Corporate Social Responsibility: the philanthropic part of the conglomerate

Corporate Social Responsibility

Corporate Social Responsibility: the philanthropic part of the conglomerate

Read Time: 3 minutes

Business is a going concern; it must seek profit to continue its existence in the long run. But the flip side of the entity also always aspires to contribute towards the society without which it cannot thrive in the sociable world. Since the dawn of the concept of corporate, responsibility of the company has been perceived in many facets in the society but with the advent of modernization and enactment of new legislation, a befitting term comes into practice that is Corporate Social Responsibility.

Corporate social responsibility (CSR, also called corporate sustainability, sustainable business, corporate conscience, corporate citizenship or responsible business) is a type of international private business self-regulation.

India is the first country in the world to make corporate social responsibility (CSR) mandatory, following an amendment to under Section 135 of the Companies Act, 2013 in April 2014. The Act advocates integrating CSR Activities into the core operations of a company. As far as scope is concerned, each corporate with 5 crores of profit, net worth 500 crores, or turnover of 100 crores has to spend 2% of their net worth on activities such as sanitation, education, healthcare, and poverty alleviation, among others, which are listed in Schedule VII of the Rules. Businesses can invest their profits in areas such as education, poverty, gender equality, and hunger.

In recent times CSR has not only become obligatory for corporate but it ushers in a wide gamut of prospects which makes thing competitive and get going for companies.

CSR is an important element of development because companies need to look after their communities, particularly those that are operating in rural areas. It also has an environmental aspect that the business might influence based on their operation

Many companies have motivations for doing CSR such as the genuine care of their environment and society that would eventually become their source of human capital as well as raw materials that they need to sustain. Some companies will see it as an important element of gaining societal acceptance for their operations. It is really true for the companies that are operating in remote areas, like mining and oil and gas companies. They are often encountered by many communities that indigenously live there, and the companies have to live with these communities.

Another aspect of it is that companies should see it as a voluntary action rather than something that is highly regulated. Because it is something that is good for the company to do, it’s not something that the company has to do because of law or anything else.

On the other hand, companies should not be really forced to do CSR as mandatory action, because again, the development players are not just companies. It also includes government as well as civil society and the community itself.

The success of CSR lies in practicing it as a core part of a company’s development strategy. It is important for the corporate sector to identify, promote and implement successful policies and practices that achieve triple bottomline results.

The practical implementation of CSR is faced with a lot of issues and challenges.

Firstly, in the past, governments have relied on legislation and regulation to deliver social and environmental objectives in the business sector. Shrinking government resources, coupled with a distrust of regulations, has led to the exploration of voluntary and non-regulatory initiatives instead.

Secondly, there is a lack of consensus amongst local agencies regarding CSR projects. This lack of consensus often results in duplication of activities by corporate houses in areas of their intervention. This results in a competitive spirit between local implementing agencies rather than building collaborative approaches on issues. This factor limits company’s ability to undertake an impact assessment of its initiatives from time to time.

Thirdly, there is a lack of interest in the local community in participating and contributing to CSR activities of companies. This is largely attributable to the fact that there exists little or no knowledge about CSR within the local communities as no serious efforts have been made to spread awareness about CSR and instill confidence in the local communities about such initiatives.

Fourthly, it is also reported that there is hardly any availability of well-organized nongovernmental organizations in remote and rural areas that can assess and identify the real needs of the community and work along with companies to ensure the successful implementation of CSR activities. This also builds the case for investing in local communities by way of building their capacities to undertake development projects at local levels.

Fifthly, there are no clear cut statutory guidelines or policy directives to give a definitive direction to CSR initiatives of companies. It is found that the scale of CSR initiatives of companies should depend upon their business size and profile. In other words, the bigger the company, the bigger is its CSR program.

Sixthly, the role of media in highlighting good cases of successful CSR initiatives is welcomed as it spreads good stories and sensitizes the local population about various ongoing CSR initiatives of companies..

Seventhly, there is evidence that the ethical conduct of companies exerts a growing influence on the purchasing decisions of customers. In a recent survey by Environics International, more than one in five consumers reported having either rewarded or punished companies based on their perceived social performance.

Eighthly, investors are changing the way they assess companies’ performance and are making decisions based on criteria that include ethical concerns.

Finally, employees are increasingly looking beyond perks and benefits and seeking out employers whose philosophies and operating practices match their own principles. In order to hire and retain skilled employees, companies are being forced to improve working conditions.

CSR is a notion that aims at achieving a balance of economic, environmental and social necessities, while also meeting expectations of both shareholders and stakeholders. Over the years we have seen a lot of improvement in CSR space, and companies are aligning their business strategies to focus on the social good. The significant thing of CSR is, that Re.1 spent by the private sector or corporate sector on CSR would get much more mileage in the corporate sector.  It is not just the money part but also the human capital which is getting into CSR from a company’s perspective.

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