Corporate Social Responsibility (CSR) is described as the “economic, legal, ethical, and discretionary expectations that society has of organizations at a given point in time.” Corporate social responsibility means that organizations have moral, ethical, and philanthropic responsibilities in addition to their responsibilities to earn a fair return for investors and comply with the law. A traditional view of the corporation suggests that its primary responsibility is to its owners, or stockholders. However, CSR requires organizations to adopt a broader view of its responsibilities that includes not only stockholders, but many other constituencies as well, including employees, suppliers, customers, local, state, and federal governments, environmental groups, and other special interest groups. Collectively, the various groups affected by the actions of an organization are called “stakeholders.”
The economic responsibilities cited in the definition refer to society’s expectation that organizations will produce goods and services that are needed and desired by customers at a reasonable price. The legal responsibilities relate to the expectation that organizations will comply with the laws set down by society to govern competition in the marketplace. The ethical responsibilities concern societal expectations that go beyond the law, such as the expectation that organizations will conduct their affairs in a fair and just way. This means that organizations are expected to do more than just comply with the law, but also make proactive efforts to anticipate and meet the norms of society. Finally, the discretionary responsibilities of corporations refer to society’s expectation that organizations be good citizens. This may involve such things as philanthropic support of programs benefiting a community or the nation. It may also involve donating employee expertise and time to worthy causes.
Corporate social responsibility is related to, but not identical with, business ethics. While CSR encompasses the economic, legal, ethical, and discretionary responsibilities of organizations, business ethics usually focuses on the moral judgments and behavior of individuals and groups within organizations. Thus, the study of business ethics may be regarded as a component of the larger study of corporate social responsibility.
The concept of CSR is a relatively new one—the phrase has only been in wide use since the 1960s. The concept of Social responsibility can be described in two ways. First, the classical perspective is directly related to social obligation. It states that the corporation has to meet several economic and legal responsibilities, thus its only responsibility is to maximize the profits of the stockholders. Second being the socioeconomic view states that organizations have to go beyond making profits in actions to preserve the environment and improve the community’s well-being. This perspective stems from the concept that organizations are an integral part of the society and they are not solely responsible toward the shareholders but also responsible toward the society and environment as a whole.
CSR is divided into three major dimensions. The first dimension is economic. CSR practices help the industry by raising the bar of expected overall behavior. Investors, seeing one company adopt CSR policies will be naturally inclined to invest in that company. Other companies in the same field, seeing the benefits to CSR, will adopt similar policies as an act of competition, and the attitude of the industry will gradually change. This saves economies from suffering declines through fraudulent business practices.
The second dimension is social. As a company integrates CSR practices into its structure, the way it treats employees will inevitably change. Individual interests are treated with more respect in CSR-conscious companies, and concerns such as employee health and family relations are considered.
The third dimension is ecological. Companies take ecological responsibility primarily in two ways. First, they adopt precautionary practices that attempt to secure a healthy and productive ecological environment for future generations and the future of the company. The second action of the ecological dimension is eco- efficiency, or the increase in economic efficiency through better ecological practices. These sort of actions reduce unhealthy emissions, replace unsafe chemicals with harmless versions, and market more natural products.
Many companies have adopted CSR in India. Some of the big names include Mahindra & Mahindra Ltd., Tata Steel Ltd., Infosys Ltd and many more. In a recent survey conducted in 2016 for CSR applicability and sustainability, Tata Steel Ltd. tops the charts followed by Tata Power Company Ltd. and Ultra Tech Cement Ltd. Companies have been viewing CSR as a social responsibility. Every year it is observed that more companies are joining the pool of CSR.
There are several arguments in favor of CSR. One of them is, since large corporations create many social problems, they should attempt to address and solve them. They suggest that corporations can do a better job of producing quality, safe products, and in conducting their operations in an open and honest manner.
Some suggest that businesses should assume social responsibilities because they are among the few private entities that have the resources to do so. Businesses should utilize some of their human and financial capital in order to “make the world a better place.”
These days, CSR is common currency but a “currency” that is rather devalued. One of the arguments is that the primary responsibility of business is to make a profit for its owners. According to this view, the self-interested actions of millions of participants in free markets will lead to positive outcomes for society. If the operation of the free market cannot solve a social problem, it becomes the responsibility of government, not business, to address the issue.
The “competitive” argument recognizes the fact that addressing social issues comes at a cost to business. To the extent that businesses internalize the costs of socially responsible actions, they hurt their competitive position relative to other businesses.
Is CSR an Obligation or an Option?
In the light of the downturn of the worldwide economies, more institutions are trying to minimize their costs and reduce its expenditures in order to survive. Basically, smaller institutions view that engaging in social activities represents a hurdle that affect their short-run financial returns. With the absence of governmental law, organizations have the complete flexibility to apply social responsibility upon their convenience.
However, the legislation for applying social activities and environmental sustainability for the case of factories and industries is far more different than the case of higher education institutions. For example, in manufacturing industries, environmental protection and employee protection from workplace hazards are implemented and backed up by a legal support.
Total engagement in CSR leads to many benefits such as increased profits, strong brand image and a sustained solid reputation. Thus investing in CSR initiatives enables the organization to occupy the position of a market leader in its field and secures a competitive advantage that makes it difficult for competitors to follow. Furthermore, educational institutions are taking advantage of their social activities through marketing and awareness campaigns to communicate their green activities to the general public as a mean to enhance their public image.Companies have taken an increased interest in CSR for a combination of reasons. The role of government has played in legislations requiring certain social behavior has decreased, giving businesses more freedom to decide their social responsibilities themselves.
In this regard, it is the role of educational institutions to widen the importance of CSR among the new generation as we can assure that with them, the notion of being socially responsible would go beyond being an obligation to be a necessity of their day to day lives. In this way the laws being made on CSR could be complied with and moreover, the objective of CSR can be achieved. Thus, we believe that students are the seeds who must be spread throughout corporations to make them flourish in their philanthropic activities and make CSR a core department in the organization. Thus, CSR is a reality in the world of business and every organization should make an attempt to adopt it.