Unit 2

Corporate Social Responsibility

Presented by:
Bal Ram Chapagain, PhD
March 27, 2024 [email protected] 1
 What is your understanding of CSR?

March 27, 2024 [email protected] 2

Concept of Corporate Social Responsibility (CSR)
▪ There are varieties of definitions and interpretations of
corporate social responsibility (CSR).
▪ But, the concept of CSR is essentially around the
question of what should be the role of business in society.
Corporate Social Responsibility (CSR) is a self-regulating business model that helps a
In a nutshell: company be socially accountable—to itself, its stakeholders, and the public.

▪ “CSR may be defined as the obligation of business

management to: obey the law, run the business in an
ethical manner, fulfil the prudent interests of different
stakeholders without compromising the sustainability of
business as well as the environment, and give something
back to society simultaneously.”
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 Basic Elements of CSR
1. Responsible Earning
▪ Obeying the applicable laws & regulations
▪ Ethical conduct of business (descriptive & normative ethics)
▪ Adherence to governance guidelines
▪ Fulfilment of prudent interests of all stakeholders beyond
minimum requirements of law
▪ Environmental integrity/sustainability
2. Spending for Social Causes
▪ Giving back to society (e.g., contributing to community
education, health, infrastructure, and helping needy people)
However, “responsible earning” is more important than
“spending for social causes”.
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 CSR vs. Window Dressing

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Major Theoretical Perspectives on CSR

1. Friedman’s Shareholder Theory

2. Freeman’s Stakeholder Theory
3. Carroll’s CSR Pyramid (Levels of CSR)
4. Porter & Kramer’s CSV Approach

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 Friedman’s Shareholder Theory (1970)

▪ Maximize profit
▪ Create employment opportunities, pay taxes
▪ Play within the rules of the game
▪ Managers are neither trained nor responsible
for meeting social goals.
▪ Aligning resources to meet social goals is the
duty of government.

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 Freeman’s Stakeholder Theory (1984)
▪ Business has to fulfill the expectations of
different stakeholders, not just shareholders.

Employees
Other stakeholders Shareholders
(e.g., environmentalists,
media, NGOs etc.)

Government Competitors
Business Firm

Suppliers Customers
Communities
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 Carroll’s CSR Pyramid (1991)
▪ There are four basic responsibilities of business toward
society. They are: economic, legal, ethical and philanthropic.

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Porter and Kramer’s CSV Approach (2011)
▪ Creating shared value (CSV) is concerned with creating value
for business & society simultaneously.
▪ CSV is not about sharing the fixed resources; rather
expanding the pie by reconceiving the traditional way of doing
business.
Examples:
▪ Nestle in India (working with farmers)
▪ Dow Chemicals in Canada (work-life balance)
▪ Wal Mart in USA (reducing packaging, rerouting trucks,
recycling plastics),
▪ Grameen Bank in Bangladesh (banking for the poor)
▪ SCBNL (use of energy efficient lights and equipment)

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 Bird-eye view of various theoretical perspectives on CSR
Concept Central idea Main literature(s)
Pure profit-making approach The ethics of ordinary life is not applicable to business and hence it has no Carr (1968)
social responsibility other than legal compliance.
Constrained profit-making There is only one social responsibility of business – to maximize profits while Friedman (1970)
approach (aka shareholder conforming to the laws and ethics.
approach)
Corporate philanthropy Companies should contribute to social causes and needy people in cash, Andrews (1952);
kind, or whatever is necessary to promote society's well-being. Koch (1979)
Stakeholder approach It is the responsibility of the business to protect and promote the prudent Freeman (1984)
interests of different stakeholders – not just shareholders.
Carroll’s CSR Pyramid Total CSR consists of economic, legal, ethical, and philanthropic Carroll (1979; 1991)
responsibilities, which can be depicted as a pyramid.
Triple bottom line (people, profit, The social responsibility of business should entail the "triple bottom line" of Elkington (1997)
planet) approach economic prosperity, environmental integrity, and justice for different groups
of people.
Corporate citizenship The role of business in society relates to administering a bunch of citizenship Matten and Crane
rights – social, civil, and political – conventionally handled by governments. (2005)
Creating shared value (CSV) The business should attend to social issues in such a way that it creates Porter and Kramer
approach added value for both business and society. (2006; 2011)
Political CSR (PCSR) PCSR connotes taking political roles by businesses to reduce governance Scherer and Palazzo
and developmental gaps by engaging in public deliberations, collective (2011);
decisions, and the provision of public goods or the restriction of public bads Scherer et al. (2016)
whenever necessary.
Enlightened shared value (ESV) Firms should be guided by both economic and moral purposes. They should Han (2023)
approachMarch 27, 2024 focus on long-term value maximization for both business and society.
© Bal Ram Chapagain. All Rights Reserved. 11
 Continuum of corporate social (ir)responsibility paradigms
Irresponsible Business Behavior Responsible Business Behavior

Legal, Responsible
ethical and
contributes towards
Illegal and Window to Social stakeholders
Unethical Dressing causes + CSV

Legal Legal Fulfills

but not and prudent
ethical ethical interests of all
stakeholders

Continuum of Business Behaviors toward Society

Narrow conceptualization
of CSR Broad Conceptualization
Misinterpretation
of CSR of CSR
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Recent Trends and Future Direction in CSR
Te recent trends and future of CSR can be captured
under the following points:
▪ Institutionalization of CSR
▪ CSR/Ethics codes, international standards become necessary
but insufficient conditions
▪ Focus on innovative CSR and cross-sector collaboration
▪ Representation of key stakeholders in governance mechanism
▪ Social entrepreneurship
▪ Increased transparency (particularly via. Artificial Intelligence)
and accountability (via. CSR feedback platforms)
▪ Some form of Generally Accepted Sustainability Practices
(GASP) will be agreed
▪ CSR audit and reporting would be more common
▪ Government interest and incentives on CSR will increase
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Legal Provisions Governing CSR in Nepal
1. The Constitution of Nepal, 2072
2. Companies Act, 2063 (amended in 2074) BENEFITS: IDPIAIA
3. Labor Act, 2074
4. The Environment Protection Act, 2076
5. Consumer Protection Act, 2075
6. The Income Tax Act, 2058
7. The Industrial Enterprise Act, 2076 and Industrial Enterprise
Rules, 2078
8. Nepal Rastra Bank’s Unified Directives, 2079
9. Nepal Insurance Authority’s Directive on CG, 2079
10. Other relevant laws and regulations…
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Provisions in the Industrial Enterprise Act (IEA), 2076
Article 54
▪ All medium (FA: 15-50 Crore) and large industries (FA > 50 Crore)
and small & cottage industries having annual turnover more than
Rs. 15 crore) are required to allocate and spend at least 1% of their
annual net profit for CSR activities in stipulated areas.
Article 43 (7)
▪ Companies which are not able to comply with the requirements of
Article 54 will be fined with 1.5% of total annual net profit.
Moreover, if any enterprise fails to fulfill it again, additional 0.5%
of annual net profit may be fined every next year(s).

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Provisions in the Industrial Enterprise Regulation (IER), 2078
IER, Clause 37:
▪ Areas of CSR Spending
▪ Natural calamities prevention and rescue operations
▪ Community health & education; health & social awareness programs
▪ Protection and promotion of arts, culture etc.
▪ Skill building and revenue generating programs for women and
disadvantaged people
▪ Environment protection and alternative energy promotion
▪ Community infrastructure development
▪ However, the enterprise must spend at least 50% of total CSR
budget in the industry affected area.
▪ Likewise, the enterprise cannot spend CSR budget that directly
benefits the firm
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NRB’ Unified Directives
▪ BFIs will be required to allocate at least 1% of their net profit to activities
relating to corporate social responsibility.
Major Subject Areas for CSR Spending:
▪ Education, health, disaster risk management, infrastructure development,
environmental protection, financial literacy, consumer protection, 17 SDGs,
child day care center for employees, etc.
Conditions:
▪ CSR budget must be allocated in more than one subject areas and in all 7
provinces (not less than 10% in one province).
▪ CSR budget should give no political and personal advantage to BOD
members.
▪ SOP should be prepared and disclosure of expenses should be made.

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 Video show on
concept, real life practices and benefits of CSR
https://www.youtube.com/watch?v=NmepP58MgpQ

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THANK YOU !