Social Responsibility

Introduction
It is defined as the obligation and commitment of
managers to take steps for protecting and improving
society’s welfare along with protecting their own
interest.
Social responsibility of business refers to all such
duties and obligations of business directed
towards the welfare of society.
These duties can be a part of the routine functions
of carrying on business activity or they may be an
additional function of carrying out welfare activity.
The concept of social responsibility discourages
businessmen from adopting unfair means like
black-marketing,
hoarding,
adulteration,
 tax evasion and cheating customers etc. to earn profit.
Instead, it encourages them to earn profit through
judicious management of the business, by providing
better working and living conditions to its employees,
providing
better products,
after sales-service, etc. to its customers and
simultaneously to control pollution
and conserve natural resources.
Corporate social responsibility is related to, but not
identical with, business ethics.
While CSR encompasses the economic, legal, ethical, and
discretionary responsibilities of organizations, business
ethics usually focuses on the moral judgments and
behavior of individuals and groups within organizations.
Thus, the study of business ethics may be regarded as a
component of the larger study of corporate social
responsibility.
Different approaches towards CSR

The social
The social responsiveness
responsibility view
The socio- view
economic
The social view
obligation
view
Classical
view
The classical view:
 Advocated by eminent economist & Nobel laureate Milton
Friedman
 The only SR of the business is to maximize profits by operating

to the best interests of the owners.

The social obligation view:

 SR is limited to the extent of meeting its economic and legal
obligations
 It limits itself to the extent of respecting the law of land

The Socio Economic View:

 Corporate should adopt a holistic approach not merely confining
it to economic entities and stakeholders.
 They should go beyond profit making & include protection and

welfare of the society

The social Responsibility View:
 The guiding philosophy of this approach says the business
organization should operate in such a manner that makes
society better and avoids those activities or actions that
could make it worse than it was.
 All the economic activities should be under taken in an ethical

manner and for the good f the society

The social responsiveness view:

 It is the ability of the corporation to relate its operations and
policies to the social environment in the way that are
usually beneficial to the corporation and to the society
 Philanthropic Performance
Philanthropic Performance
Be a good corporate citizen.
Be a good corporate citizen.
Ethical Performance
Ethical Performance
Be ethical.
Be ethical.
Legal Performance
Legal Performance
Obey the law.
Obey the law.
Economic Performance
Economic Performance
Be profitable.
Be profitable.
Moral Management of Organizational Stakeholders,”
Archie B. Carroll, “The Pyramid of Corporate Social Responsibility: Toward the
The Pyramid of CSR(P)
Y Social Responsibility
Organizational Resources –
An organization has a diverse pool of resources in form
of men, money, competencies and functional expertise.
When an organization has these resources in hand, it is
in better position to work for societal goals.
 Precautionary measure –
 if an organization lingers on dealing with the social
issues now, it would land up putting out social fires so
that no time is left for realizing its goal of producing
goods and services.
Practically, it is more cost-efficient to deal with the social
issues before they turn into disaster consuming a large
part if managements time.
Moral Obligation
 It is the moral responsibility of the organization to assist solving or
removing the social problems
 Efficient and Effective Employees
Recruiting employees becomes easier for socially responsible
organization.
Employees are attracted to contribute for more socially responsible
organizations.
Better Organizational Environment
The organization that is most responsive to the betterment of social
quality of life will consequently have a better society in which it can
perform its business operations.
Employee hiring would be easier and employee would of a superior
quality.
There would be low rate of employee turnover and absenteeism. Because
of all the social improvements, there will be low crime rate consequently
less money would be spent in form of taxes and for protection of land.
Thus, an improved society will create a better business environment.
Public Image –
The activities of business towards the welfare of the
society earn goodwill and reputation for the business.
People prefer to buy products of a company that engages
itself in various social welfare programmers.
 Again, good public image also attracts honest and
competent employees to work with such employers.
Consumer Awareness –
consumers have become very conscious about their
rights.
They protest against the supply of inferior and harmful
products by forming different groups.
This has made it obligatory for the business to protect
the interest of the consumers by providing quality
products at the most competitive price.
Survival and Growth
Every business is a part of the society. So for its survival and
growth, support from the society is very much essential.
Business utilizes the available resources like power, water,
land, roads, etc. of the society.
So it should be the responsibility of every business to spend
a part of its profit for the welfare of the society
Government Regulation –
To avoid government regulations businessmen should
discharge their duties voluntarily.
For example, if any business firm pollutes the environment
it will naturally come under strict government regulation,
which may ultimately force the firm to close down its
business. Instead, the business firm should engage itself in
maintaining a pollution free environment.
Types of Social Responsibility
 Economic – the duty of managers, as agents
of the company owners, to maximize
stockholder wealth
 Legal – the firm’s obligations to comply with
the laws that regulate business activities
 Ethical – the company’s notion of right and
proper business behavior.
 Discretionary – voluntarily
assumed by a business
organization.
Responsibility towards different interest
groups
Investors
Partners

Employees

Customers

Vendors

Communities

Environment

Competitors
Given by Boal & Peary(1985)
This a 4 stage model, that explains progression of the
social responsibility.

Stage 1
This the preliminary stage
Focus is only on owners and investors
More toward classical view of SR, where primary focus
was on profit maximization
 Responsibility towards Owners:
 Optimum return on investment

 Proper utilization of capital and other resources

 Ensuring growth and appreciation of owner’s capital

  Responsibility towards Investors /creditors
 Ensuring safety of investment

 Regular payment of interest to creditors

 Timely payment of principal amount

Stage 2
Here the focus is on the human resource and employee
satisfaction
 Responsibility
 Provision of fair compensation of services

 Timely and regular payments

 Provision of proper working conditions and welfare amenities

 Providing fringe benefits apart from salary

 Job security

 Provision of social security benefits

 Timely training and development for the up gradation of skills

 Provision of career planning an opportunities for the career prospects

Stage 3-Responsibility towards constituents of
specific business environment
Her e focus is on customers,suppliers,competitor s and
govt.
Response is directly related to the business performance

 Responsibility toward customers

 Provision of products and services in accordance with the need

 Good quality products and services

 Regularity in supply

 Price should be reasonable and affordable

 Infrastructure for after sales services

 Proper grievance handling procedure

 Unfair means should be avoided

Responsibility towards suppliers:
 Giving regular orders for purchase of goods
 Dealing with supplies on fair terms and conditions
 Availing credit to reasonable period
 Timely payment of dues to the suppliers
 Helping suppliers in up gradation of the quality and attaining

higher productivity

Responsibility towards competitors:

 Not to offer exceptionally high sales commission to
distributors, agents etc.
 Not to offer to customer heavy discount or free products in

every sale
 Not to defame the competitor
 Responsibity to wards Government:
 Setting up of the business units as per the guidelines of the govt.
 Payment of fees, duties and taxes regularly and honestly

 Not to indulge in trade practices that are illegal, monopolistic

and restrictive
 Conforming to the pollution control norms

 Not to indulge in bribery and other unlawful acts.

Stage 4-Responsibility towards society:

 Generating employment opportunities
 Making sure that business activities lead to a sustainable

development
 Protecting the environment

 Helping the weaker section of the society

 Making contributions to NGO’s

Tools /strategies for meeting CSR
Corporate governance:
It represents systems,proceses,policies,laws and
institutions that ensure the direction, control and
accountability of a business organization towards its
different stakeholders

According to SEBI(2003)
 The acceptance by the management of inalienable rights of
shareholders as the true owners of the corporation and of its
own role as trustees on the behalf of the shareholders. It is
about commitment to values, about ethical business conduct
and about making distinction between personal and
corporate funds in the management of a company
 Certain considerations are:
 Developing a code of conduct and a whistle blow policy and
ensuring that they are properly communicated and practiced
 Electing directors through independent, transparent and

rigorous process
 Focusing on sustainability of business models

Narayan Murthy(founder CMD of infosys)as identified

3 constituents of CSR
 Shareholders
 Management
 Directors
Accreditations and certifications
Social Audits:
 Was propounded by Howar R. Bowen(1950’5)
 He describes it as a systematic assessment of and

reporting on some meanful,defineabel domain of the

company's activities that have social impact
 Louis E boone & David L kurtz,defines it as the efforts

made within the firm to evaluate its own social

responsiveness
 It enables management to identify financial benefits as

well as intangible benefits to the organization from its

socially responsible behavior
 Its not legally mandatory ,but companies do make social

involvement on their annual report

Type the of social audits:
 Audits required by the government
 Not required by govt. in India

 In US, audit involving pollution control measures, product

performance and equal employment standards have been

imposed by the government

 Voluntary social Audits:

 Conducted by an organization on a voluntary basis.

Trust building Measures:

 Organizations a can go for product recall if they find that their
products are either not as per the standard or they are likely to be
harmful to the society
Complete PLC management:
 From procurement of the raw material, to manufacturing to
usage and finally disposal or recycling of waste, so as to ensure
that products as well as the by-products and waste does not
negatively effect the environment.

Green reporting:
Corporates to issue environmental report.

Clean development mechanism and carbon

credits