A new CSR model to enthuse companies

Debated and practised in one form or another Corporate Social Responsibility (CSR) has undergone much metamorphosis.

Today’s dynamic CSR movement is the result of a vigorous reaction to Nobel laureate economist Milton Friedman’s famous dictum that ‘the social responsibility of business is to maximise profits.’ Against the maximisation of share holder value or profits as conceived by Friedman, the CSR movement insists that business has responsibilities not only to share holders but to stake holders, customers, employees, suppliers, society at large and to the environment.

According to recent researches the great majority of CEOs believe that corporations should balance their obligations to share holders with those to the wider society. What motivates most businesses is the sense that they are providing something that people want or need and will want or need again. Business, it seems, is less about serving a remote share index than about creating and sustaining long-term relationships with people.

Despite getting evolved as an excellent idea CSR movement has not led to concrete practical programmes. In many enterprises CSR initiatives are just cosmetic exercises. Many enterprises are more than satisfied with their CSR initiatives by trying to restrict emissions of greenhouse gases from the staff kitchen, or recycling office stationery!

Reasons for failure

What are the reasons for the failure of CSR as a practical programme? Firstly, many CSR initiatives have very little substance behind most of them. Most CSR initiatives are characterised by micro-scale, gradual improvements. They have completely failed to make any effective impact on the grave sustainability crises that we encounter
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Incidently many of these crises have their source in the unsustainable practices in today’s giant enterprises. Secondly, in most companies CSR is just a peripheral function. Top management is not substantially committed to concrete CSR initiatives. They focus on share holder driven capitalist practices to realise short term financial gains. For a high impact CSR what is required is a long term stake holder approach.

Thirdly, CSR investments may not always result in immediate returns. In fact hard-core CSR changes that are required to address today’s crises like global warming, poverty and disease burdens etc require massive investments. Most corporations do not find any incentive in investing in addressing these issues.

In view of the failure of CSR there needs to be a radical shift from the current model of CSR.As Wayne Visser says in the edited volume ‘Responsible Business-How to manage a CSR strategy successfully’, “we can keep the acronym and CSR comes to stand for Corporate Sustainability and Responsibility .This change acknowledges that sustainability (with roots in the environmental movement) and responsibility (with roots in the social activist movement) are at the core of CSR.Making a positive contribution to society is the essence of CSR,not just as a marginal after thought, but as a way of doing business.”

Also, in many countries including India private enterprise serves the public good only if they are monitored and regulated by public authorities. Equitable and sustainable growth of the country should be an important agenda in the strategic planning of private companies.

With more than 850,000 registered companies, India has become the first country to mandate CSR through statutory provision. According to the recent company’s bill passed by the Lok Sabha, companies have to mandatorily spend 2 per cent of their average net profit for CSR activities. This becomes all the more important in an environment where the government has failed as a welfare state. When India contributes a quarter of global maternal deaths;47 per cent of young children in India are malnourished;300 million are living on less than $1 a day and 20 per cent of under five child mortality is in India, it is imperative for the corporate entities to strengthen the hands of the government. 

When the new CSR stands for Corporate Sustainability and Responsibility, rather than Corporate Social Responsibility we have to redefine CSR. As the CSR International defines it “CSR is the way in which business creates shared value in society through economic development, good governance, stakeholder responsiveness and environmental improvement. In other words CSR is an integrated, systemic approach by business that builds economic, social, human and natural capital”.