacts on the top and bottom lines.
  35. 35. One defense of the shareholder view of CSR is that shareholders take on a unique set of risks, but other stakeholders are protected by contractual relations with organizations. On the contrary most stakeholders take on risk—many a times without knowing it.
  36. 36. One result of increasing globalization is that there are many different voices around the world with differing views on corporate social responsibility. What is seen as “ethical” in one country may not be in another
  37. 37.  CSR is at a crossroads. After a decade of evolution, the pathway forward defies easy prognosis. Will external events and company choices relegate CSR to a passing fad, leading to its fading from corporate and public agendas?  Or will CSR reach full fruition as it becomes aligned, integrated and fully institutionalized in company strategy and operations?  Or, alternatively, is something more transformational on the horizon as CSR morphs into a deeper change mode, becoming a force for altering corporate purpose at the most fundamental and systemic level?
  38. 38. These questions have profound implications for the future of all corporate enterprises. Exploring possible futures yields insight into where we find ourselves today and provides guidance about where we would like to be and how to get there.
  39. 39.  Virtually all large companies pursue some form of scenario planning to optimize deployment of their financial and human capital.  In a globalizing world where capital, technology, information and trade flow are increasing freely across borders, prudent management requires nothing less for building a healthy, competitive business in the 21st century.  In an interconnected world, companies operate not as discrete, atomistic entities, but rather as elements of a global system characterized by complexity and rapid change. It is the struggle to define and manage the opportunities and risks of this new world that has fueled the emergence of CSR during the last few years, and will continue to do so in coming decades.
  40. 40. From its genesis in the early Industrial Revolution, the joint-stock corporation took root as the heir to the private- partnership organization, wherein close owner-capitalists maintained high levels of familiarity with the workings of the companies that they partially owned. As the scale of companies grew, so did the need for capital well beyond what the original entrepreneur and close partners could provide. Thus, the idea of passive investors purchasing equity shares emerged, and by the end of the 19th century this would come to dominate the industrial landscape and become a central driving force of the economic expansion of Western nations. ,
  41. 41. This development was not warmly embraced by all. Indeed, as early as the late 18th century, Adam Smith harbored doubts about the social repercussions of the joint-stock company. Notwithstanding his observation that individuals working to advance their self-interests is the surest route to aggregate societal well-being, Smith understood the threat of business monopoly, privilege and protection to societal interests. His concern with business power to “intimidate the legislature” was a premonition of contemporary corporate political influence
  42. 42. U.S. court decisions in the late 19th century fueled the rise of shareholder supremacy, a notion built on the premise that shareholding entitles shareholders to be the dominant recipients of surplus generated by corporate wealth creation. This view, while upheld in the courts, met with opposition, even among business leaders. Henry Ford and Owen D. Young, GE’s chairman in the 1920s, questioned the supremacy of shareholders relative to other parties that contribute to wealth creation. Ford was sued by two shareholders for suspending dividends in favor of plant expansion. When asked what is the purpose of his corporation, Ford responded: “To do as much good as we can, everywhere, for everybody concerned … and incidentally to make money.” Ford lost his case in a Michigan court. A few years later, Young rhetorically asked: “To whom do I owe my obligations?” His answer: the company owes “a fair rate of return to shareholders” at the same time as it serves the interests of employees, customers and the public.
  43. 43. Today, the received wisdom of shareholder value as the central purpose of business poses a continuing challenge to CSR. The conflict begins with management education and is entrenched deeply as to be the core driver of board and executive decision-making. “If the value creation is achieved by combining the resources of both employees and shareholders, why should the value distribution favor on the latter? Why must the mainstream of our theory be premised on maximizing the returns to just one of these various contributors?” In a fundamental sense, the emergence of CSR may be viewed as a modest corrective mechanism to shareholderism. Its emphasis on stakeholder rights and participation opposes the unrelenting focus on shareholder interests, especially those that place short-term share price above all other goals.
  44. 44. In India, South Africa and Brazil, skepticism of shareholderism has cast CSR as an antidote or preemptive mechanism. In India, the Ghandian model of voluntary commitment to public welfare and social needs is at least as influential in shaping attitudes toward corporate purpose. Many multinationals, of course, are well aware of these differences as they navigate relationships with host governments and business partners who may hold different views on such critical issues as labor standards, transparency and engagement of indigenous peoples. But with the globalization of business likely to continue unabated, the challenges of understanding and reconciling different CSR cultures will persist for many years to come.
  45. 45. No single historical event marks the birth of CSR. Some observers date its origins to the early environmentalism of the 1960s, when the first serious regulations were put in place in North America and Europe. At the same time, the long tradition of corporate philanthropy in the U.S. has remained a standard component and expectation of “responsible business” since the early days of the large American industrial firm. Distilled to its basics, the CSR story is a chronicle of gradual redefinition and expansion ranging from “must do” legal compliance blended with traditional philanthropy, to “should do” based on traditional benefit/cost analysis, to “ought to do” based on emerging global norms of integrity, ethics and justice. Despite its uneven and disjointed evolution, it is fair to say that one identifiable thread in CSR history is a three-fold shift in focus from what is legally required and charitable to what is financially justified and, most recently, to what is morally expected.
  46. 46. Since 2000, CSR has entered yet another phase often called “integration.” This stage reflects a maturation of the CSR idea and recognition of the inherent limits of distancing CSR from core business strategy and operations. The leading edge is now characterized by the idea of seamlessness — identifying and implementing actions that make CSR everyone’s business and ending its isolation as a useful but Dispensable add-on to “real” business activities. This Emergence in the integration phase is actually multifaceted, and comprises of · Alignment with business objectives within overall company strategy · Integration across business entities and functional areas · Institutionalization by embedding strategies, policies, processes and systems into the fabric of the organization
  47. 47. The Wall Street Journal and Fortune now often report on a range of CSR issues such as sweatshops, climate change and fair trade. Another barometer of integration is the extent to which leading companies are blending financial and CSR reporting. Integration in its various forms will continue unabated. The blurring of CSR with issues of corporate strategy, management and governance seems destined to continue For companies that have embraced CSR, this future would vindicate their efforts. At the same time, this trend would challenge the skeptics who continue to dismiss CSR as a costly, unjustified deviation from business’ principal purpose of creating shareholder value. For those who have resisted CSR, it would lay bare the foolishness of coloring CSR as diversionary and immaterial to core business concerns.
  48. 48. The global future is inextricably linked to the corporate future. As such, CSR is not an option; it is a reality. The sheer weight of the corporate role in wealth creation and the footprint associated with this creative process makes responsibility inevitable. We may argue about the degree and proper responses associated with such responsibility, but there can be little argument about the fact itself. The core question facing companies is how to harness the full potential of business to serve the public interest while preserving and enhancing core assets — creativity, innovation and competitive drive. In some sense, this has always been the central challenge of CSR.
  49. 49. But for every opportunity realized, dozens remain untapped. Why is there a paucity of initiatives like Nike’s challenge to apparel makers to create common standards and audits for contract manufacturers? Is it a question of political will? Legal impediments? Or just blind competitiveness that obscures the potential payoffs?
  50. 50. Two centuries ago, social purpose was central to the charter of U.S. corporations. One hundred years ago, well into the era of the large, investor-owned companies, industrialists like Ford and Young understood the concept of harnessing the private interest to serve a broader public purpose. With the right mix of wisdom and will, the next decades may well witness a turn away from the deleterious effects of single-minded shareholderism toward next-generation CSR that meets the dual goals of prosperous corporations and prosperous societies.
  51. 51. Business is at a crossroads. Increasing pressure to deliver immediate results to shareholders has compromised the long-term viability of many corporations, sometimes with disastrous results Tomorrow's leading organizations will practice a more balanced approach to management, recognizing that long- term success and profitability is critically linked to the welfare of a broader set of stakeholders.
  52. 52. Explore corporate social responsibility theory and resources Experience theory in action in a sophisticated business simulation Reflect on simulation results and identify opportunities to improve Apply learning to real-world CSR projects with decision support tools Share knowledge with peers in a collaboration space