Intergrating Csr as a Strategic Tool for Competitive Advantage Essay

Today, we live in an age in which companies, businesses and society are more connected and interactive than ever before in the past. Corporations are more aware of their role towards the society. They are responsible bodies that feel a sense duty towards commonwealth and the environment that comes with a growing realisation that they, as an integral part of this society themselves, can contribute to its upliftment and empower of the entire country in turn. And consumers and citizens’ campaigns can make all the difference.

This is the foundation thought behind the golden handshake between tripartite—companies, society and nation; Corporate Social Responsibility or CSR. In one of the recent natural disasters to hit India, Tsunami, the devastation and misery caused by the sudden, massive inundations of the Indian Ocean touched all. The devastation was huge and millions of people around the world spontaneously made huge donations in order to make immediate relief possible. Not only did private individuals put their hands into their pockets, but also many corporations and governments made donations on a very large scale.

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What was remarkable is how quickly so much aid has been made available. This was the fund that brought tsunami affected areas back on their feet. That was Corporate Social Responsibility in action. In so many other ways one gets to see CSR in practice—environment friendly projects, constructing schools, encouraging education— just some of the ways that organizations are giving back to the community, a part of their profits in a manner that the community benefits. In comparison to individual efforts and even just government effort is not nough to bring changes at a pace that it is actually needed. Fortunately, with the popularity of CSR, more and more companies now perform in non-financial arenas such as human rights, business ethics, environmental policies, corporate contributions, community development, corporate governance, and workplace issues. Now, social and environmental performances are considered side by side with financial performance. From local economic development concerns to international human rights policies, companies are being held accountable for their actions and their impact.

Companies are also more transparent in disclosing and communicating their policies and practices as these impact employees, communities, and the environment. Making profits is about “what you do” whereas CSR is about “what you are”. If one accepts that CSR is becoming an essential ingredient of any successful business, it stands to reason that in future all stable and sustainable businesses will have developed strategies for managing their social impact and will have incorporated such thinking into every level and aspect of their business.

However, even if one is armed with a complete understanding of what CSR is and truly intends to improve CSR in their own organisation, the practical application of a lasting and effective corporate citizenship programme is a significant undertaking that will, by definition, affect all of an organisation’s internal and external stakeholders. Additionally, as society’s expectations of the corporation steadily increase, “to be taken seriously, companies must be able to show that their CSR strategy is more than good PR”.

Key Words: Corporate Social Responsibility, Strategic Approach, Competitive Advantage What is CSR? In recent years, “the corporate sector has grown in economic and social importance in the developed world as state economic control has shrunk. Companies have become larger and more international thereby raising new questions over their accountability and societal concerns over corporate activities are now wider in scope and more in evidence”.

Consequently, “in a world where power has shifted from the public to the private sector, the expectations which society has in relation to the environmental, social, and ethical responsibilities of companies have risen”. CSR has quickly moved from a domain typically associated with anti-corporate non-governmental organisations (NGOs) and activist campaigners into a mainstream business issue which is now “a critical determinant of trust in companies”.

With this development, CSR itself (also referred to as corporate citizenship) has naturally taken on a number of different meanings. Although these definitions are similar, when attempting to identify the essential components of a successful programme for improving corporate social responsibility it is important to explore the similarities and differences among the definitions used. To that end, some of the more common and generally accepted definitions of CSR are as follows:

Corporate social responsibility is essentially a concept whereby companies decide voluntarily to contribute to a better society and a cleaner environment”; “Corporate citizenship is about business taking a greater account of its social and environmental – as well as financial – footprints”; Corporate social responsibility is where “a corporation operates in a manner that meets or exceeds the ethical, legal, commercial and public expectations that society has of businesses”; “Corporate Social Responsibility is the term used to refer to a whole range of obligations towards society that business organisations are expected to acknowledge and to reflect in their actions. These include things such as fair treatment of employees, customers, suppliers; respect for human rights; being good corporate citizens of the community in which they operate; and conservation of the natural environment”; “Corporate social responsibility refers to the overall relationship of the corporation with all of its stakeholders.

These include customers, employees, communities, owners/investors, government, suppliers and competitors”. CSR is described as “how business takes account of its economic, social and environmental impacts in the way it operates – maximizing the benefits and minimizing the downsides”. In other words, it is about taking responsibility for the impact of our business on all those who are affected by it. According to World Business Council for Sustainable Development (WBCSD), CSR is “the continuing commitment by the business to behave ethically and to contribute to economic development while improving the quality of life of the workforce and their families as well as local community and society at large” In its broadest categories, CSR typically ncludes issues related to business ethics, community investment, environment, governance, human rights, the marketplace and the workplace, because all organisations have an impact on the society and the environment through their operations, products or services, and through their interactions with key stakeholder groups including employees, customers/clients, suppliers, investors and the local community among others.

This is demonstrated in the figure 1. Figure 1: Areas of Corporate Social Responsibility CSR involves addressing the legal, ethical, commercial and other expectations society has for business, and making decisions that fairly balance the claims of all key stakeholders. Effective CSR aims at “achieving commercial success in ways that honor ethical values and respect people, communities, and the natural environment. ” Simply put it means “what you do, how you do it, and when and what you say. ” Corporate Social Responsibility is increasingly becoming an important aspect of corporate behavior.

Corporate contribution to society, environment and business when guided by enlightened self-interest improves quality of life for all. Effective corporate responsibility requires a good level of commitment from the entire organisation and especially the top management who can ensure that not is CSR practiced but also practiced well. Importance of Corporate Social Responsibility Every business needs to recognise the impact of its operations on the world. The way they do business dictates the footprint they leave behind. If they take the time to “maximise the benefits and minimise the downsides” then they can help to create a better world. Corporate social responsibility in business isn’t just a do-gooders’ charter or latest example of regulatory overdrive.

It is about creating sustainable businesses through the best possible relationships with their communities and stakeholders. The expectations of the traditional stakeholders – shareholders, customers, and employees are increasing and so, too, is the list of groups wanting to know how an organisation is run. As a result, more and more companies are working harder not only to make a positive impact on society and the environment through their operations, products or services, but also to demonstrate it to these groups. A comprehensive set of policies, practices and programmes incorporated throughout a business can increase productivity, contribute to competitiveness, improve staff recruitment and retention rates and create a more positive corporate image.

Unfortunately, many companies only use the responsible business approach as a risk management tool. This limits the benefits that could be achieved through focusing on opportunity rather than risk. Socially responsible business is not about restricting business growth; it’s about creating new opportunities, the better way of doing business. According to a world Economic Forum Survey of CEO’s and leaders (Voice of Leaders survey), corporate brand reputation outranks financial performance as the most important measure of success. Companies with public commitment to ethics perform better on 3 out 4 financial measures. On an average, CSR-oriented companies also have 18% higher profits.

If corporations of innovation and competitive advantage consider CSR using the same frameworks that guide their core business choices, they would discover that CSR returns can be potent source of innovation and competitive advantages. The task is to apply business principles and practices to make CSR sharper, smarter and focused on what really matters. The corporate sector is sated with examples of companies where CSR practices have not only established them as credible enterprise but also brought them business benefits in terms of cost savings, reducing risk, increasing revenues, building reputation, developing human capital improving access to capital among others.

A greater need for CSR in India has brought companies who initiate and participate in CSR activities into the limelight and increased public expectations of them, according to the Nielsen India Corporate Image Monitor 2008, a study designed to measure people’s perceptions of the image and reputation of India’s leading companies. “Public expectations of Corporations are on the increase as stakeholders see the significant impact they are having in various spheres, be it education, health infrastructure, environment conservation, etc. The public’s confidence in organizations undertaking socially beneficial projects is greater than their confidence in other channels that try to bring about positive social change,” said Vatsala Pant, Associate Director, Consumer Research, The Nielsen Company. CSR is an effective way of building goodwill for a company.

More than 50 percent of respondents felt that Corporates are honest towards their CSR activities. But the motive behind these activities is seen to be many, ranging from economic and tax benefits (47%), to enhance corporate reputation (45%), or to build a competitive advantage (30%), etc. 28 percent of respondents thought that Charity, either directly or via NGOs is the best way to demonstrate social responsibility. Other ways of engaging in socially uplifting activities considered beneficial by stakeholders is a written CSR policy (24%), actively involving employees in CSR activities (20%), and community work and providing employment to needy groups (both 12%).

There is however a skeptical one-third of stakeholders who believes that CSR is publicity stunt for most Corporates. “It is interesting to note that seven out of ten members of the general public are willing to pay a premium for products and services to enable a company to fulfill its CSR commitments. Considering the impact of CSR activities on a company’s reputation, organizations will have to plot a developmental path for CSR integrating it with the rest of the business,” continued Pant. CSR in India Indian companies are now expected to discharge their stakeholder responsibilities and societal obligations, along with their shareholder-wealth maximisation goal.

Nearly all leading corporates in India are involved in corporate social responsibility (CSR) programmes in areas like education, health, livelihood creation, skill development, and empowerment of weaker sections of the society. Notable efforts have come from the Tata Group, Infosys, Bharti Enterprises, ITC Welcome group, Indian Oil Corporation among others. The 2010 list of Forbes Asia’s ‘48 Heroes of Philanthropy’ contains four Indians. The 2009 list also featured four Indians. India has been named among the top ten Asian countries paying increasing importance towards corporate social responsibility (CSR) disclosure norms. India was ranked fourth in the list, according to social enterprise CSR Asia’s Asian Sustainability Ranking (ASR), released in October 2009.

According to a study undertaken by an industry body in June 2009, which studied the CSR activities of 300 corporate houses, corporate India has spread its CSR activities across 20 states and Union territories, with Maharashtra gaining the most from them. About 36 per cent of the CSR activities are concentrated in the state, followed by about 12 per cent in Gujarat, 10 per cent in Delhi and 9 per cent in Tamil Nadu. The companies have on an aggregate, identified 26 different themes for their CSR initiatives. Of these 26 schemes, community welfare tops the list, followed by education, the environment, health, as well as rural development. Further, according to a study by financial paper, The Economic Times, donations by listed companies grew 8 per cent during the fiscal ended March 2009.

The study of disclosures made by companies showed that 760 companies donated US$ 170 million in FY09, up from US$ 156 million in the year-ago period. As many as 108 companies donated over US$ 216,199, up 20 per cent over the previous year. Although corporate India is involved in CSR activities, the central government is working on a framework for quantifying the CSR initiatives of companies to promote them further. According to Minister for Corporate Affairs, Mr Salman Khurshid, one of the ways to attract companies towards CSR work is to develop a system of CSR credits, similar to the system of carbon credits which are given to companies for green initiatives.

Moreover, in 2009, the government made it mandatory for all public sector oil companies to spend 2 per cent of their net profits on corporate social responsibility. Besides the private sector, the government is also ensuring that the public sector companies participate actively in CSR initiatives. The Department of Public Enterprises (DPE) has prepared guidelines for central public sector enterprises to take up important corporate social responsibility projects to be funded by 2-5 per cent of the company’s net profits. As per the guidelines, companies with net profit of less than US$ 22. 5 million will earmark 3-5 per cent of profit for CSR, companies with net profit of between US$ 22. 5 million – US$ 112. million, will utilise 2-3 per cent for CSR activities and companies with net profit of over US$ 112. 5 million will spend 0. 5-2 per cent of net profits for CSR. India Inc has joined hands to fine-tune all its activities falling under CSR.

For this, it has set up a global platform to showcase all the work done by Indian firms. Confederation of Indian Industry (CII) and the TVS Group collaborated to form the CII-TVS Centre of Excellence for Responsive Corporate Citizenship in 2007. It provides consultancy services and technical assistance on social development and CSR. According to a National Geographic survey which studied 17,000 consumers in 17 countries, Indians are the most eco-friendly consumers in the world.

India topped the Consumer Greendex, where consumers were asked about energy use and conservation, transportation choices, food sources, the relative use of green products versus traditional products, attitudes towards the environment and sustainability and knowledge of environmental issues. • Reliance Industries and two Tata Group firms—Tata Motors and Tata Steel—are the country’s most admired companies for their corporate social responsibility initiatives, according to a Nielsen survey released in May 2009. As part of its Corporate Service Corps (CSC) programme, IBM has joined hands with the Tribal Development Department of Gujarat for a development project aimed at upliftment of tribals in the Sasan area of Gir forest. The financial services sector is going green in a steady manner. With an eye on preserving energy, companies have started easing the carbon footprint in their offices.

The year 2009 witnessed initiatives including application of renewable energy technologies, moving to paperless operations and recognition of environmental standards. Efforts by companies such as HSBC India, Max New York Life and Standard Chartered Bank have ensured that the green movement has kept its momentum by asking their customers to shift to e-statements and e-receipts. • State-owned Navratna company, Coal India Ltd (CIL) will invest US$ 67. 5 million in 201011 on social and environmental causes. Public sector aluminium company NALCO has contributed US$ 3. 23 million for development work in Orissa’s Koraput district as part of its Corporate Social Responsibility (CSR).

Conclusion CSR is increasingly becoming an important aspect of corporate behaviour. Corporate’s contribution to society, environment and business when guided by enlighted self-interest improves quality of life for all. Effective CSR requires a good level of commitment from the entire organisation and especially the top management who can ensure that not only is CSR practiced but also that it is practiced well. CSR is perceived as an important tool for survival and it plays significant role for the business to have strategic advantage over others. Therefore, CSR may be the deciding factor in future, as it reflects a company’s goal, vision, mission, culture and the strategies.

References:

Importance of Outcomes , Measurement of Corporate Social responsibility programmes – Case Nokia, Reeta Talvitie- Siren (2009) White Paper- Externalities Management- Strategic Approach to Improving Corporate Social responsibility, Hewitt Roberts (2004) Green Paper- Commission of European Communities (2001) CSR as determinant of Market Success, Sandeep K. Krishnan, Rakesh Baluchand, IIM Ahemdabad Perceptions of CSR in India- An Empirical Study, Mahavir Narwal and tejinder Sharma, Kurukshetra University Prabandhan: Indian Journal of Management, Volume 3, Number 8, August 2010. www. karmayog. com http://www. ibef. org/india/CSR. aspx www. csrindia. info www. google. co. in