By Aashna Jain, National Law University, Jodhpur.
The objective of this write-up is to examine the concept of sustainable growth as the characteristic of the phenomenon called Corporate Social Responsibility. The researcher is not indulging in examining the widely discussed aspect of the features and the outcomes of the corporate social responsibility. The focus will primarily be on the various definitions given by national and international organizations, which primarily bring out the attribute of the sustainable growth and the care for future generations.
UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION
Corporate Social Responsibility is a management concept whereby companies integrate social and environmental concerns in their business operations and interactions with their stakeholders. CSR is generally understood as being the way through which a company achieves a balance of economic, environmental and social imperatives (“Triple-Bottom-Line- Approach”), while at the same time addressing the expectations of shareholders and stakeholders.[1]
GENERAL UNDERSTANDING
In many developed countries, CSR has taken on the character of strategically planned actions that benefit all levels of society, and it has grown from entrepreneurial initiatives to state policy. In many developed countries, CSR now provides benefits for stakeholders’ communities as well as for the government. CSR allows a business to respond quickly to the emerging needs of a society, whether they are economic, environmental, or social problems.
EXAMPLE[2]
IBM works with public and not- for-profit organizations to make the World Community Grid available to a volunteer force of more than 210,000 people who donate the idle processing power of their computers to create a “virtual supercomputer” devoted solely to humanitarian research. The program is strategic to IBM because it demonstrates how leading-edge technologies the company is developing can meet major global challenges, and it gives the company feedback on the performance of those technologies in real- world applications.
Because the positive financial impact of traditional philanthropy is often indirect, efforts aren’t always sustained. But in order to have a lasting impact on society and on the business, they must be maintained and leveraged. So the closer you align philanthropy to the core strategy of the business the easier it is to consistently support the efforts.
CENTER FOR ECONOMIC AND SOCIAL DEVELOPMENT
The government is a secondary beneficiary, as successful corporate responsibility practices reduce the government’s burden for responding to a wide range of issues. In addition, companies that engage in CSR have a chance to establish a positive image for themselves in the eyes of society, which helps advertise their products. Yet in spite of all the benefits that CSR might bring, it demands coordinated action from all stakeholders and non- governmental organizations in order to achieve sustainable results.[3]
CONCEPT OF SUSTAINBILITY INTERTWINED WITH THE CORPORATE SOCIAL RESPONSIBILITY
The history of CSR is strongly intertwined with the emergence over the past forty years of the environment as a worldwide concern and the eventual transformation of the term into “sustainable development” which incorporates social issues alongside environmental and development ones. CSR has been defined by the World Business Council for Sustainable Development as, “the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large.”[4]
CORPORATE SOCIAL RESPONSIBILITY IN INDIA
CSR in India has traditionally been seen as a philanthropic activity. CSR was a concept that existed years ago when philosophers in the pre-Christian era had publicly proclaimed to follow safe, ethical and moral business practices and to make charity. The idea of helping the poor and disadvantaged can be cited in much ancient literature and backed my many religions across the globe. CSR is a concept, which formed a part of religious preaching. For example, Muslims followed the tradition of saving parts of one’s money income to give the poor and the disadvantaged, which is popularly known as “Zakaat”. The Sikhs followed the concept of “Daashaant” like the Hindus followed “Dharmada”.[5]
The Companies Act 2013 has introduced the idea of CSR to the forefront and through its disclose-or-explain mandate, is promoting greater transparency and disclosure. Schedule VII of the Act, which lists out the CSR activities, suggests communities to be the focal point. On the other hand, by discussing a company’s relationship to its stakeholders and integrating CSR into its core operations, the draft rules suggest that CSR needs to go beyond communities and beyond the concept of philanthropy. It will be interesting to observe the ways in which this will translate into action at the ground level, and how the understanding of CSR is set to undergo a change.
Corporate Sustainability is derived from the concept of sustainable that meets the needs of the present without compromising the ability of future generations to meet their own needs”[6]. Corporate sustainability essentially refers to the role that companies can play in meeting the agenda of sustainable development and entails a balanced approach to economic progress, social progress and environmental stewardship.
The WBCSD’s definition of CSR
Corporate Social Responsibility is the continuing commitment by business to contribute to economic development while improving the quality of life of the workforce and their families as well as of the community and society at large.
Why the inter-relationship between CSR and sustainability?[7]
CSR essentially deals with the concept of economic growth, social progress and most importantly environmental stewardship.
CSR tends to focus on what is done with the profits after they are made. On the other hand sustainability is about factoring the social and environmental impacts of conducting business, that is, how profits are made. Hence much of the Indian practice of CSR is an important component of sustainability or responsible business, which is a larger idea, fact that is evident from various sustainability frameworks. An interesting case in point is the NVGs for social, environmental and economic responsibilities of business issued by the Ministry of Corporate Affairs in June 2011. Principle eight relating to inclusive development encompasses most of the aspects covered by the CSR clause of the Companies Act, 2013. However, the remaining eight principles relate to other aspects of business. The UN global Compact, a widely used sustainability framework has 10 principles covering social, environmental, human rights and governance issues, and what is described, as CSR is implicit rather than explicit in these principles.
Globally, the notion of CSR and sustainability seems to be converging, as is evident from the various definitions of CSR put forth by global organizations. The genesis of this convergence can be observed from the preamble to the recently released draft rules relating to the CSR clause within the Companies Act, 2013 which talks about stakeholders and integrating it with the social, environmental and economic objectives, all of which constitute the idea of a triple bottom line approach.
It is also acknowledged in the Guidelines on Corporate Social Responsibility and Sustainability for Central Public Sector Enterprises issued by the DPE in April 2013. The new guidelines, which have replaced two existing separate guidelines on CSR and sustainable development, issued in 2010 and 2011 respectively, mentions the following:
UNITED NATIONS GLOBAL COMPACT[8]
UNGC is world’s largest corporate citizenship initiative with the objective to mainstream the adoption of sustainable and socially responsible policies by businesses around the world. The 10 principles of the un Global Compact have been derived from various UN conventions such as the Universal Declaration of Human Rights, ILO’s Declaration on Fundamental Principles and Rights at Work, the Rio Declaration on environment and development, and the UN Convention Against Corruption. These principles cover four broad areas:
- Human rights (support and respect the protection of international human rights and ensure that business is not complicit with human rights abuses)
- Labor rights (uphold the freedom of association and effective recognition of the right to collective bargaining, elimination of all forms of forced and compulsory labor, effective abolition of child labor and elimination of description in respect of employment and occupation)
- Environment (support a precautionary approach to environmental challenges, undertake initiatives to promote greater environmental responsibility and encourage the development of environmental friendly technology)
- Governance (work against corruption in all forms, including bribery and extortion).
Institute of Social and Ethical Accountability: Accountability’s AA1000 series of standards[9]
The main principles under this category are: -(i)inclusivity (stakeholder engagement to develop and implement a strategic approach to sustainability) (ii) materiality (assess the management effort required for each material issue and determine the content of sustainability reports) (iii) responsiveness (respond with solutions to material issues and challenges).
This is a guidance tool provided by the ISO which enables organizations to understand the responsibility. It is important to note that this is not a certification but only a guiding tool. Hence organizations, which comply with these standards, are self-certified. It covers six core areas of social responsibility, including (i) human rights (ii) labor practices (iii) environment (iv) fair operating practices (v) consumer issues (vi) community involvement and development. This ensures a holistic approach to the concept of social responsibility and sustainable development.
CONCLUSION
Approach of the CSR is hence three fold: –
- Is complete and holistic with a strategy for addressing the social and environmental concerns.
- The concerns of all effected people (directly or indirectly) have to be kept in mind.
- Philanthropic activities are only a part of CSR, which otherwise constitutes a much larger set of activities entailing strategic business benefits.[10]
It can therefore be concluded that corporate social responsibility and sustainability are so closely entwined, it can be said that corporate social responsibility and sustainability is a company’s commitment to its stakeholders to conduct business in an economically, socially and environmentally sustainable manner that is transparent and ethical.
[1] www.unido.org
[2] IBM Global Services, Corporate Social Responsibility
[3] http://iz.marmara.co.at/images/doku/csr_research_paper_cesd_kas.pdf
[4] Sustainable Development and Corporate Social Responsibility, A special Publication of Prospectors and Developers Association of Canada
[5] Legal Services India, Corporate Social Responsibility
[6] Brundtland Commission’s Report, 1987
[7] Handbook on Corporate Social Responsibility in India, Price Waterhouse Coopers
[8] www.unglobalcompact.org/
[9] http://www.accountability.org/standards/
[10] Supra note 7