Corporate Social Responsibility – An Essential Part of Business?

As corporates and businesses gain importance worldwide and in India, corporate social responsibility is becoming a key component of company policy. Shareholders, consumers, unions, employees, the government, NGO’s, and the local community are all showing an increasing interest in the measure of social responsibility demonstrated by the corporate sector. But what exactly is Corporate Social Responsibility (CSR)?

A generally accepted statement about CSR could be that it is the responsibility of the business towards the society that it takes from. It is the management of the business in a manner such that it produces a positive impact on society. Critics of CSR say that the primary purpose of a business is to make profit, and that it has no additional duty as long as it complies with all rules and regulations. Not doing anything negative might seem easy, but it could actually go a long way.

It would mean that the company pays all its employees right from management to manual labour fair wages, provides everyone sick leave, insurance, and good working conditions with safety regulations in place. It does not use child labour, and gives reasonable compensation toward those who might be negatively affected by the company’s actions. It would mean that it protects the environment to the best of its ability within the sphere of its operations, pays all taxes and never makes false claims to the consumers or shareholders.

Could all of the above actually be included as a part of CSR? Some would say that it is all a business has to do, and nothing more is required. A business is not an entity which is supposed to directly serve the people; it only has to make money according to fair means.

If you look into the policies of Indian corporates, almost all the major companies have well-formed CSR policies. These include community development programmes, upliftment of the underprivileged through health, education, etc. It would seem like the corporates are all putting a fair amount of their profit into actively doing something positive for society.

At the same time, of course, we hear of labor unions, strikes, coercive land acquisitions, destruction of the environment, and so on. What is more important – that a business should do something positive, or that it should not do anything negative?

Perhaps one of the starkest examples of the failure of a corporate to do its duty is the incident of the Bhopal Gas tragedy of 1984, when gas leaked from a Union Carbide plant, which resulted in the death of over 10,000 people and is acknowledged as the worst industrial disaster in history.

Some say CSR is taken up by companies in an effort to detract the attention of the public from activities which are unethical, like in the case of cigarette manufacturers, or companies which make use of child labour. In these cases, it is important to remember that doing something positive does not cancel out the effect of negative consequences of their actions that emanate from the core business itself.

So perhaps, CSR is not an obligation upon a business. But these days, all consumers like to feel that the enterprises they support are doing ‘their bit’ toward society. Shareholders look into CSR policies before investing. Even fresh graduates are keenly interested in a prospective company’s CSR mandate. Not being socially responsible, it seems, is starting to become taboo in the corporate world.

Ultimately, it is more beneficial to the company to have CSR activities than not. They are the ones who gain goodwill; they are the ones who make more profit. This is, after all, the aim of any business enterprise. And nobody is complaining, for we seem to have reached a win-win situation.

Arya Raje

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