User:Ben Joy Panackaparambil/sandbox

CORPORATE SOCIAL RESPONSIBILITY (CSR) Corporate Social Responsibility [1] is a method that’s involved with treating the stakeholders of a corporation or establishment ethically or responsibly. It means treating stakeholders in a manner that is acceptable in line with international norms. Stakeholders are those groups who have a stake in or claim on the form. A stakeholder can be a supplier, customer, employees, or stockholders. This is a broad definition of CSR. Various definitions are there for CSR. We can say that CSR tells about the relationship between global corporations, governments of countries, and individual citizens [2]. Fig. 1 shows idea of CSR. Fig 1: Idea of CSR In an organization, any course of action will have an impact on the external environment. The external environment consists of the business environment in which the firm is operating, the local societal environment in which the organization is located. The effects of an organization’s decisions include the utilization of natural resources, enriching the society by giving employment opportunities, waste production, and the effect of competition with direct rivals. These are some of the examples.

2.1.1 CSR Principles As discussed earlier, CSR does not have a crystal-clear definition as such. It is because of its uncertain nature. But there three principles based on which CSR activity is carried out. The first one among them is sustainability. It is concerned with the action taken in the present on the future available options. If resources are used in the present will there be a future when the resources get depleted? It is important to find out similar resources with the same cost to run the organization smoothly. The utilization speed of the resource and regeneration should be at the same pace. The second principle is accountability. It is about the responsibility for the effects of action taken internally and externally. Along with being responsible for the actions, it should be noted that external stakeholders have the power to affect how the organization takes the decision. The third one is transparency. Transparency is important to external users as these users lack the background details and knowledge available to the internal users.

2.1.2 Types of Corporate Social Responsibility i. Corporate Philanthropy [4]: Here the corporation is promoting the welfare of others. It is done using charitable donations and funds. This type of CSR can be implemented in various ways like matching gift programs. ii. Corporate Volunteerism: Corporations encourage employees to volunteer. Companies assign hours to go for volunteering during the workdays. They also volunteer grants to the nonprofits where the employees will volunteer. This type of CSR is very much helpful to nonprofit organization. iii. Environment Leadership: Companies can perform environment leadership in various ways. By trying to reduce carbon emissions, recycling their goods, giving back to the environmental causes. Being an environmental leader, corporations can also build a solid reputation. iv. Ethical Labor Practices: Following ethics in labor is also important for a socially responsible organization. Commonly ethical labor practices are done by offering competitive salaries to employees, offering better compensation packages, or providing enough parental leave. Various methods are used here as well. v. Economic Responsibility: To become economically responsible companies clear their dues to society by paying taxes at the right time, investing more in their communities, or paying employees a competitive salary.

2.1.3 Implementing CSR CSR may come under the human resources or business development department of a firm or as a separate unit. There are various steps through which CSR as a whole can be implemented. Some of them are described below. The engagement plan [5] is the first among that. As we know planning makes it perfect, we follow it here too. CSR implementation plan helps to reach the service to the desired audience. An individual or CSR team will be doing the planning. They plan the CSR activity in line with the organization’s objectives and goals. The economic actions of an organization will have some social and environmental effects. Social accounting helps to find out this effect in society. There are various guidelines and standards defined for social accounting. Some examples are Account ability’s AA1000 standard, Global reporting initiative’s sustainability reporting guidelines and Earth check certification/standard. The verification of the CSR and its reports and efforts are important. For verification, many industries have their resources. The United Nations Global Compact provides a framework not only for verification but also for reporting human rights violations in corporate supply chains. Like this, there are various methods. Ethics training helps the employees to take the correct decision when the solutions are unclear. After training organizations see improved employee loyalty and pride in the organization. Common CSR actions include environmental sustainability, human capital enhancement, community involvement, and ethical marketing. Environmental sustainability is achieved by recycling the products, implementing efficient waste management, using reusable materials, following LEED building standards, etc. For human capacity enhancement companies provide various capacity building training for employees both technical and professional training, language classes, etc. Companies raise funds for local charities, they sponsor local events, employing local workers, engaging fair trade practices, etc for community involvement. Ethical marketing helps the organization to increase its brand reputation among consumers. For attracting customers they won’t falsely advertise or manipulate things.

2.1.4 Business Benefits of CSR It is hard to quantify CSR benefits. The following measures can give an idea of how much beneficial is an organization’s CSR activities. Triple Bottom Line (TBL) [6]: People, planet, and profit are the three things in TBL. Corporations and stakeholders need to know about the effects of CSR. Triple Bottom Line (TBL) offers a way for it. This TBL helps to answer the following questions: are they making a profit, staying solvent, or falling into debt? People refer to decent work policies, the community, and the locality where it operates. Profit is the economic value of the company after deducting the cost of all the inputs and the capital. Human Resources: CSR greatly affects employee turnover. The socially responsible activities of an organization generate lower employee turnover. Irresponsible behavior of the firm will create a negative impact thus increasing employee turnover. Risk Management: Reputations can be ruined by scandals or environmental accidents. This will create unwanted media, court, and government attention to the firm. CSR helps to limit these risks. Brand Differentiation: CSR helps to increase the brand reputation as the customers are aware of the CSR activities of the firm. Companies that operate strong CSR activities tend to get more customer attention regardless of the price of the product or service. The relation between CSR and financial performance are mostly inconclusive. Most of the time positive relations between the two have been reported in various studies. Keeping social goal along with the business goal helps the organization to promote their economic objective. With the help of CSR mangers noticed better firm performance. Moreover, improved stakeholder relations have the potential to improve a firm’s performance and reputation.

2.1.5 Criticisms about CSR Some critics are questioning the idea of CSR. Some of them are discussed here. CSR changes the decision making and resources allocation part from the public to private. Therefore better government regulations rather than voluntary measures can be used instead of the current idea of CSR. Some critics believe that CSR activities are held to distract the public from questioning their core operations. By following CSR activities companies get additional benefits like brand reputation which in turn increases their profit. Sometimes companies may use CSR to hide their other harmful business practices. McDonald’s corporation raised funds for children’s charity activities while their food has been accused of poor eating habits.

2.2 Conclusion It is correct that CSR involves various practices that will create a positive impact on the community and also create a brand image for the business. Since there is a lack of evidence for the impact of CSR activities on the business’ financial performance other than brand reputation, there has been a slow uptake amongst the various business organization. But it is proven from studies that CSR activities help businesses to have loyal customers who get attached to the business because of their CSR actions which assure an increase in sales revenue. It is important to strike that CSR activities lead to the outflow of cash without a guarantee of return. Secondly, CSR activities can be used to hide other core operations which are harmful to the community. In the case of the adoption of CSR activities, public companies tend to undergo a lot of pressure compared to private firms, since they are subjected to high-level public scrutiny.