Corporate Social Responsibility – Meaning, Definition

Corporate Social Responsibility

Table of Contents:-

  1. Corporate Social Responsibility
  2. Corporate Social Responsibility Meaning
  3. Corporate Social Responsibility Definition
  4. Corporate Social Responsibility of Business Towards Different Groups

Corporate Social Responsibility

The concept of Corporate Social Responsibility has been in practice by companies for many years, even though the term is of more recent origin. Companies are aware of their responsibilities towards the communities of the society where they operate. As the CSR concept is based on ethics, companies following CSR policies always strive to develop the society and environment. Corporate Social Responsibility refers to those activities through which companies control their actions and check whether they are following ethical and legal norms. It should be followed voluntarily by every company regardless of its size or location.

Corporate Social Responsibility Meaning

Corporate Social Responsibility (CSR) or Social responsibility is self-imposed restriction by companies on their activities. Companies by implementing CSR practices can contribute to the betterment of society and the environment while also enhancing their reputation, brand image and brand loyalty.

CSR involves taking responsibility for the impact that a company’s operations have on the environment and society. This includes reducing carbon emissions, promoting ethical business practices, conserving natural resources, and supporting local communities.

By adopting CSR practices, companies can demonstrate their obligation to sustainability and social responsibility, which can help them attract and retain customers, investors, and employees.

Corporate Social Responsibility Definition

According to Cannon, “Corporate social responsibility means devising corporate strategies and building a business with the society’s needs in mind”.

Koontz and O’Donnel state that, “Social responsibility is the personal obligation of everyone as he acts for his own interests to assure that the rights and legitimate interests of all others do not impinge”.

According to Lord Holme and Richard Watts, “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”.

Corporate Social Responsibility of Business Towards Different Groups

Businesses have plenty of social responsibilities towards stakeholders or groups. These responsibilities help maintain a positive reputation of the company and contribute to the overall well-being of society, some of which are given below:

Social Responsibilities of Business towards Different Groups

  • Responsibility towards Shareholders or Owners
  • Responsibility towards Customers
  • Responsibility towards Creditors
  • Responsibility towards Workers/Employees
  • Responsibility towards Suppliers
  • Responsibility towards Government
  • Responsibility towards Society/Community

1) Responsibilities towards Shareholders (or Owners)

In the case of joint stock companies, the shareholders as one unit are the owners of a company. There are thousands of shareholders of a large company, who appoint individuals as directors on the Board of Directors, which constitutes the Management of the company. The Management is responsible for protecting the rights of the shareholders, especially regarding the return on investment the shareholders have made in the company with an attitude of trust.

These responsibilities can be categorised as follows:

i) Reasonable Dividend

The interests of shareholders lie in a good dividend and handsome appreciation in the value of the shares they hold in the company’s business. A responsible company takes care of these interests, on the other hand, there are fraudulent companies that misappropriate the shareholders’ money.

ii) Soundness

Responsible management sees to it that its financial status is sound and it has a promising growth record.

iii) Information

Responsible management keeps its shareholders informed about the appointment of new directors, CEO, etc., any changes in policy, acquisition, change of auditors or solicitors, new projects and any other facts relevant to the shareholders. Withholding relevant information from being disseminated to shareholders includes irresponsible behaviour.

iv) Protection of Assets

It is the responsibility of the management of a company to safeguard the assets of the organization. This demonstrates responsible behaviour towards shareholders and it also ensures that the money invested by them is utilized effectively in purchasing the assets for the company.

2) Responsibilities towards Workers/Employees

Employees are the human resources of a company and as such deserve a humane attitude on the part of the management of a company.

As a business, it is crucial to understand and fulfil the responsibilities towards employees. These responsibilities include the following:

i) Pay Fair Wages

An enterprise should regularly pay reasonable wages to its employees and revise the same from time to time as inflation rises. This enables employees to enjoy a satisfactory standard of living.

ii) Provide Good Working Conditions

Responsible management provides good working conditions for its employees. This is a fundamental right, as well as a necessity to maintain sound physical and mental health.

iii) Provide Adequate Service Benefits

Service benefits include adequate house rent, medical allowances, adequate insurance; and retirement benefits. These are essentials for leading a life with a feeling of security.

iv) Extend and Gain Cooperation

Responsible management cooperates with and gains the cooperation of its employees. An atmosphere of cooperation gets the best possible results in terms of profitability for the company, which means more funds at the disposal of the management that can be used for employee welfare activities, apart from the fact that the company is in a better position to pay higher wages to its employees.

v) Recognise Employees’ Rights

Responsible management recognises and safeguards the rights of its employees. These rights include fair wages, basic facilities such as paid leave, and the right to form unions, etc. Management must understand that employees are the backbone of any organization and their well-being should be a top priority. By acknowledging and respecting their rights, management can promote a positive work environment that promotes productivity and loyalty. It is essential to create a workplace culture that values and supports its employees, as this will eventually lead to the success of the organization.

vi) Provide Opportunities for Growth

The management should provide its employees with ample opportunities for growth by providing or sponsoring training allowing leave to enhance qualifications and holding continuous learning programmes.

3) Responsibility towards Customers

A company stands with its head held high because of a large number of satisfied customers; after all, the company gets its profits from the sale of its goods or services. To be satisfied, a customer needs the best possible quality at the lowest possible price.

On the other hand, a customer does not remain loyal to a company that is ethically not sound; does not deliver quality as assured, cheats in measurements; has inadequate servicing facilities; and discourteous behaviour are examples of ethically unsound behaviour.

It is the responsibility of the management to pay sufficient attention to the following aspects:

i) Need Satisfaction

Are the goods of the company made to cater to the needs of the customers, or does the company manufacture goods for its profits and then coax people into buying these goods even though they do not need these goods? A responsible company manufactures goods that meet the needs of its customers and also takes into consideration its purchasing power.

ii) Regular Flow of Goods

The management should ensure a regular supply of quality goods at affordable prices. Disruption in the collection of goods may cause hoarding and a spiral up of prices, which is not in the customers’ interest.

iii) Courteous Service

Courteous behaviour while selling i.e., courteous salesmanship and effective after-sales service are two vital factors at the heart of customer-friendly behaviour. These elements help build strong relationships with customers and ensure their satisfaction with products or services. By providing courteous salesmanship, a company demonstrate respect for its customers and their needs, which can lead to boosting trust and brand loyalty.

iv) Precise Information

The management should provide precise information to its customers, be it advertisement, product information brochures, or packages. Businesses must prioritize this aspect to establish credibility and gain the confidence of their target market. If a company does not put this into practice, it fails to gain the trust of the customers.

v) Fair Trade Practices

Some guidelines have been established to ensure fair trade practices. Unethical practices such as hoarding, providing misleading information, and adulteration are considered unfair and should be avoided by companies.

4) Responsibilities towards Suppliers

Suppliers supply materials as raw material input or as a component input to traders and manufacturers, mostly on credit terms. A company that buys these from suppliers has the responsibility to pay the agreed amount within the agreed period and behave courteously with them. The breach of any of these behaviours on the part of the company makes it untrustworthy of its suppliers.

The following are the responsibilities of businesses towards their suppliers:

i) Ensuring accuracy in the specifications of ordered goods.

ii) Contracting with the suppliers on proper terms and conditions.

iii) Informing about changes in specifications fairly in advance.

iv) Paying the agreed amount within the agreed period.

v) Keeping the suppliers informed about future schedules.

5) Responsibility towards Creditors

Apart from suppliers, a company has other creditors like banks and financing organisations that have provided loans to it. For a company, it is imperative to acknowledge and fulfil certain responsibilities towards creditors. A company has the following responsibilities towards creditors.

i) A company should furnish accurate information about its financial status, including its assets and liabilities; other loans availed of, its suppliers; its major customers; etc.

ii) A company should repay loans promptly and in any case never after the due date. For the delayed return of the loan, it should pay interest at the agreed or reasonable rate.

iii) Even after receiving the loan amount, the company that has received the loan should not behave arrogantly but should understand that the advancement of the loan and receiving of the loan are mutually cooperative acts that satisfy the needs of both parties.

6) Responsibilities towards Government

Apart from those laws of a country that are commonly applied to one and all, some laws are specifically applicable to certain sectors of business. It is the responsibility of every business organisation to act in conformity with both these categories of laws.

In general, all businesses should fulfil the following responsibilities towards the government:

i) To obey the laws of the nations in which they operate.

ii) To honestly pay all government taxes within the stipulated time.

iii) To shun all unethical practices while dealing with the government.

iv) To avoid the accumulation of excessive wealth and the establishment of monopolies.

v) To act in conformity with appropriate trade practices.

7) Responsibilities towards Society/Community

Following are some of the responsibilities of businesses towards society:

i) Socioeconomic Objectives

A society’s socioeconomic objectives broadly include social welfare and the economic welfare of its underprivileged individuals. It is the responsibility of every company or firm to use its resources to meet the socioeconomic objectives of the society in which it operates. It is also needed for every company to not indulge in, and to discourage, antisocial and unfair behaviour.

ii) Improvement of the Local Business Environment

Responsible management should ensure the following points:

  • its operations do not corrupt the environment;
  • it helps create a health-promoting environment;
  • it develops gardens, playgrounds, recreational facilities, etc, to improve the quality of life of its staff and the general public.

iii) Employment Opportunities

Creating employment opportunities is one of the basic social responsibilities of all businesses. It helps reduce unemployment and crime.

iv) Efficient Use of Resources

Apart from the improvement of the environment, the resources of businesses should be used for general beneficial initiatives like free or subsidised medical consultancy facilities, free medical check-up facilities, legal assistance, community halls for weddings, and cooperative stores selling goods at fair prices.

v) Ethical Behaviour

It is the social responsibility of every business to ensure that the ethical canvas of the society in which they operate is not blemished due to their activities. They should strictly ensure that everyone associated with it adopts ethical and sociable behaviour business-related or otherwise.

Corporate Social Responsibility

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