The emerging concept of Corporate Social Responsibility (CSR) goes beyond charity and

requires the company to act beyond its legal obligations and to integrated social,
environmental and ethical concerns into company’s business process.
Business has today, emerged as one of the most powerful institutions on the earth. Some of
the biggest companies in the world are in fact, bigger in size than some of the developing
countries of the world. Globalization makes the world smaller, and business, worldwide, is
expanding like never before. Companies are expanding their operations and crossing
geographical boundaries.
Indian companies too have made their way into the business boom and are today globally
acknowledged as major players. India is currently amongst the fastest growing countries in
the world. The globalization and liberalization of the Indian economy has helped in stepping
up growth rates. Integration of the Indian with the global economy has also resulted in Indian
businesses opening up to international competition and thereby increasing their operations.
In the current scheme of things, business enterprises are no longer expected to play their
traditional role of mere profit making enterprises. The ever-increasing role of civil society has
started to put pressure on companies to act in an economically, socially and environmentally
sustainable way.
The companies are facing increased pressure for transparency and accountability, being
placed on them by their employees, customers, shareholders, media and civil society.
Business does not operate in isolation and there is today, an increased realization that not
only can companies affect society at large, but they are also in a unique position to influence
society and make positive impact.
Milton Friedman, Nobel Laureate in Economics and author of several books wrote in 1970 in
the New York Times Magazine that “the social responsibility of business is to increase its
profits” and “the business of business is business”. This represented an extreme view that
the only social responsibility a law-abiding business has is to maximize profits for the
shareholders, which were considered the only stakeholders for the company. However, time
has given the term ‘stakeholder’ wider connotations.
Edward Freeman defines, ‘a stakeholder in an organization is any group or individual who
can affect or is affected by the achievement of the organization’s objectives.’ Thus, the term
stakeholder includes (apart from shareholders), but not limited to, customers, employees,
suppliers, community, environment and society at large.
These and a host of other such ideas have given rise to the concept of Corporate Social
Responsibility (CSR). The concept of CSR goes beyond charity or philanthropy and requires
the company to act beyond its legal obligations and to integrate social, environmental and
ethical concerns into its business process. Business for Social
Responsibility defines CSR as “achieving commercial success in ways that honor ethical
values and respect people, communities, and the environment.
It means addressing the legal, ethical, commercial and other expectations that society has
for business and making decisions that fairly balance the claims of all key stakeholders. In its
simplest terms it is: “what you do, how you do it, and when and what you say.” A widely
quoted definition by the World Business Council forSustainable Development states that
CONCEPT OF CSR
“Corporate social responsibility is 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”.
Though, there is no universal definition of CSR but the common understanding amongst
most of these definitions concern with how the profits are made and how they are
used, keeping in mind the interests of all stakeholders. The concept of Corporate Social
Responsibility is constantly evolving.
The emerging concept of CSR goes beyond charity and requires the company to act beyond
its legal obligations and to integrate social, environmental and ethical concerns into
company’s business process. What is generally understood by CSR is that the business has
a responsibility – towards its stakeholders and society at large – that extends beyond its
legal and enforceable obligations.
The triple bottom line approach to CSR emphasizes a company’s commitment to operating
in an economically, socially and environmentally sustainable manner. The emerging concept
of CSR advocates moving away from a ‘shareholder alone’ focus to a ‘multi-stakeholder’
focus. This would include investors, employees, business partners, customers,
regulators, supply chain, local communities, the environment and society at large.
The key components of CSR would therefore include the following:
Corporate Governance: Within the ambit of corporate governance, major issues are the
accountability, transparency and conduct in conformity with the laws. Good corporate
governance policy would enable the company to realize its corporate objectives, protect
shareholder rights, meet legal requirements and create transparency for all stakeholders.
Business Ethics: Relates to value-based and ethical business practices.
‘Business ethics defines how a company integrates core values – such as honesty, trust,
respect, and fairness – into its policies, practices, and decision making. Business ethics also
involves a company’s compliance with legal standards and adherence to internal rules and
regulations.’1
Workplace and labour relations: Human resources are most important and critical to a
company. Good CSR practices relating to workplace and labour relations can help in
improving the workplace in terms of health and safety, employee relations as well as result in
a healthy balance between work and non-work aspects of employees’ life. It can also make it
easier to recruit employees and make them stay longer, thereby reducing the costs and
disruption of recruitment and retraining.
Affirmative action/good practices: Equal opportunity employer, diversity of workforce that
includes people with disability, people from the local community etc., gender policy, code of
conduct/guidelines on prevention of sexual harassment at workplace, prevention of
HIV/AIDS at workplace, employee volunteering etc. are some of the good practices which
reflect CSR practices of the company.
Supply Chain: The business process of the company is not just limited to the operations
internal to the company but to the entire supply chain involved in goods and
services
. If anyone from the supply chain neglects social, environmental, human rights or other
aspects, it may reflect badly on the company and may ultimately affect business heavily.
Thus, company should use its strategic position to influence the entire supply chain to
positively impact the stakeholders.
Customers: The products and services of a company are ultimately aimed at the customers.
The cost and quality of products may be of greatest concern to the customers but these are
not the only aspects that the customers are concerned with. With increased awareness and
means of communication, customer satisfaction and loyalty would depend on how the
company has produced the goods and services, considering the social, environmental,
supply-chain and other such aspects.

Environment: Merely meeting legal requirements in itself does not comprise CSR but it
requires company to engage in such a way that goes beyond mandatory requirements and
delivers environmental benefits. It would include, but not limited to, finding sustainable
solutions for natural resources, reducing adverse impacts on environment, reducing
environment-risky pollutants/emissions as well as producing environment-friendly goods.

Community: A major stakeholder to the business is the community in which the company
operates. The involvement of a company with the community would depend upon its direct
interaction with the community and assessment of issues/risks faced by those living in the
company surrounding areas. This helps in delivering a community-focused CSR strategy –
making positive changes to the lives of the people and improving the brand-image of the
company. Involvement with the community could be both direct & indirect – through funding
and other support for community projects implemented by local agencies.
 THE IMPORTANCE OF CORPORATE SOCIAL
RESPONSIBILITY

In this article, we tackle the importance of Corporate Social Responsibility (CSR),

Corporate Social Investment (CSI) and the ethics surrounding both, in a global as well as
South African context. We will also look at how sustainable these efforts are.

Corporate Social Responsibility: People, Planet and Profit

It is important to understand the legislative, policy and institutional frameworks that

govern contemporary CSR and CSI practices and programmes, and how concepts like
the Triple Bottom Line – understood in the context of People, Planet, Profit (Social,
Environmental, Financial measures) – can benefit the organisation and the environment
in which the company conducts its business.

Previously, the terms CSR and CSI were used interchangeably. Subsequently, with the
change of the corporate and Broad–Based Black Economic Empowerment landscapes,
these terms have been defined separately. Corporate Social Investment is a sub-
component of Corporate Social Responsibility.

Let’s begin by defining CSR. CSR refers to an organisation’s total responsibility towards
the business environment in which it operates. CSR encompasses a broader solution to
the Triple Bottom Line mentioned above.

The term ‘Corporate Social Responsibility’ came about in the late 1960′s and early
1970′s after many multinational corporations used it to describe organisational activities
that impacted their responsibility towards the greater environment. CSR originated in
philanthropy. Currently it supports projects external to the normal business activities of a
company that are not directed towards making a profit. Typically, such projects have a
strong developmental approach and utilise company resources to benefit non-profit
organisations and communities. CSR spend must not be confused
with marketing spend, which is utilised to promote the profile of the company brand.

CSR Standards and Practices

ISO 26000 is the recognised international standard body for CSR. The ISO 26000
standards benefit CSR because they provide clarity on an organisation’s concepts, terms
and definitions related to social responsibility. ISO 26000 intends to assist organisations
in contributing to sustainable development. The standards provide insight into trends
and characteristics of social responsibility. ISO 26000 therefore aims to integrate,
implement and promote socially responsible behaviour throughout the organisation and
in its engagement with its stakeholders.

It is important for businesses not only to provide products and

services
to satisfy the customer, but also to ensure that the business is not harmful to the environment in
which it operates. In order for an organisation to be successful, the business must be built on ethical
practices. Companies are increasingly pressurised to behave ethically. This pressure comes from
customers, consumers, governments, associations and the public at large. ISO 26000 was created
with this in mind, to provide guidance on the international standards on CSR. It is intended for
organisations in both public and private sectors, in developed and developing countries.
These standards motivate businesses to go beyond legal compliance, recognising that
compliance with the law is a fundamental duty of any organisation and an essential part
of their social responsibility. Being trustworthy and transparent, however, increases
consumers’ preference for a company and its product or service.

The King Report on Corporate Governance (South Africa 2009 – King III) promotes good
social and environmental practices as part of good corporate governance. It is closely
aligned with the standards for international corporate governance. The JSE
(Johannesburg Stock Exchange) Securities Exchange prescribes compliance with King III
for listed companies.

CSR focuses on achieving economic success through responsible corporate governance

in a company’s core area of business. CSR pushes organisations to do better because
their actions affect customers, suppliers, employees, shareholders and the community at
large. Partnerships with the communities, particularly those that have been
disadvantaged, can help companies build productive relationships and stimulate
economic growth in disadvantaged areas.

Around the world, companies are motivated to make their business

decisions more sustainable by applying the principles of CSR within their organisations.
Examples include the protection of human rights, drawing up and implementing
employment and environmental standards, and minimising corruption.

Choosing the Right CSI Strategy

Corporate Social Investment is a strategically focused investment in bringing about
meaningful transformation that is in line with core business objectives.

There are four CSI strategies, organisations usually fit in one of the following. These
include:

 Obstructive strategy – these are companies that meet economic demands;

 Defensive strategy – these are companies that meet economic and legal
responsibilities;
 Accommodative strategy – these are companies that meet economic, legal and
ethical responsibilities; and
 Proactive strategy – these are companies that meet economic, legal, ethical and
discretionary responsibilities.
It must be the goal of every organisation to use a proactive strategy where they do what
is right, meet legal obligations and contribute to the community, while still making a
profit. A well-known example of this strategy is the Tylenol case in 1982. Johnson &
Johnson spent over $100 million dollars recalling Tylenol, its best-selling product, after
someone tampered with bottles of the painkiller. The result was a rise in consumer
confidence despite the contamination scare.

Companies that operate with business ethics have a competitive advantage because
consumers are more willing to trust ethical brands and remain loyal to those products,
even during difficult periods. However, not all businesses operate in the same way.

Ethical companies that relocate their manufacturing facilities to developing countries

must not tolerate certain practices that are acceptable in some of those countries, such
as child labour, poor health and safety, poverty-level wages and coerced employment.

It is important for companies to understand the importance of operating ethically and to

measure their success by more than just profitability. Corporate Social Responsibility is
more than just philanthropic activity. There must be measurable and sustainable action
with each programme that is implemented.

In conclusion, by becoming a good corporate citizen, an organisation can improve its

competitive edge in respect of attracting and retaining investors, clients and employees.
If carefully aligned to the core business strategy (as well as to company and industry
charters from Broad–Based Black Economic Empowerment, Social Responsibility Index
and Global Reporting Index), organisational CSR and CSI strategies can maximise
opportunities for South African and international corporates. This will enable them to go
beyond compliance and a ‘tick-box’ exercise, to good corporate citizenship and
sustainability.
 The Importance of CSR
“It’s all about the bottom line”. There are few people, whether in the private or public sector,
who haven’t heard that phrase. Because the bottom line refers to the last line of a financial
statement – profit or loss – it has traditionally been the ultimate measure of short and long-term
organizational decisions, referring to the economics of costs and revenue.

While economics is still important, the increased complexity of global markets and
sophistication of consumers, as well as the increased importance of environmental and social
impacts, have changed the way successful organizations look at what positively impacts their bottom
line.

Today, organizations that want to achieve long-term success must consider what is known as the
Triple Bottom Line: Economic, Environmental and Social. This Triple Bottom Line is also known
as the 3Ps: Profit, Planet and People.
Corporate Social Responsibility (“CSR”), as a strategic practice, is key to organizational
success because it is one of the few practices that can positively impact all three elements of
the Triple Bottom Line, contributing to a healthy bottom line and long-term sustainability.
Because CSR can influence economic, environmental and social factors in a variety of ways,
there is no “one size fits all” approach. An effective CSR strategy must consider alignment with the
organization’s business strategy, commercial added value, and sustainabilityof impact. The
benefits of an effective CSR approach to an organization can include:
 Stronger performance and profitability
 Improved relations with the investment community and access to capital
 Enhanced employee relations and company culture
 Risk management and access to social opportunities
 Stronger relationships with communities and legal regulators
At Schema, it is our role to understand our clients’ short and long-term organizational
objectives, and develop effective CSR strategies that are sustainable and can be
implemented, measured and reported on.
Our CSR services include:
 Assessment of existing CSR activities
 Development of CSR strategies aligned with the organization’s business objectives
 Development of sustainable CSR programs, including implementation, management,
impact assessment, and reporting
 Stakeholder engagement
 Preparation of Sustainability/Corporate Responsibility reports based on a variety of
globally accepted frameworks
 Assistance in supporting the Global Compact agenda
 Assistance in impacting suppliers, distributors, subcontractors, subsidiaries, etc