2.1 Definition -- What is Corporate Social responsibility?
There are hundreds of definitions of corporate social responsibility, or CSR. The one we think says it the best comes from the international organization for standardization’s Guidance standard on Social responsibility, ISO 26000, published in 2010. It says:
“Social responsibility is the responsibility of any organization for the impacts of its decisions and activities on society and the environment, through transparent and ethical behaviour that:
Corporate Social Responsibility or CSR has been debated since the early twentieth century, but there has been little agreement over its definition due to:
Differences in national and cultural approaches to business
Differences in motivation for CSR –doing it because it is morally correct or doing it because it makes good business sense
Differences in disciplinary backgrounds, perspectives and methods of scholars engaged with CSR
An important remark to make before defining CSR is that it is a very broad topic with no clear-cut definition; this creates a lot of uncertainty. In order to reduce some uncertainty it is essential to divide CSR into two different parts and look at it in a more detailed manner. First part that will be looked at is the internal CSR, which is limited by the scope of the company, it deals with social policies of the employees. The second part is the external CSR, which is responsible for the outside framework and therefore deals with a much broader spectrum than the internal, as it takes into the account all the social and environmental factors, in some cases it helps eliminate the failures of the authorities in the social sphere, shifting a significant share of burden to the corporations.
Example – CSR
Unilever is a multinational corporation, in the food and beverage sector, with a comprehensive CSR strategy. The company has been ranked ‘Food Industry leader’ in the Dow Jones Sustainability World Indexes for the 11 consecutive years and ranked 7th in the ‘Global 100 Most Sustainable Corporations in the World’.
One of the major and unique initiatives is the ‘sustainable tea’ programme. On a partnership-based model with the Rainforest Alliance (an NGO), Unilever aims to source all of its Lipton and PG Tips tea bags from Rainforest Alliance Certified™ farms by 2015. The Rainforest Alliance Certification offers farms a way to differentiate their products as being socially, economically and environmentally sustainable.
2.2 Evolution of Corporate Social Responsibility
The history of CSR dates back many years and in one instance can even be traced back 5000 years in Ancient Mesopotamia around 1700 BC, King Hammurabi introduced a code in which builders, innkeepers or farmers were put to death if their negligence caused the deaths of others, or major inconvenience to local citizens. In Ancient Rome senators grumbled about the failure of businesses to contribute sufficient taxes to fund their military campaigns, while in 1622 disgruntled shareholders in the Dutch East India Company started issuing pamphlets complaining about management secrecy and "self enrichment". With industrialisation, the impacts of business on society and the environment assumed an entirely new dimension.
The "corporate paternalists" of the late nineteenth and early twentieth centuries used some of their wealth to support philanthropic ventures. By the 1920s discussions about the social responsibilities of business had evolved into what we can recognise as the beginnings of the "modern" CSR movement. "The phrase Corporate Social Responsibility was coined in 1953 with the publication of Bowen's Social Responsibility of Businessmen" (Corporate watch report, 2006). The evolution of CSR is as old as trade and business for any of corporation. Industrialization and impact of businesses on the society led to a complete new vision. By 80's and 90's CSR was taken into discussion, the first company to implement CSR was Shell in 1998. (Corporate watch report, 2006) With well informed and educated general people it has become a threat to the corporate and CSR is the solution to it. In 1990 CSR was standard in the industry with companies like Price Waterhouse Copper and KPMG. CSR evolved beyond code of conduct and reporting, eventually it started taking initiative in NGO's, multi stake holder, ethical trading. (Corporate watch report, 2006).
3.0 Review of Literature
3.1 Theoretical foundation
Refer to Clark, (2000) CSR consists of four steps process i.e., awareness or recognition of an issue, analysis and planning, response intern of policy development and implementation. The process of CSR also includes environmental assessment, stakeholder management, and issues management.
Becker-Olsen et al, (2006) mentioned that CSR a link between social initiatives and improved financial performance.
According Besley and Ghatak, (2007) CSR is dependable with profit-maximization in competitive markets. In equilibrium firms sell ethical brands and neutral brands, and consumers self-select according to their valuation of the public good.
According to Margolis et al, (2008) the relationship between corporate social responsibility (CSR) and corporate financial performance across eight categories of CSR and found that different initiatives have significantly different impacts on financial performance.
Pies et al, (2009) documented that the ordonomic approach can be used in business ethics to foster effective leadership skills and encourage CSR. The ordonomic perspective is a valuable framework for discussing the meaning and role of ethics in effective leadership and CSR in the age of globalization. The authors explained that the ordonomic approach provides a three-tiered conceptual framework for analyzing society and social interaction (refer to figure 2).
Figure 2: the three-tiered conceptual framework of the ordonomic perspective (extacted from Pies et al, 2009)
This framework distinguishes between the basic games of antagonistic social cooperation, the meta-games of social rule setting, and the meta-meta games of rule-finding discourse.
The authors stated that the basic game of social interaction refers as cooperation is only made possible by the existence of institutions, i.e., rules. for mutual advantage. The meta game is rule-setting processes that are geared toward creating a mutually advantageous social structure. Finally, the meta-meta game serves as a rule-finding discourse. Its discursive practices aim at critically discussing semantics and with the goal of developing shared perceptions as to the social interdependence of the players (Pies et al, 2009).
3.2 Carroll’s CSR Pyramid
Carroll’s CSR Pyramid. According to Carroll (1983:608), “corporate social responsibility involves the conduct of a business so that it is economically profitable, law abiding, ethical and socially supportive. To be socially responsible then means that profitability and obedience to the law are foremost conditions when discussing the firm’s ethics and the extent to which it supports the society in which it exists with contributions of money, time and talent”. And the different layers in the pyramid help managers see the different types of obligations that society expects of businesses.
3.3 Dose CSR affects Performance?
There are various literatures on the connection between CSR and performance. A variety state that is difficult to measure what aspect of CSR can affect corporation performance Schimdt & Rynes (2006)
Firstly there are not clear signs that acting appropriately by showing good behaviour influences the length of businesses value. This can be seen from two points of view.
From the financial market outlook, stambaugh and Levin (2005) argued that between 1% and 2.5% of corporations that are enlisted on the “ethical indices” lose their value compared to other competitors as a result of “anti-liquid trading effect”. A different approach was also used by Ter-host & Zhang (2007) they also achieved a similar result.
Devenney (2008) stated that the value of equity may not be affected by who possess the equity when trading effect is absent. He cited that the example of COIPERS who chose to remove tobacco from its portfolio. After this move, it did not affect the “operational” performance of the firm, despite it costing pension holders $700 million.
4.1 What is GRI?
GRI helps businesses and governments worldwide understand and communicate their impact on critical sustainability issues such as climate change, human rights, governance and social well-being. This enables real action to create social, environmental and economic benefits for everyone. The GRI Sustainability Reporting Standards are developed with true multi-stakeholder contributions and rooted in the public interest.
The Power of Sustainability Reporting
?The GRI Sustainability Reporting Standards (GRI Standards) are the first and most widely adopted global standards for sustainability reporting. Since GRI's inception in 1997, we have transformed it from a niche practice to one now adopted by a growing majority of organizations. In fact, 93% of the world’s largest 250 corporations report on their sustainability performance.*
The practice of disclosing sustainability information inspires accountability, helps identify and manage risks, and enables organizations to seize new opportunities. Reporting with the GRI Standards supports companies, public and private, large and small, protect the environment and improve society, while at the same time thriving economically by improving governance and stakeholder relations, enhancing reputations and building trust.
We work with the largest companies in the world as a force for positive change – companies with revenues larger than the GDPs of entire countries and supply chains that stretch the globe. As a result, the impact of our work on social well-being, through better jobs, less environmental damage, access to clean water, less child and forced labor, and gender equality has enormous scale.
Four Focus area of GRI:
?1. Create standards and guidance to advance sustainable development: Provide the market with leadership on consistent sustainability disclosures, including engaging with stakeholders on emerging sustainability issues.
4.2 GRI G3 Framework
GRI is an international independent organization that helps businesses, governments and other organisations understand and communicate the impact of business on critical sustainability issues such as climate change, human rights, corruption and many others.
Founded in 1997, GRI is a non-profit organisation with its Secretariat in Amsterdam. GRI produces one of the world's most commonly used standards for sustainability reporting; also known as ecological footprint reporting, environmental social governance (ESG) reporting, triple bottom line (TBL) reporting and corporate social responsibility (CSR) reporting.
As of 2015, 7,500 organizations used GRI for the sustainability reports. The GRI Guidelines apply to multinational organisations, public agencies, small and medium enterprises, NGOs and industry groups.
GRI G3 to G4 Transition
2015 represents the final year that organisations are able to achieve a GRI certification using the G3 framework. The switch to G4 and its materiality focus has already been undertaken by many and though there is no doubting that this change does require additional resource and a re-examination of much of the reporting done in order to achieve GRI accreditation, it is also true that these changes will make for a more relevant and in many regards a more powerful sustainability report.
GRI recommends that first time reporting organisations use the G4 Guidelines, even if they do not fulfil the requirements of the ‘in accordance’ options in the first reporting cycles. Reporting organisations using the G3 or G3.1 Guidelines will need to decide for themselves when to transition to the G4 Guidelines.
GRI will continue to recognise reports based on the G3 and G3.1 Guidelines for up to two full reporting cycles. However, reports published after 31 December 2015 should be prepared in accordance with the G4 Guidelines.
The following two links present the changes in standard disclosures from previous generations to G4 in an accessible format.
4.3 CSR Guidelines, Government of India
CSR Responsibilities under Companies Act 2013
Corporate Social Responsibility (CSR) assumes significance as it permits companies to engage in projects or programs related to activities related to social welfare and improvement enlisted under the terms of Companies Act, 2013. There is an element of flexibility in company activities by allowing them to select their preferred CSR engagements that are in agreement with the overall CSR policy of the company. In this article, we review the applicability of CSR, policy of CSR, role of Board of Directors and activities of CSR.
Applicability of Corporate Social Responsibility to Companies
Corporate Social Responsibility is required for all companies viz. private limited company, limited company. The following companies are necessary to constitute a CSR committee:
Companies with a net worth of Rs. 500 crores or greater, or
Companies with a turnover of Rs. 1000 crores or greater, or
Companies with a net profit of Rs. 5 crores or greater.
If any of the above financial strength criteria are met, the Corporate Social Responsibility (CSR) provisions and related rules will be applicable to the company. These companies are required to form a CSR committee consisting of its directors. This committee oversees the entire CSR activities of the Company.
Note: Corporate Social Responsibility is a requirement for companies meeting the above criteria. On the other hand, Section 8 Companies are incorporated solely for not-for-profit purposes.
Role of Board of Directors in CSR
The board of directors of a company plays a significant role in CSR activities of the company. The role of Board is as follows:
4.4 Public Environmental Reporting, Australia
Major providers of sustainability reporting guidance include:
There are number of current practices in environmental reporting in Australia. It is limited to consideration of mandatory and voluntary initiatives at the national level (rather than state or territory levels). Three initiatives are explored. Two of these are mandatory requirements—section 299 corporate disclosures required under the 2001 Corporations Act and section 516 disclosures by Commonwealth government organizations under the Environmental Protection and Biodiversity Conservation Act 1999. One other initiative is voluntary—Public Environmental Reporting—and is aimed at all organizations. Links with the Global Reporting Initiative are considered, followed by a brief comment on incentives and users of environmental reports. The briefing concludes by raising three issues that need to be addressed in the future—sustainable development; education, training and communication; and environmental accounting.
This Project focuses on the measurement Imperative and comparison of CSR reporting. Using Excellence theory in Public Relations, this study aims to content analyse the measurement criteria of GRI’s Sustainability Reporting Guidelines in comparison to the reporting principles of the Indian and Australian Frameworks on the basis of the triple bottom-line approach. This methodology is considered ideal because it helps understand, analyze and simplify the various sustainability indexes created by governments/global organizations. The secondary research material used for this study includes GRI’s Sustainability Reporting Framework, the Japanese Environmental Reporting Guidelines, and, the Australian Public Environmental Reporting Framework. Furthermore, this study aims to establish a universally-acceptable measurement index which has the potential to serve as a guideline for all corporations to use, irrespective of size and country-of-origin.
Key Research Questions:
In this part of our research we briefly going to discuss how CSR is measured in both countries along with the current governmental measurements.
It includes the key comparison between both countries in view of reporting guidelines as a similarities and differences.
We are also thinking of including one case study on GRI G3 Framework or latest GRI G4 introduction and implementation which might support our in-depth understanding of CSR concept.
In this part we mainly focus on CSR effects on Companies and Society worldwide as CSR is a dot which covers each and every corner of world map. We will discuss the Advantages and Limitations of CSR impact briefly.
Finally we conclude our study in nutshell along with the references/ bibliography including Articles, Books, Magazines, websites, and other library resources. In Appendix we will attach Current CSR Guidelines of government of India and Australia for further detailed study.
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