Corporate social responsibility Essay

Social responsibility is an ethical theory that an entity, be it an organization or individual, has an obligation to act to benefit society at large. Social responsibility is a duty every individual has to perform so as to maintain a balance between the economy and the ecosystems. Businesses can use ethical decision making to secure their businesses by making decisions that allow for government agencies to minimize their involvement with the corporation. Critics argue that Corporate social responsibility (CSR) distracts from the fundamental economic role of businesses; others argue that it is nothing more than superficial window-dressing; others argue that it is an attempt to pre-empt the role of governments as a watchdog over powerful corporations though there is no systematic evidence to support these criticisms. A significant number of studies have shown no negative influence on shareholder results from CSR but rather a slightly negative correlation with improved shareholder returns. Corporate social responsibility (CSR, also called corporate conscience, corporate citizenship, social performance, or sustainable responsible business/ Responsible Business) is a form of corporate self-regulation integrated into a business model. CSR policy functions as a built-in, self-regulating mechanism whereby a business monitors and ensures its active compliance with the spirit of the law, ethical standards, and international norms. In some models, a firm’s implementation of CSR goes beyond compliance and engages in â€Å"actions that appear to further some social good, beyond the interests of the firm and that which is required by law. CSR is a process with the aim to embrace responsibility for the company’s actions and encourage a positive impact through its activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere who may also be considered as stakeholders. FUNCTIONS OF CORPORATE SOCIAL RESPONSIBILITY The function of corporate social responsibility is for corporations to hold themselves accountable for the ethical, legal, societal and ecological impacts of their business practices. Corporate social responsibility practices are self-monitoring, meaning there aren’t laws requiring corporations to behave in a socially responsible manner. Rules regarding corporate responsibility practices are generally written into the corporate bylaws, mission statements and employee handbooks. Ethical Function Ethics are one of the most important aspects in corporate governance and therefore have an important function in corporate social responsibility. A company must have internal controls regarding the expected ethical behavior and consequences of unethical business practices of its top executives and employees. Behaving ethically makes the company as a whole accountable to its investors, shareholders and consumers. The ethical function of corporate social responsibility helps to prevent conflicts of interest between earning corporate profits and maintaining the integrity of the company and the goods and services it produces. Legal Function The legal function of corporate social responsibility is to encourage transparency in a company’s business practices and financial reporting. Maintaining high levels of legal business practices, such as adhering to Occupational Safety and Health Administration, or OSHA, regulations promotes goodwill toward employees. Maintaining high levels of legal financial practices maintains good will among investors, stakeholders and government financial-reporting regulatory agencies such as the Securities and Exchange Commission, or SEC. Societal Function The societal function of corporate social responsibility is to respect and invest in the communities in which the company operates. Companies are aware of how the production of their products affects the local community. These companies take necessary actions to diminish the negative impacts of factors such as increased traffic, noise and pollution for the communities in which they operate. The societal function of corporate social responsibility also includes companies reinvesting in the communities in which they operate, such as donating money to local charities. Ecological Function The ecological function of corporate social responsibility is to not only respect the immediate environment in which the company operates but also to respect the company’s effect on the global environment. Companies are aware of the environmental impact the production of their products have on their local communities. In corporate social responsibility, these companies adhere to strict standards in an effort to diminish the negative impact of the environmental byproducts such as air and water pollution from the production of their products. Having such standards impacts both the local and global environments. CHARACTERISTICS OF CORPORATE SOCIAL RESPONSIBILITY The idea of Corporate Social Responsibility, CSR, first appeared in the late 1960s in response to the need for businesses to address the effect of their pursuits on the environment and society, in addition to the interests of their shareholders. CSR attempts to portray corporations as responsible citizens who are concerned with issues of social and environmental welfare. The Public CSR argues that corporations bear responsibility for the effect they have on other sectors of society. The activities of corporations have an impact on individuals who don’t work for them and don’t buy their products, through, for example, secondary economic impacts and degradation of the natural environment. CSR acknowledges this, and attempts to make the interactions between corporations and society positive and productive. This can be done by consulting with neighbors and citizens who are affected by corporate activities and by striving for transparency in corporate pursuits so that the public knows what is going on. The Environment Increased knowledge on the part of the public about declining resources, toxic waste and global warming is compelling companies to make more efforts to be more environmentally benign. The traditional view that the natural world is merely a source of materials and an equally convenient dump for waste is being challenged from many quarters, and CSR is an attempt by corporations to respond to these concerns. The sincerity of changes being made on the part of corporations includes some serious efforts to achieve sustainability and other efforts that are essentially â€Å"greenwashing,† activities in which corporations put more effort into appearing green than into actually being green. Clients CSR challenges the traditional wisdom that the interests and needs of the clients of a corporation will be adequately protected by the market itself. Because the free market has been severely compromised by a combination of government subsidies and manipulative marketing practices, CSR attempts to remedy this situation by installing practices into corporate life that will monitor the interaction between corporations and their clients in an attempt to ensure that nobody is being exploited or cheated. Consumer protection can be enforced by the government or voluntarily pursued by companies, the latter course have clear advantages for the public relations of the company. Staff Staff and employees of corporations have a right to expect fair pay, safe working conditions and meaningful work. CSR is one aspect of a transformation in the corporate world that attempts to overcome archaic views of workers as mere means to an end on the part of shareholders. Particularly in less developed countries that are often the sites of intensive resource extraction, the treatment of labor is frequently substandard. CSR is intended to promote the rights of all workers and to ensure that corporations respect these rights and make whatever changes are required to prevent the exploitation and mistreatment of labor. FOUR TYPES OF CORPORATE SOCIAL RESPONSIBILITY As large corporations begin to dominate the world economy, it raises questions about the importance of corporate social responsibility in business. A variety of types of corporate social responsibilities have emerged in public discussions, and understanding their implications is important. Environmental Responsibility People expect businesses to exhibit environmentally responsible behavior, as evidenced by a PricewaterhouseCoopers survey that found that the No. 1 issue for companies in the future, according to U. S. respondents, is carbon emissions reductions. Specific environmental issues that affect businesses include global warming, sustainable resources and pollution. Businesses are being urged by environmental groups and governments to reduce their carbon footprint, to obtain their materials from sustainable sources and to reduce their pollution. Human Rights Responsibility The 21st-century marketplace is highly global. This means that when a product is purchased in the United States, for example, it may have been produced in China, or have components from South America. The ethical issue for corporations is ensuring that human rights are respected throughout all levels of the supply chain. Major companies have received criticism for their use of sweat shops and for sourcing resources that are harvested by unfairly treated workers. This has lead to a push for the use of strict labor standards to be applied to suppliers, and a demand for fair trade products such as chocolate and coffee. Financial Responsibility Financial responsibility is an important issue in corporate social responsibility. In the wake of the accounting fraud perpetrated by Enron and Arthur Andersen and Ponzi schemes orchestrated by the likes of Bernie Madoff, businesses are questioned about the accuracy of their financial reporting by increasingly skeptical shareholders and government officials, as evidenced by the Sarbanes-Oxley Act. Employees are expected to act as whistle blowers in such situations, and white collar crime is seeing high-profile prosecutions like that of Martha Stewart or former Worldcom CEO Bernie Ebbers. Political Responsibility Trading with repressive regimes is a difficult issue in corporate social responsibility. Some businesses argue that working with these regimes will help to advance them and bring rights to the countries. People and governments have demanded that businesses stop trading with repressive regimes, which was most notably observed when several western governments launched an embargo against the Apartheid government in South Africa during the 1980s. Shell Oil received considerable consumer backlash during the 1990s for its complicit involvement with the Nigerian government that murdered anti-oil activists. These issues make doing business with certain governments an important consideration for corporate social responsibility. PROS & CONS OF CORPORATE SOCIAL RESPONSIBILITY Corporate social responsibility is generally perceived as a positive business ideology in the 21st century, despite some challenges. A significant expansion of basic business ethics, CSR establishes guidelines for ethical and socially responsible behavior. It addresses how companies that want to satisfy government and societal requirements should treat key stakeholder groups, including customers, suppliers, employees and the community. Pro 1: Social Responsibility and Customer Relationships One of the foundational elements of CSR is that it causes companies to reason beyond basic ethics to consider the benefits of active involvement in communities. In his article â€Å"The 7 Principles of Business Integrity,† business strategist Robert Moment argues that 21st-century companies must prove themselves to customers to build long-term, trusting relationships. They must also get involved in the community to give back. This community connection endears your company to the local markets in which you operate. Pro 2: Motivated Employees Employees are a company’s most valued asset. This is the premise of a company’s obligation to this key stakeholder group with regard to CSR compliance. This means treating employees with respect and offering fair working conditions. It also means establishing fair hiring practices and promoting a non-discriminatory workplace. This improves morale within the workplace and encourages teamwork. Additionally, a writer on the As You Sow website stresses the importance of managing a diverse workplace so that you can benefit from a variety of backgrounds and life experiences. Con 1: Expenses The main reason any company would object to participating in CSR is the associated costs. With CSR, you pay for environmental programs, more employee training and efficient waste management programs. Proponents of CSR agree that any expenses to businesses are ultimately covered by stronger relationships with key customers. However, David Vogel indicates in his Forbes article â€Å"CSR Doesn’t Pay† that investment in CSR programs may not necessary result in measurable financial results. Con 2: Shareholder Expectations Another challenge for companies when considering CSR is the possible negative perception of shareholders. Historically, publicly-owned companies had a primary focus of maximizing shareholder value. Now, they must balance the financial expectations of company owners with the social and environmental requirements of other stakeholder groups. Some shareholders are happy to invest in companies that operate with high integrity. Others may not approve of the aforementioned expenses of operating under CSR guidelines. IMPORTANCE OF CORPORATE SOCIAL RESPONSIBILITY Social responsibility is so important to current and long-term business success that corporate social responsibility, CSR, has become a widely recognized business process in the early 21st century. An entrepreneur point out that CSR is an evolution of corporate ethics because it involves balancing the social expectations of all stakeholders, including shareholders, citizens, providers and customers, along with environmental responsibility. Basic Integrity Most experts and CSR analysts agree that this broad business concept is an evolution of basic business ethics and integrity. Entrepreneur and business strategist Robert Moment â€Å"The 7 Princes of Business Integrity† agree that treating stakeholders with respect and earning trust of customers through ethical business operations is the CSR foundation. Leading advocate of corporate accountability, the As You Sow Foundation, also stresses the importance of internal business controls that mandated ethics from corporate leaders and employees. Community Relations The word â€Å"social† is key to understanding how CSR goes beyond basic integrity. Moment states in one of his seven principles that as a CSR adherent, you must â€Å"remain involved in community-related issues and activities thereby demonstrating that your business is a responsible community contributor. † This community involvement and participation shows your marketplace that you are interested in more than just taking money from their pockets. In the long run, this strategy leads to a stronger public reputation and more profitable business relationships. The Environment Another reason CSR is much broader than conventional business ethics is its necessary inclusion of environmental responsibility. Once an opportunity for companies to add value and enhance their brand image, green-friendly operations are now a societal requirement with CSR. As You Sow discusses the importance of preserving the environment, optimizing efficient use of natural resources, such as renew, reuse and recycle, and reduction of waste as important to the environmental component of CSR. Companies that do not consider these initiatives draw the ire of the government, public and consumer watch groups. Bottom Line The underlying question is whether CSR operations improve a company’s bottom line performance. David Vogel argues in his 2008 Forbes article that â€Å"CSR Doesn’t Pay. † Vogel argues that operating under CSR guidelines is not likely to produce higher tangible profits for a company throughout time. Now that socially responsible behavior is expected, it goes largely unnoticed, argues Vogel. He does agree, though, that companies that ignore CSR may experience public backlash and negative business consequences. Still, many advocates of CSR believe that companies can still profit in the long run through stronger business and customer relationships. PRINCIPLES OF CORPORATE SOCIAL RESPONSIBILITY The main principles involving corporate social responsibility involve economic, legal, ethical and discretionary aspects. A corporation needs to generate profits, while operating within the laws of the state. The corporation also needs to be ethical, but has the right to be discretional about the decisions it makes. Levels of corporate social responsiveness to an issue include being reactive, defensive, responsive and interactive. All terms are useful in issues management. Selecting when and how to act can make a difference in the outcome of the action taken. CSR has inspired national governments to include CSR issues into their national public policy agendas. The increased importance driven by CSR has prompted governments to promote socially and environmentally responsible corporate practices. Over the past decade governments have considered CSR as a public issue that requires national governmental involvement to address the very issues relevant to CSR. The heightened role of government in CSR has facilitated the development of numerous CSR programs and policies. Increasingly, corporations are motivated to become more socially responsible because their most important stakeholders expect them to understand and address the social and community issues that are relevant to them. Understanding what causes are important to employees is usually the first priority because of the many interrelated business benefits that can be derived from increased employee engagement (i. e. more loyalty, improved recruitment, increased retention, higher productivity, and so on). Key external stakeholders include customers, consumers, investors (particularly institutional investors), and communities in the areas where the corporation operates its facilities, regulators, academics, and the media. The debate, on whether responsibility of a business enterprise is only to its shareholders (owners) or to all stakeholders, including environment and the society at large, is an on going one and continues. In received literature â€Å"Stakeholder†, as an expression is fairly recent in origin, reportedly appearing first in an internal memorandum of the Stanford Research Institute in the year 1963. According to a definition given by Edward Freeman â€Å"A stakeholder is any group or individual who can effect, or is affected by the activities and achievements of an organization. † Friedrich Neubauer and Ada Demb in â€Å"The Legitimate Corporation† identify six groups of distinguishable stakeholders (not necessarily in this order) as follows a) Providers of funds b) Employees c) General public d) Government e) Customers and f) Suppliers An increasing number of companies are reporting publicly on their social, environmental and ethical performance, both as a communication to stakeholders, and as a management tool. However, as this practice has only become more widespread since the mid 1990s, there is as yet no standard format to address the type of information companies choose to report, or how that information is collected, analyzed and presented. At the same time, many stakeholders are becoming increasingly sophisticated in the type and quality of information they are demanding from companies. In an effort to meet these demands – as well as to strengthen the credibility of their social and environmental reports – some companies are choosing to have their reports externally verified. In doing so, companies recognize that verification by a third party can add value to the overall social and environmental reporting process by enhancing relationships with stakeholders, improving business performance and decision-making, aligning practice with organizational values, and strengthening reputation risk management. Social Responsibility Principles The Corporate Social Responsibility is based on the following principles: Legal Compliance Principle: The enterprise shall comply with and understand all applicable, local, international, written, declared, and effected laws and regulations, in accordance with fixed, specific procedures. Adherence to Customary International Laws Principle: The enterprise shall adhere to international and governmental agreements, executive regulations, declarations, covenants, decisions, and guidelines, when setting its policies and practices pertinent to Social Responsibility. Respecting Related Stakeholders lefts Principle: The enterprise shall acknowledge and accept the diversity of related stakeholders’ lefts and interests, and the diversity of the major and minor enterprises’ activities and products, among other elements, which may affect such related stakeholders. Transparency Principle: the enterprise shall clearly, accurately, and comprehensively declare its policy, decisions, and activities, including known and potential effects on environment and society. Moreover, such information shall be available to affected persons, or those who are likely to be affected materially by the enterprise. Respect for Human lefts Principle: the enterprise shall execute policies and practices which shall result in respecting existent human lefts in the Universal Declaration of Human lefts. Because CSR can influence economic, environmental and social factors in a variety of ways, there is no â€Å"one size fits all† approach. An effective CSR strategy must consider alignment with the organization’s business strategy, commercial added value, and sustainability of impact. The benefits of an effective CSR approach to an organization can include: Stronger performance and profitability Improved relations with the investment community and access to capital Enhanced employee relations and company culture Risk management and access to social opportunities Stronger relationships with communities and legal regulators CORPORATE SOCIAL RESPONSIBILITY AT RELIANCE POWER LTD Reliance Power Limited is part of the Reliance Anil Dhirubhai Ambani Group, one of India’s largest business houses. It was established to develop, construct and operate power projects in the Indian and international markets. Reliance Energy Limited, an Indian private sector power utility company and the Anil Dhirubhai Ambani Group promote Reliance Power. With its subsidiaries, it is developing 13 medium and large-sized power projects with a combined planned installed capacity of 33,480 MW. Reliance Natural Resources merged with Reliance Power in 2010, shortly after its initial public offering. The group operates across multiple sectors, including telecommunications, financial services, media and entertainment, infrastructure and energy. The energy sector companies include Reliance Infrastructure and Reliance Power. Reliance Power has been established to develop, construct and operate power projects both in India as well as internationally. The Company on its own and through its subsidiaries has a portfolio of over 35,000 MW of power generation capacity, both in operation as well as capacity under development. The power projects are going to be diverse in terms of geographic location, fuel type, fuel source and off-take, and each project is planned to be strategically located near an available fuel supply or load centre. The company has 1,540 MW of operational power generation assets. The projects under development include seven coal-fired projects to be fueled by reserves from captive mines and supplies from India and elsewhere; two gas-fired projects; and twelve hydroelectric projects, six of them in Arunachal Pradesh, five in Himachal Pradesh and one in Uttarakhand. Reliance Power has won three of the four Ultra Mega Power Projects (UMPPs) awarded by the Indian Government so far. These include UMPPs in Sasan( Madhya Pradesh),Krishnapatnam( Andhra Pradesh) & Tilaiya(Jharkhand). UMPPs are a significant part of the Indian government’s initiative to collaborate with power generation companies to set up 4,000 MW projects to ease the country’s power deficit situation. Besides these, Reliance Power is also developing coal bed methane (CBM) blocks to fuel gas based power generation. The company is registering projects with the Clean Development Mechanism executive board for issuance of Certified Emission Reduction (CER) certificates to augment its revenues. Reliance Power in its continuous efforts to positively impact the society, especially the areas around its sites and offices, has formulated policies for social development that are based on the following guiding principles: Adopt an approach that aims at achieving a greater balance between social development and economic development. Adopt new measures to accelerate and ensure the basic needs of all people. Work towards elimination of all barriers for the social inclusion of disadvantaged groups- such as the poor and the disabled Give unfailing attention to children for in their hands lies the country’s future. It is for their sake that health, education and environment get topmost priority in our programs and investments. In areas around its power plant sites in Sasan,Rosa,Krishnapatnam,Butibori,Chitrangi and others, Reliance Power has been actively involved in various social and environmental organizations to address the issue of sustainable development and social uplift. The Company in discharge of its responsibility as a corporate citizen actively contributes to community welfare measures and takes up several social initiatives every year. Reliance Power Ltd. has been closely working with institutions and social organizations and supporting their programs for social development, adult literacy, adoption of village, tree plantation schemes etc. HEALTH Health and safety are of universal concern across the spectrum of communities. As a company, we are not only committed to compliance with legal norms but its is our endeavour to voluntarily go beyond that and provide quality healthcare facilities in the regions around our site. We are committed to providing all possible support to create awareness on various health related issues impacting the local people. We believe in a multidimensional approach that considers the needs of the area leading to an effective plan to address all issues in consultation with the local administration, community workers and NGOs working in the area. At its various project sites, Reliance Power sites runs medical facility center, physiotherapy center, and mobile medical vans that dispenses free medicines and provide free health check-ups. Also periodically we come up with health camps like general health check up camps, gynecology camps, eye check up camps and corrective surgery camps for disabled children. EDUCATION Education is a basic tool to bring development to an area and its people. We aim to create an awareness pool of human resource both within and across our area of operations. We are committed to bridging the digital divide between the ‘haves’ and ‘have nots’ in educational infrastructure and facilities. Exposure to technology along with a sustainable education model could be strengthened through partnership with government and quasi-government agencies. Reliance Power is involved in a surfeit of activities that have changed the lives of the people residing at the sites or the PAFs (Project Affected Families). Education is the main thrust of these activities. Major contributions made in the area include building of a DAV school at the site for the children of the PAFs and the children of the villages around the sites, free school bus facility for the students, stipend to every child who attends school (a boy child gets Rs. 250 per month while a girl child gets a stipend of Rs. 300 per month), free uniforms, study tours for children, teaching aids to the teachers, training of teachers, as well as night schools for uneducated adults etc. EMPLOYMENT Community is an integral part of the business environment and the basic commitment lies towards augmenting the overall economic and social development of local communities by discharging our social responsibilities in a sustainable manner. Reliance Power invests significantly in skill up gradation of people around the sites. The trained manpower available for construction will ensure quality and accident free working. CIDC, a Government of India initiative has been engaged and has trained about 300 project affected youths as electricians, welders, carpenters and masons and bar benders in batches of 40 each. To further encourage them we paid them, a monthly stipend of Rs. 1000 per month. In addition efforts are on to enroll the oustees in short term courses at the ITI operating in the region. Apart from these, training is also provided are: Computer coaching centre English speaking classes Personality development classes Physiotherapy training center Training by NAC (National Academy of Construction) and use them for future requirement of the construction. For the women folk of the villages, in an effort to empower them the company trains them in soft skills like tailoring and poultry farming etc. Reliance Power provides assistance to women keen on starting their own businesses. THE HUMAN TOUCH BEYOND POLICY IMPERATIVES Although the main thrust of Reliance Power’s CSR lies in providing quality education, health care and livelihood, we don’t restrict ourselves to it. In order to better lives around our areas of interest and business, we strive to provide basic amenities like electrification in the villages, augmentation and development of roads connecting the village to the main roads, old age support for senior citizens of the project affect families, development of the grazing lands for the cattle of the villagers, afforestation and veterinary camps for domestic cattle. Moral and financial support is extended during social occasions like marriages, community prayers, funerals and other such occasions.