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Importance of CSR

Why Corporate Social Responsibility is Important in 2015

We recently posted a blog on defining corporate social responsibility,
but we want to take this time to elaborate on its importance in strategic
plans for both corporations and nonprofit organizations, especially with the
new year rapidly approaching.
Before we delve in, if youre part of a corporation, take a minute to think
about some of the programs you offer that can be considered socially
responsible (in short, they should be positively impacting the community).
Are there any programs that you know of? If they exist, what kind and how
much of an impact are they having on the local community? How engaged
are employees in these programs?
If youre part of a nonprofit organization, what kind of programs do you
participate in with corporations to help solidify relationships in the
community? Are you actively seeking these kinds of connections? Are you
helping to educate corporate officials why the relationship is mutually
So, final question. Did you have a good answer to any of the above
questions? If so, this is key information you need to work toward a larger,
overall success in the realm of social responsibility (from both the corporate
and nonprofit side). If you werent 100% sure about your answers, dont
worry quite yet. Obtaining this information can be tough, but its important
for the future. Below, we discuss more concrete examples on how your
organization can either continue to or even start to benefit from programs
like these, depending on your strategy for social responsibility in 2015.
Corporate Social Responsibility How Corporations Benefit
As mentioned in our earlier blog about corporate social responsibility,
current times dont allow for companies to simply be in business for the
sake of making a profit anymore. While consumers may rely on
corporations for goods and services, the level of competition allows
customers to make decisions based on several factors, including (maybe
surprisingly) how much good a corporation is also doing outside of the
workplace. Many individuals today are basing their corporate loyalties on
how companies are positively impacting their community.

A Better Public Image

A corporations public image is at the mercy of its social responsibility
programs and how aware consumers are of them (remember, this is the
biggest obstacle education and awareness)! According to a study by
Cone Communications, 9 out of 10 consumers would refrain from doing
business with a corporation if there existed no corporate social
responsibility plan.
For example, if a company is heavily involved in the practice of donating
funds or goods to local nonprofit organizations and schools, this increases
the likelihood that a consumer will use their product. Additionally, if a
corporation takes great care to ensure the materials used in its products
are environmentally safe and the process is sustainable, this goes a long
way in the eye of the public.
If you havent seen the Scarecrow video from Chipotle, you should take a
few minutes to watch it.
Remember, consumers feel good shopping at institutions that help the
community. Clean up your public image (and broadcast it to the world!)
Better and More Media Coverage
Going along with how the public sees your corporation, the amount of
positive media coverage a corporation receives is extremely important for
business. It doesnt matter how much your company is doing to save the
environment if nobody knows about it. As they say, its okay to toot your
own horn every once in a while. Make sure youre forming relationships
with local media outlets so theyll be more likely to cover the stories you
offer them.
How much good a company can do in the local communities, or even
beyond that, is corporate social responsibility. And the better the benefits,
the better the media coverage.
On the other hand, however, if a corporation participates in production or
activities that bring upon negative community impacts, the media will also
pick this up (and unfortunately, bad news spreads quicker than good news).
Media visibility is only so useful in that it sheds a positive light to your
Fosters a Positive Workplace Environment
This section is short and simple because its just common sense
employees like working for a company that has a good public image and is

constantly in the media for positive reasons.Happy employees almost

always equals positive output.
Corporate Social Responsibility How Nonprofits Benefit
How corporations embrace corporate social responsibility in 2015 is also
going to be of great importance to the nonprofit world. Corporate giving
programs, which can include everything from matching gifts to volunteer
grants; from team building volunteer efforts to fundraising events. These
types of programs, which vastly increase the public good that corporations
are doing, are vital to nonprofit organizations because of the great
monetary and volunteer implications.
Greater Funding through Employee Matching Gift Programs
Corporations that offer matching gift programs are
essentially doubling donations that its employees are giving to eligible
nonprofits. For example, if an employee provides a $100 donation to a
nonprofit of their choice, his or her employer (if the company offers a
matching gift program) will write an additional $100 check, thereby
increasing total funds brought in. Its really that simple!
A recurring theme here seems to be the education factor of it. These are
phenomenal socially responsible programs that benefit both corporations
and nonprofits, but if they are underutilized because of a lack of
awareness, then these programs do little good. As a nonprofit, encourage
corporations to promote these programs to employees in fact, offer to
help them! Use social media outlets as a way to spread the word.
Sometimes a simple Facebook post can make all the difference.
It should also come as no surprise that matching gift programs increase
employee engagement for companies that offer these kinds of socially
responsible programs, but they also help foster deeper nonprofit-donor
relationships. If youre looking to increase fundraising from existing donors,
matching gift programs are a great place to start.
Greater Time Commitments through Employee Volunteer Grant Programs
Corporations that offer volunteer grants, or even offer paid time off to
volunteer at nonprofit organizations, are bringing in helping hands to
eligible nonprofit organizations. A corporation with this kind of program
might offer (for example) a $250 check to a nonprofit once an employee

has volunteered at least 10 hours with the organization. There are also
pay-per-hour grants that many corporations offer, paying a certain dollar
amount per hour volunteered.
This kind of socially responsible program is a win-win for both parties
involved. Employees of corporations are seen volunteering and donating
their time to important causes in the community, and nonprofits are
receiving free time and volunteer work, which is essential the success of so
many nonprofits.
Volunteer grant programs are another huge reason why corporate social
responsibility is important, especially for the upcoming year!
Forging Corporate Partnerships
Yet another positive impact corporate social responsibility has on nonprofit
organizations is the possibility of corporate partnerships. These
partnerships are vital to the work a corporation can do in the local
community, and important to a nonprofit that may not have the resources
for major marketing campaigns. Longterm corporate-nonprofit partnerships
can benefit everyone.
For a corporation, a partnership with a local or national nonprofit
organization improves the companys image in the public eye, as
consumers can clearly see the positive impact a corporation is having on
their community. A key benefit is that it makes it easier for consumers to
trust a company.
For a nonprofit organization, a partnership with a local or national
corporation puts its name on tons of marketing materials that otherwise
could not have been afforded on tight budgets. A key benefit is the
partnership brings additional awareness to the nonprofits cause.
Corporate Social Responsibility Helps Everyone Involved
As you can see, socially responsible programs are mutually beneficial in
the corporate-nonprofit world. When working on your strategic plans for

2015, make sure to take some time and look at the programs your
company offers or benefits from and how they are working toward a better
community and corporate environment for everyone involved. Work from
there to expand your reach, and good luck!


The concept of "corporate social responsibility" has become
pervasive enough that it has earned its own acronym in business
circles: CSR. The term means that a corporation should be
accountable to a community, as well as to shareholders, for its
actions and operations. When a corporation adopts a CSR policy,
it aims to demonstrate a goal of upholding ethical values, as well
as respecting people, communities and the environment. The
corporation undertakes to monitor its compliance with its stated
CSR policy and report this with the same frequency that it reports
its financial results.
A CSR policy improves company profitability and value. The
introduction of energy efficiencies and waste recycling cuts
operational costs and benefits the environment. CSR also
increases company accountability and its transparency with
investment analysts and the media, shareholders and local
communities. This in turn enhances its reputation among
investors such as mutual funds that integrate CSR into their stock
selection. The result is a virtuous circle where the company's
stock value increases and its access to investment capital is
Customer Relations
A majority of consumers -- 77 percent -- of consumers think that
companies should be socially responsible, according to a survey
by branding company Landor Associates cited by the University of
Pennsylvania's Wharton School. Consumers are drawn to those
companies that have a reputation of being a good corporate
citizen. Research at Tilburg University in the Netherlands showed
that consumers are prepared to pay a 10 percent higher price for
products they deem to be socially responsible.

The main disadvantage of CSR is that its costs fall
disproportionally on small businesses. Major corporations can
afford to allocate a budget to CSR reporting, but this is not always
open to smaller businesses with between 10 and 200 employees.
A small business can use social media to communicate its CSR
policy to customers and the local community. But it takes time to
monitor exchanges and could involve hiring extra personnel that
the business may not be able to afford.
Some critics believe that corporate social responsibility can be an
exercise in futility. A company's management has a fiduciary duty
to its shareholders, and CSR directly opposes this, argues
AneelKarnani, Professor at the University of Michigan in a Wall
Street Journal article. The responsibility of executives to
shareholders is to maximize profits. A manager who forsakes
profits in favor of some benefits to society may expect to lose his
job and be replaced by someone for whom profits are a priority.
That is why some companies talk about CSR but do nothing about
it. This is called greenwashing,

In a societal structure, we have many stakeholders, one amongst them are companies or
Corporate Houses.These Corporate houses are meaningfully contributing from their kitty which
impact their internal stakeholdersand also openhandedly support societal initiatives. In India
companies like TATA and Birla are practicing theCorporate Social Responsibility (CSR) for
decades, long before CSR become a popular basis. There are manyinstances where
corporate have played a dominant role in addressing issues of education, health,
environmentand livelihoods through their corporate social responsibility interventions across
the country.As per United Nations and the European Commission, Corporate Social
Responsibility (CSR) leads to triple bottomline: profits, protection of environment and fight for social justice. It is expected th

at Civil society,activist groups, Government and corporate sectors should work together to
create appropriate means andavenues for the marginalized and bring them to the
mainstream. The success of CSR lies in practicing it as acore part of a companys
development strategy. It is important for the corporate sector to identify, promote andimplement
successful policies and practices that achieve triple bottom-line results.
At one end of the spectrum, CSR can be viewed simply as a collection of good citizenship
activities beingengaged by various organizations. At the other end, it can be a way of doing
business that has significant impacton society. For this latter vision to be enacted in India, it will
be necessary to build CSR into a movement. Thatis to say, public and private organizations will
need to come together to set standards, share best practices, jointly promote CSR, and pool
resources where useful. An alliance of interested stakeholders will be able to
takecollective action to establish CSR as an integral part of doing business this is not a
passing fad. There are morethan 1,000,000 registered companies in India out of which less than
1percent companies are traded on the IndianStock Exchange. A new Trend has started in
Corporate is the establishment of special committees within
the board of directors to oversee CSR activities. Groups of corporate are being enc
ouraged to come together to promote CSR. In 2006, Europe created the European
Alliance for CSR. It currently consists of 70 multinationalcorporate houses and 25
national partner organizations and has become a unique resource for building capabilityin CSR.
Definition of CSR
The well accepted definition of CSR is not a common term; MNCs prefers sustainable
development orsustainable business while several Indian companies talk about responsible
business or Triple P (People, Planet,and Profit).It is important to note that Indian companies and
stakeholders give a broader definition of CSR then MNC andstakeholders. According to the
Indian Corporate: Sustainable development implies optimizing
financial position while not depleting social and environmental aspects and CSR im
plies supporting issues related tochildren, women and environment.These corporate
refer in its definition of CSR to community development. In the context of
Westerncommunity, development is often seen as charity. In the Indian context it is seen as a
large responsibility of acorporate, not only by stakeholders but also by the local Indian
management. The background of this is thatstakeholders see the large western companies as
capitalist islands in a developing country. This position givesthem a certain responsibility
towards the community. Most of the MNCs leave room to their Indian daughtercompany to
develop initiatives in this field; sometimes they have a special fund. All kinds of
initiatives aredeveloped by the interviewed Indian companies, many times bottom up
initiated by the employees.

Literature Review
Can shareholder money be used for a company's corporate social responsibility (CSR)
practices? Shouldn'tshareholders have a say in the CSR activities of the company they are
invested in?As per ACCSRs State of CSR in Australia Annual Review report Full
understanding of CSR still emerging;There are many obstacles are emerging while
adopting successful CSR strategies include the difficulty inmaking a business case for
CSR, difficulty in integrating CSR with organizational values and practices, and thelack of
organizational buy-in and commitment to CSR.Other obstacles reported is the lack of time and
financial resources to pursue CSR practices are directly relatedto the above three. When an
organization finds it hard to make a business case for CSR or link it to coreorganizational
operations, it will be reluctant to commit and allocate resources or time to such
practices.Moreover, these obstacles also point to another set of findings in the report:
respondents view CSR more so asa means to manage regulatory impacts, reduce risk, and
respond to stakeholders concerns, and to a lesser extentas a strategic source of competitive

CSR Strategies Focusing on Protection rather than Competitive Advantage

A CSR strategy that is focused on avoiding regulatory liability and maintaining a license to
operate in thecurrent business will neither lead to current competitive advantage nor
an imagination of future businessmodels.Managing regulations, risk and legitimacy
(license to operate) is also reflected in the main capabilitiesemphasized by the
respondents: ethical behavior, social accountability and stakeholder engagement.
In order to leverage its CSR/sustainability strategy for competitive advantage, an
organization needs theadvanced capabilities of organizational learning and
sustainable innovation. These two capabilities are criticalfor building sustainable
business models that will lead to future sustained competitive advantage.
In the article on Corporate Social Responsibility in India Putting Social-Economic
Development on a Fast Track by RamyaSathish mentioned that many CSR initiatives are
executed by corporate in partnership with Non-governmental organizations (NGOs) who
are well versed in working with the local communities and areexperts in tackling
specific social problems. For example, SAP India in partnership with Hope Foundation, an
NGO that works for the betterment of the poor and the needy throughout India,
has been working on short and long-term rebuilding initiatives for thetsunami
victims. Together, they also startedThe SAP Labs Center of HOPE in Bangalore, a home
for street children, where they provide food, clothing, shelter, medical care and education. CSR

has come a long way in India. From responsive activities to sustainable initiatives, corporate
have clearly exhibited their ability to make a significant difference in the society and
improve the overall quality of life. Inthe current social situation in India, it is difficult for
one single entity to bring about change, as the scale isenormous. Corporate have the expertise,
strategic thinking, manpower and money to facilitate extensive socialchange. Effective
partnerships between corporate, NGOs and the government will place Indias
socialdevelopment on a faster track.
In an article on Trust and Corporate Social responsibility: Lessons from India, authors
mentioned Spiritualityand Corporate Social Responsibility have had a deep-rooted connection
in India.A phenomenon that has preceded the coining of the term CSR, the link between the
karma as espoused bysacred Indian texts and initiatives anchoring corporate as responsible
citizens has been amply evident in Indiasince the early days.This is widely divergent from
the perspective of corporate social responsibility in Western economies asreflected
in the observation by Arthur Page, vice president of public relations at AT&T for around 20
years andformer advisor to the US President: all business in a democratic country begins
with public permission andexists by public approval .
Viewed from this perspective, public relations professionals are the custodians of trust for the
corporate world.While the global spotlight today focuses on debates on corporate trust, India
can proudly flaunt a head start inthisarena.Yet, before we present Indias case, lets
briefly scan some recent happenings, particularly in the US, that ledto an erosion of
trust in Corporate Inc. worldwide.
Education is the most preferred area of CSR for Indian companies, with 85% of the
companiessurveyedengaged in it, followed by health (67.5 per cent) and rural development and
livelihoods (57.5 %).
Issues & Challenges
Many companies think thatcorporate social responsibility is a peripheral issue for their
business and customersatisfaction more important for them. They imagine that customer
satisfaction is now only about price andservice, but they fail to point out on important changes
that are taking place worldwide that could blow the business out of the water. The
change is named as social responsibility which is an opportunity for the
business.Some of the drivers pushing business towards CSR include:
The Shrinking Role of Government
In the past, governments have relied on legislation and regulation to deliver
social and environmental objectivesin the business sector. Shrinking government
resources, coupled with a distrust of regulations, has led to theexploration of voluntary and nonregulatory initiatives instead.

Demands for Greater Disclosure

There is a growing demand for corporate disclosure from stakeholders, including customers,
suppliers,employees, communities, investors, and activist organizations.
Increased Customer Interest
There is evidence that the ethical conduct of companies exerts a growing influence on the
purchasing decisionsof customers. In a recent survey by Environics International, more than
one in five consumers reported havingeither rewarded or punished companies based on their
perceived social performance.
Growing Investor Pressure
Investors are changing the way they assess companies' performance, and are making decisions
based on criteriathat include ethical concerns. The Social Investment Forum reports that in the
US in 1999, there was more than$2 trillion worth of assets invested in portfolios that used
screens linked to the environment and social responsibility. A separate survey by Environics
International revealed that more than a quarter of share-owningAmericans took into account
ethical considerations when buying and selling stocks. (More on sociallyresponsible investment
can be found in the 'Banking and investment' section of the site.)
Competitive Labour Markets
Employees are increasingly looking beyond paychecks and benefits, and seeking out
employers whose philosophies and operating practices match their own principles.
In order to hire and retain skilled employees,companies are being forced to improve
working conditions.
Supplier Relations
As stakeholders are becoming increasingly interested in business affairs, many companies are
taking steps toensure that their partners conduct themselves in a socially responsible manner.
Some are introducing codes ofconduct for their suppliers, to ensure that other companies'
policies or practices do not tarnish their reputation.DrRatnam said the concept of CSR
had different meanings depending on the stakeholder and that dependingon the
specific situation of the enterprises expectations can also vary. A CSR project can begin in
response to acrisis or adverse publicity that a company may suffer. The motive for launching
CSR can vary between philanthropy or notions of corporate citizenship. In India, over
time, the expectations of the public has grownenormously with demands focusing on
poverty alleviation, tackling unemployment, fighting inequality orforcing companies to take
affirmative action.The historical driver of CSR has been philanthropy or a sense of ethics. After
the Second World War, a varietyof national and international regulations arose through bodies
such as the International Labor Organization(ILO) emphasizing the need for an active social
policy for transnational companies (TNCs). This additionaldriver, international
institutions, has relevance for India through the work of the ILO, the OECD,
SociallyResponsible Investment (SRI), the SA8000 Social Accountability scheme and
through the work of the UNCommission on Human Rights which tackled the human rights

responsibilities of TNCs.In India, some public sector companies can spend up to 5% of their
profits on CSR activities. Pressure groupshave been quite successful in inducing companies to
fund CSR schemes, even to the point of using kidnappingas a tactic! Forms of CSR differ
according to the country or region. In Europe, for example, notions of CSR probably
developed out of the Church and a sense of ethics. In India, CSR has evolved to
encompass employees,customers, stakeholders and notions of sustainable development or
corporate citizenship. In transnationalcompanies, the approach to CSR typically emerges from
one of three elements including a decentralizedstrategy (which might examine human rights), a
centralized strategy (which would be company-wide) or aglobally integrated strategy (which
would include Coca Cola or oil companies - where local actions can impingeglobally).
The survey conducted by Times of India group on CSR used a sample size of 250 companies
involved in CSRactivities through a method of online administration of questionnaire. The
questionnaire was evolved after duediligence including focus group meetings, consultations
with key stakeholders and a pilot in four metros. Finally82 organizations responded to the
questionnaire. These comprised 11 public sector undertakings (PSUs),
39 private national agencies and 32 private multinational organizations. The respon
dent organizations form asatisfactory percentage of 33 per cent of the sample size, given the
fact that only those companies that had director indirect involvement in CSR activities were
chosen to be approached for the survey.
The survey elicited responses from participating organizations about various challenges facing
CSR initiativesin different parts of the country. Responses obtained from the participating
organizations have been collated and broadly categorized by the research team. These
challenges are listed below:

Lack of Community Participation in CSR Activities:

There is a lack of interest of the localcommunity in participating and contributing to
CSR activities of companies. This is largely attributableto the fact that there exists little
or no knowledge about CSR within the local communities as no seriousefforts have been
made to spread awareness about CSR and instil confidence in the local
communitiesabout such initiatives. The situation is further aggravated by a lack of
communication between thecompany and the community at the grassroots.

Need to Build Local Capacities:

There is a need for capacity building of the local non-governmentalorganizations as there is
serious dearth of trained and efficient organizations that can effectivelycontribute to

the ongoing CSR activities initiated by companies. This seriously compromises scaling upof
CSR initiatives and subsequently limits the scope of such activities.

Issues of Transparency:
Lack of transparency is one of the key issues brought forth by the survey.There is an expression
by the companies that there exists lack of transparency on the part of the localimplementing
agencies as they do not make adequate efforts to disclose information on their
programs,audit issues, impact assessment and utilization of funds. This reported
lack of transparency negativelyimpacts the process of trust building between companies
and local communities, which is a key to thesuccess of any CSR initiative at the local level.

Non-availability of Well Organized Non-governmental Organizations:

It is also reported that thereis non-availability of well organized nongovernmental
organizations in remote and rural areas that canassess and identify real needs of the community
and work along with companies to ensure successfulimplementation of CSR activities. This
also builds the case for investing in local communities by wayof building their capacities to
undertake development projects at local levels.

Visibility Factor:
The role of media in highlighting good cases of successful CSR initiatives
iswelcomed as it spreads good stories and sensitizes the local population about various ongoing
CSRinitiatives of companies. This apparent influence of gaining visibility and
branding exercise often leadsmany nongovernmental organizations to involve themselves
in event-based programs; in the process,they often miss out on meaningful grassroots

Narrow Perception towards CSR Initiatives:

Non-governmental organizations and Governmentagencies usually possess a narrow outlook
towards the CSR initiatives of companies, often definingCSR initiatives more donordriven than local in approach. As a result, they find it hard to decidewhether they
should participate in such activities at all in medium and long run.

Non-availability of Clear CSR Guidelines:

There are no clear cut statutory guidelines or policydirectives to give a definitive

direction to CSR initiatives of companies. It is found that the scale ofCSR initiatives
of companies should depend upon their business size and profile. In other words, the bigger
the company, the bigger is its CSR program.

Lack of Consensus on Implementing CSR Issues:

There is a lack of consensus amongst localagencies regarding CSR projects. This lack of
consensus often results in duplication of activities bycorporate houses in areas of their
intervention. This results in a competitive spirit between localimplementing agencies
rather than building collaborative approaches on issues. This factor limitscompanys abilities to
undertake impact assessment of their initiatives from time to time.

The concept of corporate social responsibility is now firmly rooted on the global business
agenda. But in orderto move from theory to concrete action, many obstacles need to be
overcome. A key challenge facing business isthe need for more reliable indicators of progress in
the field of CSR, along with the dissemination of CSRstrategies. Transparency and dialogue
can help to make a business appear more trustworthy, and push up thestandards of other
organizations at the same time. Some of the positive outcomes that can arise when
businessesadopt a policy of social responsibility include:
Company Benefits
Improved financial performance;
Lower operating costs;
Enhanced brand image and reputation;
Increased sales and customer loyalty;
Greater productivity and quality;

More ability to attract and retain employees;

Reduced regulatory oversight;
Access to capital;
Workforce diversity;
Product safety and decreased liability.
Benefits to the Community and the General Public
Charitable contributions;
Employee volunteer programs;
Corporate involvement in community education, employment and homelessness programs;
Product safety and quality.
Environmental Benefits
Greater material recyclability;
Better product durability and functionality;
Greater use of renewable resources;
Integration of environmental management tools into business plans, including lifecycleassessment and costing, environmental management standards, and eco-labeling.


CSR Approaches

Some commentators have identified a difference between the Canadian (Montreal school of CSR),
theContinental European and the Anglo-Saxon approaches to CSR.[22] It is said that for Chinese
consumers, a socially responsible company makes safe, high-quality products; for Germans it
provides secure employment; in South Africa it makes a positive contribution to social needs such as
health care and education.[23] And even within Europe the discussion about CSR is very
A more common approach to CSR is corporate philanthropy. This includes monetary donations and
aid given to nonprofit organizations and communities. Donations are made in areas such as the arts,
education, housing, health, social welfare and the environment, among others, but excluding political
contributions and commercial event sponsorship.[25]
Another approach to CSR is to incorporate the CSR strategy directly into operations. For instance,
procurement of Fair Trade tea and coffee.
Creating Shared Value, or CSV is based on the idea that corporate success and social welfare are
interdependent. A business needs a healthy, educated workforce, sustainable resources and adept
government to compete effectively. For society to thrive, profitable and competitive businesses must
be developed and supported to create income, wealth, tax revenues and philanthropy. The Harvard
Business Review article Strategy & Society: The Link between Competitive Advantage and
Corporate Social Responsibility provided examples of companies that have developed deep linkages
between their business strategies and CSR.[26] CSV acknowledges trade-offs between short-term

profitability and social or environmental goals, but emphasizes the opportunities for competitive
advantage from building a social value proposition into corporate strategy. CSV gives the impression
that only two stakeholders are important - shareholders and consumers.
Many companies employ benchmarking to assess their CSR policy, implementation and
effectiveness. Benchmarking involves reviewing competitor initiatives, as well as measuring and
evaluating the impact that those policies have on society and the environment, and how others
perceive competitor CSR strategy.[27]

Cost-benefit analysis[edit]
In competitive markets cost-benefit analysis of CSR initiatives, can be examined using a resourcebased view (RBV). According to Barney (1990) "formulation of the RBV, sustainable competitive
advantage requires that resources be valuable (V), rare (R), inimitable (I) and non-substitutable
(S)."[28][29] A firm introducing a CSR-based strategy might only sustain high returns on their investment
if their CSR-based strategy could not be copied (I). However, should competitors imitate such a
strategy, that might increase overall social benefits. Firms that choose CSR for strategic financial
gain are also acting responsibly.[3]
RBV presumes that firms are bundles of heterogeneous resources and capabilities that are
imperfectly mobile across firms. This imperfect mobility can produce competitive advantages for
firms that acquire immobile resources. McWilliams and Siegel (2001) examined CSR activities and
attributes as a differentiation strategy. They concluded that managers can determine the appropriate
level of investment in CSR by conducting cost benefit analysis in the same way that they analyze
other investments.
Reinhardt (1998) found that a firm engaging in a CSR-based strategy could only sustain an
abnormal return if it could prevent competitors from imitating its strategy.

Potential business benefits[edit]

A large body of literature exhorts business to adopt measures non-financial measures of success
(e.g., Deming's Fourteen Points, balanced scorecards). While CSR benefits are hard to quantify,
Orlitzky, Schmidt and Rynes[54] found a correlation between social/environmental performance and
financial performance.
The business case for CSR[55] within a company employs one or more of these arguments:

Triple bottom line[edit]

"People, planet and profit", also known as the triple bottom line form one way to evaluate CSR.
"People" refers to fair labour practices, the community and region where the business operates.
"Planet" refers to sustainable environmental practices. Profit is the economic value created by the
organization after deducting the cost of all inputs, including the cost of the capital (unlike accounting
definitions of profit).[56][57]
This measure was claimed to help some companies be more conscious of their social and moral
responsibilities.[58] However, critics claim that it is selective and substitutes a company's perspective
for that of the community. Another criticism is about the absence of a standard auditing procedure. [59]

Human resources[edit]
A CSR program can be an aid to recruitment and retention,[60][61] particularly within the
competitive graduate student market. Potential recruits often consider a firm's CSR policy. CSR can
also help improve the perception of a company among its staff, particularly when staff can become
involved through payroll giving, fundraising activities or community volunteering. CSR has been
credited with encouraging customer orientation among customer-facing employees. [62]

Risk management[edit]
Managing risk is an important executive responsibility. Reputations that take decades to build up can
be ruined in hours through corruption scandals or environmental accidents. [63] These draw unwanted
attention from regulators, courts, governments and media. CSR can limit these risks. [64]

Brand differentiation[edit]
CSR can help build customer loyalty based on distinctive ethical values. [65] Some companies use
their commitment to CSR as their primary positioning tool, e.g., The Co-operative Group, The Body
Shop and American Apparel[66]
Some companies use CSR methodologies as a strategic tactic to gain public support for their
presence in global markets, helping them sustain a competitive advantage by using their social
contributions as another form of advertising.[67]

Reduced scrutiny[edit]
Corporations are keen to avoid interference in their business through taxation and/or regulations. A
CSR program can persuade governments and the public that a company takes health and safety,

diversity and the environment seriously, reducing the likelihood that company practices will be
closely monitored.

Supplier relations[edit]
Appropriate CSR programs can increase the attractiveness of supplier firms to potential customer
corporations. E.g., a fashion merchandiser may find value in an overseas manufacturer that uses
CSR to establish a positive imageand to reduce the risks of bad publicity from uncovered

Criticisms and concerns[edit]

CSR concerns include its relationship to the purpose of business and the motives for engaging in it.

Nature of business[edit]
Milton Friedman and others argued that a corporation's purpose is to maximize returns to its
shareholders and that obeying the laws of the jurisdictions within which it operates constitutes
socially responsible behavior.[68]
While some CSR supporters claim that companies practicing CSR, especially in developing
countries, are less likely to exploit workers and communities, critics claim that CSR itself imposes
outside values on local communities with unpredictable outcomes.[69]
Better governmental regulation and enforcement, rather than voluntary measures, are an alternative
to CSR that moves decision-making and resource allocation from public to private bodies.

However, critics claim that effective CSR must be voluntary as mandatory social responsibility

programs regulated by the government interferes with peoples own plans and preferences, distorts
the allocation of resources, and increases the likelihood of irresponsible decisions.

Some critics believe that CSR programs are undertaken by companies to distract the public from
ethical questions posed by their core operations. They argue that the reputational benefits that CSR
companies receive (cited above as a benefit to the corporation) demonstrate the hypocrisy of the

Another concern is that sometimes companies use CSR to direct public attention away from other,
harmful business practices. For example, McDonald's Corporation positioned its association

with Ronald McDonald House as CSR[74] while its meals have been accused of promoting poor eating

Controversial industries[edit]
Industries such as tobacco, alcohol or munitions firms make products that damage their consumers
and/or the environment. Such firms may engage in the same philanthropic activities as those in other
industries. This duality complicates assessments of such firms with respect to CSR.

Stakeholder influence[edit]
One motivation for corporations to adopt CSR is to satisfy stakeholders.
Branco and Rodrigues (2007) describe the stakeholder perspective of CSR as the set of views of
corporate responsibility held by all groups or constituents with a relationship to the firm. [78] In their
normative model the company accepts these views as long as they do not hinder the organization.
The stakeholder perspective fails to acknowledge the complexity of network interactions that can
occur in cross-sector partnerships. It relegates communication to a maintenance function, similar to
the exchange perspective.[79]

Ethical consumerism[edit]
The rise in popularity of ethical consumerism over the last two decades can be linked to the rise of
CSR.[80] Consumers are becoming more aware of the environmental and social implications of their
day-to-day consumption decisions and in some cases make purchasing decisions related to their
environmental and ethical concerns.[81]

Socially responsible investing[edit]

Main article: Socially responsible investing
Shareholders and investors, through socially responsible investing are using their capital to
encourage behavior they consider responsible. However, definitions of what constitutes ethical
behavior vary. For example, some religious investors in the US have withdrawn investment from
companies that violate their religious views, while secular investors divest from companies that they
see as imposing religious views on workers or customers.[82]

Creating shared value[edit]

Non-governmental organizations are also taking an increasing role, leveraging the media and the
Internet to increase the visibility of corporate behavior. Through education and dialogue, the
development of community awareness in pushing businesses to change their behavior is growing. [83]
Creating Shared Value (CSV) claims to be more community aware than CSR. Several companies
are refining their collaboration with stakeholders accordingly.

Public policies[edit]
Some national governments promote socially and environmentally responsible corporate practices.
The heightened role of government in CSR has facilitated the development of numerous CSR
programs and policies.[84] Various European governments have pushed companies to develop
sustainable corporate practices.[85] CSR critics such as Robert Reich argued that governments
should set the agenda for social responsibility with laws and regulation that describe how to conduct
business responsibly.
Fifteen European Union countries actively engaged in CSR regulation and public policy
development.[85] CSR efforts and policies are different among countries, responding to the complexity
and diversity of governmental, corporate and societal roles. Studies claimed that the role and
effectiveness of these actors were case-specific.[84]
The variety among companies complicates regulatory processes. [86] Self-regulation allows each
corporate actor to balance profits and social responsibility without cumbersome governmental
involvement. Studies suggest that mandated CSR distorts the allocation of resources and increases
the likelihood of irresponsible decisions.[87]
Bulkeley cited the Australian government's actions to avoid compliance with the Kyoto Protocol in
1997, over concerns of economic loss and national interest. The Australian government claimed that
the pact would damage Australia more than any other OECD nation.[88] In November 2007, the new
Prime Minister Kevin Rudd ratified the protocol.
Canada adopted CSR in 2007. Prime Minister Harper encouraged Canadian mining companies to
meet Canadas newly developed CSR standards.[89]
The Heilbronn Declaration is a voluntary agreement of enterprises and institutions in Germany
especially of the Heilbronn-Franconia region signed the 15th of September 2012. The approach of
the Heilbronn Declaration targets the decisive factors of success or failure, the achievements of the

implementation and best practices regarding CSR. A form of responsible entrepreneurship shall be
initiated to meet the requirements of stakeholders trust in economy. It is an approach to make
voluntary commitments more binding.[90]
In the 1800s,the US government could take away a firm's license if it acted irresponsibly.
Corporations were viewed as "creatures of the state" under the law. In 1819, the United States
Supreme Court in Dartmouth College vs. Woodward established a corporation as a legal person in
specific contexts. This ruling allowed corporations to be protected under the Constitution and
prevented states from regulating firms.[91] Recently countries included CSR policies in government
On 16 December 2008, the Danish parliament adopted a bill making it mandatory for the 1100
largest Danish companies, investors and state-owned companies to include CSR information in their
financial reports. The reporting requirements became effective on 1 January 2009. [92] The required
information included:

CSR/SRI policies

How such policies are implemented in practice

Results and management expectations

CSR/SRI is voluntary in Denmark, but if a company has no policy on this it must state its positioning
on CSR in financial reports.[93]
In 2014, India became the world's first country to enact a mandatory minimum CSR spending law.
Under Companies Act, 2013, any company having a net worth of 500 crore or more or a turnover of
1,000 crore or a net profit of 5 crore must spend 2% of their net profits on CSR activities. [94] The rules
came into effect from 1 April 2014.[95]

Crises and their consequences[edit]

Crises have encouraged the adoption of CSR. The CERES principles were adopted following the
1989 Exxon Valdez incident.[45] Other examples include the lead paint used by toy maker Mattel,
which required the recall of millions of toys and caused the company to initiate new risk
management and quality control processes. Magellan Metals was found responsible for lead
contamination killing thousands of birds in Australia. The company ceased business immediately and
had to work with independent regulatory bodies to execute a cleanup. Odwalla experienced a crisis

with sales dropping 90% and its stock price dropping 34% due to cases of E. coli. The company
recalled all apple or carrot juice products and introduced a new process called "flash pasteurization"
as well as maintaining lines of communication constantly open with customers.