Definition: Corporate Social Responsibility, or otherwise called as CSR is an on-going commitment of the organization to act in an ethical manner and make a contribution in the country’s economic development, while bettering the standard of living of the employees and their families, along with the society and public at large.
It refers to the accountability of the organizations to incorporate the interest of the stakeholders, such as employees, creditors, suppliers, customers, shareholders, communities and environment, in their values, decisions, culture, strategies and business activities.
CSR can be in the form of:
- Health and safety of employees
- Free education to poor children
- Community investment
- Volunteer assistance programme
- Infrastructure development of cities
- Cleaning of rivers
- Preservation of cultural heritage
- Free hospitals for poor people
Its aim is to create value by producing those products and services at reasonable prices, which is needed by society. In this way, the organization can earn profits for its shareholders, while fulfilling the necessities of society.
Need of CSR
Corporate Social Responsibility or CSR is adopted by the firms in an attempt to conform their economic, environmental and societal objectives while meeting the expectations and requirements of the stakeholders. The reasons why companies should implement Corporate Social Responsibilities are given as under:
- CSR helps in creating a positive public image of the company which attracts customers. It has been observed that the companies which integrate and present its CSR, their brand equity is higher than the others.
- CSR promotes social engagement of the employees, that develops loyalty towards the firm and creates a dedicated workforce.
- When CSR is implemented in the organization it ensures fair wages to the employees, along with a discrimination-free and good working environment.
- Adoption of CSR will also ensure a number of measures to reduce pollution, such as banning the use of plastic bags, waste management, etc.
- Through CSR, society gets quality products and services at reasonable prices and employment opportunities, and the organization gains a better community, from where the workforce and consumers of its product and services belong.
- When the organization is socially involved, excessive regulation and government interventions are reduced.
Corporate Social Responsibility is intimately related to the conventions of Sustainable Development, which states that the companies should consider long term social and environmental outcomes along with the financial factors while taking decisions.
Triple Bottom Line (TBL) Approach of CSR
Nowadays, the concept of Triple Bottom Line (TBL) is emerging, as well as attaining importance, i.e. getting popular among business houses.
The concept is introduced by John Ellington in the year 1997. The assumption states that the companies have a lot to do, rather than just making profits, for shareholders, which can be understood by only bottom-line people.
In this approach “People”, “Planet” and “Profit” is used to clearly and specifically describe the TBL, where people denotes human capital describing fair business practices, as to the employees and community, planet implies natural capital as to sustainable environmental practices. Lastly, profit refers to economic capital, which is the bottom line that is shared by all the shareholders.
In a nutshell, CSR is a unified blend of policies, processes, programs and practices, stretching throughout the company’s business operations and the society in which the business operates, as to, the way in which companies self regulate the business processes to attain positive results, which will benefit the society.