Vinod Kaul Jan.

2023
What should be Corporate’s Responsibility?
• ‘Business should not only be responsible morally to the shareholders
but also to the society, environment and towards a sustainable planet
at large.
CSR
• World Business Council:
• CSR is the continuing commitment by business to behave ethically &
contribute to economic development while improving the quality of life of the
workforce & their families, local communities and society at large.
• Other terms for CSR
• Socially responsible business
• Responsible business conduct
• Corporate citizenship
• Corporate accountability
• Corporate sustainability
CSR Explained
• CSR requires companies to acknowledge they should be
publically accountable not only for their financial performance
but also for their social and environmental record.
• CSR encompasses the extent to which companies should
promote human rights, democracy, community improvement
and sustainable development objectives throughout the world. –
Confederation of British Industry (2001)
• CSR is the commitment of business to contribute to sustainable
economic development working with employees, their families,
the local community and society at large to improve their quality CSR is a non-Business
of life in ways that are both useful for business and good for Corporate practice
international development. – Word Bank (2004)
CSR Models LEVELS
Ethical
Legal
Accountable
• Ethical model Philanthropic
• Voluntary commitment to public welfare (Mahatma Gandhi)
• Statist Model
• State ownership & legal requirements determine corporate responsibilities
(Jawaharlal Nehru)
• Stockholder Model
• Corporate responsibilities limited to private owners / shareholders (Milton
Friedman)
• Stakeholder Model
• Respond to needs of stakeholders – customers, creditors, employees,
communities
 Justification for CSR
Trusteeship Model
• Thesis: The Company is an independent entity
different from its members, and has its assets,
rights, duties, will & capacity to act; and the
managers should act as trustees
• Fiduciary duty is to uphold the firm’s
obligations to:
• shareholder’s wealth
• Expectation of the government
• Capability of employees, customers, suppliers,
distributors
• Demands of community & ecosystem
CSR Corporate Drivers
• Philanthropic – giving back to society, for no
pecuniary gain
• e.g. Melinda Foundation
• Peer & social pressure – meeting social,
government & consumer expectations
• e.g. Reliance
• Specific business benefits
• e.g. Image
• Minimum Legal requirements
• Sec.135 Companies Act, Minimum Wages, Bonus
Act, pollution control laws, etc.
 The Giving Pledge
Not-for-profit / charitable organization
givingpledge.org
The Giving Pledge is a campaign to encourage
wealthy people to contribute a majority of their
wealth to philanthropic causes. As of 2018, the
pledge has 184 signatories, either individuals or
couples, from 22 different countries. Wikipedia

Founded: 2010, Membership: 184

Founders: Warren Buffett, Bill Gates
Indian Signatories:
Aziz Premji, Kiran Mazumdar Shaw, PNC
Menon, Sunil Mittal, Nandan Nilekani
 Why CSR? What are the benefits to the corporate?
• Increased reputation & brand image.
• Increase in customer loyalty, brand value, market
share, revenue?
• Increased employee loyalty and retention.
• Increase in human capital?
• Greater productivity and quality.
• Reduced regulatory oversight.
• Innovation & Learning
• Access to capital and market.
• Stock prices, investor attractiveness?
• Product safety and decreased liability.
• Improved risk management?
Arguments against the CSR

• Fundamental principles of business may get compromised.

• It is an unnecessary expense / drain on profits.

• Takes away company focus & efforts.

• CSR projects may not be successful.

• These are not the special areas / competencies of any business.

Driving forces behind CSR…
• Power & influence of business corporations.
• Globalization
• Growing access to education & information.
• Growing awareness of environmental issues.
• Spread of corporate scandals & public distrust.
• Public Opinion & Social Expectation.
 The Broad Dimensions of CSR
• Business ethics, values and principles.
• Accountability and transparency / legal compliance.
• Commitments to socio-economic development
• Environmental concerns. Not just
• Human rights. philanthropy
• Workers rights & welfare.
• Market relations.
• Sustainability
• Corporate governance.
Political & Religious Influence on CSR
• US & Europe: liberal model based on individual equality and
liberty.
• Japan & Korea: nationalist model in which the economic
activities are subordinated to the goals of the state.
• China & Cuba: Marxist model in which investment and
enterprise is controlled by the state.
• Islamic countries: moral right and wrong determined by
religious doctrines.
New Company Law mandates CSR
• Effective 1st April, 2014
• Applicable for public & private
limited companies
• Net worth of Rs 500cr
• Turnover of Rs 1000cr
• Profit of Rs 5cr
• needs to spend at least 2% of its
average net profit for the
immediately preceding three
financial years on corporate
social responsibility activities
listed in Schedul VII of the Act.
Schedule VII of Companies Act 2013
• Eradicating hunger, poverty & malnutrition • ensuring environmental sustainability
• Promoting preventive healthcare and ecological balance
• Promoting education • animal welfare
• Promoting gender equality • protection of national heritage and art
• Setting up homes for women, orphans & and culture
senior citizens • measures for the benefit of armed
• Measures to reduce inequities faced by forces veterans, war widows and their
socially & economically backward groups dependents
• Contributions to Prime Minister’s national • training to promote rural youth
relief fund or other similar funds
• Development & welfare of SC, ST, OBCs, • nationally recognized, Paralympic or
minorities & women Olympic sports
• Technology incubators located within • Rural development projects.
academic institutions
CSR Models - implementation
• Carroll’s Four Part Model (1991) • Ackerman Model (1976)
• Focus on the internal policy goals & their
relation to the CSR.
• Four stages:
1) Managers of the company get to know
the most common social problem & then
express a willingness to take a particular
project which will solve some social
problems.
2) Intensive study of the problem by
hiring experts & getting their
suggestions to make it operational.
3) Managers take up the project
actively & work hard.
4) Evaluating the project by
addressing the issues.
Types of CSR
• Ethical CSR
• Fulfilling perceived responsibility to avoid harm or social
injuries.
• Altruistic CSR
• Contributing to the common good at possible expenses of the
business for altruistic, humanitarian or philanthropic causes.
• Strategic CSR
• Fulfilling the firm’s social welfare responsibilities that benefit
both the corporate and stakeholders.
Strategic CSR
Leveraging Social Cause
CSR Millennium Goals
UN Millennium Goals

• Eradicate extreme poverty and hunger.

• Achieve universal Primary education.
• Promote gender equality and empower women.
• Reduce child mortality.
• Improve maternal health.
• Combat HIV / AIDS, malaria & other fatal
diseases.
• Ensure environmental sustainability.
• Develop a global partnership.
External Corporate Responsibility Standards
• The Caux Round Table (CRT)
• Founded 1986, based in Caux (Switzerland), senior business leaders from Europe,
Japan, N.America, Principles of Business – worldwide standard for ethical &
responsible corp. behavior.
• Organization for Economic Cooperation & Development (OECD)
• Government to business voluntary guidelines.
• UN Global Compact (UNGC)
• Kofi Annan’s nine principles, largest (2500 companies) voluntary corporate
citizenship initiative.
• Asia-Pacific Economic Cooperation (APEC) business code of conduct
• Similar to OECD for member economies around the Pacific Rim
• The Global Reporting Initiative (GRI)
• 1997: Sustainability Reporting Guidelines
 Dow Jones Sustainability Index (DJSI)
• launched in 1999, they are a family of indices evaluating the
sustainability performance of the largest 2,500 companies listed on
the Dow Jones Global Total Market Index.
• They have become the key reference point in sustainability investing
for investors and companies alike.
• The DJSI is based on an analysis of corporate economic,
environmental and social performance, assessing issues such as:
• corporate governance, risk management, branding, climate change
mitigation, supply chain standards and labor practices. The trend is to
reject companies that do not operate in a sustainable and ethical manner.
• It includes general as well as industry-specific sustainability criteria for
each of the 58 sectors defined according to the Industry Classification
Benchmark (ICB).
• The DJSI family contains one main global index - DJSI World; indexes
based on geographic regions: Europe, Nordic, North America and
Asia Pacific. Industry-specific indexes called "blue chip indexes".
• Companies are assessed and selected based on their long-term
economic, social and environmental asset management plans.
Selection criteria evolve each year and companies must continue to
make improvements to their long-term sustainability plans in order
to remain on the Index. Indexes are updated yearly and companies
are monitored throughout the year.
Economic Responsibilities of Corporates
• Financial profit, economic growth, asset creation.
• Economic impact through business processes, outsourcing, social
investments, etc.
• Monetary support for political parties.
• Stock exchange activities including insider trading.
• Economic regulations & tax compliance.
• IPR, property rights, patents, trademarks.
• Fair competition.
 Social Responsibilities of Corporates
• Labour rights: equal opportunities, non-discrimination, minimum
wages, health & safety.
• Right to work: vocational training, protection against unjustified
dismissal
• Right to hold opinions: freedom of expression, thought, conscience,
religion, political affiliation.
• Right to privacy: personal information, surveillance.
• Cultural rights
• Right to family life.
Environmental responsibilities of corporates
• Ecological conservation & protection of biodiversity.
• Greenhouse gas emissions and global warming.
• Soil and water contamination
• Waste management.
• Recycling & reuse of materials.
CSR Green Strategies
• Green buildings: The LEED certification by
the US Green building Council has resulted
in an active green building movement.
• Green manufacturing to reduce emissions
of green house gases and environmental
pollution
• Green products initiatives to reduce toxic
chemicals.
• Encourage everyone in value chain to
contribute to product sustainability.
• Reduce waste.
CSR Concept of Triple Bottom Line

• Economic Responsibility (Profit)

• Social Responsibility (People)

• Environmental Responsibility (Planet)

Notable cases of Corporate Irresponsibility
• Nike factories in Asia were criticized for employing young children in
extremely poor working conditions.
• Explosion at Union Carbide Ltd., Bhopal in Dec. 1984 caused thousands of
deaths and rendered many more disabled due to leakage of MIC gas.
• Fraudulent accounting manipulations led to the collapse of Houston, US
based Enron corporation.
The collapse of Enron
• Enron was once voted America’s most innovative company.
• In 2001, Enron’s Board of Directors was named the 3rd best board in the US
by Chief Executive Magazine.
• In Dec 2001, Enron filed for bankruptcy with $63 bil in assets. It became
the largest ever bankruptcy in US, and an example of crass corporate greed
and dishonesty.
• 94,000 jobs were lost putting investors and employees to unprecedented
losses.
• To restore public trust, US Congress passed the Sarbanes-Oxley Act in 2002
in order to protect the investor by improving the accuracy & reliability of
corporate disclosures in accordance with securities laws.
The Indian un-Ethical Environment
• Bribery & corruption
• Child labour
• Black money
• Electoral process, high tax
structure, real estate
• License Raj, inspector raj
• Crony capitalism
• Scams
 The Business of Mohammed Yunus
Muhammad Yunus (born 28 June 1940) is a Bangladeshi social
entrepreneur, banker, economist and civil society leader who was
awarded the Nobel Peace Prize for founding the Grameen Bank and
pioneering the concepts of microcredit and microfinance.

These loans are given to entrepreneurs too poor to qualify for

traditional bank loans. In 2006, Yunus and the Grameen Bank were
jointly awarded the Nobel Peace Prize "for their efforts through
microcredit to create economic and social development from below".

The Nobel Committee noted that "lasting peace cannot be achieved

unless large population groups find ways in which to break out of
poverty" and that "across cultures and civilizations, Yunus and
Grameen Bank have shown that even the poorest of the poor can
work to bring about their own development".