06-09-2025
SUSTAINABILITY,
RESPONSIBILITY
&
MANAGERIAL ETHICS
Session 7
Dr. Aniruddha Chatterjee
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Milton Friedman (1970)
“There is one and only one social responsibility of business—to
use its resources and engage in activities designed to increase its
profits.”
________________versus________________
the purpose of a business is to create a positive
impact on society.
Businesses are not APART from Society.
Businesses are A PART of Society.
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Business responsibility refers to voluntarily
assuming accountability for social, economic, and
environmental issues related to stakeholders,
aiming to optimize stakeholder value.
…applies to all types of business equally,
independent of size, maturity, or organizational
structure
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[Link]
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Laasch, O., & Conaway, R. N. (2014). Principles of responsible management: Global sustainability, responsibility, and ethics. Cengage Learning.
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Business
Opportunities
Institutional
Global Connect
Pressures
Responsible
Business
Stakeholder Evolving Global
Interests Crises
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ISO 14 000 (environmental management)
ISO 26 000 (social responsibility)
United Nations Global Compact (UNGC)
World Business Council for Sustainable Development
(WBCSD)
Dow Jones Sustainability Index (DJSI)
Integration Is stakeholder responsibility a part
of the core business ?
Does responsible business get
Transformation support from structure/ culture /
processes ?
Scale Are the responsible practices
scalable for larger impact ?
Entrepreneurship Is the business systematically
targeting new opportunities ?
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Varied understanding of ‘responsibility’
Competing strategic priorities
Complexity of implementation across areas
Lack of recognition from financial markets
Lack of managerial skills & knowledge
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Profit motives/ focus
Cushion for economic volatility
Vague and uncertain results
Scope for Misleading (example: Greenwashing)
Critics and Lobbying
Selected Few
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Stakeholder
management.
Responsibility
management
Stakeholder value
Materiality
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Stakeholder management is the Materiality combines the importance of
process of managing relationships issues to the company and the
with the various groups, individuals, stakeholders in a joint evaluation. By
and entities that affect or are affected materiality assessment, companies
by an activity. identify the importance of certain
issues for stakeholders and contrast it
Responsibility management is an with their importance to the company
administrative practice centred on
stakeholders and aimed at the Stakeholder value is the degree of
maximization of stakeholder value, satisfaction of either single
which is a necessary condition for stakeholders or all stakeholders of a
business responsibility. specific activity.
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Stakeholder Stakeholder
Identification Communication
Stakeholder Value
Prioritization Co-creation
Laasch, O., & Conaway, R. N. (2014). Principles of responsible management: Global sustainability, responsibility, and ethics. Cengage Learning. 16
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The process of stakeholder management consists of the two tasks:
stakeholder assessment (understanding stakeholders) and stakeholder
engagement (interacting with stakeholders).
Stakeholder assessment consists of the two steps of stakeholder
identification, through which stakeholders are mapped, and stakeholder
prioritization, through which stakeholders´ characteristics are understood
and categorized by their priority for engagement.
Stakeholder engagement consists of the two steps: stakeholder
communication, through which direct contact with stakeholders is
established, and the co-creation of activities, through which stakeholders
and the company start to collaborate for a joint objective.
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Dependency
▪ is based on dependence of the organization or stakeholder of one
on another.
Responsibility
▪ is based on existence of legal, commercial, operational, or
ethical/moral responsibilities.
Tension
▪ is based on the need for immediate attention from the organization
with regard to financial, wider economic, social, or environmental
issues.
Influence
▪ is based on the impact on the organization’s or a stakeholder’s
strategic or operational decision making.
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Savage, G. T., Nix, Timothy W., Whitehead, Carlton J., & Blair, John D. (1991). Strategies for assessing and managing organizational stakeholders. Academy of Management
Executive, 2(5), 61–75; (right) Clarkson. (1994). In A. B. Carroll & A. K. Buchholtz (2008), Business and society, 7th ed. Scarborough, Canada: Cengage.
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Maximization
achieve the maximum possible stakeholder value.
Fairness
stakeholder value distribution should be fair in process and
outcome.
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Laasch, O., & Conaway, R. N. (2014). Principles of responsible management: Global sustainability, responsibility, and ethics. Cengage Learning.
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ORGANIZATIONAL
SOCIETAL LEARNING
LEARNING
Defensive Latent
Compliance Emerging
Managerial Consolidating
Strategic Institutionalized
Civil
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ORGANIZATIONAL LEARNING SOCIETAL LEARNING
Defensive “It’s not our job to fix that”
Compliance We will do just as much as we have to do
Managerial It’s the business, of course
Strategic It gives us competitive advantage
Civil We need to make sure everybody does it
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Time period Economic currents State role Corporate CSR
1850-1914 Industrialisation Colonial, extraction Dynastic charity
1914-1947 Trade barriers for new Colonial, exploitative Support freedom
industries struggle
1947-1960 Socialism, protectionism Five year plans Support new state;
launch own rural
initiatives
1960-1990 Heavy regulations Licence raj; Corporate trusts
development failures
1991-2013 Liberalisation Shrinking in production; Family trusts, private-
expanding in social public partnerships,
provision NGO sponsorship
2013-present Globalisation Need to manage Introduction of
inequality; new reforms mandatory 2% rule
to liberalise further
[Link] 26
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In 2014 CSR was introduced as a statutory obligation under Section 135 of the
Companies Act, 2013.
The Act requires companies with a net worth of ₹500 crore or more, or turnover
of ₹1,000 crore or more, or a net profit of ₹5 crore or more during the
immediately preceding financial year, to spend 2 per cent of the average net
profits of the immediately preceding three years on CSR activities.
[Link]
[Link]
[Link]
to-mandatory-expenditure/
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Activities must be in project or programme mode
Must be based on CSR policy & Schedule VII of Companies Act
Preferably in local region of operation
May undertake activities through a non-profit of reputation or own
foundation
Must have strong monitoring and reporting system
May invest, an amount not exceeding 5% of total CSR expenditure on
capacity building of CSR personnel
Salaries to regular CSR staff & volunteers can be included in CSR
expenditure
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Expenses on activities required for any compliance
Activities benefiting only the employees of the company & their
family
Expenses on activities in pursuance of normal course of business
On- off events such as advertisements/ awards/ sponsorship
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[Link]
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More companies
CSR spend stays Compliance level
spending beyond
above 2% increasing
the mandate
With the highest
Rising preference Financials, IT,
case load,
for implementation energy are the
Maharashtra
partners major contributors
remains in spotlight
Private sector drives
rise in CSR spend
[Link] 32
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1. Managers cherry pick ideas for projects
2. Company’s long term vs short term priorities.
3. Geographical Imbalance – possibility of poor becoming poorer
4. Masked dodging - Mixing business motives with CSR
5. Measurability - How to know which project is working
6. Corruption - Re-funneling through charitable trusts
7. Misuse/ Misgovernance/ Misdirected efforts
8. Implementation – inadequate follow up
…and many more
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The greatest impediments to the promise of social and
economic progress are the internal barriers that prevent
companies from taking action. But corporate executives often
lack the courage and the vision to wade into the social sector,
engage openly with civil society, understand the business case,
and pursue a longer-term strategy in cooperation with others.
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Reconceiving products and markets.
Redefining productivity in the value chain
Enabling local cluster development
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Baines, P. (2014). Doing good by doing good: why creating shared value is the key to powering business growth and innovation. John Wiley & Sons.
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Shared value reveals new customer needs, new available
markets, new value chain choices, and new ways to
address external constraints
Shared value opens up new ways of defining the business
Shared value creates new value propositions and new
opportunities for strategic positioning
Shared value strategies often more sustainable than
conventional cost, feature, and quality advantages
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The purpose in business is to create economic value in a way that also creates
shared value for society
Businesses acting as businesses, not as charitable givers, are arguably the
most powerful force for addressing many of society’s pressing issues
–Innovation and scalability
Shared value opens up major strategic opportunities to create competitive
advantage, while driving the next wave of innovation, productivity, and
economic growth
Realigning companies around shared value gives greater purpose to the
corporation and to capitalism itself
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‘social goals’ as opposed to economic gains
social activism
entrepreneurship and innovation
economic profit as a means to solve a social problem (rather
than as an end in itself)
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Poor governance, extreme inequality, limited public sector
capacity, political intransigence; climate change and
environmental degradation; poverty; lack of infrastructure,
limited resources, less education; lack of access to basic
healthcare and hygiene, clean water and energy, and mass
migration etc.
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[Link] 46
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