CHAPTER 1
CORPORATE SOCIAL RESPONSIBILITY Definitions of social responsibility Corporate social responsibility (CSR) is:
•
An obligation, beyond that required by the law and economics, for a firm to pursue long term goals that are good for society The continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as that of the local community and society at large
•
•
About how a company manages its business process to produce an overall positive impact on society
Corporate social responsibility means:
•
Conducting business in an ethical way and in the interests of the wider community Responding expectations positively to emerging societal priorities and
•
• •
A willingness to act ahead of regulatory confrontation Balancing shareholder interests against the interests of the wider community Being a good citizen in the community
•
Is CSR the same as business ethics?
• •
There is clearly an overlap between CSR and business ethics Both concepts concern values, objectives and decision based on something than the pursuit of profits
•
And socially responsible firms must act ethically
The difference is that ethics concern individual actions which can be assessed as right or wrong by reference to moral principles. CSR is about the organization’s obligations to all stakeholders – and not just shareholders. There are four dimensions of corporate responsibility
• •
Economic - responsibility to earn profit for owners Legal responsibility to comply with the law (society’s codification of right and wrong)
•
Ethical - not acting just for profit but doing what is right, just and fair Voluntary and philanthropic - promoting human welfare and goodwill Being a good corporate citizen contributing to the community and the quality of life
•
•
Corporate Social Responsibility Business as it is said, is a product of environment. The nature of business, location, the product to be manufactured, the size, volume of operation, etc is determined by the environment in which it operates. Similarly it has an impact on the environment in which it exists. The business decisions in an organization completely depend upon the environment and their impact. The environment can be divided into: ? ? Internal Environment External Environment Internal Environmen t Business Decision External Environment
Social Responsibility of business refers to what business does over and above the statutory requirement for the benefit of the society. The word “responsibility” emphasizes that the business has some moral obligations towards the society. The term corporate citizenship is also commonly used to refer to the moral obligations of the business towards the society. It implies that like individuals, corporates are also the part of the society and their behavior shall be guided by the social norms. Social Responsibility has been defined by Davis as follows: “Social responsibilities refer to businessman’s decision and actions taken to reason at least partially beyond the firm’s direct economic or technical interest.” Still broader view has been suggested by Andrews when he says that: “By social responsibility, we mean the intelligent and objective concern for the welfare of the society that restrains immediately defined.” There has been a growing acceptance of the plea that business should be socially responsible i.e. it which it is an integral part. H. S. Singhania classifies CSR into two categories: ? The manner in which a business carries out its own business activity. should discharge its duties and responsibilities in enhancing the welfare of the society of profitable, and leads in the individual of and corporate behavior from ultimately destructive activities, no mater how direction positive contributions to human betterment, variously as the latter may be
?
The welfare activity that it takes upon itself as an additional function.
CHAPTER 2
Models of Corporate Social Responsibility
There are some models, which endeavor to describe the evolution and extent of social orientation of companies. Carroll’s Model: He defines CSR as a range and obligations a business has towards the society. There are four categories of the obligation. Discretionary Resp. Ethical Resp. Orgn Legal Resp. Economic Resp. ? Economic Responsibility: A firm being an economic unity, this is its prime responsibility, i.e. to satisfy the economic needs of Legal Responsibility: A company performs this because it is bound to obey the law and the legal system. ? Ethical Responsibility: the society through generating surplus and investing in development of the society. ?
Business organization is expected to undertake these though they are not mandatory. These include not restoring to unfair trade practices, not cheating the customer, etc. ? Discretionary Responsibility: It refers to the voluntary activities undertaken by the organization for social development programmes. These levels of responsibilities was named as “Pyramid of Corporate Social Responsibility” Ackerman’s Model: Also described that CSR done by a company generally spreads over three phases: ? FIRST where the top management recognizes the existence of social problem, which deserves attention and acknowledges the company’s policy towards it by making an oral or written statement. ? SECOND phase is where the Co. appoints staff specialists or external consultants to study the problem and suggest ways of dealing with it. ? THIRD phase involves the implementation of the social responsibility programmes.
THE INTEREST GROUPS
Social Responsibility requires the identification of various interest groups, which may affect the functioning of a business organization and may also be affected by its functioning. Normally various groups associated with a business organization are shareholders, workers, customers, creditors, suppliers, government and society in general. The management owes responsibility towards all these groups. Therefore, management should show a standardized norm of behavior.
?
Shareholders: The first responsibility of the management is to protect the interest of shareholders. The interests of majority of shareholders and large minority of shareholders are generally well protected through either direct participation in the management actions or they have real power to intervene, if necessary. They should be informed about the functioning of the organization adequately and timely. Therefore, management has a responsibility to provide proper safeguard to the money invested by shareholders. ? Workers: Workers have direct interest in an organization because by working there, they satisfy their needs. Thus, it is the management’s responsibility to protect the interest of workers in the organization. This can be done by the management in the following ways: ? cart Management should treat workers as another wheel of the
?
Management should develop administrative process in that promotes cooperative endeavor between
such a way
employers and employees. ? The management should adopt a progressive labor policy on recognition of genuine trade union rights – based
participation of workers in management, creating a sense of belongingness, improving their living and working conditions. ? Management should pay fair and reasonable wages and other financial benefits to workers. ? Customers: Management owes a primary obligation to give a fair deal to the customers. This can be done in the following ways: ? Customers should be charged a fair and reasonable price.
? The supply of goods and services should be of uniform standard and of reasonable quality. ? Management should not indulge in profiteering, hoarding, or creating artificial scarcity. ? Management should not mislead the customers by false, misleading and exaggerated advertisements. ? Creditors, Suppliers and Others: They affect the organization in various ways. Therefore , the management is responsible to fulfill its obligations towards them. This can be done in the following ways. ? Management should create healthy and cooperative Management should provide accurate and relevant inter business relationship between different businesses. ? information to creditors and suppliers.
?
Payments
of
price
of
materials,
interest
on
borrowings, other charges should be prompt. Government: It is very closely related with the business system of the country. It provides various facilities for the development of business. Government, no doubt, exercises control over business, but these controls are meant for overall development of business. Management can discharge its obligation to government by: ? ? Management should be a law-abiding citizen Management should pay taxes and other dues fully, It should not corrupt government workers and public It should not buy political favors by any means
?
timely & honestly. ? servants and the democratic process ?
?
Society: Organizations exist within a social system and get facilities from
the system. Therefore, they owe obligations to the society as a whole. This can be done by: ? Management should maintain fair business policies and It should play a proper role in civic affairs. It should provide and promote general amenities and help practices. ? ?
in creating better living conditions in general.
CHAPTER 3
WHY SOCIAL RESPONSIBILITIES OF BUSINESS?
“Why business should be concerned about social responsibilities?” is a question that has attracted the attention of many thinkers, both from academics as well as from practitioners. There have been arguments and counterarguments in favour of and against social responsibility of business.
The business case for CSR
The benefits of CSR to businesses vary depending on the nature of the enterprise, and are typically very difficult to quantify. A major metaanalysis has been conducted seeking to draw a correlation between social/environmental performance and financial performance. It should be noted that the definition of CSR used within business can vary from the strict 'stakeholder impacts' definition and will often include charitable efforts and volunteering. The business case for CSR within a company will likely rest on one or more of these arguments:
Human Resources
Corporate Social Responsibility can be an important aid to recruitment and retention, particularly within the competitive graduate market. Potential recruits are increasingly likely to ask about a firm's CSR policy during an interview and having a comprehensive policy can give an advantage. CSR can also help to build a 'feel good' atmosphere among exisiting staff, particularly when they can become involved through payroll giving, fundraising activities or community volunteering.
Risk Management
Managing risk is a central part of many corporate strategies. Reputations that take decades to build up can be ruined in hours through incidents such as corruption scandals or environmental accidents. These events can also draw unwanted attention from regulators, courts, governments and media. Building a genuine culture of 'doing the right thing' within a corporation can offset these risks.
Brand Differentiation
In crowded marketplaces companies strive for 'X Factors' which can separate them from the competition in the minds of consumers. Several major brands, such as The Co-operative Group and The Body Shop are built on ethical values. Business service organisations can benefit too from building a reputation for integrity and best practice.
License to operate
Corporations are keen to avoid interference in their business through taxation or regulations. By taking substantive voluntary steps they can persuade governments and the wider public that they are taking current issues like health, safety, diversity or the environment seriously and so avoid intervention. This also applies to firms seeking to justify eye-catching profits and high levels of boardroom pay. Those operating away from their home country can make sure they stay welcome by being good corporate citizens with respect to labour standards and impacts on the environment.
Diverting Attention
Major corporations which have existing reputational problems due to their core business activities may engage in high-profile CSR programmes to draw attention away from their perceived negative impacts. Thus British American Tobacco (BAT) will take part in health initatives and the petroleum giant BP has installed very visible windturbines on the roofs of some petrol stations in the UK.
CHAPTER 4
ARGUMENTS AGAINST SOCIAL RESPONSIBILITY:
1. Profit maximization: The first and the most important argument against CSR is that a business organization’s primary objective is profit maximization. Since business operates in a world of poverty and hunger, the economic efficiency of the business is a matter of top priority and should be the sole mission of business. Its function is economic and not social and economic values should be the only criteria used to measure success. 2. Society has to pay the cost: Another argument is that the costs of social responsibility will be passed on to the society and it is the society, which has to bear its cost. The question is whether the society can afford these costs?
3. Lack of social skills: Business managers are best in managing matters related to business. They are not equally good at solving social problems. If society is going to depend on someone to work with social problems, why choose a group, which is not qualified to do it.
4. Lack of accountability: Another point of view is that business has not direct accountability towards the people, so it is unwise to give the businessman the responsibility for areas he is not accountable. Until
the society can develop mechanisms, which establish direct lines of social accountability from business to the public, it should pursue its goal of profit where it is directly accountable through the market system. 5. Friedman’s Views: The most convincing criticism has been voiced by the economist Milton Friedman. Friedman based his arguments on two principal contentions, one economic and one legal. From the economic perspective, he asserted that if managers spend corporate funds on projects not intended to maximize profits, the efficiency of the market mechanism will be undermined and resources will be misallocated within the economy. On the legal side, Friedman contended that because managers are legal agents of the stockholders, their sole duty is to maximize the financial return to the stockholders. Hence if they spend corporate funds for social purposes they are essentially stealing from the stockholders.
CHAPTER 5
HOW CSR HELP THE COMPANIES
Globalization, the explosion of information technology, advances in the biological sciences, and the growth of democracy and diversity can be considered among the positive developments in our world today. On the other hand, poverty, environmental crises such as global warming, epidemics such as AIDS, and terrorism are also part of today's world. What do these positive and negative aspects have in common? They reflect the breathtaking increase in global interdependence, to the extent that borders don't count for much anymore and local communities are increasingly affected by things that happen a long way from home. Corporate social responsibility (CSR) has been proposed as a way to respond to some of these issues, both locally and globally. According to "Integrating Responsibility," most companies that have initiated CSR programs have done so in response to one problem or another; for example, in the thermal power station, it was environmental issues. CSR programs have also surfaced in the sourcing departments of companies facing supply chain issues. CSR is built on four key points: • Reputation- Building trust in a company is a long, uphill battle, but losing it can have dramatic effects on share prices and customer loyalty. • Retention and recruitment- Employees want to work for responsible companies that care about their employees and contribute to society. • Operational efficiency- CSR can improve the bottom line by using materials efficiently and minimizing waste.
•
Increased
sales-
Cause-related
marketing,
ethical
and
environmentally conscious labels, and new product innovation can influence the top line. Every business has an impact on the communities in which it operates, and the business depends on a basic set of social conditions--an educated workforce, available natural resources, health care, good government--in order to operate and compete. Communities also depend on business. The economic and social welfare of the population is dependent on having companies that can sustain the local economy. Every company draws on different resources and produces different effects in different locations.CSR practices and philanthropy must address these specific interactions between a business and the social conditions in which it operates • • • Generic social issues- which neither significantly affect nor are significantly affected by the business. Value chain impact- the consequences of a company's operating activities, good or bad. Competitive context- those aspects of the social environment that constrain the productivity of the business in its operating location. Schools, for example, may affect the competitiveness of companies that depend on a local workforce, even if the companies' activities do not have a direct impact on the schools. To be an effective and socially responsible business, companies need to move beyond generalized concepts of good citizenship.
CHAPTER 6
ARGUMENTS FOR SOCIAL RESPONSIBILITY:
1. Changed Public Expectations of Business: One of the most potent arguments for social responsibilities is that public expectations from business have changed. It is reasoned that the institution of business exists only because it satisfies the valuable need of the society. Society gave business its charter to exist, and the charter can be amended or revoked at any time that business fails to live up to society’s expectations. Therefore, if business wishes to remain viable in the long run, it must respond to society’s needs and give society’s needs and give society what it wants. 2. Public Image: Another argument in favor of social responsibility is that it improves public image. Each individual firm seeks an enhanced public image so that it may gain more customers, better employees more responsive money market and other benefits. Affirm which seeks better public image should support social goal. 3. Avoidance of Government Regulation: It seeks to regulate business in the public interest. Government regulation is costly and denies the much needed freedom in decision-making. Before government stretches its long arms, business should discharge its obligation to society. 4. Business has the Resources: Another argument for social responsibility is that business has a vast pool of resources in terms of men, talents, fictional expertise and money. Probably, business is without peers in respect of the
resources it possesses. With these resources at its command, business is in a better position to work for social goals 5. Prevention is Better than Cure: If business delays dealing with social problems now, it may find itself constantly occupied with social problems now, it may find itself constantly occupied with putting out social fires so that it has no time to accomplish its goal of producing goods and services. Since these social problems have to be dealt some time, it is actually more economical to deal with them before they develop into serious social breakdowns that consume management time. 6. Citizenship argument: If individual members of society have an obligation to improve society, corporations also have this responsibility. After all, corporations unlike citizens are created by the society. Corporations are citizens and citizens have civic duties and responsibilities. The proponents of social responsibility say that the old concept of profit maximization has vanished and even economists have accepted it. The have substituted profit maximization with satisfactory profit. Today, business decision – making is a mixture of altruism, self interest and good citizenship. Managers do take actions, which are in the social interest even though there is a cost involved and the connection with the long-range profit is quite remote. Therefore, the responsibilities of a business can be represented as follows:
Economic Concern
Mutual Concern
Social Concern
The figure shows that though there may be some cleary distinct economic and social goals of an organisation, there is
always a common area. This is the area that provides a realistic view of the social responsibility of a business
CUMI
CHAPTER 7
CUMI
Profile
CUMI was founded in 1954 as a tripartite collaboration between the Murugappa Group, The Carborundum Co., USA and the Universal Grinding Wheel Co. Ltd., U.K. The company pioneered the manufacture of Coated and Bonded Abrasive in India in addition to the manufacture of Super Refractories, Electro Minerals, Industrial Ceramics and Ceramic Fibres. Today the company's range of over 20,000 different varieties of abrasives, refractory products and electro-minerals are manufactured in ten locations across various parts of the country. With state-of-the art facilities and strategic alliances with global partners, CUMI has achieved a reputation for quality and innovation. CUMI is one of the five manufacturers in the world with fully integrated operations that include mining, fusioning, wind and hydro power stations, manufacturing, marketing and distribution. Almost all of CUMI's ten manufacturing facilities have received the ISO 9001:2000 accreditation for quality standards. A well connected marketing and distribution network of offices and warehouses in India and abroad ensure that service to customers is given prime importance. CUMI's constant innovation and product up gradation, through in-house R&D and strategic alliances with global leaders in grinding technology, have not only ensured it market leadership in India and abroad, but
also international recognition as a manufacturer of quality abrasives and a provider of total grinding solutions. CUMI's products are being exported to 43 countries spread across North America, Europe, Australia, South Africa and Asia.
CORPORATE SOCIAL RESPONSIBILITY IN CUMI
Community Initiatives – “We care beyond Business” We believe that Corporate Social Responsibility is a continuing commitment by business to behave ethically and contribute to economic development as well as of the local community and society at large... All our CSR initiatives are devoted towards creating a difference in the society and sustaining them, focusing on health, education etc
CUMI ‘S focus on CSR.
Medical Camps As a part of Medical camps, in 2008-09 we organized an eye camp in association with Aravind Eye hospital at Maniyar. A total of 260 people benefited out of the camp from nearby locality (Vadaserikara & Ranni Perinad Panchayats). Medicines and spectacles were distributed at subsidized rates and 10 patients were taken for cataract surgery to be held at Aravind Eye Hospitals, Tirunelveli
Developmental Government
Initiatives
Partnering
with
NGO’s
&
Awareness Camp on Chikungunya We always extend a timely help to the local community whenever a need arises. In this regard in 2007 we have organized an awareness camp about the spreading of the contagious ailment, chikungunya. This camp was done for the students of Government Higher Secondary School,
Kalamassery
in
association
with
the
Primary
Health
Center
& Kalamassery Municipality.
Chikungunya - state wide cleaning campaign was held all over the state. We supported the campaign by aiding necessary equipment to the local authorities.
Celebrations with Orphanages We celebrate our festivals with socially & economically backward sections of the society. Onam, being the traditional festival of Kerala, we provide Onam Sadhya (a special lunch) to many of the nearby
orphanages. Other Services We support the NGO’s for their services rendered to the society. We have provided space & infrastructure for the Rotary club of the
local community for Karamakendra. We have adopted our local library and offered various facilities for them. Support to Educational Institutions Education being the prime factor for the development of our future generation, we have supported nearby educational institutions by providing furnitures and other necessary materials. Environment – “Striking an ecological balance” We always have paramount concern on the surrounding environment. Our commitment towards high standards of environmental management is fulfilled through various initiatives such as reducing the water consumption, water treatment facility, controlling the dust and noise emission levels within the limits, stretching green belt in our campus and by maintaining local ecologies. Our Hosur plant has been awarded the International Environmental Certification, ISO 14001. Our Environmental Policy We at CUMI are committed to preserving the environment through a comprehensive Environmental Policy and a proactive approach in planning and executing our manufacturing and service activities. The objective of CUMI’s Environmental Policy is: ? To adhere to all applicable environmental legislations and regulations. ? To adopt pollution preventive techniques in design & manufacture of our products. ? To conserve all resources such as power, water, oil, gas, compressed air etc., and optimize their usage, through scientific methods.
? To continuously strive to minimize waste generation by all possible ways and to Reduce, Reuse & Recycle the same through a time bound action plan. ? To provide a clean working environment to our employees, contractors and neighbors. Towards fulfilling the above objective, we propagate our environmental policy and our commitment to continuous improvement to all employees, suppliers, customers and neighbors. We will strive towards maintaining harmony between society and environment towards achieving our environmental goal. CUMI, are committed to be an eco - friendly organization and shall strive to protect, preserve and improve our environment. This will be achieved through:
•
Continual improvement of the operations for achieving better environmental performance. Optimizing usage of energy and other resources. Minimizing wastage generation and disposing appropriately to reduce impact on environment. Complying with environmental legislations and regulations. Creating environmental awareness among employees through training and communication. Protecting employees by improving safety standards and
• •
• •
•
monitoring health on periodic basis.
•
Review effectiveness of environment management system
Go Green To stretch the green cover across our company campus, we have initiated go green projects in all our plant locations. We started the Go
Green initiative with mass tree planting at our plant campus on World Environment day in 2008. Go green is an ongoing initiative which includes beautification of our campus & tree planting. We have totally planted 200 trees, creating an Herbal garden in our premises. Effluent Treatment Facility We have initiated water effluent treatment facilities in all our locations, primarily to avoid water polluting the bionetwork. Since water being a depleting resource, we have taken steps to reduce the water consumption by recycling waste water to reuse for secondary purposes. We also have set up facilities to convert food waste to reusable energy resource in our canteen through the Bio Gas Plant. Resource Conservation With better awareness and appreciation towards ecology and
environment, thermal power utilities have been continually looking for innovative and cost effective solutions to conserve natural resources and reduce wastes. Some of the measures include:
•
Reduction in land requirements for main plant and ash disposal areas in newer units. Capacity addition in old plants, within existing land. Reduction in water requirement for main plant and ash disposal areas through recycle and reuse of water. Reduction in fuel requirement through more efficient
• •
•
combustion and adoption of state-of-the-art technologies such as super critical boilers.
3.4.4 Pollution Control Systems While deciding the appropriate technology for its projects, CUMI integrates many environmental provisions into the plant design. In order to keep emission, effluents and ambient air quality well within acceptable limits, CUMI has provided the best available equipments, devices and systems such as high efficiency Electrostatic Precipitators (ESPs), Tall Stacks and Low NOx Burners for control of stack emissions, Dust Extraction and Dust Suppression Systems for control of fugitive dust, Effluent Treatment Plants, Neutralization Pits and Ash Ponds for control of the effluent quality, Ash Water Re-circulation System and Cooling Towers for control of the effluent quality as well as conservation of water and Sewage Treatment Plant (STP) for treatment of the domestic sewage from its plant and township areas. 3.4.5 Monitoring of Environmental Parameters A broad based Environment Monitoring Program has been formulated and implemented in CUMI. All pollutants discharged from the power plant through stack emission, ash pond effluent, main plant effluent, domestic effluent and Condenser Cooling Water (CCW) effluent are monitored at the stipulated frequency at the source itself and at the points of discharge. In addition to the above, ambient air, surface water and ground water quality in and around CUMI plants are regularly monitored to assess any adverse impacts as a result of operation of the power plant. 3.4.6 Ash Water Recycling System CUMI is aiming at adopting the concept of "Near Zero Effluent Discharge" for once - through ash disposal system wherein huge quantity of water is used for disposal of ash to the ash ponds. This has
been further necessitated in view of ever increasing scarcity of water, as also, fast deterioration in water quality of our rivers and other water sources due to discharges from polluting industries. For conservation of water, Ash Water Recycling System has been envisaged for the ash ponds in all new projects and in a number of its operating stations. CUMI has drawn a program for changing ash disposal systems at its existing power plants from once-through system to recycling system where clear effluent from ash pond is recycled and only little quantity of blow down is required to be discharged after treatment. The ash water recycling system has already been installed and is in operation at a number of Stations such as Ramagundam, Talcher Kaniha, Talcher Thermal, Kahalgaon, Korba and Vindhyachal. The scheme has helped stations to save huge quantity of fresh water required as make-up water for disposal of ash. 3.4.7 Advanced / Eco-friendly Technologies CUMI has gained expertise in operation and management of 200 MW and 500MW Units installed at different Stations all over the country and is looking ahead for higher capacity Unit sizes with super critical steam parameters for higher efficiencies and for associated environmental gains. At Sipat (Chattisgarh), higher capacity Units of size of 660 MW and advanced Steam Generators employing super critical steam parameters have already been envisaged as a green field project. Higher efficiency Combined Cycle Gas Power Plants are already under operation at all gas-based power projects in CUMI. Advanced clean coal technologies such as Integrated Gasification Combined Cycle (IGCC) have higher efficiencies of the order of 45% as compared to about 38% for conventional plants. CUMI has initiated a techno-
economic study under USDOE / USAID for setting up a commercial scale demonstration power plant by using IGCC technology. These plants can use low grade coals and have higher efficiency as compared to conventional plants.
CHAPTER 8
CONCLUSION
The concept of corporate social responsibility is not new in India. Right from the pre-independence times, the Gandhian model has been in practice. Many family owned businesses continue to engage in philanthropic activities. However with the passage of time and increased privatization and globalization, the stakeholder model is gaining more importance. Hence, corporate responsibility is becoming an integral part of the business strategy. A poll reveals a number of areas where further progress is needed for the business sector to keep pace with greater expectations for responsible, transparent and accountable corporate conduct from various stakeholders. • • • High expectations from companies are not yet matched by judgments about CSRs. More trust is placed in media and NGOs than the industry. Finding creative ways to work in collaboration with the NGOs would help to enhance the corporate image. The emerging message to corporations seems quite clear. Take care of your customers; do not ignore your suppliers. Your employees are your most important partners in the wealth creation process: share your potential prosperity with your people. Meet your debt service obligations promptly and on schedule. All these are imperative in ensuring shareholder wealth maximization, which is indeed the primary goal of the corporation. Companies must focus on their prime responsibility to the shareholders, the owners of the company. But in order to sustain such achievements, working within and as part of society is all-important, failing which society will reject the socially unconscientiously corporation, often sooner rather than later. Such are the challenges and opportunities for corporations in quest of worldclass standards of excellence in the twenty first century.
doc_977958976.doc
CORPORATE SOCIAL RESPONSIBILITY Definitions of social responsibility Corporate social responsibility (CSR) is:
•
An obligation, beyond that required by the law and economics, for a firm to pursue long term goals that are good for society The continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as that of the local community and society at large
•
•
About how a company manages its business process to produce an overall positive impact on society
Corporate social responsibility means:
•
Conducting business in an ethical way and in the interests of the wider community Responding expectations positively to emerging societal priorities and
•
• •
A willingness to act ahead of regulatory confrontation Balancing shareholder interests against the interests of the wider community Being a good citizen in the community
•
Is CSR the same as business ethics?
• •
There is clearly an overlap between CSR and business ethics Both concepts concern values, objectives and decision based on something than the pursuit of profits
•
And socially responsible firms must act ethically
The difference is that ethics concern individual actions which can be assessed as right or wrong by reference to moral principles. CSR is about the organization’s obligations to all stakeholders – and not just shareholders. There are four dimensions of corporate responsibility
• •
Economic - responsibility to earn profit for owners Legal responsibility to comply with the law (society’s codification of right and wrong)
•
Ethical - not acting just for profit but doing what is right, just and fair Voluntary and philanthropic - promoting human welfare and goodwill Being a good corporate citizen contributing to the community and the quality of life
•
•
Corporate Social Responsibility Business as it is said, is a product of environment. The nature of business, location, the product to be manufactured, the size, volume of operation, etc is determined by the environment in which it operates. Similarly it has an impact on the environment in which it exists. The business decisions in an organization completely depend upon the environment and their impact. The environment can be divided into: ? ? Internal Environment External Environment Internal Environmen t Business Decision External Environment
Social Responsibility of business refers to what business does over and above the statutory requirement for the benefit of the society. The word “responsibility” emphasizes that the business has some moral obligations towards the society. The term corporate citizenship is also commonly used to refer to the moral obligations of the business towards the society. It implies that like individuals, corporates are also the part of the society and their behavior shall be guided by the social norms. Social Responsibility has been defined by Davis as follows: “Social responsibilities refer to businessman’s decision and actions taken to reason at least partially beyond the firm’s direct economic or technical interest.” Still broader view has been suggested by Andrews when he says that: “By social responsibility, we mean the intelligent and objective concern for the welfare of the society that restrains immediately defined.” There has been a growing acceptance of the plea that business should be socially responsible i.e. it which it is an integral part. H. S. Singhania classifies CSR into two categories: ? The manner in which a business carries out its own business activity. should discharge its duties and responsibilities in enhancing the welfare of the society of profitable, and leads in the individual of and corporate behavior from ultimately destructive activities, no mater how direction positive contributions to human betterment, variously as the latter may be
?
The welfare activity that it takes upon itself as an additional function.
CHAPTER 2
Models of Corporate Social Responsibility
There are some models, which endeavor to describe the evolution and extent of social orientation of companies. Carroll’s Model: He defines CSR as a range and obligations a business has towards the society. There are four categories of the obligation. Discretionary Resp. Ethical Resp. Orgn Legal Resp. Economic Resp. ? Economic Responsibility: A firm being an economic unity, this is its prime responsibility, i.e. to satisfy the economic needs of Legal Responsibility: A company performs this because it is bound to obey the law and the legal system. ? Ethical Responsibility: the society through generating surplus and investing in development of the society. ?
Business organization is expected to undertake these though they are not mandatory. These include not restoring to unfair trade practices, not cheating the customer, etc. ? Discretionary Responsibility: It refers to the voluntary activities undertaken by the organization for social development programmes. These levels of responsibilities was named as “Pyramid of Corporate Social Responsibility” Ackerman’s Model: Also described that CSR done by a company generally spreads over three phases: ? FIRST where the top management recognizes the existence of social problem, which deserves attention and acknowledges the company’s policy towards it by making an oral or written statement. ? SECOND phase is where the Co. appoints staff specialists or external consultants to study the problem and suggest ways of dealing with it. ? THIRD phase involves the implementation of the social responsibility programmes.
THE INTEREST GROUPS
Social Responsibility requires the identification of various interest groups, which may affect the functioning of a business organization and may also be affected by its functioning. Normally various groups associated with a business organization are shareholders, workers, customers, creditors, suppliers, government and society in general. The management owes responsibility towards all these groups. Therefore, management should show a standardized norm of behavior.
?
Shareholders: The first responsibility of the management is to protect the interest of shareholders. The interests of majority of shareholders and large minority of shareholders are generally well protected through either direct participation in the management actions or they have real power to intervene, if necessary. They should be informed about the functioning of the organization adequately and timely. Therefore, management has a responsibility to provide proper safeguard to the money invested by shareholders. ? Workers: Workers have direct interest in an organization because by working there, they satisfy their needs. Thus, it is the management’s responsibility to protect the interest of workers in the organization. This can be done by the management in the following ways: ? cart Management should treat workers as another wheel of the
?
Management should develop administrative process in that promotes cooperative endeavor between
such a way
employers and employees. ? The management should adopt a progressive labor policy on recognition of genuine trade union rights – based
participation of workers in management, creating a sense of belongingness, improving their living and working conditions. ? Management should pay fair and reasonable wages and other financial benefits to workers. ? Customers: Management owes a primary obligation to give a fair deal to the customers. This can be done in the following ways: ? Customers should be charged a fair and reasonable price.
? The supply of goods and services should be of uniform standard and of reasonable quality. ? Management should not indulge in profiteering, hoarding, or creating artificial scarcity. ? Management should not mislead the customers by false, misleading and exaggerated advertisements. ? Creditors, Suppliers and Others: They affect the organization in various ways. Therefore , the management is responsible to fulfill its obligations towards them. This can be done in the following ways. ? Management should create healthy and cooperative Management should provide accurate and relevant inter business relationship between different businesses. ? information to creditors and suppliers.
?
Payments
of
price
of
materials,
interest
on
borrowings, other charges should be prompt. Government: It is very closely related with the business system of the country. It provides various facilities for the development of business. Government, no doubt, exercises control over business, but these controls are meant for overall development of business. Management can discharge its obligation to government by: ? ? Management should be a law-abiding citizen Management should pay taxes and other dues fully, It should not corrupt government workers and public It should not buy political favors by any means
?
timely & honestly. ? servants and the democratic process ?
?
Society: Organizations exist within a social system and get facilities from
the system. Therefore, they owe obligations to the society as a whole. This can be done by: ? Management should maintain fair business policies and It should play a proper role in civic affairs. It should provide and promote general amenities and help practices. ? ?
in creating better living conditions in general.
CHAPTER 3
WHY SOCIAL RESPONSIBILITIES OF BUSINESS?
“Why business should be concerned about social responsibilities?” is a question that has attracted the attention of many thinkers, both from academics as well as from practitioners. There have been arguments and counterarguments in favour of and against social responsibility of business.
The business case for CSR
The benefits of CSR to businesses vary depending on the nature of the enterprise, and are typically very difficult to quantify. A major metaanalysis has been conducted seeking to draw a correlation between social/environmental performance and financial performance. It should be noted that the definition of CSR used within business can vary from the strict 'stakeholder impacts' definition and will often include charitable efforts and volunteering. The business case for CSR within a company will likely rest on one or more of these arguments:
Human Resources
Corporate Social Responsibility can be an important aid to recruitment and retention, particularly within the competitive graduate market. Potential recruits are increasingly likely to ask about a firm's CSR policy during an interview and having a comprehensive policy can give an advantage. CSR can also help to build a 'feel good' atmosphere among exisiting staff, particularly when they can become involved through payroll giving, fundraising activities or community volunteering.
Risk Management
Managing risk is a central part of many corporate strategies. Reputations that take decades to build up can be ruined in hours through incidents such as corruption scandals or environmental accidents. These events can also draw unwanted attention from regulators, courts, governments and media. Building a genuine culture of 'doing the right thing' within a corporation can offset these risks.
Brand Differentiation
In crowded marketplaces companies strive for 'X Factors' which can separate them from the competition in the minds of consumers. Several major brands, such as The Co-operative Group and The Body Shop are built on ethical values. Business service organisations can benefit too from building a reputation for integrity and best practice.
License to operate
Corporations are keen to avoid interference in their business through taxation or regulations. By taking substantive voluntary steps they can persuade governments and the wider public that they are taking current issues like health, safety, diversity or the environment seriously and so avoid intervention. This also applies to firms seeking to justify eye-catching profits and high levels of boardroom pay. Those operating away from their home country can make sure they stay welcome by being good corporate citizens with respect to labour standards and impacts on the environment.
Diverting Attention
Major corporations which have existing reputational problems due to their core business activities may engage in high-profile CSR programmes to draw attention away from their perceived negative impacts. Thus British American Tobacco (BAT) will take part in health initatives and the petroleum giant BP has installed very visible windturbines on the roofs of some petrol stations in the UK.
CHAPTER 4
ARGUMENTS AGAINST SOCIAL RESPONSIBILITY:
1. Profit maximization: The first and the most important argument against CSR is that a business organization’s primary objective is profit maximization. Since business operates in a world of poverty and hunger, the economic efficiency of the business is a matter of top priority and should be the sole mission of business. Its function is economic and not social and economic values should be the only criteria used to measure success. 2. Society has to pay the cost: Another argument is that the costs of social responsibility will be passed on to the society and it is the society, which has to bear its cost. The question is whether the society can afford these costs?
3. Lack of social skills: Business managers are best in managing matters related to business. They are not equally good at solving social problems. If society is going to depend on someone to work with social problems, why choose a group, which is not qualified to do it.
4. Lack of accountability: Another point of view is that business has not direct accountability towards the people, so it is unwise to give the businessman the responsibility for areas he is not accountable. Until
the society can develop mechanisms, which establish direct lines of social accountability from business to the public, it should pursue its goal of profit where it is directly accountable through the market system. 5. Friedman’s Views: The most convincing criticism has been voiced by the economist Milton Friedman. Friedman based his arguments on two principal contentions, one economic and one legal. From the economic perspective, he asserted that if managers spend corporate funds on projects not intended to maximize profits, the efficiency of the market mechanism will be undermined and resources will be misallocated within the economy. On the legal side, Friedman contended that because managers are legal agents of the stockholders, their sole duty is to maximize the financial return to the stockholders. Hence if they spend corporate funds for social purposes they are essentially stealing from the stockholders.
CHAPTER 5
HOW CSR HELP THE COMPANIES
Globalization, the explosion of information technology, advances in the biological sciences, and the growth of democracy and diversity can be considered among the positive developments in our world today. On the other hand, poverty, environmental crises such as global warming, epidemics such as AIDS, and terrorism are also part of today's world. What do these positive and negative aspects have in common? They reflect the breathtaking increase in global interdependence, to the extent that borders don't count for much anymore and local communities are increasingly affected by things that happen a long way from home. Corporate social responsibility (CSR) has been proposed as a way to respond to some of these issues, both locally and globally. According to "Integrating Responsibility," most companies that have initiated CSR programs have done so in response to one problem or another; for example, in the thermal power station, it was environmental issues. CSR programs have also surfaced in the sourcing departments of companies facing supply chain issues. CSR is built on four key points: • Reputation- Building trust in a company is a long, uphill battle, but losing it can have dramatic effects on share prices and customer loyalty. • Retention and recruitment- Employees want to work for responsible companies that care about their employees and contribute to society. • Operational efficiency- CSR can improve the bottom line by using materials efficiently and minimizing waste.
•
Increased
sales-
Cause-related
marketing,
ethical
and
environmentally conscious labels, and new product innovation can influence the top line. Every business has an impact on the communities in which it operates, and the business depends on a basic set of social conditions--an educated workforce, available natural resources, health care, good government--in order to operate and compete. Communities also depend on business. The economic and social welfare of the population is dependent on having companies that can sustain the local economy. Every company draws on different resources and produces different effects in different locations.CSR practices and philanthropy must address these specific interactions between a business and the social conditions in which it operates • • • Generic social issues- which neither significantly affect nor are significantly affected by the business. Value chain impact- the consequences of a company's operating activities, good or bad. Competitive context- those aspects of the social environment that constrain the productivity of the business in its operating location. Schools, for example, may affect the competitiveness of companies that depend on a local workforce, even if the companies' activities do not have a direct impact on the schools. To be an effective and socially responsible business, companies need to move beyond generalized concepts of good citizenship.
CHAPTER 6
ARGUMENTS FOR SOCIAL RESPONSIBILITY:
1. Changed Public Expectations of Business: One of the most potent arguments for social responsibilities is that public expectations from business have changed. It is reasoned that the institution of business exists only because it satisfies the valuable need of the society. Society gave business its charter to exist, and the charter can be amended or revoked at any time that business fails to live up to society’s expectations. Therefore, if business wishes to remain viable in the long run, it must respond to society’s needs and give society’s needs and give society what it wants. 2. Public Image: Another argument in favor of social responsibility is that it improves public image. Each individual firm seeks an enhanced public image so that it may gain more customers, better employees more responsive money market and other benefits. Affirm which seeks better public image should support social goal. 3. Avoidance of Government Regulation: It seeks to regulate business in the public interest. Government regulation is costly and denies the much needed freedom in decision-making. Before government stretches its long arms, business should discharge its obligation to society. 4. Business has the Resources: Another argument for social responsibility is that business has a vast pool of resources in terms of men, talents, fictional expertise and money. Probably, business is without peers in respect of the
resources it possesses. With these resources at its command, business is in a better position to work for social goals 5. Prevention is Better than Cure: If business delays dealing with social problems now, it may find itself constantly occupied with social problems now, it may find itself constantly occupied with putting out social fires so that it has no time to accomplish its goal of producing goods and services. Since these social problems have to be dealt some time, it is actually more economical to deal with them before they develop into serious social breakdowns that consume management time. 6. Citizenship argument: If individual members of society have an obligation to improve society, corporations also have this responsibility. After all, corporations unlike citizens are created by the society. Corporations are citizens and citizens have civic duties and responsibilities. The proponents of social responsibility say that the old concept of profit maximization has vanished and even economists have accepted it. The have substituted profit maximization with satisfactory profit. Today, business decision – making is a mixture of altruism, self interest and good citizenship. Managers do take actions, which are in the social interest even though there is a cost involved and the connection with the long-range profit is quite remote. Therefore, the responsibilities of a business can be represented as follows:
Economic Concern
Mutual Concern
Social Concern
The figure shows that though there may be some cleary distinct economic and social goals of an organisation, there is
always a common area. This is the area that provides a realistic view of the social responsibility of a business
CUMI
CHAPTER 7
CUMI
Profile
CUMI was founded in 1954 as a tripartite collaboration between the Murugappa Group, The Carborundum Co., USA and the Universal Grinding Wheel Co. Ltd., U.K. The company pioneered the manufacture of Coated and Bonded Abrasive in India in addition to the manufacture of Super Refractories, Electro Minerals, Industrial Ceramics and Ceramic Fibres. Today the company's range of over 20,000 different varieties of abrasives, refractory products and electro-minerals are manufactured in ten locations across various parts of the country. With state-of-the art facilities and strategic alliances with global partners, CUMI has achieved a reputation for quality and innovation. CUMI is one of the five manufacturers in the world with fully integrated operations that include mining, fusioning, wind and hydro power stations, manufacturing, marketing and distribution. Almost all of CUMI's ten manufacturing facilities have received the ISO 9001:2000 accreditation for quality standards. A well connected marketing and distribution network of offices and warehouses in India and abroad ensure that service to customers is given prime importance. CUMI's constant innovation and product up gradation, through in-house R&D and strategic alliances with global leaders in grinding technology, have not only ensured it market leadership in India and abroad, but
also international recognition as a manufacturer of quality abrasives and a provider of total grinding solutions. CUMI's products are being exported to 43 countries spread across North America, Europe, Australia, South Africa and Asia.
CORPORATE SOCIAL RESPONSIBILITY IN CUMI
Community Initiatives – “We care beyond Business” We believe that Corporate Social Responsibility is a continuing commitment by business to behave ethically and contribute to economic development as well as of the local community and society at large... All our CSR initiatives are devoted towards creating a difference in the society and sustaining them, focusing on health, education etc
CUMI ‘S focus on CSR.
Medical Camps As a part of Medical camps, in 2008-09 we organized an eye camp in association with Aravind Eye hospital at Maniyar. A total of 260 people benefited out of the camp from nearby locality (Vadaserikara & Ranni Perinad Panchayats). Medicines and spectacles were distributed at subsidized rates and 10 patients were taken for cataract surgery to be held at Aravind Eye Hospitals, Tirunelveli
Developmental Government
Initiatives
Partnering
with
NGO’s
&
Awareness Camp on Chikungunya We always extend a timely help to the local community whenever a need arises. In this regard in 2007 we have organized an awareness camp about the spreading of the contagious ailment, chikungunya. This camp was done for the students of Government Higher Secondary School,
Kalamassery
in
association
with
the
Primary
Health
Center
& Kalamassery Municipality.
Chikungunya - state wide cleaning campaign was held all over the state. We supported the campaign by aiding necessary equipment to the local authorities.
Celebrations with Orphanages We celebrate our festivals with socially & economically backward sections of the society. Onam, being the traditional festival of Kerala, we provide Onam Sadhya (a special lunch) to many of the nearby
orphanages. Other Services We support the NGO’s for their services rendered to the society. We have provided space & infrastructure for the Rotary club of the
local community for Karamakendra. We have adopted our local library and offered various facilities for them. Support to Educational Institutions Education being the prime factor for the development of our future generation, we have supported nearby educational institutions by providing furnitures and other necessary materials. Environment – “Striking an ecological balance” We always have paramount concern on the surrounding environment. Our commitment towards high standards of environmental management is fulfilled through various initiatives such as reducing the water consumption, water treatment facility, controlling the dust and noise emission levels within the limits, stretching green belt in our campus and by maintaining local ecologies. Our Hosur plant has been awarded the International Environmental Certification, ISO 14001. Our Environmental Policy We at CUMI are committed to preserving the environment through a comprehensive Environmental Policy and a proactive approach in planning and executing our manufacturing and service activities. The objective of CUMI’s Environmental Policy is: ? To adhere to all applicable environmental legislations and regulations. ? To adopt pollution preventive techniques in design & manufacture of our products. ? To conserve all resources such as power, water, oil, gas, compressed air etc., and optimize their usage, through scientific methods.
? To continuously strive to minimize waste generation by all possible ways and to Reduce, Reuse & Recycle the same through a time bound action plan. ? To provide a clean working environment to our employees, contractors and neighbors. Towards fulfilling the above objective, we propagate our environmental policy and our commitment to continuous improvement to all employees, suppliers, customers and neighbors. We will strive towards maintaining harmony between society and environment towards achieving our environmental goal. CUMI, are committed to be an eco - friendly organization and shall strive to protect, preserve and improve our environment. This will be achieved through:
•
Continual improvement of the operations for achieving better environmental performance. Optimizing usage of energy and other resources. Minimizing wastage generation and disposing appropriately to reduce impact on environment. Complying with environmental legislations and regulations. Creating environmental awareness among employees through training and communication. Protecting employees by improving safety standards and
• •
• •
•
monitoring health on periodic basis.
•
Review effectiveness of environment management system
Go Green To stretch the green cover across our company campus, we have initiated go green projects in all our plant locations. We started the Go
Green initiative with mass tree planting at our plant campus on World Environment day in 2008. Go green is an ongoing initiative which includes beautification of our campus & tree planting. We have totally planted 200 trees, creating an Herbal garden in our premises. Effluent Treatment Facility We have initiated water effluent treatment facilities in all our locations, primarily to avoid water polluting the bionetwork. Since water being a depleting resource, we have taken steps to reduce the water consumption by recycling waste water to reuse for secondary purposes. We also have set up facilities to convert food waste to reusable energy resource in our canteen through the Bio Gas Plant. Resource Conservation With better awareness and appreciation towards ecology and
environment, thermal power utilities have been continually looking for innovative and cost effective solutions to conserve natural resources and reduce wastes. Some of the measures include:
•
Reduction in land requirements for main plant and ash disposal areas in newer units. Capacity addition in old plants, within existing land. Reduction in water requirement for main plant and ash disposal areas through recycle and reuse of water. Reduction in fuel requirement through more efficient
• •
•
combustion and adoption of state-of-the-art technologies such as super critical boilers.
3.4.4 Pollution Control Systems While deciding the appropriate technology for its projects, CUMI integrates many environmental provisions into the plant design. In order to keep emission, effluents and ambient air quality well within acceptable limits, CUMI has provided the best available equipments, devices and systems such as high efficiency Electrostatic Precipitators (ESPs), Tall Stacks and Low NOx Burners for control of stack emissions, Dust Extraction and Dust Suppression Systems for control of fugitive dust, Effluent Treatment Plants, Neutralization Pits and Ash Ponds for control of the effluent quality, Ash Water Re-circulation System and Cooling Towers for control of the effluent quality as well as conservation of water and Sewage Treatment Plant (STP) for treatment of the domestic sewage from its plant and township areas. 3.4.5 Monitoring of Environmental Parameters A broad based Environment Monitoring Program has been formulated and implemented in CUMI. All pollutants discharged from the power plant through stack emission, ash pond effluent, main plant effluent, domestic effluent and Condenser Cooling Water (CCW) effluent are monitored at the stipulated frequency at the source itself and at the points of discharge. In addition to the above, ambient air, surface water and ground water quality in and around CUMI plants are regularly monitored to assess any adverse impacts as a result of operation of the power plant. 3.4.6 Ash Water Recycling System CUMI is aiming at adopting the concept of "Near Zero Effluent Discharge" for once - through ash disposal system wherein huge quantity of water is used for disposal of ash to the ash ponds. This has
been further necessitated in view of ever increasing scarcity of water, as also, fast deterioration in water quality of our rivers and other water sources due to discharges from polluting industries. For conservation of water, Ash Water Recycling System has been envisaged for the ash ponds in all new projects and in a number of its operating stations. CUMI has drawn a program for changing ash disposal systems at its existing power plants from once-through system to recycling system where clear effluent from ash pond is recycled and only little quantity of blow down is required to be discharged after treatment. The ash water recycling system has already been installed and is in operation at a number of Stations such as Ramagundam, Talcher Kaniha, Talcher Thermal, Kahalgaon, Korba and Vindhyachal. The scheme has helped stations to save huge quantity of fresh water required as make-up water for disposal of ash. 3.4.7 Advanced / Eco-friendly Technologies CUMI has gained expertise in operation and management of 200 MW and 500MW Units installed at different Stations all over the country and is looking ahead for higher capacity Unit sizes with super critical steam parameters for higher efficiencies and for associated environmental gains. At Sipat (Chattisgarh), higher capacity Units of size of 660 MW and advanced Steam Generators employing super critical steam parameters have already been envisaged as a green field project. Higher efficiency Combined Cycle Gas Power Plants are already under operation at all gas-based power projects in CUMI. Advanced clean coal technologies such as Integrated Gasification Combined Cycle (IGCC) have higher efficiencies of the order of 45% as compared to about 38% for conventional plants. CUMI has initiated a techno-
economic study under USDOE / USAID for setting up a commercial scale demonstration power plant by using IGCC technology. These plants can use low grade coals and have higher efficiency as compared to conventional plants.
CHAPTER 8
CONCLUSION
The concept of corporate social responsibility is not new in India. Right from the pre-independence times, the Gandhian model has been in practice. Many family owned businesses continue to engage in philanthropic activities. However with the passage of time and increased privatization and globalization, the stakeholder model is gaining more importance. Hence, corporate responsibility is becoming an integral part of the business strategy. A poll reveals a number of areas where further progress is needed for the business sector to keep pace with greater expectations for responsible, transparent and accountable corporate conduct from various stakeholders. • • • High expectations from companies are not yet matched by judgments about CSRs. More trust is placed in media and NGOs than the industry. Finding creative ways to work in collaboration with the NGOs would help to enhance the corporate image. The emerging message to corporations seems quite clear. Take care of your customers; do not ignore your suppliers. Your employees are your most important partners in the wealth creation process: share your potential prosperity with your people. Meet your debt service obligations promptly and on schedule. All these are imperative in ensuring shareholder wealth maximization, which is indeed the primary goal of the corporation. Companies must focus on their prime responsibility to the shareholders, the owners of the company. But in order to sustain such achievements, working within and as part of society is all-important, failing which society will reject the socially unconscientiously corporation, often sooner rather than later. Such are the challenges and opportunities for corporations in quest of worldclass standards of excellence in the twenty first century.
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