Corporate Social Responsibility and Sustainable Development - Essay Example

Corporate Social Responsibility and Sustainable Development Executive Summary Is Corporate Social Responsibility and Business Growth CompatibleCompanies have realised that practising unacceptable processes carry not only legal risks but also the risk of businesses not performing well. Though business leaders realise that Corporate Social Responsibility (CSR) is an integral part of business performance, often the justifications of incorporating it into the business process is unclear. 2. Should Businesses Invest in CSR Given the Recessionary Times The new challenges of recession have to be faced with strategic CSR activities that will aim to maximise total wealth. Businesses cannot walk away from the communities, which they touch, by claiming insufficient funds. The nature of CSR activities will of course change. Businesses need to view CSR as an investment and not expenditure. 3. CSR and Sustainable Development as a Business Opportunity Companies are incorporating strategic CSR into their business models; identifying a set of social issues, to which it can contribute the best, is the key to this strategy. Being a valuable corporate citizen and mitigating harmful activities from the value chain are responsibilities that businesses understand. Sustainable development is the new 'mantra' of business development and companies across the world is making an effort to go 'clean and green.' Is Corporate Social Responsibility and Business Growth Compatible Businesses are facing an increasing pressure to adopt Corporate Social Responsibility (CSR) in its agenda of growth. Companies have realised that practising unacceptable processes carry not only legal risks but also the risk of businesses not performing well. Though business leaders realise that CSR is an integral part of business performance, often the justifications of incorporating it into the business process is unclear. Most justification given in support of CSR highlights the 'trade-off' between business and society rather than the 'interdependence' of the two. It is seen that businesses view CSR as means to secure the goodwill and reputation of the business, with all the stakeholders, a moral obligation to support ethical values and meeting the needs of sustainable development. What is missed out in this is the reality; the fulfilment of the social objectives of a business actually enhances the economic objectives of the business in the long-run. That this is possible has been proved by many companies. PepsiCo India has employed various processes to optimise water usage and minimise water wastage. Across its manufacturing plants in India, PepsiCo has installed water recovery equipment and has bettered the water management through recycling and reuse in cooling towers, flushes and gardens. The company has also made it a standard practice to harvest rain water either by collecting rain water in ponds that have been excavated for this purpose or by roof-water harvesting. PepsiCo plants in Bharuch, Bazpur, Palakkad, Jainpur, Panipat, Channo, Pune, Mahul and other places, in India, follow this as a standard practice. PepsiCo has also ventured into community water projects and watershed management programmes. The company has saved an approximate two billion litres of water in two years, from the start of this initiative, build its image as a socially responsible business house and to top it all has done very well with its bottled water and non-carbonated beverages. Another case in point is that of Nestl, which entered the poverty ridden Moga region in India. Poor soil, small tracts of land, droughts, animals suffering from disease and non-existent market, all sorts of challenges were existent here, till Nestl entered Moga in 1962. The company started with establishing milk purchasing organizations in the area and by creating infrastructure in the form of dairies with refrigeration, veterinarians, nutritionists and agronomists to advice farmers and medicine and supplements for the animals. Water supply facilities were also arranged in the area to protect the region from the periodic droughts. All these efforts paid off as Moga became a productive milk cluster with 75,000 farmers supplying milk through 650 dairies. The company ensured that the region gain a better standard of living. Nestl succeeded in building a long-term competitive advantage in the region through its CSR activity. Should Businesses Invest in CSR Given the Recessionary Times The definition of CSR, as given by The World Bank, is 'Corporate social responsibility is the commitment of business to contribute to sustainable economic development-working with employees, their families, the local community and society at large to improve the quality of life in ways that are both good for business and good for development.' Never was this truer than during these times of global recession. This is the time for companies to actually invest in sustainable CSR to dispel the belief that CSR is an activity that businesses involve in good times of profit; it is the only way to reinstall the faith of the consumers and society in business. The new challenges of the recession have to be faced with strategic CSR activities that will aim to maximise total wealth. Businesses cannot walk away from the communities, which they touch, by claiming insufficient funds. The nature of CSR activities will of course change. Businesses need to view CSR as an investment and not expenditure. The benefits to the community and the company should be tangible. Intelligent management will pull in non-financial resources such as employee time to make a difference in the community. Also if recession has forced the business to down-size, then it makes sense in utilizing the free physical resource to develop the community; for example help start a smaller new venture that is capable of creating wealth. The last thing that business houses can afford to do is to cut CSR budget, when the total salary of boardroom executives, in all probability, cross that budget. Giving money to aid the community is not sustainable. Businesses need to develop micro-enterprises by providing skill, education and training by which small enterprises can start building capacity and become self-sufficient. The recession is the perfect time to target the vulnerable sector to become sustainable. A company that is looking towards future growth has to depend on a consumer base with spending power. The recession is the time that a company can build a band of loyal customers, as people will be watching and will align themselves with companies that demonstrate integrity in these trying times. That companies are not shying away from responsibilities can be proved by the recent statistics provided in the 'Environmental Leader.' According to a study by the Hitachi Foundation and the Boston College Center for Corporate Citizenship, CSR investment has gone up despite the economic downturn. Around 10 percent of companies are getting into local and domestic sourcing and manufacturing, while 15 percent companies have increased their budget for research and development of sustainable products. Another study 'Weathering the Storm: The State of Corporate Citizenship' reveals that companies are continuing with their environmental programmes. There has been a 10 percent increase, from 2007, in companies supporting environmental issues through CSR activities. Nearly 59 percent of big companies also offer energy-efficient products. The Greening of the Wal-Mart supply chain is one of the best examples of companies understanding that 'greening' efforts actually pay business dividends. From the time in October 2005, when Wal-Mart President and CEO, Lee Scott, declared that Wal-Mart will aim to become the 'most innovative and competitive company in the world' riding its major greening plan of 'creating zero waste, sell products that sustain the resources and the environment and be powered 100 percent through renewable energy,' the company has not looked back. CSR and Sustainable Development as a Business Opportunity Businesses can neither bear the cost or responsibility of all the problems in society. In spite of this, it cannot be denied that only businesses can create wealth and have a positive impact on society. Companies are incorporating strategic CSR into their business models; identifying a set of social issues to which it can contribute the best, is the key to this strategy. Being a valuable corporate citizen and mitigating harmful activities from the value chain are responsibilities that businesses understand. Sustainable development is the new 'mantra' of business development and companies across the world is making an effort to go 'clean and green.' Why else would the baron of 'luxury living' consider what he thoughtfully refers to as 'sustainable luxury' In Delhi, this year in March, French billionaire Francois-Henri Pinault said "Nobody today would deny the existence of global warming, the threat to biodiversity. This is not a time for reflection. We must act now to change the future." If owning Stella McCartney, Gucci, Alexander McQueen, Yves Saint Laurent (all synonymous with unsustainability), among others, sounds in contradiction to his championing recycling, solar power and green stores, then Pinault has enough evidence of the efforts that are being taken to make the fashion industry sustainable. Along with Frida Giannini, the Gucci designer, Pinault is working on recycling leather and suede products. Looking at sustainable development as a business opportunity, Pinault, says that the only way to differentiate your company from the rest and to establish it as a 'human' venture is to go the green way. In his personal life he has made various adjustments such as using a hybrid Lexus in place of an Aston Martin and taking the train while travelling in Europe. He supports smaller packaging, sea freight and has ordered his stores to switch off the neon sign after 11 in the night. Reference List: 1. Pepsico India. Reducing water debit. [Internet] (Updated NA) Available at: http://www.pepsiindia.co.in/pepsiinitiative.html [Accessed 27 Nov 2009.] 2. APEC Study Centres Consortium Conference Piura, Peru. Corporate Social Responsibility and APEC. [Internet] (21 June 2008) Available at: http://74.125.153.132/searchq=cache:r46aBAi90k4J:www.apec.org.au/docs/08_ASCconf/022_Quesada_ppt.pdf+Is+CSR+activity+and+business+investment+compatible%3F&cd=2&hl=en&ct=clnk&gl=in [Accessed 27 Nov 2009.] 3. Strategy and Society: Corporate Social Responsibility and the Competitive Advantage. Harvard Business School. Liverpool Summit -Transforming Technology. [Professor Michael E. Porter] [Internet] (Updated 1st Oct 2008) Available at: http://www.isc.hbs.edu/pdf/20081001_LiverpoolSummit_CSR.pdf [Accessed 27 Nov 2009.] 4. How can corporations respond to CSR in a recession. CSR Asia's weekly newsletter. [Richard Welford] [Internet] (Updated 30 Dec 2008) (Volume 4, Week 43) Available at: http://www.csr360gpn.org/news/story/how-can-corporations-respond-to-csr-in-a-recession [Accessed 27 Nov 2009.] 5. The Greening of Wal-Mart's Supply Chain. Supply Chain Management Review. [Erica L. Plambeck] [Internet] (Updated 1st July 2007) (Volume 4, Week 43) Available at: http://www.scmr.com/article/329829-The_Greening_of_Wal_Mart_s_Supply_Chain.php [Accessed 27 Nov 2009.] 6. Environmental Leader . Energy and Environment News for Business. CSR Investments Up Despite Economy. [Internet] (Updated 23 Sept 2009) Available at: http://www.environmentalleader.com/2009/09/23/csr-investments-up-despite-economy/ [Accessed 27 Nov 2009.] 7. The Sunday Times. Ethics are now coming into fashion. Franois-Henri Pinault wants to save the planet - one handbag at a time. [John Arlidge] [Internet] (Updated 27 Nov 2009) Available at: http://foro.univision.com/univision/board/messageboard.id=salmahayek&message.id=25336 [Accessed 27 Nov 2009.] Read More