Chapter 9
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Handmaid of Ethics:
Corporate Social Responsibility
Business Ethics, 3e Author: A C Fernando
Perspectives of Corporate Social Responsibility
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There are three perspectives that prompt corporate
social responsibility. These are:
•Business perspective
•Eco-social perspective
•Rights-based perspective
Business Ethics, 3e Author: A C Fernando
Why Social Responsibility of Business?
• Accountability to Society
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In a democratic society any kind of enterprise exists for
the sake of society.
• Corporations’ Debt to Society
A corporation has to behave as a good citizen. The
corporation has to donate generously towards causes of
public welfare and must get itself directly involved in
social welfare programmes.
Business Ethics, 3e Author: A C Fernando
Definitions of CSR
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It is a set of obligations to pursue those policies, to make
those decisions, or to follow those lines of action which are
desirable in terms of the objectives and values of our
society.
It is the overall relationship of the corporate with all of its
stakeholders.
Elements of social responsibility include investment in
community outreach, employee relations, creation and
maintenance of employment, environmental stewardship
and financial performance.
Business Ethics, 3e Author: A C Fernando
Definitions of CSR (Contd.)
The classical economic model: Adam Smith believed that
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public interest was served best by individuals pursuing their
own self-interests.
The socio-economic model: Business is seen as one
subsystem among many in a highly interdependent society.
•It recognizes that companies have stakeholders other than
their stockholders.
•Business has an obligation to respond to the needs of all
stakeholders while pursuing its profit.
Business Ethics, 3e Author: A C Fernando
Today’s Corporate Social Responsibility
The corporate social responsibility of an organization today,
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is a set of obligations with which it has to protect, enhance,
and otherwise work to the betterment of the society in
which it functions.
The concept of corporate social performance includes a
business organization’s
• configuration of principles of social responsibility
• process of social responsiveness, and
• policies, programmes, and observable outcomes as they
relate to the firm’s societal relationships.
Business Ethics, 3e Author: A C Fernando
Implementation of CSR
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The systematic implementation of CSR means:
● The adoption of strong organizational values and norms
depicting behaviours that are appropriate towards a
variety of stakeholders.
● The continuous generation of intelligence about
stakeholder issues, along with positive responses to these
issues.
Business Ethics, 3e Author: A C Fernando
Theoretical Justification
for CSR
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Trusteeship Model adopts a realistic and descriptive
perspective in viewing the current governing situation of a
publicly held corporation, drawing from the continental
European conception of the corporation as a social
institution with a corporate personality.
Business Ethics, 3e Author: A C Fernando
Theoretical Justification
for CSR (Contd.)
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Social entity theory: The social entity conception of the
corporation regards the company not as a private association
united by individual property rights, but as a public
association constituted through political and legal processes
and as a social entity for pursuing collective goals with public
objectives.
Business Ethics, 3e Author: A C Fernando
Theoretical Justification
for CSR (Contd.)
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The Pluralistic Model: This model supports the idea of
multiple interests of stakeholders, rather than shareholder
interest alone. It argues that the corporation should serve
and accommodate wider stakeholder interests in order to
make the corporation more efficient and more legitimate.
Business Ethics, 3e Author: A C Fernando
What are Corporations Expected to Do?
Corporations need to erase the perception of the public
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that they accumulate wealth for their own cause;
They should participate in social welfare projects, which
will improve their image in public esteem;
They also have to make quality products and stick to
delivery schedules while importing and exporting goods;
and
They should create employment opportunities for the
disadvantaged.
Business Ethics, 3e Author: A C Fernando
Models for Implementation of CSR
Four Models of CSR
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Model Emphasis Proponent
Ethical Voluntary commitment by Mahatma Gandhi
companies to public welfare
Statist State ownership and legal Jawaharlal Nehru
requirements determine
corporate responsibilities
Liberal Corporate responsibilities limited Milton Friedman
to private owners (shareholders)
Stakeholder Companies respond to the needs R. Edward Freeman
of stakeholders – customers,
creditors, employees,
communities, etc.
Business Ethics, 3e Author: A C Fernando
Advantages of Corporate Social Responsibility
There are several advantages to corporations when they
exhibit a sense of CSR and implement it, such as:
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[Link] financial performance
[Link] brand image and reputation
[Link] sales and customer loyalty
[Link] ability to attract and retain employees
[Link] regulatory oversight
[Link] and learning
[Link] management
[Link] access to capital
[Link] operating costs
Business Ethics, 3e Author: A C Fernando
Scope of Corporate Social Responsibility
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Three levels of social responsibility can be identified
(evolution of areas of social responsibility)
[Link] forces
[Link] actions
[Link] actions
Business Ethics, 3e Author: A C Fernando
Understanding Social Responsibility of Business
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1) Protecting and promoting stakeholders’ interests
a) to consumers and community
b) social responsibilities of business towards employees
c) to owners and inter-business establishments
2) Promotion of common welfare programmes
3) Philanthropy
Business Ethics, 3e Author: A C Fernando
Understanding Social Responsibility of Business
(Contd.)
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4) Good corporate governance
5) Render social service
6) Abiding by rules and regulations
7) Creation of wealth
8) Ensure ecological balance
Business Ethics, 3e Author: A C Fernando
Understanding Social Responsibility of Business
(Contd.)
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9) Focus on the human element
10) Improve productivity
11) Sponsor social and charitable causes
12) Supplement state efforts
Business Ethics, 3e Author: A C Fernando
Steps to Corporate Social Responsibility
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The International Chamber of Commerce recommends the
following nine steps to attain Corporate Social Responsibility:
1. Confirm CEO/Board commitment to prioritize
responsible business conduct
2. State company purpose and agree on company
values
3. Identify key stakeholders
4. Define business principles and policies
Business Ethics, 3e Author: A C Fernando
Steps to Corporate Social Responsibility (Contd.)
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5. Establish implementation procedures and management
systems
6. Benchmark against selected external codes and
standards
7. Set up internal monitoring
8. Use language that everyone can understand
9. Set pragmatic and realistic objectives.
Business Ethics, 3e Author: A C Fernando
External Standards on CSR
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• The Caux Round Table (CRT)
• Organization for Economic Cooperation and Development
(OECD)
• United Nations Global Compact
• Asian-Pacific Economic Cooperation (APEC) Business Code
of Conduct
• The Global Reporting Initiative (GRI)
Business Ethics, 3e Author: A C Fernando
External Standards on CSR
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• AA1000 Accountability
• Social Accountability 8000
• Principles for Global Corporate Responsibility
• The Global Sullivan Principles
• The Keidanren Charter for Good Corporate Behaviour
Business Ethics, 3e Author: A C Fernando
India on the Ethical/CSR Matrix
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Indian corporations consider business ethics, compliance
with regulatory requirements and consistency in value
delivery as the three most important factors that impact
their social reputation.
Business Ethics, 3e Author: A C Fernando
India on the Ethical/CSR Matrix (Contd.)
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Wider adoption of CSR in Indian companies will be enabled by:
• Provision of tax, duties and custom benefits.
• Inclusion of CSR performance of promoters as a parameter
in according fast track clearance to projects.
• Decreased government interventions.
• Depreciation benefits where asset investments are made.
• Development guidelines on estimation of socio-economic
impacts.
Business Ethics, 3e Author: A C Fernando
Ethics and Social Responsibility of Business
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• Business ethics in India today
• Why so much corruption?
• The license raj
• Black money
Business Ethics, 3e Author: A C Fernando
Future of Indian CSR
There is a clear need for
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• Transition from the present compliance centric approach
to the new paradigm
• Creation of an enabling environment and an array of
support measures.
• Business schools teaching CSR to facilitate this process
• Industry associations to share experiences and reward
best practice
• Need to incorporate public policies into the Indian CSR.
• International agencies to share cross-country experience.
Business Ethics, 3e Author: A C Fernando