Corporate Social Responsibility

& Governance
MASROOR ALI SOOMRO
Sukkur IBA University
Lecture Outline:
 Corporate Social responsibility.
 Types and nature of social responsibilities.
 CSR principles and strategies.
 Models of CSR.
 Best practices of CSR.
 Need of CSR.
 Arguments for and against CSR.
Corporate Social Responsibility

CSR is now a mainstream approach to business:

“The movement for CSR has won the battle of ideas …CSR
commands the attention of Top Executives Everywhere.”
(Economist 2005)
Corporate Social Responsibility
• What is CSR?
• How does it relate to other concepts like:
 Sustainable development,
 corporate governance,
 corporate responsibility,
 corporate citizenship)

• Same/different/related?
• Is CSR purely voluntary or does it now have legal dimensions?
 Corporate Social Responsibility
Definition Definition

A voluntary initiative on the part of a business to

contribute to a better society and a greener and cleaner
environment.
 Defining: “Corporate Social
Responsibility”

“CSR is about how companies manage the business

processes to produce an overall positive impact on
society.”
 Defining: “Corporate Social
Responsibility”

“Achieving commercial success in ways that honour

ethical values and respect people, communities, and the
natural environment”
 WBCSD (World Business Council for
Sustainable Development)

“The continuing commitment by business to behave

ethically and contribute to sustainable economic
development while improving the quality of life of the
workforce and their families as well as of the local
community and society.”
 Corporate Social Responsibility
Definition Definition

Analysis of the definition by the World Business Council For Sustainable

Development

• Expectation of stakeholders that companies should behave ethically

• Expectation that business should contribute to economic development
• Expectation that business should improve the quality of life of its workforce and
their families

• Expectation that business should play active part in the improvement of the
society
 Defining: “Corporate Social
Responsibility”
“The term [CSR] is often used interchangeably with others,
including corporate responsibility, corporate citizenship,
social enterprise, sustainability, sustainable development,
triple-bottom line, corporate ethics, and in some cases
corporate governance.
Though these terms are different, they all point in the same
direction: throughout the industrialized world and in many
developing countries there has been a sharp escalation in
the social roles corporations are expected to play.”
(The Kennedy School of Government (Harvard University), CSR Initiative)
Meaning:
 Corporate social responsibility is a gesture of showing the
company’s concern & commitment towards society’s

sustainability & development.

 CSR is the ethical behaviour of a company towards society.

Pyramid of CSR
 Defining: “Corporate Social
Responsibility”
CSR in Equation Form Is the Sum of =
Economic Responsibilities (Make a profit)+
Legal Responsibilities (Obey the law)+
Ethical Responsibilities (Be ethical)+
Philanthropic Responsibilities (Good corporate citizen)
Common Understanding One: Integration
Corporate Social Responsibility: The Integrated
Approach to Business in the 21st Century

Consumer
Exchange Confidence Interest
Rates Rates
Regulation/Policy
Governance
Economic

Climate Corruption
Change
Environment Social Communities
Waste

Biodiversity Labour/
Workplace
Resource Human
Use Rights
 Evolution of CSR

• CSR considers the impact of the company’s

actions on society (Bauer)
• CSR requires decision makers to take actions
that protect and improve the welfare of
society as a whole along with their own
interests (Davis and Blomstrom)
 Phases of Corporate Social
Responsibility

Frederick provides expanded framework for understanding

the evolution of CSR concept Divided into 4 phases:

• Corporate social stewardship: 1950s – 1960s

• Corporate social responsiveness: 1960s – 1970s
• Corporate/business ethics: 1980s – 1990s
• Corporate/global citizenship: 1990s – 2000s
Drivers of Corporate Social
Responsibility

• The shrinking role of government

• Demands for greater disclosure
• Growing investor pressure
• Competitive markets
 CSR – A New Paradigm

• To think comprehensively and systematically about The

role of business in development
• The manner in which the business is conducted
• Corporate Governance
• Poverty alleviation
• Corporate contribution to peace and war against terror
• Business, government and civil society partnership-
common ground and collective action
 CSR also known as

• Sustainable Development
• Corporate Citizenship
• Triple Bottom Line
• Business Ethics
• Sustainable Business Practices
Types of Social Responsibility
Responsibility towards Society
 Carrying on business with moral& ethical standards.
 Prevention of environmental pollution.
 Minimizing ecological imbalance.
 Contributing towards the development of social health,
education
 Making use of appropriate technology.
 Overall development of locality.
Responsibility towards
Government
 Obey rules & regulations.
 Regular payment of taxes.
 Cooperating with the Govt to
promote social values.
 Not to take advantage of
loopholes in business laws.
 Cooperating with the Govt for
economic growth & development.
Responsibility towards Shareholders
 To ensure a reasonable rate of
return over time.
 To work for the survival & the
growth of the concern.
 To build reputation & goodwill
of the company.
 To remain transparent &
accountable.
 Responsibility towards Employee
 To provide a healthy working environment.
 To grant regular & fair wages.
 To provide welfare services.
 To provide training & promotion facilities.
 To provide reasonable working standard &
norms.
 To provide efficient mechanism to redress
worker’s grievances.
 Proper recognition of efficiency & hard work.
Responsibility towards consumers
 Supplying socially harmless
products.
 Supplying the quality, standards,
as promised.
 Adopt fair pricing.
 Provide after sales services.
 Resisting black-marketing &
profiteering.
 Maintaining consumer’s
grievances cell.
 Fair competition.
 Nature of social responsibility
 CSR is normative in nature.
 CSR is a relative concept.
 CSR may be started as a proactive or reactive.
 All firms do not follow the same patterns of CSR.
 Legal & socially responsible.
 Legal but socially irresponsible.
 Illegal but socially responsible.
 Illegal & socially irresponsible.
 CSR Principles & Strategies.
 Respect for human rights.
 Respect for the differences of views.
 Diversity & non-discrimination should be the guiding
principle.
 Make some social contribution.
 Enter into e dialogue
 Self-realization & creativity.
 Fair dealings & collaboration.
 Feedback from the community.
 Positive value- added
 Long term economic & social development.
 Corporate Social Responsibility
Stakeholder Dynamics

CSR – Driver and Stakeholder Dynamism

Use of Resistance Managing

Impact of
Driver of CSR Changer to Change the Change
Change
Agent
 Best Practices of CSR
 To set a feasible, Viable & measureable goal.
 Build a long lasting relationship with the community.
 Retain the community core values.
 The impact of the CSR needs to be assessed.
 Reporting the impact.
 Create community awareness.
 Need for Corporate Social Responsibility

 To reduce the social cost.

 To enhance the performance of employees.
 It a type of investment.
 It leads to industrial peace.
 It improves the public image.
 Can generate more profit.
 To provide moral justification.
 It satisfies the stakeholders.
 Helps to avoid government regulations & control.
 Enhance the health by non polluting measures.
Arguments for & against the CSR

???
 Corporate Social Responsibility
Myths surrounding CSR

CSR is not for small businesses

It is too complicated and technical

It is too expensive

It is a market gimmick

It is a separate corporate initiative

 Arguments for the CSR

 Corporate should have some moral & social obligations to

undertake for the welfare of the society.
 Proper use of resources, capability & competence.
 The expenditure on CSR is a sort of investment.
 Company can avoid many legal complications.
 It create a better impression.
 Corporate should return a part of wealth.
Benefits of CSR Corporate Social Responsibility
Legislative Framework

Winning new
s
fi t

businesses
ne

Increase in Enhanced
Be

Relationship with
customer retention
stakeholders

Saving money Attracting,

on energy and
operating cost
Benefits Retaining and
Maintaining a happy

of CSR workforce

Differentiating
yourself from the
Media interest
competitor
and good

s
reputation

fi t
Enhancing your

ne
influence in the Access to funding

Be
industry opportunities
 Arguments against the CSR

 Fundamental principles of business gets violated.

 It vey expensive for business houses.
 CSR projects will not be successful.
 There are not the special areas of any business.
 CSR is to induce them to steal away the shareholders money.
 Pakistani Perspective.
 The Sachar committee was appointed in 1978 to look into
corporate social responsibility issues concerning companies.
 The company must behave & function as a responsible
member of society.
 Committee suggests openness in corporate affairs &
behaviour.
 Some business houses have established social institutions like
Schools, colleges, charitable hospitals etc.
 Corporate sectors have not made significant contributions.
(Polluting Environment).
 CSR EXAMPLES
 IBM UK - Reinventing Education Partnership programme
Interactions and sharing of knowledge through a web-based
technology - the “Learning Village” software. Culture of
openness and sharing of good practice

 AVON - a partnership with Breakthrough Breast Cancer, and

its Breast Cancer Crusade has raised over 10 million pounds
since its launch 12 years ago

 TOI’s Lead India campaign, campaign for contribution

towards educating the poor
 Companies in trouble
 Dasani mineral water (part of Coca-Cola).
 Coke’s sale was banned as the result of tests, including
those by the Indian government, which found high
concentrations of pesticides.

 Communities in India , around Coca-Cola's bottling

operations are facing severe shortages of water as a result
of the cola major sucking huge amounts of water from the
common groundwater source.
 Issues at NIKE
 Nike Inc producer of footwear, clothing, equipment and accessory
products for the sports and athletic market.
 Selling to approximately 19,000 retail accounts in the US, and
approximately 140 countries around the world.
 Manufactures in China, Taiwan, Korea, Indonesia , Mexico as well as
in the US and in Italy.
 People working - 58% young adults between 20 and 24 years old,
83% - women.
 Few have work-related skills when they arrive at the factory.
 Issue- unhealthy work environment – debates heated arguments,
verbal abuse , 7.8% of workers reported receiving unwelcome sexual
comments, and 3.3% reported being physically abused. In addition,
sexual trade practices in recruitment and promotion were reported
 Corporate Social Responsibility

CSR Initiatives and Application

 Corporate Social Responsibility
CSR Initiatives
Guiding Principles for CSR Projects

• CSR is about corporate citizenship

• It is about giving back to the society
• It is about business sustainability
• It is about thriving in a competitive business environment
 Corporate Social Responsibility
CSR Initiatives
CSR Projects for Businesses
Employee Market focused
focused initiative initiative

Result - Driven CSR

= Benefits
Society focused Product focused
initiative initiative

Environmentally
focused initiative
 Corporate Social Responsibility
Practical Application of CSR
Guidelines

• You need to evaluate various aspects of your business and operations

• You need to evaluate the impact your business is having on your
stakeholders.

• Then set realistic targets on how to improve your business operations

and processes.

• Draw up a result- driven CSR Policy.

• Embed your CSR into your business strategy.
 Corporate Social Responsibility
Practical Application of CSR
Guidelines

• Appoint a driver for your CSR initiative

• Communicate your CSR efforts to all your stakeholders clearly and boldly.
• Make your CSR initiative part of your business culture
• Set up CSR measuring indicators to monitor progress and possible
deviations.

• Be enthusiastic about your CSR initiative; be committed to it.

• Report on your initiatives and measure progress/ impact made.
Models of corporate social
responsibility
 Models of corporate social
responsibility
 Friedman model
 Ackerman Model
 Carroll Model
 Environmental Integrity & Community Model.
 Corporate Citizenship Model.
 Stockholders & Stakeholders Model.
 New Model of CSR.
Friedman Model(1962-73)
 A businessmen should perform his duty well, he is
performing a social as well as a moral duty.
 A businessmen has no other social responsibility to perform
except to serve his shareholders & stockholders.
 Ackerman Model (1976)
 The model has emphasized on the internal policy goals & their
relation to the CSR.
 Four stages involved in CSR.
 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.
 Intensive study of the problem by hiring experts &
getting their suggestions to make it operational.
 Managers take up the project actively & work
hard.
 Evaluating of the project by addressing the issues.
Contd….
 Six Strategies in the adoption of CSR.
 Rejection strategy
 Adversary strategy
 Resistance strategy
 Compliance strategy
 Accommodation strategy
 Proactive strategy
Carroll Model(1991)
Carroll Model(1991)
 Philanthropic requirements: Donation, gifts, helping
the poor. It ensure goodwill & social welfare.
 Ethical responsibility: Follow moral & ethical values
to deal with all the stakeholders.
 Economic responsibility: Maximize the shareholders
value by paying good return.
 Legal responsibility: Abiding the laws of the land.
 Corporate Social Performance

Carroll’s CSP model integrates economic concerns into a social

performance framework
 Corporate Social Responsibility (CSR)
Carroll’s Four Part Definition
Understanding the Four Components

Responsibil Societal Examples

ity Expectati
on
Economic Required Be profitable. Maximize
sales, minimize costs,
etc.
Legal Required Obey laws and
regulations.
Ethical Expected Do what is right, fair and
just.
Discretiona Desired/ Be a good corporate
Business and Society: Ethics and Stakeholder Management, 5E • Carroll & Buchholtz Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved

ry Expected citizen.
(Philanthro
pic)
 Environmental Integrity & Community
Health Model.
 This model developed by Redman.
 Many corporate in US adopted this model.
 Corporate contribution towards environmental integrity &
human health, there will be greater expansion opportunities.
 Healthy people can work more & earn more.
 CSR is beneficial for the corporate sector.
 CSR in a particular form is welcome.
 Corporate Citizenship Model
 To be a corporate citizen, a corporate firm has to satisfy four
conditions:
 Consistently satisfactory
 Sustainable economic performance
 Ethical actions
 Behaviour.
 A particular firm’s commitment to corporate citizenship
requires the fulfillment of certain social responsibilty.
 Stockholders & Stakeholders Model

Stockholders Stakeholder
ORIENTATION
Model Model

1 2
Self Interest

Productivism Progressivism
MOTIVES

3 4
Moral Duty
Philanthropy Ethical Idealism
Contd………….
 Productvists believe that the only mission of a firm is to
maximize the profit.
 Philanthropists who entertain the stockholders. CSR is
dominated by moral obligations & not self-interest.
 Progressivists believes the corporate behaviour basically
motivated by self interest & should have ability to transform
the society for good.
 Ethical Idealism concern with sharing of corporate profits for
humanitarian activities.
 New Model of CSR

Ethical Rooting
Strong Poor
Financial Capability

Strong

CSR (+) CSR(-)

CSR(-) CSR(-)
Poor
 Corporate Citizenship

Corporate citizenship embraces all the facets of

corporate social responsibility, responsiveness and
performance
Social—and Financial—Performance

Perspective 1: CSP Drives the Relationship

Good Corporate
Good Corporate Good Corporate
Financial
Social Performance Reputation
Performance

Perspective 2: CFP Drives the Relationship

Good Corporate Good Corporate

Good Corporate
Financial Social
Reputation
Performance Performance

Perspective 3: Interactive Relationship Among CSP, CFP, and CR

Good Corporate
Good Corporate Good Corporate
Financial
Social Performance Reputation
Performance