An Introduction : What is Corporate Social Responsibility?

“Corporate Social Responsibility is a management concept whereby companies integrate social and environmental concerns in their business operations and interactions with their stakeholders. CSR is generally understood as being the way through which a company achieves a balance of economic, environmental and social imperatives, while at the same time addressing the expectations of shareholders and stakeholders. In this sense it is important to draw a distinction between CSR, which can be a strategic business management concept, and charity, sponsorships or philanthropy. Even though the latter can also make a valuable contribution to poverty reduction, will directly enhance the reputation of a company and strengthen its brand, the concept of CSR clearly goes beyond that.”

– United Nations Industrial Development Organization (UNIDO)

 It should also be kept in mind that :

• The CSR approach is holistic and integrated with the core business strategy for addressing social and environmental impacts of businesses.

• CSR needs to address the well-being of all stakeholders and not just the company’s shareholders.

• Philanthropic activities are only a part of CSR, which otherwise constitutes a much larger set of activities entailing strategic business benefits.

PHILANTHROPY vs. CSR

When a business decides to donate a portion of profit to a charity, this action qualifies as philanthropy. In this case either a one-time or ongoing commitment is made to give money to a non-profit organization, and that organization uses the money to further its mission. Social responsibility involves adopting responsible behaviours for the business. Corporate social responsibility of a company encompasses any practice that improves the lives of its work force, community and the environment.

Corporate Philanthropy and Employees:

When a business donates money to charity, the employees may not be directly affected, and they may not be aware of the company’s charitable actions. Philanthropy decisions come from owners and chief executive officers. While employees may be made aware of the charitable contribution, they are seldom consulted about which charity the company chooses to contribute to.

Social Responsibility and Employees:

When a campaign is launched to make a company more socially responsible, employees can participate actively to make it a success. In fact, employees can head efforts to clean up the community, paint and repair schools, start recycling programs, collect donations for the underprivileged, conduct blood drives or reduce company waste.

Corporate Philanthropy and Company Gain:

In philanthropy, the peers and the public do not expect the company to gain from it, according to the Gulf News website – “Publicizing your philanthropic efforts as a way to improve your company reputation can backfire. If you leave publicity up to the charity, you may benefit without appearing to be self-serving”.

Corporate Social Responsibility and Company Gain:

The business can publicize its efforts to be socially responsible. The public tends to accept this and may respect the company for boldly stating that social responsibility is a corporate duty. If the community and the customers can be involved in helping the efforts to engage in socially responsible business, goodwill for the company can be created. This goodwill can translate into loyal customers and positive brand recognition.

Corporate philanthropy and social responsibility are different but not mutually exclusive. One can engage in both. Since philanthropy and social responsibility come with costs, one should evaluate the extent of one’s financial commitments before making them. Engaging in philanthropy and social responsibility simultaneously can help others while establishing a company as a good neighbour and generous giver.

CSR IN INDIA
With the passage of the Companies Act, 2013 the mandate for corporate social responsibility (CSR) has been formally introduced to the dashboard of the Boards of Indian companies. The Industry has responded positively to the reform measure undertaken by the government with a wide interest across the public and private sector, Indian and multinational companies. Under the new Companies Act, mid and large companies have to spend 2% of their three-year annual average net profit on CSR activities. 

The activities which can be included by companies in their CSR policies include: eradicating hunger, poverty, malnutrition and promoting preventive healthcare, promoting sanitation and availability of safe drinking water, promoting education, promoting gender equality, ensuring environmental sustainability, protection of national heritage, etc. Those spending for the benefit of armed forces veterans, war widows and their dependents would be eligible to cover the expenses under CSR spending rules.

Under gender equality activities related to empowering women, setting up homes and hostels for women and orphans, setting up old age homes, day-care centers and similar facilities for senior citizens and projects on reducing inequalities faced by socially and economically backward groups have been included.

Spending on training to promote rural and nationally recognized para-olympic and Olympic sports would also qualify for credit under the CSR rules. Rural development projects and contributions or funds to technology incubators located within academic institutions and approved by the government would also be approved under this category.

The importance of CSR has emerged significantly nowadays. CSR in India expanded to include economic and social interests. Along with this it also broadened to cover environmental interests. Companies have become more transparent in accounting and display ‘public reporting’ due to pressures from various stakeholders. It is possible for companies to behave in the ‘desired’ ethical and responsible manner towards consumers, employees, communities, stakeholders and environment. They have started incorporating their CSR initiative in their annual reports.