Corporate Social Responsibility By Dr Shanker Adawal
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Corporate Social Responsibility by Dr. Shanker Adawal
Word Count: 1540
Summary
Generating wealth in a socially and environmentally sustainable way is crucial for both domestic and international businesses. In today's global economy, ethical and responsible business practices are increasingly vital. Companies are recognizing the interconnected nature of the world, realizing that business does not operate in isolation but is part of a broader community.
Article Body
Businesses have responsibilities not only to customers, employees, and shareholders but also to their communities. Supporting social and economic upliftment can lead to increased productivity for corporations.
In India, the corporate sector often criticizes the government for poor governance. However, the question arises: Are corporations fulfilling their duty to contribute to national growth? Is their criticism justified if they are not actively participating in nation-building?
Most Indian companies lack a clear corporate social responsibility (CSR) policy. Unlike countries like England, where there are dedicated ministries for CSR, India has no definitive guidelines. Those companies involved in social development often do so more to avoid taxes than out of a genuine commitment to societal welfare.
There needs to be a stronger relationship between business and society. CSR is still emerging in India, largely because the concept is not well defined. Companies need to be more aware of their social responsibilities, particularly in light of globalization and increasing competition. A shift in business culture towards enterprise-led development and social responsibility is necessary.
CSR should cover areas like health, education, employment, and quality of life. Corporations, with their significant resources, should contribute to these sectors, recognizing that a healthier populace can boost purchasing power.
In 1970, Milton Friedman famously stated that the primary social responsibility of a business is to increase profits. While this view remains influential, the lines between profit and social responsibility are blurring. Businesses must invest in intangibles to enhance corporate value.
Significance of CSR for India
Ideal corporate citizenship in India involves ethical and philosophical dimensions, especially given the vast disparities in income and living standards.
The Tata Energy Research Institute (TERI) survey, "Altered Images: The 2001 State of Corporate Responsibility in India Poll," outlines four models of CSR prevalent in India:
1. Ethical Model: Pioneered by 19th-century philanthropists like the Cadbury brothers and the Tata family, this model was influenced by Mahatma Gandhi's concept of trusteeship?"where property owners manage wealth for public benefit. During India's independence movement, businesses were encouraged to contribute to nation-building, leading to philanthropic activities such as funding schools and hospitals.
2. Statist Model: Post-independence, India adopted a socialist economy with significant public sector involvement. State-owned enterprises followed labor laws that embedded corporate responsibility, a concept that persists despite privatization.
3. Liberal Model: This model argues that companies are accountable only to their owners, focusing solely on economic success. This view, championed by economist Milton Friedman, suggests that legal compliance and wealth generation are sufficient for corporate responsibility.
4. Stakeholder Model: Globalization has expanded businesses' social responsibilities, with consumer and shareholder pressure driving the stakeholder model. R. Edward Freeman's analysis introduced the idea that stakeholders?"anyone impacting or impacted by a business?"should be considered in corporate strategies.
Perception and Practices of CSR in India
A 2001 survey by ORG-MARG for TERI-Europe assessed perceptions of CSR among the public, workers, and corporate executives. The survey found that people expect companies to engage actively in social issues, demanding fair treatment of employees, adherence to labor standards, and environmentally friendly practices. Over 60% believe companies should help bridge societal gaps and address social problems.
CSR as Business Success
CSR is integral to business success through efficient resource management, environmental protection, and fostering an eco-friendly atmosphere. Ashok Khosla, President of Development Alternatives, emphasizes that sustainability involves both production and consumption, with responsibilities falling on both businesses and consumers. CSR requires tailored approaches based on company size, type, and location.
Civil society plays a crucial role as a CSR auditor, helping businesses learn from interactions that can minimize risk and enhance competitiveness.
Conclusion
In the 21st century, businesses must embrace CSR. Prompt adoption will benefit corporate houses. New laws should reinforce CSR practices.
Traditionally, Indian CSR has been rooted in philanthropy, driven by business necessities due to limited state welfare and infrastructure. CSR should be compulsory, supporting human rights through measures such as:
- Including social actions in annual reports
- Establishing independent social accountability committees
- Creating dedicated CSR departments
- Conducting regular CSR training programs
- Linking CSR to financial success
- Allocating a certain profit percentage to social development, reflected in balance sheets
These steps will ensure more robust participation in social development by corporations, ultimately benefiting the nation.
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