According to the World Business Council for Sustainable Development, CSR is “the commitment of business to contribute to sustainable economic development……….” The primary purpose of CSR is to engage with the internal and external stakeholders. Generation of CSR:
In the 1970s from Social Betterment to After 1970 to Social Responsiveness
There have been three generations of development of CSR, they are: • The first showed that companies can be responsible in ways that do not detract from commercial success. The most prominent changes include adoption of a strategic approach to philanthropy, expansion of the geographic focus of corporate, and evolving of measurement tools. • The second generation is focusing CSR on an integral part of long – term business strategy. • The third generation of CSR is expected to make a significant contribution to address issues such as poverty, exclusion and environmental degradation. This will involve both partnerships with civil society and changes in public policy.
Arguments for CSR:
Those who are in favour of CSR put forth their arguments as below: • Balancing corporate power with corporate responsibility. • Discouraging the creation and imposition of government regulations. • Focusing on social problems.
Arguments against CSR:
Some arguments against CSR are:
• Stakeholders bear the cost of corporate social action (shareholders, employees and consumers) which affect a “corporation’s operating efficiency and weaken competitive position and advantage. • Mismatch of the roles and expectations between the organization and society. • The prospects of corporations becoming even more powerful, as they may already exercise considerable power over society. • Management is trained in functional areas of management and does not have the expertise in handling social issues.
THEORIES AND MODELS
Different models of CSR are as below:
ETHICS and CSR:
Business Ethics examines “moral controversies” that commonly arise in the business world. The operationalization of business ethics is related to other forms of CSR, such as articulation and integration of core values, stakeholders interactions, social audit and other forms of social – performance measurement and reporting.
The term Altruistic or Humanitarian CSR involves personal or organizational sacrifice. It is considered the “fourth face” of CSR – PHILANTHROPIC responsibilities: the implied concept of corporate citizenship fundamental to the notion of giving back to society.
A Political theory of CSR:
The political theory of CSR is based on assumptions about the “motivation of public officials and corporations. Political decisions – makers orient their behavior towards constituencies that can provide valuable resources”.
Social Contract Theory:
A social contract, with implicit and explicit terms, is conceived to exist between the organization and the public at large, and not merely between its shareholders. Earlier, an organization’s sole responsibility was to maximize profits for shareholders; the firm’s profits were viewed as a measure of legitimacy.
It is also called “the dominant paradigm in CSR.” Six categories of stakeholder view were propagated: owners, employees, customers, suppliers, communities and governments. Still later, natural environment was also included.
Financial Performance and CSR:
The relationship between financial performance and CSR essentially comprise of two types: The first uses the event study methodology to assess the short – run financial impact (abnormal returns) when the firm engages in either socially responsible or irresponsible acts. The second study was to explore the relationship between social responsibility and accounting – based performance measures.
Globalization and CSR:
Traditionally companies were seen primarily from the economic point of view i.e., companies provide products and services and, in doing so they create jobs and wealth. Increasingly, stakeholders (shareholders, investors, communities, regulators, employees, customers and NGOs) are taking a broader perspective of corporate responsibility that incorporates not only economic performance, but also social and environmental performance factors.
The UN Global Compact:
In 1999, the UN Secretary General provided certain principles by way of Global Compact, these principles focus on labour standards, human rights and environmental protection.
Social Aspects of CSR:
Social CSR aspects are as follows: Human Rights, Labour, Consumer Protection and Respect for National Sovereignty and local communities.
Economic Theory of Self Regulation:
The adoption of business ethics codes or codes of conduct; efforts to ensure racial, ethnic, and gender diversity, transparency and accountability measures; compliance with labour laws and protection of human rights.