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Corporate Social Responsibility for National Building By- Mukesh Kumar Mishra Krityanand UNESCO Club, Jamshedpur

Abstract The three distinct pillars sustaining any nation-building process. First one is, government, which also could be categorized as political leadership, Second, civil society, and third, business. Last couple of years has been a challenging year for all and one that has brought us with a global economic recession of unprecedented proportions, and attack on India’s financial capital. It may seem a trifle strange to work on Corporate Social Responsibility during such times. But we are convinced that there is no better time than now to reiterate the need for “Responsibility� - responsibility as citizens, as business persons and as humans inhabiting this fragile planet. The question whether business has a role to play in nation-building is by and large settled today. Corporate social responsibility encompasses not only what companies do with their profits, but also how they make them. It goes beyond philanthropy and compliance and addresses how companies manage their economic, social, and environmental impacts, as well as their relationships in all key spheres of influence: the workplace, the marketplace, the supply chain, the community, and the public policy realm.

Introduction: Academicians and management experts have defined corporate social responsibility in a different of ways and yet there is no accepted definition of the term. However, a general understanding of the term is the obligation business has towards society beyond what it owes to its owners or shareholders. The goal of CSR is to give back to the society, what it (business) has taken from it, in the course of its quest for creation of


wealth. Scholars such as Andriof and McIntosh (2001) suggest that corporate social responsibility requires corporate leaders to understand that everything a company does has consequences both inside and outside the company, from customers and employees to communities and the environment. They suggest that these impacts have a ripple effect on society that can be divided into three broad overlapping areas Such as Economic, Social and Environment. India is today one of the six fastest growing economies of the world. Recession notwithstanding the business and regulatory environment is evolving and moving towards constant improvement. The Indian economy has transformed into a vibrant, rapidly growing consumer market, comprising over 300 million strong middle class with increasing purchasing power. India provides a large market for consumer goods on the first hand and imports capital goods and technology to modernize its manufacturing base on the other. However, despite these laudable indicators, when it comes to health indices, food security, nutrition, bio-energy, environment and livelihood for rural India, we have repeatedly failed the vast majority. Given this scenario, every citizen and organization has a responsibility towards the country, which can no longer be shirked off. There is no single method for pursuing a corporate social responsibility (CSR) approach. Each firm has unique characteristics and circumstances that will affect how it views its operational context and its defining social responsibilities. Each will vary in its awareness of CSR issues and how much work it has already done towards implementing a CSR approach. Proposed Draft Corporate Social Responsibility Rules under Section 135 of the Companies Act, 2013 is as “CSR is the process by which an organization thinks about and evolves its relationships with stakeholders for the common good, and demonstrates its commitment in this regard by adoption of appropriate business processes and strategies. Thus CSR is not charity or mere donations�. CSR is a way of conducting business, by which corporate entities visibly contribute to the social good. Socially responsible companies do not limit themselves to using resources to engage in 2


activities that increase only their profits. They use CSR to integrate economic, environmental and social objectives with the company’s operations and growth.CSR is not simply an act of charity—it encompasses far more and relates to all stakeholders of a company. An initiative that is closer to the true nature of business in a corporation rather than just an ancillary function. Today Corporate social responsibility has become the norm for any big corporate. It has several dimensions. Doing business which is not only consistent with the environment but also helps sustain the same in the long run. Sustaining the confidence of the investors or civil society through adherence to corporate governance norms is another critical aspect of CSR. There are three areas of CSR Economic, Social and Environment, the relationship of each with the business is different. Economic and environmental issues typically get addressed and implemented from within a business, often because they have a direct impact on costs. Social issues, on the other hand, require closer liaison, and sometimes partnership, with external groups to address various social issues. CSR assigns to businesses a new role and purpose. They are to embrace ‘corporate citizenship’, and run their affairs, in close conjunction with an array of different ‘stakeholders’, so as to promote the goal of ‘sustainable development’. Hence businesses should set objectives, measure their performance, and have that performance independently audited, in relation to all three. They should aim to meet the ‘triple bottom line’, rather than focusing only on profitability and shareholder value. The Harvard definition on the other hand provides a more holistic description and seems to view a corporate as an integral part of society and therefore approaches CSR in a more organic fashion. Corporate social responsibility is often presented as an extra cost, an added burden born by the corporation already struggling to be profitable in a difficult economic phase. But in some situations, the opportunity to improve its business ethics also offers the company extraordinary marketing and branding possibilities. It is important to point out those companies known for their ethics and CSR activities adopted these values not when they had become big and prosperous, but when they 3


were small outfits. And it is precisely their values that gave them the backing of the public in difficult times, which enabled them to grow to their present giant size.

CSR and Indian Economy The Indian Parliament recently passed the Companies Bill that ushers in a new regulatory stance towards corporate social responsibility (CSR). The Bill lays down mandatory requirements for larger companies to spend at least 2% of annual net profit on CSR activities. In fact, there is considerable flexibility for corporate on the areas that they can address as part of their social responsibility activities, the geographical regions that could be chosen for the intervention and the manner of engagement. India is today one of the six fastest growing economies of the world. Recession not with standing the business and regulatory environment is evolving and moving towards constant improvement. A highly talented, skilled and English-speaking human resource base forms its backbone. The Indian economy has transformed into a vibrant, rapidly growing consumer market, comprising over 300 million strong middle class with increasing purchasing power. India provides a large market for consumer goods on the one hand and imports capital goods and technology to modernize its manufacturing base on the other. However, despite these laudable indicators, when it comes to health indices, food security, nutrition, bio-energy, environment and livelihood for rural India, we have repeatedly failed the vast majority. Given this scenario, every citizen and organization has a responsibility towards the country, which can no longer be shirked off. The IT industry contribution has been a good start but much more needs to be done if a significant impact needs to be realized.

CSR for Nation Building The words of Pt.Jawaharlal Nehru said it all when he portrayed the public sector units as the 'leading lights' of the Indian economy. But to be fair to him, he was actually being in tune with the times, given the small size of private business in India and the sheer 4


scale of the task of building critical infrastructure in a large country. The government of India today aims to build 7,000-8,000 km a year or 20 to 25 km a day. The same is the case with energy, where we need rapid generation-capacity additions to overcome the power shortage that we have to live with today. To develop our international trade, we have undertaken several initiatives to build new ports or modernizing existing ports. For such hard infrastructure, we are looking at a total investment of $1.5 trillion within a span of 10 years. India is going to be one big construction site during this period. So, who will support to do this, the government alone cannot accomplish this on its own. Public-private is going to make this happen for us. Of the 20 to 25 km-a-day highway construction plan, half is going to be built by the private sector. In the case of energy, more than half of our new generation capacity is going to be in the private sector. We already have several new airports in Mumbai, Delhi, Bangalore and Hyderabad under the public-private mode. More are in the pipeline. In telecom sector, telecom about 20 years ago, a telephone connection was a scarce commodity doled out by the government in a controlled fashion. Today, not everyone might own a phone, but almost everyone has access to one as more than 95% of our population is under mobile coverage. Billions of dollars have been invested in the sector to make this possible. Telecom is going to constitute a critical building block of the country's infrastructure. Same as to agriculture sector, almost 40 million tones of the country's fresh produce get wasted every year. For a nation where 25-30% of the population still struggles below the poverty line, this is a colossal wastage. Now the question is can the government stop this wastage on its own? The simple answer is no. We need large-scale investment in cold chain and supply chain management to do this, which can only come from the private sector. We also need large-scale investments post-harvest handling and food processing as well. The government needs to play the facilitator in this space, streamlining the difficult regulatory provisions restricting the corporate from playing an elaborate role. Opening the retail sector to foreign direct investment could also prove to 5


be a great enabler, given the fact that investment in supply chain has a direct correlation with the growth of organized retailing. The role of corporate well and truly goes beyond their performance in the arena of business, which is exclusively oriented towards generation of profit for the shareholders. Philanthropy is another arena for corporate engagement in nation-building. Corporate houses have gone through distinct phases of engagement with philanthropy in India. In the early days, corporate houses like Tata, the Birla, and the Dalmia— were known for making major contributions towards setting up schools, colleges and hospitals. Widespread poverty around them was clearly a big motivator for them to contribute. Later, during the 1960s, 1970s and even 1980s, businesses were struggling with high taxes and multiple regulations. Running businesses was a cumbersome job, leave alone making contributions to the social cause. Things have changed since then, thanks to liberalization. Corporatism is more confident today both about the present and the future and has once again started contributing. Education is quite rightly a key focus area for many of the corporate initiatives. Bharti Foundation, are running 236 primary schools catering to over 30,000 students. Many corporate are supporting skill development initiatives too. This is going to be a critical area of nation-building in the days to come. Is the corporate doing enough for our nation building. The answer could, at best, be mixed. There are two reasons behind this. One, there is a serious cultural barrier for Indians to donate personal wealth. Because of the strong family bond, Indian parents, in contrast to their western counterparts, prefer to transfer their personal wealth to their offspring. Western parents, in contrast, use their personal wealth to promote social causes they subscribe to. We already have seen great examples in corporate philanthropy in the shape of the Bill and Melinda Gates Foundation and other western foundations, which have created endowments worth billions of dollars. Cultures take a

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long time to change. So, it will be quite a while before we see substantial change in this aspect of the Indian reality. Companies have also been encouraged to adopt or expand CSR efforts as a result of pressures from customers, suppliers, employees, communities, investors, activist organization and other stakeholders. As a result CSR has grown dramatically in recent years with companies of all sizes and sectors developing innovative strategies. Corporate have experienced a range of bottom line benefits, which include:  Enhanced brand image and reputation  Increased sales and customer loyalty  Increased ability to attract and retain employees  Enhanced operational efficiencies and cost savings  Enhanced ability to address change CSR road map The International Standards Organization (ISO) has produced a number of auditable standards and accreditation systems for reporting on corporate performance. In particular, it provides standards on environmental management systems (ISO 14000 series). ISO 14002 is a guide for environmental auditing and qualification criteria for environmental auditors. ISO26000 is recognized as the new international standard developed by ISO on social responsibility. ISO 26000 which will be published in 2010 could have a profound impact on the way CSR develops globally. According to IFC Corporate social responsibility is the commitment of businesses to contribute to sustainable economic development by working with employees, their families, the local community and society at large to improve their lives in ways that are good for business and for development. For many companies, it is easier to get started by making a small but significant beginning. It is important to note that it is not the size 7


of the initiative that matters; there is more value to be gained and larger impact by identifying projects which are more crucial to the community in which a firm functions. Some examples of small ways in which to begin CSR:  Provide a safer working environment and educational  Assistance to employees, especially  Support and contractual staff.  Enhance gender equality in the workplace and  Actively recruit people with disabilities.  Use more energy-efficient appliances.  Use of buses instead of cabs amongst employees.  Source more from local suppliers.  Support more local community projects.  Recycle more waste.  Ensure a better work/life balance for employees. Developing CSR Strategy for Nation Building

As more companies make CSR a mandate, they are also looking at it as a long-term strategy those ties in with their philosophy, values, expertise and business. CSR today is moving away from donations and events to a more long-term strategic engagement that will reap social and business dividends for the company in the long run.  Conceptualizing CSR strategy and defining CSR philosophy and objectives  Defining vision, mission and funding strategy of the foundation  Recommending causes or social initiatives that complement corporate mandate  Conducting a stakeholder needs assessment and recommending initiatives that leverage expertise and meet stakeholder’s expectations  Evaluating internal process and making recommendations to CSR objectives

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Implementing CSR projects An efficient and trusted partner at the grassroots with direct access to beneficiaries is one of the most important components of a successful CSR program.  Preparing an implementation roadmap and budgets  Selecting NGO or implementation partners and training them to execute CSR mandate  Defining processes and reporting framework to measure outcomes and monitor progress  Publish periodic reports for company review

Conceptualizing and facilitating employee engagement Employees across the board shows that a growing number of employees are starting to prefer companies that are committed to CSR, stand by the values they preach and pledge to create lasting social and environmental impact. To make employees an integral part of company’s CSR programs and give them an opportunity to make a difference first-hand.  Defining the employee engagement strategy  Performing needs assessment that takes into account management priorities, employee competencies and interests, budget, etc.  Selecting NGOs and/or projects to partner with  Structuring and facilitating volunteering activities  Conducting NGO and employee satisfaction surveys to measure efficacy of engagement

Driving cause-related campaigns

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Through supporting little-known and hardly-talked-about causes, any company not can only raise awareness but also build a brand through marketing products relevant to the causes. So;  Identifying a cause that is a natural extension of business and the chosen product and service  Conceptualizing a campaign that is simple, impactful and successfully engages customers  Implementing and publicizing the campaign through individual donor outreach, partnerships and social media.

Performing stakeholder needs assessment No business can sustain without identifying, nurturing and responding to the needs of its stakeholders. Community is an important stakeholder for any companies, mapping community needs to company resources and interest and making recommendations for CSR programs. Performing impact assessment of existing CSR programs Evaluating the effectiveness of CSR programs is one of the most important steps in end-to-end implementation of programs. Producing CSR reports Corporate with effective CSR programs that are strategic and create significant social impact. Research can help understand the overall industry trends, explore CSR strategies, and highlight best practices and case studies of successful programs by companies in the industry. Further research can provide and support the sector-specific reports, giving an understanding of the sector, current government and non-government involvement, gaps in provisions, evidence of high-impact interventions etc.

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CSR activities as defined by Siemens India Corporate Social Responsibility is an integral part of Siemens’ business philosophy – “Giving back graciously to society a piece of our success”. Siemens does not believe in merely handing over a cheque, but supports a cause with active participation. At the centre of all these activities are the caring hands that Siemens employees extend to disadvantaged people everywhere. The company strategy is geared towards four global megatrends – demographic change, urbanization, climate change and globalization – and their effects on society and business. Corporate governance based on the principles of sustainability forms an integral part of what Siemens understand by profitable and successful entrepreneurship and intention is to make more intensive use of the opportunities offered by sustainable business practices. A prime example of this is the Siemens Environmental Portfolio, where the company is already a global leader and commitment to sustainable development is clearly evident in expertise in “green” solutions. What is more, by shouldering social responsibility, the company is ensuring long-term value creation for its investors, customers, employees, business partners and other target groups. Volunteering time and expertise to assist children, young people and the needy is a crucial component of Siemens identity. As a company with a strong sense of values and commitment, Siemens believes that profitability must go hand in hand with a sense of responsibility towards employees, stakeholders and the society. It is not only one of the core principle values followed by Siemens, but it is also an integral part of the company’s business philosophy.

Conclusion  CSR is widely seen as corporate management strategy option. A growing number of successful examples have demonstrated that respecting CSR in

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strategic planning, and following these through plans in operations, either leads to increased economic output, or at least is neutral in its effect on business.  Growing number of large companies have recognized the need to improve their social and environmental risk management strategies, opportunities in innovative technology development and knowledge creation, and engage more proactively with their stakeholders. Government needs to play the facilitator in this space, streamlining the difficult regulatory provisions restricting the corporate from playing an elaborate role. Opening the retail sector to foreign direct investment could also prove to be a great enabler, given the fact that investment in supply chain has a direct correlation with the growth of organized retailing.  CSR activities should be relating to as Eradicating extreme hunger and poverty, Promotion of education and Promoting gender equality and empowering women, Reducing child morality and improving maternal health, Combating human immunodeficiency virus, acquired immune deficiency syndrome, malaria and other diseases, Ensuring environmental sustainability, Employment enhancing vocational skills, Social business projects,  There is a need for Indian companies to learn from thinking in terms of just charity, to the concept of responsibility and to integrate CSR with business strategy i.e. to link company’s core business and strengths on the one hand with resources available with the organization internally and needs of the external environment.  Corporate philanthropy is an essential component of community engagement, and as such, must continue even during difficult times with the contribution of resources and employee time.

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References 1. Web page of Nasscom Foundation. 2. Web page of Siemens 3. CSR Guide, Nasscom Foundation 2009 4. Annual Report 2012.UNGC New Delhi. 5. Official Web page of United Nations Global Compact 6. The Economic Times, New Delhi 21 Dec 2009.

Author Contact details

Mukesh Kumar Mishra Secretary General KRITYANAND UNESCO CLUB 102/A, Kalpanapuri Adityapur Industrial Area Jamshedpur 832109, INDIA. Tel: +91 657 2101198 Mobile: + 91 9279502203, E- Mail: knunesco@yahoo.com

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Corporate Social Responsibility for National Building