Corporate Social responsibility Competitive Advantage or Social Concern

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Corporate Social responsibility Competitive Advantage or Social Concern
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  Public Policy and Administration Researchwww.iiste.org ISSN 2224-5731(Paper) ISSN 2225-0972(Online)Vol.2, No.1, 2012 11 Corporate Social responsibility – Competitive Advantage orSocial Concern Nita Choudhary * , Niranjan Kumar Singh Dept. of Management Studies, Jain University, Bangalore – 560038, India   * Email of the corresponding author: xiss12@gmail.com Abstract Corporate Social Responsibility (CSR) which was seen as corporate “Philanthropy” till 1990s isconsidered as a buzzword today. Business bodies are seeing it as a strategy for coping up withuncertain, turbulent environment. Tata and Birla group of industries are considered pioneers in thisfield. Business bodies have realized that they may gain competitive advantage when society supportsthem strongly. Business firms have to make arduous effort to align CSR with competitive advantage,thus balancing the interests of all stakeholders. There is a “need for balance” – companies must addressthe long term equitable growth issues on which prosperity and human progress depend. Today privatecapital accounts for 50 percent of all net long term capital flow to developing states. Along with this,pressure has been increasing on business towards social responsibility previously handled bygovernment. Companies have to pay attention to all stakeholders if they have to achieve their businessgoals.In this paper, the pillars and model of Corporate Social Responsibility has been proposed. Also asurvey is conducted to know employee’s perception towards CSR whether CSR is for competitiveadvantage or social concern or both. The responses obtained from the respondent would help to gainmore insight into this topic. Keywords : Philanthropy, Strategies, Governance, Competency, Code of conduct, Ethics 1. Introduction In the early 20 th century, business firms were dominated solely by the objective of profit maximization.In the 1970s, social activists began questioning business firms of their sole objective of profitmaximization, since very firm gains its existence and momentum from society. Hence firms havecertain duties towards the society to perform.Corporate Social Responsibility (CSR) which was seen as corporate “Philanthropy” till 1990s isconsidered as a strategy today to gain competitive advantage. Also turbulent, complex and competitivebusiness environment urged business bodies to dive into CSR. Today CSR is seen as a key to long termsuccess, reputation and brand image. Corporate books have understood that without healthy andprosperous society the business bodies cannot excel. One of the main objectives of any businessactivity is to serve the society apart from making profits. A business serves the society by providingemployment, raising the standard of living, playing role in civic affairs, providing basic amenities likehealthcare and education facilities. Tatas and Birlas are pioneers in this field.Corporate leaders say that companies must pay attention to the well being of the societies in which theyfunction if they wish to flourish. This means companies must identify social trends, behaveconstructively and work with local communities to promote growth and development. There is a “needfor balance” – companies must address the long term equitable growth issues on which prosperity andhuman progress depend. Today private capital accounts for 50 percent of all net long term capital flowto developing states (Passline, 2010). Along with this, pressure has been increasing on business towardssocial responsibility previously handled by government. Companies have to pay attention to allstakeholders if they have to achieve their business goals. 1.1 Theoretical concept of CSR The phrase Corporate Social Responsibility was coined in 1953 with the publication of Bowen's 'SocialResponsibility of Businessmen'. The World Business Council for Sustainable Development in itspublication "Making Good Business Sense" by Lord Holme and Richard Watts, used the followingdefinition. "Corporate Social Responsibility is the continuing commitment by business to behave  Public Policy and Administration Researchwww.iiste.org ISSN 2224-5731(Paper) ISSN 2225-0972(Online)Vol.2, No.1, 2012 12 ethically and contribute to economic development while improving the quality of life of the workforceand their families as well as of the local community and society at large". (www.sbcsd.com, 2000).As per European Commission (2001) CSR is “A concept whereby companies decide voluntarilyto contribute to a better society and a cleaner environment.According to Business for Social Responsibility (2003) CSR is “Business decision making linked toethical values, compliance with legal requirements, and respect for people, communities, and theenvironment around the world”.The operational definition of social responsibility is “Social responsibility contends that managementis responsible to the organization itself and to all the interest groups with which it interacts. Otherinterest groups such as workers, customers, creditors, suppliers, government and society are placedessentially equal with shareholders” 2. Literature Review Business firms have realized that they can gain reputation only when society supports them strongly.The 2002 World Summit on Sustainable Development (WSSD) marked the crowning of CSR. Carroll’s(1979) classic definition of CSR included four parts: economic, legal, ethical, and voluntary orphilanthropic. Good ethics can have a positive economic impact on the performance of firms (Brendar andDinah,2002). CSR depends on the relationship between business and society and how businessesresponds towards their key stakeholders such as employees, customers, investors, suppliers,communities, and special interest groups (Hick, 2000). Businesses have a moral obligation to give back to society and enhance it, as they draw their resources from society, (Barnett, 2007). According toBurke and Logsdon (1996), tougher competitive conditions in recent years have put pressure on firmsto examine their philanthropy and social responsibility activities. If companies can shift one-timephilanthropic donations into a focused program of community partnering, it can be a good first step todevelop a comprehensive approach to social responsibility (Tapan & Ravneet, 2007). Over the pastdecades, CSR has grown to a complex concept which is increasingly central to today’s corporatedecision making (Cochran, 2007).It's sometimes asserted that corporate social responsibility is a luxury that is just too expensive forcompanies and consumers in the developing countries to create jobs and boost GDP. CSR is consideredas a secret weapon to acquire more market share. Investors are seeking financial gains from their firms’involvement in CSR initiatives (Dan O'Brien, 2001). Competitive strategy is the means by whichcompanies increase profitability. While strategic decisions are long-term in nature, managers tend tofocus on short-term profitability to meet the expectations of analysts and institutional shareholders. AsFriedman (1970) wrote in New York Times, the social responsibility of business is to increase its profit.The only social responsibility of business is to use its resources and to engage in activities designed toincrease its profit so long as it stays within the rules of the game, (Friedman, 1967, 1996). Thecompany should operate in ways that secure long term economic performance by avoiding short termbehavior that is socially detrimental or socially wasteful (Porter & Mark, 2006). According to Abagail   & Donald Siegel (2009), CSR has a neutral impact on financial performance of firms. A company’score competencies allow it to adapt quickly to new opportunities and integrate production andtechnology processes to develop new products cheaper and quicker than competitors (Prahalad &Hamel, 1990). Davis (1973) says that long-run self interest is one of the most prevalent reasons topractice CSR to remain profitable in the long run. The integration of SACs (Socially AnchoredCompetencies) can directly benefit business by increasing profitability (Hill, 1999). There is acompetitive advantage that companies believe they can reap by being socially responsible. 2.1 Global Reporting Initiative (GRI) implications on CSR The Global Reporting Initiative (GRI) produces one of the world's most prevalent standards forsustainability reporting. As of January 2009, more than 1,500 organizations from 60 countries use theGuidelines to produce their sustainability reports.  Public Policy and Administration Researchwww.iiste.org ISSN 2224-5731(Paper) ISSN 2225-0972(Online)Vol.2, No.1, 2012 13 2.2 GRI reporting framework  This framework sets out the principles and indicators that organizations can use to measure and reporttheir economic, environmental, and social performance.The cornerstone of the framework is theSustainability Reporting Guidelines. The third version of theGuidelines – known as the G3 Guidelines - waspublished in 2006. It facilitates transparency andaccountability by organizations and provides stakeholders a universally-applicable, comparableframework from which to understand disclosed information.Fig. 1: G3 Reporting framework Source: www.globalreporting.org/ReportingFramework/ReportingFrameworkOverview/  2.3 Rising expectations around CSR in India   Thedataon attitudes towards CSR in India suggests that nearly two-thirds (63%) of the Indian publicsay they want their government to force companies to go beyond their traditional economic roles andwork to improve society, even if this means higher prices and fewer jobs. They're more demanding inthis respect than the Japanese (55%), British (50%) or Americans (39%). Consumer attentiveness toCSR communications by companies also looks to be on the rise in the subcontinent. Consumers, inother words, are conflicted - economic growth is transforming the lives of so many, but this doesn'tmean that they're blind to the social and environmental costs that accompany it.With faith in corporate leadership on the decline in India, companies are going to need to demonstratecredibly what they're doing to meet these heightened expectations, or risk government stepping in andenforcing a responsible approach to business. 3. Problem statement The purpose of this study is to find out “Employees’ perception towards CSR - whether CSR is forcompletive advantage, social concern or both”. 3.1 Objectives of the study 1.   To gain insights into the concept of CSR like:- •   Whether a company can survive without practicing CSR •   Whether company’s CSR is linked with financial benefits •   Whether company’s CSR is linked with building favorable public image •   Whether CSR increases motivational level of people •   Whether CSR protects shareholder’s interests2.   To know employees’ perception towards CSR – whether it is for completive advantage, socialconcern or both.3.   To propose the model and pillars of CSR.4.   To create a conceptual management framework for corporate social responsibility.  Public Policy and Administration Researchwww.iiste.org ISSN 2224-5731(Paper) ISSN 2225-0972(Online)Vol.2, No.1, 2012 14 3.2 Proposed pillars of CSR 1)   Code of conduct – It is a set of rulesoutlining the responsibilities of or proper practices for anindividual or organization. It consists of practices, principles and values.Fig. 2. Elements of code of conductSource: www.solihullarts.org.uk 2) Society – Organization functions within a social system and draw their resources from it. Themanagement of business bodies has to preserve and enhance the well being of the members of society.For eg. Dabur has initiated some significant programmes for ecological regeneration and protection of endangered plant species The company is also involved in reforestation in the Himalayan ranges.3) Good governance – Corporate governance is a term that refers broadly to the rules, processes, orlaws by which businesses are operated, regulated, and controlled. Good corporate governance is a keyto the integrity of corporations, financial institutions and markets, and central to the health of oureconomies and their stability.For eg. ITC's Corporate Governance initiative is based on two core principles. These are: •   Management must have the executive freedom to drive the enterprise forward without unduerestraints; and •   This freedom of management should be exercised within a framework of effectiveaccountability.4) Philanthropy – Corporate philanthropy or corporate giving is the act of corporations donatingsome of their profits, or their resources, to nonprofit organizations. For eg. IBM gives millions of dollars each year to nonprofits through its corporate philanthropy programs.5) Customer satisfaction – Business firms have understood the importance of keeping customerssatisfied and happy. Unless the customers are satisfied, the business bodies cannot prosper.Fig 3: Elements of customer satisfactionSource: www.kiwipumps.com6) Stakeholders’ interest – The primary responsibility of any business is to safeguard the interests of itsstakeholders as they pride the crux of business ie. Capital.  Public Policy and Administration Researchwww.iiste.org ISSN 2224-5731(Paper) ISSN 2225-0972(Online)Vol.2, No.1, 2012 15 7) CSR programs – The Corporate Social Responsibility Program promotescorporate responsibilitybyengaging publicly held companies to adopt more progressive social and environmental policies - usingthe power of ownership to promote positive change. Proposed Model of CSR CSR programsFig 4: Proposed model of CSRGroups CSR elementsFoundation Philanthropy, Competency, Ethics, Community and Stakeholder interestBuilding Bricks Corporate Governance, and Environmental and social strategiesBinding Mortar Corporate LeadershipRoof CSR programs 4. Methodology The study started with the literature survey via journals, websites that helped to comprehend thevarious facets of CSR in industries. Hence the questionnaire was designed based upon the objectives of the study. 4.1 Tools of Data Collection and Analysis The study employs primary data collected by the executives of the organizations with the help of astructured questionnaire. The respondents were from both public and private sector comprising of manufacturing, IT, Pharmaceutical, FMCG, banking & insurance, education and telecom sector inBangalore. The survey was carried out in Bangalore City during September 2010 – June 2011. Thestudy employed non-probabilistic sampling. 800 nos. of questions were distributed by the way of personal contact and email but finally 124 nos. of responses were received. In the sample size of 124,working executives were surveyed from different companies. The analysis of data was carried outusing Mini Tab software.The questionnaire consists of nine closed-ended questions and one open-ended question for the purposeof data collection. The perceptions on various issues selected for the study were collected on a 5-pointLikert scale (1 – strongly agree; 5 – strongly disagree). The information and data collected wereorganized using simple statistics (e.g. frequency distribution, percentile ranking, etc.) and graphicalEnvironmental & Social strategiesCorporate GovernanceStakeholder interestCommunityEthicsCompetencyPhilanthropy   CorporateLeadership
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