Concept of Corporate Social Responsibility (CSR)

By | April 11, 2020

Corporate Social Responsibility (CSR) is philanthropy and set of activities that corporates exercise in order to perform their moral duties. It is humanitarian, community work or social work done by the enterprises. It is the relationship between business and the people or societies with which they work together. It is enduring commitment of the firm to act responsibly and fairly add to the economic development of the nation while enhancing the living standards and quality of life of their employees and their families along with the local public and society. It is a service to society.

According to Keith Davis, ‘It is the firm’s consideration of and response to, issues beyond the narrow economic, technical and legal requirements of the firm.’

According to Archie Carroll. ‘The social responsibility of the business encompasses the economic, legal, ethical and discretionary expectations that society has of organisations at a given point of time.’

According to Michael Hopkins,’CSR is concerned with treating the stakeholders of the firm ethically or in a responsible manner, meaning treating stakeholders in a manner deemed acceptable in civilised societies. The wider the aim of social responsibility is to create higher and higher standards of living, preserving the profitability of the corporations, for the people both within and outside the corporation.’

Importance of CSR:

Survival: Business houses are no longer an economic unit that intends to earn only profits. It cannot flourish in a society where there are social injustice, inequality and economic disparity. Hence, CSR is important for business houses to survive in the long run.

Balance: It balances and satisfies various stakeholders of the company. Any organisation has direct and indirect interested parties. Direct stakeholders are the customers, suppliers, government, dealers along with the investors. Indirect stakeholders are community living near the production plant or others who can be affected by the operations of the company. Thus, the CSR creates balances between various direct and indirect stakeholders by obliging the company to act ethically.

Sustainable Growth: CSR focuses on sustainable growth and long term objectives rather than short term economic objectives.

Environmental Protection: There are several environmental issues such as pollution, global warming, deforestation, greenhouse effect, ozone depletion that is occurring mainly due to large scale productions and developments. Hence, CSR activities focus on sensitizing the corporations their responsibilities towards the environment preserevation.

Models of CSR:

Ethical Model: It was given by MK Gandhi and deals with philanthropically driven activities of the companies. Based on the concept of trusteeship that the company is the trusty of the society and will manage the wealth of the people on their behalf.

Statist Model: It was given by Jawaharlal Nehru. After the mixed economy framework was adopted by the Indian economy, there was growth of PSUs and state enterprises. Thus, state model deals with responsibility of the state to contribute to CSR activities by incorporating them in their enterprises.

Liberal Model: It was propounded by Milton Friedman. He said that business in itself has responsibility towards the shareholders. The organisation must obey the rules and laws of the country and operate and create wealth for the shareholders. It is the duty of the state to charge taxes and distribute the income to the society.

Stakeholder Model: It was given by R Edward. It is a comprehensive model of CSR which creates a loyal bond with the employees, suppliers, customers and investors. Thus, in return gives commercial sustainability, loyalty and success. Hence, the company must focus on the needs of all its stakeholders.

Carroll’s Pyramid Model: It is a simple model in the shape of a pyramid that states what the key priorities of the enterprise are and how they should be aligned with the social responsibilities. The base of the pyramid is built on profit that is the first step is to earn profit. The second layer is to ensure that the companies comply with regulations and laws. The third layer is the company must practice and perform ethical duties. The top of the pyramid or the last layer comprises of philanthropy.