Corporate Social Responsibility in India - Research Paper Example

Running Header: Corporate Social Responsibility in India Student’s Name: Instructor’s Name: Course Name & Code: Date of Submission: Introduction According to Samuel & Walter (2009), Corporate Social Responsibility (CRS) is an idea whereby organizations incorporate environmental and social concern in their operations and in their relations with stakeholders on a voluntary basis. CSR is also viewed as corporate conscience, sustainable responsible business, or social performance. The corporate social responsibility aims at contributing to sustainable development. Responsibility of an organization for its activities and decisions impacts on the community and the environment through ethical and transparent behavior is called social responsibility. The main objective of CSR is to embrace liability for the actions of corporation and persuade an optimistic impact through its actions on the stakeholders, employees, communities, consumers, environment, and other members of communal sphere. This contributes to sustainable development that includes health and welfare of society. It also takes into considerations the stakeholders expectations. In short form, CSR is how business activities are run by companies so as to generate an overall positive outcome on community as illustrated by Anuradha & Kellogg School of Management, (2007). It involves balancing shareholders’ interests against the wider community interests. CSR is addition of communal concern into the decision making of the corporate while taking into consideration the profit, people, and planet. Corporate Social Responsibility is being aware of as well as bringing about change to working practices to reduce exploitation and promote safety and equality. CRS deals with governance, business ethics, human rights, and environment in developed countries. This compares to developing countries like India that focus on employment, healthcare, community support, rural development, national building, and socio-economic development according to Fernando, (2009). Development of CSR in India Sanjay, (2008) illustrates that India is ranked among number 73 in the world with 56 percent according to world Social Responsibility Index (NSRI). CSR is not a fresh idea in India. Nevertheless, there is a shift of focus from organizations that make profits to the ones that meets societal challenges or problems. They are various philosophies in India that have led to rise of various models that include ethical, liberal, statist, and stakeholder. Ethical model was championed by MK Gandhi and focused on voluntary commitment to public welfare by organizations. Statist model was championed by Jawaharlal Nehru and focused on how corporate responsibilities are determined by state ownership and legal requirements. Milton Friedman championed liberal model that focused on corporate responsibilities limited to the shareholders or private owners. Edward Freeman championed stakeholder model that focused on how companies respond to stakeholders needs. In India, CSR is believed to be the continued dedication by organizations to act justly as well as contribute towards financial growth while improving the value of life of the employees and their families and that of local society. In India, CSR exhibits the ethical behavior exhibited by organizations towards its external and internal stakeholders including employees and customers. It also denotes the organization’s responsibility towards society and environment where it operates. Corporate Social Responsibility in India started in 1907 when Tata Steel was established in Indian industry. However, this was less corporate social responsibility involvements from 1900 to 1990s. However, this has been significant rise of CSR since 2000 in India to 2010. Different from the past as argued by Shanker, (2010), CSR has been the key agenda of many companies where most of them are engaging in some CSR activities. Private sector has overtaken public sector towards corporate social responsibility which was not case sometimes back. In past, there was little involvement of private sector towards corporate social responsibility with aggressive involvement of government/public in social responsibility in India. Currently, there is adequate and aggressive involvement of all sectors in India as the need and importance of corporate social responsibility increases. In India, CSR approaches and strategies are based on the social-economic environment, perception of customer oversight, global visibility, founding fathers ethical beliefs, and business areas where companies operate as illustrated by Krishna (1992). CSR in India tied up with charity and community development. GSR had foundations within companies that followed the ideology by Gandhi of “giving back to the society”. In India, they are three categories of companies that are associated with corporate responsibility. They include many small and medium-sized businesses, large national organizations that appreciate corporate responsibility’s values, and big Indian multinational firms with proper corporate responsibility mechanisms put in place. The pattern of CSR in India initially focused on the shareholder’s profit then shifted to passive donations to various charities but mainly on request. This then moved to strategic giving linked to the interests of the business or rather community affairs. The CSR then shifted to strategic partnerships that were started by company or simply corporate community investment. The current CSR involves the integration into business functions, goals, and strategy or sustainable business. CSR has developed in India to incorporate employees, stakeholders, consumers and corporate citizenship. The CSR spectrum comprises number of aspects such as safety at work, climate protection, safety at work, environment caring, consumer protection, and sustainable management of natural resources. Several examples in India include TATA in 1945 that put into practice the environment protection measures as a way of protecting the environment against pollution and climate. This was also a measure towards sustaining natural resources within the society that saw a significant reduction of pollution within the society. TVS electronics in India was involved in CSR at the time of Tsunami in providing aids and other relief to the affected people. It has also corporate with government to improve sanitation in Tiruvidenthai village. Those are the initiatives that will assist towards the improvement of conditions in the rural areas as illustrated by Krishna, (1992). CSR in India entails focus on nation development, society support, socio-economic development, rural growth, education, health care, and employment. Several main CSR schemes have been started in India from mid-1990s including first voluntary code of governance established in April 1998 and it is referred as “Desirable corporate governance: A code”. This initiative was carried out by Confederation of Indian Industry (CII). This is the leading business organization in India. Indian government established a National Foundation for Corporate Governance (NFCG) in its efforts towards sustainable corporate governance. This is in partnership with CII, the Institute of Chartered Accountants of India (ICAI), and the Institute of Company Secretaries of India (ICSI) (norwayemb 2009). The main aim of NFCG is towards the promotion of enhanced company governance practices. It also assists in raising the company governance standards in India in the achievement of development and stability. Such are the practices that the Indian government has undertaken in its efforts towards establishing and CSR. Some of the front runners of CSR in India include Birlas, Hero, Honda, Hindustan Unilever, ITC, Maruti Udyog, BHEL, NTPC, IT, IT ES, Arvind mills, Dabur, Leyland, Eicher, Reliance, Wipro and life science among others. They have undertaken various actions due to several under rising issues. Hindalco Company addressed the issue of community development; it undertook an Asian CSR Award for Integrated Rural Poverty Alleviation programme. Indian Oil Corporation addressed corporate giving by dedicating 0.75 percent to communal development programs. Larsen and Toubro is another company that addresses health issues which in turn made it among the first corporate to launch HIV/AIDS programme. NTPC as an Indian Company that that addressed the issue of gender equality where it established a policy for the grant of paternity leave. BHEL has undertaken the issues of environmental management; this has made all its units become certified to the ISO 14 001 environmental management systems as argued by Bidyut, (2011). Drivers of Corporate Social Development in India According to Visser, (2008), the main drivers of CSR in India are the political reforms and social-economic priorities by government and various organizations. In an effort by the government to win the population support, current Indian government tries to engage in various CSR projects or activities in the population. Gain of market access is another major driver of CSR. This is as organizations try to get community realizing their services and brands. Another driver is crisis response whereby society is faced by certain crisis like hunger, severe pollution, and other types of accidents. In an effort to solve the issues, organizations and government have to engage in CSR. The enlighten self-interest for surviving by various organizations and companies in India has also been the major driver towards CSR. This is as various companies try to battle out the rising competitive forces as well as protecting their reputations. Governance gaps is another driver whereby CSR is seen as a way to plug the “governance gaps” left by corrupt or less-resourced governments failing to provide social resources adequately. Companies also try to improve their bottom line while building competitive edge and defending the attacks of the outside forces according to Jan & Marinus, (2006). Social-economic priorities by companies have also been a drive to many organizations that wants to thrive economically in India. Cultural tradition is another major driver by organizations. Others are international drivers that include international standardization as companies seek to become ISO certified. Stakeholder activism is driver whereby stakeholders find the need to assist or help the community. Supply chain and investment incentive have been major drivers that makes organizations engage in CSR activities in India as illustrated by Visser, (2008). Barriers to CSR in India According to Michael, (2007), they are various barriers towards the realization of CSR in India. They are lack of clear connection between CSR and financial achievement of any organization. Low voluntary adoption of CSR is known to lead to ‘green washing’. Other barrier includes lack of mechanisms of measuring, monitoring, evaluating, and even report impacts of CSR. Due to lack of mechanisms to evaluate the extent to which the CSR is benefiting the society are major hindrances as organizations and government are not able to know how much is required to be put in place as illustrated by Michael (2007). Measuring, monitoring, evaluating, and even reporting the impacts of CSR by an organization leads to motivation of organizations towards engaging in CSR. Myths are other barriers that hinder CSR in India; this is when smaller companies have a feeling that bigger ones have the responsibilities for to undertake CSR as illustrated by Subhabrata, (2007). Most small companies’ feels that they have no enough resources like major companies that would enable them engage in CSR; this makes them restrain from engaging in CSR activities. Some organizations think that it is a charitable exercise hence they do not put a lot of dedication towards it. High overheads associated with the implementation and sustenance of CSR efforts usually act as barrier to various organizations in ensuring its implementation. Lack of universally accepted frameworks in India has also been a major hindrance of CSR initiatives by some organizations. Lack of understanding, non-availability of authentic data, inadequate trained personnel, lack of proper policies, and lack of specific information on various CSR activities are other barriers towards effective CSR programmes in India. Lack of clear policies by the Indian government also contributes towards unsuccessful corporate social responsibility. Lack of well defined nomenclature of social responsibility has led to corporate social responsibility becoming not well defined in India. Role of Government in CSR Indian government plays a key role in ensuring organizations behaves in accordance to society norms. It plays a key role in supporting initiatives by corporate social responsibility. Other than private sector, corporate players in the public sector in India are also actively involved in various corporate social responsibility initiatives. Government has set up examples to private sector in order to give them morale of speeding up the processes of corporate social responsibility. It assures organizations that they stand to gain from the activities of CSR because of its acceptance and social influence. Government provides fiscal incentives to various private sector companies as a way of motivating them to start up various projects. In India, Companies that set up industries in less developed regions are offered special benefits with companies setting up water purification projects being offered tax incentives. Indian government usually legislates, fosters, partners with organizations, and endorses good practices so as to promote corporate social responsibility (India. Ministry of Corporate Affairs et el, 2008). Government has a role of promoting CSR initiatives as a way of developing company social responsibility. This has been the case with Gujarat government in one of the Indian states. Indian Government also has a role of developing better policies for various organizations willing to engage in social responsibility. Government has a role of providing or issuing voluntary guidelines that are intended to encourage the best practices by Indian corporations for the need to observe corporate social responsibilities. Such a role is being undertaken by Indian government through the ministry of Corporate Affairs. The guidelines should address the key elements for various companies to follow. The government has also a role of ensuring that organizations behave in an ethical manner without engaging in business that are unfair, corrupt, abusive or anti-competitive. It is crucial for the government to set up a certain amount of percentage for various companies that they should spend or dedicate to CSR initiatives. Government has powers to mandate companies to spend part of their profits in doing well or undertaking CSR initiatives as part of their role towards CSR. Indian government has taken up that role where parliament is mulling a bill that will require more than 3400 companies to set aside 2 percent of their net profits to funds meant for developing CSR initiatives as argued by Leon (2010). According to bill, organizations performances for the last three fiscal years will be evaluated. Government should mobilize various involved sectors like government, private sector, and NGOs towards working through partnership. Such partnership includes the Tri-sector partnership involving government, NGOs and Business. Such initiatives by government will assist rural India in eliminating and facing the challenges that arises. Therefore, it is the role of the government to promote such concepts towards ensuring it successfully deals with challenges that affect the society as well as giving morale to NGOs and especially business including companies in participating as illustrated by Raymond, (2009). Examples of CSR best practice in India There have been various successful organizations in using social responsibility. TATAS is one of the major organizations in India that has successfully undertaken CSR. TATA has been a role model on this path according to Ratan Tata the chairman of the TATA group. According to TATA, they carry out CSR in order to have satisfaction of achieving something that is worthy rather than raising publicity. The business Excellent Model of TATA incorporates social responsibility into corporate management framework whereby CSR is summarized as the main process of business. CSR programmes at TATA go a wide spectrum to include family initiatives, ethnic development, rural development, water management, and social welfare and community development. TATA Steel Rural Development Society (TSRDS) runs development projects around Orissa and Jamshedpur areas where over 7000 villages benefit. These programmes cover aspects that include adult literacy, irrigation, and rehabilitation of the handicapped people, vocational training, education, handicrafts, and afforestation. Tata’s community Development and Social Welfare Department (CDSW) carries out various programmes like medical/health, blood donation, drug de-action, and mass screening of TB patients as well as immunization camps. Tata initiated AIDS awareness programme in 1999, this has become an essential part of the training programmes. Tata’s centre for family initiatives was doing well towards persuading 59 percent of eligible couples of Jamshedpur in practicing family planning comparing to 35 percent of the national figure. Community welfare commitment has been the key in its value system of operations. Tata council for community initiatives has created the Tata guidelines on community development in order to build upon this heritage. This effort of more than 3 years from the field has changed into a framework of finest performances. Tata also provides vocational training whereby over 3000 women with distribution of over 1400 tool kits including electrical, tailoring and electronic repair tools. It has also trained over 10000 villagers under its village development programme in its Carpet Weaving Center as argued by Ashwani & Prema, (2009). IBM is another organization that has joined hands with Tribal Development Department of Gujarat towards development of various community projects. Such include various community development projects in Sasan area of Gir forest where society various water projects have been set up by IBM. Public sector aluminum company NALCO as part of its CSR has contributed US$3.23 million towards development work in Orissa’s Koraput district. National Thermal Power Corporation (NTPC) in its efforts to start CSR activities has plans to build an engineering college and a medical college in Orissa area in India to assist the local community as illustrated by Michael, (2007). Examples of CSR worst practice in India Although TATA has played a key role in promoting CSR within society, it has some of the worst practices in India. TATA is denying marginalized society their rights including Adivasis and fishermen. This is in their efforts to protect environment through conversation, environment protection, and social responsibility. This has made the fishermen and Adivasis community become affected in their efforts to earn a living in India as illustrated by Sanjay (2008). About 30 years ago, TATA started Fishermen’s Cove Beach Resort that was 30km south of Chennai. There was a lease of agreement with the landowner. In order to build a resort, Tata also took 7acreas of land that was belonging to the fishing village on agreement that basic services like drinking water, rice during rainy season, a fee on taking guests in hotel on boat cruises, and education for their children in terms of fees and books. After tsunami disaster, fishermen in the area had their boats destroyed and they were provided with others from hotel. However, they were restricted from parking them in front of the hotel. The hotel also declined to give them enough relief after the disaster as illustrated by Sanjay (2008). The initial agreements were ignored by the hotel with only an alternative land less than half of original land. This is a bad CSR practice by TATA that would lead to doubts of whether it is truly concerned with the society’s welfare or its own benefits. TATA is utilizing CSR to divert the attention from real and serious issues. TATA is also highlighting their charity towards influencing decision makers so as to avoid regulation and gain legitimacy. Recommendations/ what needs to change to improve CSR in India It is crucial for the Indian government to consider imposing laws on companies to spend 2percent of its profits on CRS. The CSR should be voluntary with no forceful imposition to the governments to companies. This is likely to reduce the morale of those willing to engage in CSR initiatives. Government should be allowed to work and operate freely without much interference by the government. Instead, government should frame a CSR policy in organization for activities prioritization. This is for allocation of separate funds and social spending for purpose of CSR and as a means of attaining the social objectives. It is crucial to encourage a drive in the state organization towards superior accountability on Corporate Social Responsibility. It is crucial for Indian government and organizations to monitor periodically and even analyze their CSR spending and budgets in order to ensure it has some impact to CSR initiatives as illustrated by Ramon, (2009). In India, media should change the ways in which it involves itself in CSR initiatives. Media in India are known to just cover social services for few days then move to another issue without emphasizing much on the underlying issues. Media should not only talk about issues affecting society when they arise and then varnish. They should review such issues regularly while putting more emphasizes as a way of encouraging organizations undertake CSF initiatives. Government should encourage then unification of various sectors and organizations as well as discourage barriers of suspicion between various organizations. This is because they are hindrance to successful CSR in India. Indian government itself should be the first partner to join hands with organizations and other businesses towards ensuring successful attainment of Corporate Social Responsibility. Indian government should set up clear policy on social responsibility like in the case of England that has ministries of looking after matters of corporate social responsibility. Government and organizations/business should change their attitude towards CSR while government should create more awareness among the corporate concerning their social responsibilities. Government should exempt tax on the money spent on CSR by various companies. This is a major step that may play a key role in encouraging more initiatives on CSR by businesses. Corporate leaders should ensure their organizations come up and volunteer towards partnering with government in providing basic infrastructure and other social amenities in rural areas (Das 2009). Conclusion In order to undertake CSR role, they are some crucial skills that require being in place. They include business skills, understanding society, building capacity, people skills, strategic view, harnessing diversity, stakeholder relationships, technical skills, and questioning business usual. CSR assist community in ensuring it is able to sustain itself well. It is through corporate social responsibility through businesses that community or society is able to have hospitals build for them with frequent medical care provided to them. This plays a key role in reducing the impacts of diseases among the less fortunate in the society as well as supporting those people who are affected by HIV/AIDS in the community while providing them with the counseling they require. Environment is also cleaned and looked after as a result of CSR. CSR by various businesses and organizations ensures that people are able to develop their skills through extensive training. This is by providing them with skills they require such as tailoring, carpentry, among others. This is mainly achieved through the establishment of vocational training centers by organizations. There is need for Indian companies to see local communities as their allies in the process of development rather than looking them at the prism of charity according to Subhabrata, (2007). References Anuradha, D & Kellogg School of Management 2007, Global corporate citizenship, Northwestern University Press, Illinois. 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Samuel, O & Walter, L 2009, Global Practices of Corporate Social Responsibility, Springer, New Delhi. Sanjay, K 2008, Corporate Social Responsibility in India, SAGE Publications, London. Shanker, A 2010, ‘Corporate Social Responsibility’, Business Review Journal, vol. 8, no 3, pp. 45-67. Subhabrata, B 2007, Corporate social responsibility; the good, the bad and the ugly, Edward Elgar Publishing, Calcutta. Visser, W 2009, The Forces shaping corporate sustainability and Responsibility, viewed 28 February 2011, http://www.waynevisser.com/article_waynevisser_csr_drivers.pdf Read More