Month: May 2021

India is the first country in the world to make corporate social responsibility (CSR) mandatory, following an amendment to The Company Act, 2013 in April 2014. Businesses can invest their profits in areas such as education, poverty, gender equality, and hunger.

The amendment notified in the Schedule VII of the Companies Act advocates that those companies with a net worth of US$73 million (Rs 4.96 billion) or more, or an annual turnover of US$146 million (Rs 9.92 billion) or more, or a net profit of US$732,654 (Rs 50 million) or more during a financial year, shall earmark 2 percent of average net profits of three years towards CSR.

In the draft Companies Bill, 2009, the CSR clause was voluntary, though it was mandatory for companies to disclose their CSR spending to shareholders. It is also mandatory that company boards should have at least one female member.

CSR has been defined under the CSR rules, which includes but is not limited to:

• Projects related to activities specified in the Schedule; or
• Projects related to activities taken by the company board as recommended by the CSR Committee, provided those activities cover items listed in the Schedule.

Methodology of corporate social responsibility

CSR is the procedure of assessing an organization’s impact on society and evaluating their responsibilities. It begins with an assessment of the following aspects of each business:

• Customers;
• Suppliers;
• Environment;
• Communities;
  
• Employees

The most effective CSR plans ensure that while organizations comply with legislation, their investments also respect the growth and development of marginalized communities and the environment. CSR should also be sustainable involving activities that an organization can uphold without negatively affecting their business goals.

Organizations in India have been quite sensible in taking up CSR initiatives and integrating them into their business processes.

It has become progressively projected in the Indian corporate setting because organizations have recognized that besides growing their businesses, it is also important to shape responsible and supportable relationships with the community at large.

Companies now have specific departments and teams that develop specific policies, strategies, and goals for their CSR programs and set separate budgets to support them.

Most of the time, these programs are based on well-defined social beliefs or are carefully aligned with the companies’ business domain.

CSR trends in India

FY 2015-16 witnessed a 28 percent growth in CSR spending in comparison to the previous year.

Listed companies in India spent US$1.23 billion (Rs 83.45 billion) in various programs ranging from educational programs, skill development, social welfare, healthcare, and environment conservation. The Prime Minister’s Relief Fund saw an increase of 418 percent to US$103 million (Rs 7.01 billion) in comparison to US$24.5 million (Rs 1.68 billion) in 2014-15. The education sector received the maximum funding of US$300 million (Rs 20.42 billion) followed by healthcare at US$240.88 million (Rs 16.38 billion), while programs such as child mortality, maternal health, gender equality, and social projects saw negligible spend.

In terms of absolute spending, Reliance Industries spent the most followed by the government-owned National Thermal Power Corporation (NTPC) and Oil & Natural Gas (ONGC). Projects implemented through foundations have gone up from 99 in FY 2015 to 153 in FY 2016, with an increasing number of companies setting up their own foundations rather than working with existing non-profits to have more control over their CSR spending.

2017 CSR spends further rose with corporate firms aligning their initiatives with new government programs such as Swachh Bharat (Clean India) and Digital India, in addition to education and healthcare, to foster inclusive growth.

Corporate Social Reporting

Growth of corporate sector is the outcome of 20th century and number of corporations is rapidly increasing throughout the globe. Increased number of corporations not only domestic but global has led to the development of new type of financial reporting. The concept of scattered ownership gave birth to the concept of financial reporting whereas rapidly increased number of corporate sector particularly industrial corporate sector has given birth to the social corporate reporting.

Measurement and reporting of the social performance of profit oriented corporations form the core of social corporate reporting.

“The term corporate social performance reflects the impact of a corporation’s activities on the society. This embodies the performance of its economic functions and other actions taken to contribute to the quality of life. These activities may extend beyond meeting the letter of the law, the pressures of competition or the requirements of contracts.”

American Accounting Association committee on measurement of social costs supplement to the accounting review in 1974 has also emphasized on the role of corporate form of organisations in attaining their operational goals such as enhancement of profits by 8% p.a., increase in sales by 20%, a reduction in pollution levels by 30% and employee mix reflects the mix of minorities in working class where plants are located. General awareness among various classes of society has led to serious debate on social desirability of industrial units. Social accounting and reporting has emerged as contemporary accounting issues.

Problems and Prospects Concerning Social Corporate Reporting:

1. Interaction of Business with Society at Large:

A strong belief is that business carries out only economic functions of the society. Business units have some type of social responsibility to society. Cannon chairman of Marks and Spencer has rightly said that “Business only contributes fully to society if it is efficiently profitable and socially responsible” Business should undertake social activities with a business benefits is not a new concept. Wood another author has rightly said that “The basic idea of corporate social responsibility is that business and society are inter-woven rather than distinct entities.”

2. Issues of Environments and Package of Financial Statements:

In past, only social accounting was prevalent and emphasis was only on social disclosures. But in current global scenario, emphasis has shifted from social accounting to green accounting. Earlier the financial statements were being prepared for owners only, but now-a-days package of financial statements is prepared for stake holders. Those stakeholders have not just interest in the affairs of corporate unit, rather they also have keen interest on degree of influence over the shaping of those affairs.

3. Transparency and Accountability:

The concept of accountability is not fully understood by managers and few of them agree to the wider context within which the word accountability has been used business, law, government, politics and morality. The notion of accountability is commonly described in regard to organisation’s legal compliance and its financial reporting to shareholders and governmental agencies.

Thus accountability is concerned with responsibility of supplying information and the right to receive. Social responsibility is part of the reason for seeking greater accountability from corporate management. This responsibility keeps on changing and developing with the passage of time.

Nevertheless, just because the natural responsibilities are difficult, if not impossible to account for with accurate figures does not mean that such issues have to be neglected. An accountable organisation has to bring transparency by supplying financial and non-financial information to all the stakeholders particularly other than shareholders.

4. Stock Markets and Social or Environmental Disclosures:

Stock Markets throughout the world are playing a very dominant role for economic development particularly in developed economies like Japan, UK, USA, etc. Institutional investors are also playing their major role for fluctuations in share markets indices. Market prices of shares of every corporate unit reflect financial condition of corporate unit.

In most of the developed countries social and environmental disclosures in annual reports do play very crucial role in quoting the market price of shares. Any corporate unit cannot be run successfully without its concern for society in form of social desirability of the corporate unit.

5. Accounting and Sustainability:

The central to any discussion of accounting and the environment is very challenging and debatable question: Do we believe that the corporate unit which accounting serves and supports can deliver environmental security and sustainability? Sustainability relates to both present and future generations. Geno a famous author has argued that sustainability is corner stone of green accounting.

6. Social and Green Accounting:

Social Accounting literature concentrated only the questions of how a corporate unit should report on its social performance and how its performance should be assessed. Now standards are being issued on social accounting and reporting for instance, Global Reporting Initiative. Global warming is a burning issue for the whole world and that has given birth to the Environmental or Green reporting. Both country specific and comparative studies have recorded upward trend in environmental disclosures through annual reports.

7. Environmental Issues and Auditing Practices:

Grey, a prominent author has identified an increasing concern amongst auditors about potential risk exposure they face as a consequence of the environmental impact on the business. There are growing demands upon auditors to include environmental reports/data in their attestation of the financial statements. The main problem which auditors face while doing audit practices is standards. Every, accountant needs standards to do the audit concerning corporate social responsibility.

8. “Environmental Influence” on Corporate, Managers, and Accountants:

Research studies have. identified a number of reasons why corporate might be influenced to adopt more socially and environmentally responsible attitudes and behaviour. Generally external pressures from stakeholders like customers, competitors, environmentalists, NGOs, Governmental agencies etc. is there.

Corporate do environmental disclosures so as to satisfy needs of those stakeholders. Researches have also identified number of reasons why corporate might not be influenced to adopt environmental and social attitudes. One reason may be additional costs involved for such social and environmental activities and other reasons may be gathering of data, lack of understanding of the concepts of environmental accounting.

9. Accounting Education:

A lot of research is still needed in the field of accounting education in general and social and environmental in particular. Accountants themselves do not have accounting knowledge and -practice particularly in environmental accounting.” Another reason may be negative role being played by accounting teachers in the area. Every business is an open system Corporate unit have specific interaction with, society. Corporate social responsibility is a part of the reason for seeking greater accountability and transparency from corporate managements.

To account is to give a description or depiction of something that happens or happened. Accountability would therefore be taken to literally mean the process of giving an account of an event. The tricky part; about it, is that for the people to whom the account is being given, the accuracy and probity of the story is very important. To achieve this, accountability usually moves hand in hand with seven other principles. These include, “delegation, responsibility, disclosure, autonomy, authority, power and legitimacy.” :Chansa (2006).

Accountability is when an individual or department experiences consequences for their performance or actions. Accountability is essential for an organization and for a society. Without it, it is difficult to get people to assume ownership of their own actions because they believe they will not face any consequences.

Accountability, in terms of ethics and governance, is equated with answerability, blameworthiness, liability, and the expectation of account giving. As in an aspect of governance, it has been central to discussions related to problems in the public sector, nonprofit and private (corporate) and individual contexts. In leadership roles, accountability is the acknowledgment and assumption of responsibility for actions, products, decisions, and policies including the administration, governance, and implementation within the scope of the role or employment position and encompassing the obligation to report, explain and be answerable for resulting consequences.

In governance, accountability has expanded beyond the basic definition of “being called to account for one’s actions”. It is frequently described as an account giving relationship between individuals, e.g. “A is accountable to B when A is obliged to inform B about A’s (past or future) actions and decisions, to justify them, and to suffer punishment in the case of eventual misconduct” and more. Accountability cannot exist without proper accounting practices; in other words, an absence of accounting means an absence of accountability. Another key area that contributes to accountability is good records management.

Accountability is especially important in the world of corporate finance and accounting. Otherwise, investors and the public can lose faith in the trustworthiness of corporate financial reports, which has happened following high-profile accounting scandals in the past. Without checks, balances, and consequences for wrongdoing, the integrity of the capital markets would not be able to be maintained, damaging those markets’ ability to perform their vital social functions.

Corporate accounting scandals in the late 90s and early aughts, the global financial crisis and the rigging of interest and exchange rates have all served to erode public trust in financial institutions. Such scandals usually result in tougher regulations, and indeed there are compliance departments and entire armies of regulators and private watchdogs working to make sure that companies report their earnings correctly, trades are executed in a timely fashion, and information provided to investors is timely, informative, and fair.

But many leaders have called for the creation of a new culture of accountability in finance one that comes from within.

Importance of Accountability

The separation of ownership from management can cause conflict if there is a breach of trust by managers either by intentional acts, omission of key facts from reports, neglect, or incompetence. One way in which this can be avoided is for entities (in their entirety) to act with transparency and be accountable to the shareholders and other stakeholders. Therefore apart from just being a component of corporate governance, there are many advantages of accountability.

Firstly, it is a key to economic prosperity. If there is poor accountability by players in the economy, stakeholders may lose the confidence they have in it and hence become reluctant to put in their best. For instance; for some developing countries, lack of accountability may lead to a fall in the participation rate in their development programmes by their cooperating partners a situation that leads to further deterioration in the development process. Accountability is also a key to performance measurement. The more accountable corporate governors are, the more likely it is that results of performance measurement processes are going to be a true and fair representative of the performance being measured.

Accountability is a very important pillar of corporate governance. Without it, the agency problem would be hard to defeat. With it, the confidence of stakeholders is increased. It is achieved through faithfulness in various aspects of corporate governance especially reporting. The strength and accuracy of the reporting is also strengthened by various standards and regulations.

Examples of Accountability in Action

There are several examples of how the world of finance tries to implement accountability. An auditor reviewing a company’s financial statements is responsible for obtaining reasonable assurance that the financial statements are free from any material misstatements caused by error or fraud.

Accountability forces an accountant to be careful and knowledgeable in their professional practices, as even negligence can cause them to be legally responsible. As an example, an accountant is accountable for the integrity and accuracy of the financial statements, even if errors were not made by them. Managers of a company may try to manipulate their company’s financial statements without the accountant knowing. There are clear incentives for the managers to do this, as their pay is usually tied to company performance.

This is why independent outside accountants must audit the financial statements, and accountability forces them to be careful and knowledgeable in their review. Public companies are also required to have an audit committee as a part of their board of directors who are outside individuals with accounting knowledge. Their job is to oversee the audit.

The Committee (1978), inter alia, looked into the social responsibilities of companies. Every company apart from being able to justify itself on the test of economic viability will have to pass the test of a socially responsible entity.

In this context, it will be judged by various tests dependent upon the circumstances in each company and in each area.

Thus, a chemical company which may declare very high dividend may yet be responsible for polluting the water and air and would have to be named as a socially irresponsible company.

Similarly, the waste discharge from the factories resulting in loss of fish and thereby depriving a large number of fishermen of their livelihood and also posing a risk to those eating fish would certainly be ranked as an irresponsible act. No company in these days can disown its social responsibility.

For securing responsible behaviour, the committee was in favour of “openness in corporate affairs” i.e. adequate disclosure of information for the benefit of shareholders, creditors, workers and the community.

It suggested that social costs-benefit analysis, which was one of the prime considerations for investment decisions in the public sector, ought to be taken into account in the matter of investments in the private sector.

The accountability of the public sector to the people through Parliament must find its parallel in the private sector in the form of social accountability, at least to the extent of informing the public about the extent and the manner in which it has or has not been able to discharge its social obligations in the course of its own economic operations.

It is in this sense that social responsibility of business, as far as the private sector is concerned, is but social accountability and is a mere extension of the principle of public disclosure to which the corporations must be subject.

Other relevant suggestions of the Committee are as follows:

1. The test for judging a company’s consciousness towards the interests of the public may include: the interest it makes in the area of its operation, the welfare of its employees, the spread of adult literacy and so on.
2. It should be obligatory on a company to give a social report every year showing to what extent it has been able to meet its social obligations.
3. While quantifying the contribution that a company claims to have made towards social obligations, the social report should specify that no part of the benefits from contribution made by the company have gone either to the directors or their relatives or to any association in which the directors and their relatives have any personal interest.
4. The Companies Act should be suitably amended requiring every company to give along with the director’s report a social report, which will indicate and quantify, the various activities relating to social responsibilities carried out by a company in the previous year.
5. A majority of the population of the country lives in rural areas and its well-being is essential. A company which consciously and with deliberate choice establishes its business in such areas will certainly be held to have played a more socially responsible role even though in terms of its returns on investment it is less profitable than other companies.
6. Social responsiveness may also be judged from the policy of employment followed by a company so far as the socially handicapped and the weaker sections of the community are concerned.

In 1980 there was a significant development in that the TISCO invited a team of eminent persons to undertake a “social audit” of their organisation and published the findings in the form of a report

CSR in India

India is the first country in the world to make corporate social responsibility (CSR) mandatory, following an amendment to The Company Act, 2013 in April 2014. Businesses can invest their profits in areas such as education, poverty, gender equality, and hunger. Company having:

• Minimum net worth of rupees 500 Crore.
• Turnover up to “1000 Crore”
• having a net profit of at least ‘5crore’

During any financial year, are covered by this provision.

The Company should constitute a Corporate Social Responsibility Committee as follows:

• The Committee shall consist of minimum 3 including 1 Independent Director, however in case of Private Company or the Company, which is not required to appoint Independent Director on board, or Foreign Company committee can be formulated with 2 directors.
• The CSR Policy shall be formulated in accordance with Schedule VII and the CSR Committee will be responsible for framing the policy, finalizing the amount to be spent on CSR, monitoring & implementation of the Scheme.
• If Company ceases to fulfill the eligibility criteria for three consecutive years, then the company is not required to comply until the company will meet the eligibility criteria once again.

Current CSR Practices of the Firms in India

Brief on CSR Activities as prescribed under Schedule VII of Companies Act, 2013

• Objective to efface the daily life segments including poverty, malnutrition and hunger while enhancing the standard of living and promoting the facets of better health care and sanitation.
• Introducing varied projects for Rural Development.
• Initiative to promote the different segments of education including special education and programs to enhance the vocation skills for all ages like children, women, elderly and conducting other livelihood enhancement projects.
• Aim to bring the uniformity in respect of different sections of the society to promote gender equality and other facilities for senior citizens and developing hostels for women and orphans and taking initiative for empowering women and lowering inequalities faced by socially and economically backward groups.
• Elevate the segment of flora and fauna to bring the ecological balance and environmental sustainability in respect of animal welfare, conservation of natural resources and ago forestry while maintaining the quality of air, water and soil.
• Enhancement of Craftsmanship while protecting art and culture and measures to restore sites of historical importance and national heritage and promoting the works of art and setting up of public libraries.
• Steps to bring worthy to the part of war windows, armed force veterans and their departments.
• Sports programs and training sessions to enhance the level of rural sports, nationally recognized sports, Paralympic sports and Olympics sports.
• Favoring to Prime Minister’s National Relief Fund and contribution to other fund set up by the central government to promote socio-economic development and welfare of the schedule castes and Schedule Tribes and for supporting backward classes, minorities and women.
• To uplift the technology of incubator that’s comes under academic institutions and which are approved by the Central Government.

Example:

• Tata Group: The Tata Group conglomerate in India carries out various CSR projects, most of which are community improvement and poverty alleviation programs. Through self-help groups, it is engaged in women empowerment activities, income generation, rural community development, and other social welfare programs. In the field of education, the Tata Group provides scholarships and endowments for numerous institutions.
• Ultratech Cement: Ultratech Cement, India’s biggest cement company is involved in social work across 407 villages in the country aiming to create sustainability and self-reliance. Its CSR activities focus on healthcare and family welfare programs, education, infrastructure, environment, social welfare, and sustainable livelihood. The company has organized medical camps, immunization programs, sanitization programs, school enrollment, plantation drives, water conservation programs, industrial training, and organic farming programs.
• Mahindra & Mahindra: Indian automobile manufacturer Mahindra & Mahindra (M&M) established the K. C. Mahindra Education Trust in 1954, followed by Mahindra Foundation in 1969 with the purpose of promoting education. The company primarily focuses on education programs to assist economically and socially disadvantaged communities. CSR programs invest in scholarships and grants, livelihood training, healthcare for remote areas, water conservation, and disaster relief programs. M&M runs programs such as Nanhi Kali focusing on girl education, Mahindra Pride Schools for industrial training, and Lifeline Express for healthcare services in remote areas.

Current CSR Practices of the Firms in Abroad

CSR in US

US companies have had the luxury of defining and interpreting their own view of responsible business within the context of their own company. Subsequently they have been able to measure and promote activities with greater freedom than their international counterparts.

CSR in Australia

“Social responsibility is the responsibility of an organization for the impacts of its decisions and activities on society and the environment, through transparent and ethical behavior that contributes to sustainable development, including the health and the welfare of society

• Considers the expectations of stakeholders
• Follows applicable law and consistent with international norms of behavior and is integrated throughout the organization and practiced in its relationships.”

Corporate Social Responsibility or CSR has been debated since the early twentieth century, but there has been little agreement over its definition due to:

• Differences in national and cultural approaches to business
• Differences in motivation for CSR – doing it because it is morally correct or doing it because it makes good business sense
• Differences in disciplinary backgrounds, perspectives and methods of scholars engaged with CSR

CSR in Canada

Canada’s enhanced Corporate Social Responsibility (CSR) Strategy, “Doing Business the Canadian Way: A Strategy to Advance Corporate Social Responsibility in Canada’s Extractive Sector Abroad” builds on experience and best practices gained since the 2009 launch of Canada’s first CSR strategy, “Building the Canadian Advantage: A Corporate Social Responsibility Strategy for the Canadian Extractive Sector Abroad.”

• Re-focusing the role of the Office of the CSR Counsellor, including strengthening its mandate to promote strong CSR guidelines to the Canadian extractive sector and advising companies on incorporating such guidelines into their operating approach. The CSR Counsellor will also build on the work conducted at missions abroad by refocusing efforts on working to prevent, identify and resolve disputes in their early stages;
• In situations where parties to a dispute would benefit from formal mediation, the CSR Counselor will encourage them to refer their issue to Canada’s National Contact Point (NCP), the robust and proven dispute resolution mechanism, guided by the OECD Guidelines for Multinational Enterprises on responsible business conduct, and active in 46 countries;
• Companies are expected to align with CSR guidelines and will be recognized by the CSR Counselor’s Office as eligible for enhanced Government of Canada economic diplomacy. As a penalty for companies that do not embody CSR best practices and refuse to participate in the CSR Counselor’s Office or NCP dispute resolution processes, Government of Canada support in foreign markets will be withdrawn;

CSR in United Arab Emirates

The concept of corporate social responsibility (CSR) in Dubai and the UAE has always been present from the earliest Islamic times, with people and organizations practising Islamic values, donating through philanthropy and Shariah compliant ways of commerce. In recent years, there have been worldwide initiatives to invest responsibly and focus on investing profits into community life and saving the environment.

The concept of corporate social responsibility (CSR) has witnessed various interpretations since its inception. Even though the present era of CSR has been significantly reassuring, there is an urgent need to understand the primary role of CSR. In order to do so, it becomes necessary to study the evolution of the concept of CSR over the years. This research compares the models of CSR on the basis of certain accepted indices, arguably the most relevant ones in this context, and establishes a line of evolution not a temporal convergence but a thematic convergence of the same thus concluding that the idea of CSR is gradually moving towards a consolidated form. There is a stark difference between the conception and the practical implementation of a model. Although several models have been proposed and modified since the 1950s, the question still remains whether an evolutionary line can be established as far as their practicability is concerned. Each organization or nation, as a whole, follows different strategies to implement CSR activities.

CSR contributes to another form of self-regulation that goes further and involves firms taking action to help people and the environment. CSR is described as “a belief that corporations have a social responsibility beyond pure profit.” In other words, “Firms are social entities, and so they should play a role in the social issues of the day. They should take seriously their ‘obligations to society’ and actively try to fulfill them.” As such, corporations should employ a decision-making process to achieve more than financial success on the assumption that CSR is integral to an optimum long-term strategy.

Corporate social responsibility (CSR) is a self-regulating business model that helps a company be socially accountable to itself, its stakeholders, and the public. By practicing corporate social responsibility, also called corporate citizenship, companies can be conscious of the kind of impact they are having on all aspects of society, including economic, social, and environmental.

Consumers today expect a lot out of companies. According to a study by Cone Communications, 9 out of 10 consumers expect companies to operate responsibly and address social and environmental issues rather than simply make a profit. In addition, 84 percent of consumers seek out responsible products.^[1]

To please consumers, many companies now practice corporate social responsibility. Corporate social responsibility (CSR), also known as corporate citizenship, is a business concept in which social and environmental concerns are integrated into a company’s operations. Whole Foods Market CEO John Mackey refers to CSR as conscious capitalism, in which businesses “serve the interests of all major stakeholders customers, employees, investors, communities, suppliers, and the environment.” Mackey witnessed the benefits of conscious capitalism when a Whole Foods Market store was terribly affected by a flood. Unexpectedly, customers and neighbors helped, employees worked for free, suppliers resupplied products on credit, and its bank loaned it money to restock. The Whole Foods store was able to reopen 28 days after the flood.

Although there are multiple versions of CSR, the general main categories of CSR include environmental efforts, philanthropy, ethical labor practices, and volunteerism. Let’s take a closer look at each of these.

Environmental Efforts

The primary focus of many companies in their commitment to CSR is through environmental efforts. For example, companies can have a large carbon footprint on the environment, which is the amount of greenhouse gases, especially carbon dioxide, emitted by an individual, organization, process, event, structure, or product. The majority of scientists believe that greenhouse gases are causing changes in the global climate, sea level, ecosystems, and thus, agricultural patterns. The carbon footprints of companies vary greatly depending on business operations, their size, and their location.

Any action taken to reduce a carbon footprint is considered beneficial for the environment. These efforts have included minimizing the amount of land occupied or used, constructing/occupying energy-efficient buildings, planting trees in the rainforest, and using locally sourced products. For example, the Bingham Hotel outside of London sources as much food as possible from suppliers within a 10-mile radius and the rest of its food from the British Isles.^[3] Purchasing locally sourced products supports local employment and reduces pollution by limiting the distances products must be transported.

Philanthropy

Many companies practice CSR by donating to various charities, starting charitable programs, and offering scholarships to underprivileged students wanting to attend college. Nu Skin, a personal-care company, developed a charity called Nourish the Children, which allows leaders, employees, and customers to donate nutrient-rich meals to children around the world. From 2002, when the program began, to 2017, people had donated more than 500 million meals through the program.

Ethical Labor Practices

Labor practices are often controversial from an ethical perspective. For example, Apple’s iPhones contain parts from companies in other countries. Specifically, the tin, which is used for a part, comes from mines in Indonesia. With labor laws that vary from one country to another, the company exercised due diligence in ensuring that its sourcing companies follow all applicable labor laws in their country of operation. But it was revealed to consumers in the United States that the tin was mined from companies in Indonesia that use child labor. Moreover, during the mining process, laborers as young as 12 years old were subject to the hazards of unstable soil. US consumers were appalled.

To address the issue, Apple instituted more robust labor practices, which were communicated to consumers. In a statement, Apple said, “the simplest course of action would be for Apple to unilaterally refuse any tin from Indonesian mines. That would be easy for us to do and would certainly shield us from criticism. But that would also be the lazy and cowardly path, since it would do nothing to improve the situation. We have chosen to stay engaged and attempt to drive changes on the ground.”^[5] For improved transparency, Apple has released annual reports that include details of its work with suppliers and their labor practices. Recent investigations have shown some improvements to the working conditions of the employees of Apple’s suppliers. However, the company still faces some criticism.

Volunteerism

Many companies are encouraging volunteerism by incorporating it into their policies and establishing employee volunteer programs. For example, some companies make a donation to the charities their employees volunteer at, in the amount equivalent to the employees’ regular pay for the same number of hours volunteered. Other companies offer gift cards to employees who volunteer. Companies are finding creative ways to encourage and reward the volunteerism of employees not only to help society and the environment but also so that consumers and stakeholders will perceive them as socially responsible.

1. Environment

This area involves the environmental aspects of production, covering pollution control in the conduct of business operations, prevention or repair of damage to the environment resulting from processing of natural resources and the conservation of natural resources.

Corporate social objectives are to be found in the abatement of the negative external social effects of industrial production, and adopting more efficient technologies to minimize the use of irreplaceable resources and the production of waste.

2. Energy

This area covers conservation of energy in the conduct of business operations and increasing the energy efficiency of the company’s products.

3. Fair Business Practices

This area concerns the relationship of the company to special interest groups.

In particular it deals with:

• Employment of minorities
• Advancement of minorities
• Employment of women
• Employment of other special interest groups
• Support for minority businesses
• Socially responsible practices abroad.

4. Human Resources

This area concerns the impact of organizational activities on the people who constitute the human resources of the organization.

These activities include:

• Recruiting practices
• Training programs
• Experience building -job rotation
• Job enrichment
• Wage and salary levels
• Fringe benefit plans
• Congruence of employee and organizational goals
• Mutual trust and confidence
• Job security, stability of workforce, layoff and recall practices
• Transfer and promotion policies
• Occupational health

5. Community Development

This area involves community activities, health-related activities, education and the arts and other community activity disclosures.

6. Products

This area concerns the qualitative aspects of the products, for example their utility, life- durability, safety and serviceability, as well as their effect on pollution. Moreover, it includes customer satisfaction, truthfulness in advertising, completeness and clarity of labelling and packaging. Many of these considerations are important already from a marketing point of view. It is clear, however, that the social responsibility aspect of the product contribution extends beyond what is advantageous from a marketing angle.

1. Environmental Corporate Social Responsibility

One of the most common forms of corporate social responsibility, a number of companies focus their CSR efforts towards reducing their impact on the environment.

Whilst some UK businesses are now obliged by law to report on their greenhouse gas emissions, many others that are not required to are also beginning to address cutting their carbon footprint.

Though harmful effects on the environment were once dismissed as a necessary and unavoidable cost of doing business, pollution and excessive consumption of resources now also pose a social and political concern on a global level.

For this reason, environmental CSR has taken off, with many companies now prioritising the impact that their business has on the environment.

Broadly, environmental CSR tends to focus on a business cutting down its greenhouse gas emissions and waste. This involves re-evaluation of a business’s production processes in order to identify wasteful acts and cut these from the company’s business plan.

Example of Environmental Corporate Social Responsibility

One example of a business focusing on environmental responsibility in their CSR strategy is Unilever.

The UK’s largest deodorant manufacturer, in 2014 Unilever began compressing the cans of their deodorants, cutting the carbon footprint of each aerosol spray by 25% per can.

The business achieved this by using 50% less propellant gas and 25% less aluminium. The deodorants still last the same length of time as the older designs, however are half the size, meaning that 53% more cans fit into pallets and therefore fewer lorries are required, meaning a cut in transport emissions too.

In addressing everything from the product design phase to shipping, Unilever have cut their costs in addition to their impact on the environment.

2. Ethical Corporate Social Responsibility

Ethical corporate social responsibility programmes focus on ensuring that all stakeholders in a business receive fair treatment, from employees to customers.

Ethical responsibilities are self enforced initiatives that a company puts in place because they believe it is the morally correct thing to do rather than out of any obligation. Businesses consider how stakeholders will be affected by their activity and work to have the most positive impact.

Whilst economic and legal responsibilities are the primary concerns of a company, after addressing these fundamental requirements businesses can then begin to focus on their ethical responsibilities.

Ethical CSR initiatives are intended to enforce fairer treatment for all employees, with common examples including paying higher wages, offering jobs to those who might otherwise struggle to find work, ensuring that decent standards are maintained in factories and refusing to partner in business with unscrupulous businesses or oppressive countries.

Ethical CSR considers every level of the supply chain, including employees who may not be directly working for the business. For example, CSR programmes might be in place to ensure that people producing clothes for a company receive fair treatment, or to prevent small scale farmers from being exploited by offering fair payment for their crops.

Though sometimes difficult to enforce, these programmes are intended to help ensure that employees, customers, shareholders and all other stakeholders get the fairest deal possible.

Ethical CSR Company Example:

Cosmetics company Lush is known for its global campaigning against animal testing and strong ethical initiatives. Alongside the annual Lush Prize which fuels innovation of anti-testing methods, Lush has been dedicated to operating fair and direct trade.

The company consistently sources ingredients from producers directly, allowing them to ensure that their suppliers’ working conditions are dignified and they receive fair prices for their products.

Doing so also allows the company to ensure they source the safest and most suitable raw materials for their products, ensuring that consumers receive the best quality cosmetics.

The company also insists that their suppliers do not support child labour. If their producers become aware of any child labour, they are expected to support the child back into education through a training and transition programme.

Placing ethics above profits, the company has continued to partner with sustainable suppliers, working with them from the ground up to establish solid long-term relationships.

3. Philanthropic Corporate Social Responsibility

Philanthropic social responsibilities go beyond simply operating as ethically as possible and involve actively bettering society. This type of corporate social responsibility is frequently associated with donating money to charities, with many businesses supporting particular charities that are relevant to their business in some way.

However, philanthropic CSR does not only refer to charity donations. Other common philanthropic responsibilities include investing in the community or participating in local projects. The main intention is to support a community in some way that goes beyond just hiring.

By investing in the community, the business encourages loyalty from employees whilst benefiting from an improved support system. Corporate philanthropy also serves as a way of representing a company’s commitment to society, demonstrating that they value the community beyond simply providing a workforce or source of revenue.

For example, businesses might offer their employees the opportunity to volunteer with local charities during working hours or through matching gift programmes where workers’ donations to charities are matched by the company.

Philanthropic CSR Company Example:

Google is well known for its corporate philanthropy, running multiple charity programmes through Google.org that have provided over $100 million in grants and investments.

The company carries out a volunteer programme which allows employees to dedicate up to 20 hours of work time to volunteering in their communities each year.

In addition, Google has a matching gift programme in place where donations made by employees that are between $50 and $12,000 are matched at a 1:1 ratio.

However, beyond these programs, Google has carried out numerous initiatives focusing on improving particular regions. One such example of this is their work with Learning Equality towards making digital content accessible online in order to allow students without the internet to have better access to learning resources.

By making materials available through a cloud library, Google hopes to help contribute to reducing the gap between disadvantaged communities in India, Latin America and Africa and countries with better access to technology.

With the company’s motto being ‘You can make money without doing evil’, it makes sense that Google is known for its philanthropy, having a track record of meeting the interests of its stakeholders and their communities.

A CSR, corporate social responsibility or sustainability report is a periodical (usually annual) report published by companies with the goal of sharing their corporate social responsibility actions and results.

According to the Global Reporting Initiative, a CSR report can be defined as:

“A sustainability report is a report published by a company or organization about the economic, environmental and social impacts caused by its everyday activities. A sustainability report also presents the organization’s values and governance model, and demonstrates the link between its strategy and its commitment to a sustainable global economy.”

The report synthesizes and makes public the information organizations decide to communicate regarding their commitments and actions in social and environmental areas. By doing so, organizations let stakeholders (i.e., all parties interested in their activities) aware of how they are integrating the principles of sustainable development into their everyday operations.

Purpose of a CSR Report

The main intention of a CSR or sustainability report is to improve the transparency of organizations’ activities. The goal is twofold:

On one hand, CSR reports aim to enable companies to measure the impact of their activities on the environment, on society and on the economy (the famous triple-bottom-line). In this way, companies can get accurate and insightful data which will help them improve their processes and have a more positive impact in society and in the world.

On the other hand, a CSR or sustainability report also allows companies to externally communicate with their stakeholders what are their goals regarding sustainable development and CSR. This allows stakeholders such as employees, investors, media, NGOs, among other interested parties, to get to know better what are the short, medium and long-term goals of companies and make more informed decisions. These decisions can spread from investing in a business, buying its products, writing positive (or negative) reviews, protesting in the streets against the intentions or actions of an organization.

Important

As discussed above, CSR and sustainability reports can be used to achieve both internal and/or external goals.

The Internal Organizational Benefits of a Sustainability Report

Internally speaking, CSR reports are important because they allow companies to estimate the impact their operations have on the environment, society, and the economy. Through the (supposedly) detailed and meaningful data collected (or simply gathered) for the sustainability report, companies have a chance to improve their operations and to reduce operational costs. Not only do they become better prepared to optimize and reduce their energy consumption; as a result of reviewing their waste cycles product innovation strategies or circular economy opportunities can be found.

At the same time, collecting this data requires joint efforts from different departments. As a result of the hype that’s created, employees often end up becoming more conscious the company is focusing on CSR and sustainability, which leaves them proud increasing employee retention and decreasing turnover (and its costs). It’s good news for employer branding.

The External Organizational Benefits of a Sustainability Report

When it comes to external benefits, a CSR and sustainability report can help companies engage better with their interested parties. By letting their stakeholders know about the organization’s short, medium and long-term project decisions, companies can be better understood which may have positive financial outputs.

For instance, a sustainability report helps stakeholders become aware of whether a company is positively contributing to minimizing the negative impacts of an environmental hazard or that it is only focused on growing profits for its managers and investors. Silence is also a way of communication and if no sustainability report is found the odds are people will focus on the second option just mentioned.

In this way, consumers can decide whether they want to buy from a brand that protects orangutans by sourcing sustainable palm oil or one that produces clothes locally with little environmental harm and paying fair wages. Investors can anticipate if companies are becoming more resilient to face consequences of climate change and decide whether to invest in them or not. Journalists can share best case practices from companies leading the way on topics such as microplastics pollution or ocean acidification. NGOs can exert pressure and expose irresponsible practices.