Corporate social responsibility (CSR) has been termed also as corporate conscience. It has been described as a form of corporate self-regulation integrated into a business model which functions as a built-in, self-regulating mechanism whereby a business monitors and ensures its active compliance with the spirit of the law, ethical standards, and international norms.
It is hoped that this process not only helps a company to be more responsible in its actions but also encourages it to make a positive impact through its activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere.
It may be recalled that the term "corporate social responsibility" came into common use in the late 1960s and early 1970s when many multinational corporations adopted the term 'stakeholder', meaning those on whom an organisation's activities have an impact.
CSR is viewed as responsible corporate philanthropy. This includes monetary donations and aid given to local and non-local nonprofit organisations and communities, including donations in areas such as the arts, education, housing, health, social welfare, and the environment, among others, but excluding political contributions and commercial sponsorship of events. This philanthropy-based approach is encouraged to help build the skills of local populations, out of the belief that this will encourage community-based development and subsequently lead to more sustainable development.
Various methods are followed by business organisations to achieve their targets of CSR. One approach to CSR is to incorporate the CSR strategy directly into the business strategy of an organisation. Another approach is garnering increasing corporate responsibility interest. This is called Creating Shared Value (CSV). The shared value model is based on the idea that corporate success and social welfare are interdependent. A business, it is felt, needs a healthy, educated workforce and sustainable resources to compete effectively.
Some feel that CSR pits businesses against society, emphasising the costs and limitations of compliance with externally imposed social and environmental standards. In this context, they point out that CSV acknowledges trade-offs between short-term profitability and social or environmental goals. CSV, in that context, is seen as having a limitation in that it gives the impression that only two stakeholders are important - shareholders and consumers - and belies the multi-stakeholder approach of most CSR advocates.
It would be worthwhile to note here that some economists emphasise on a business taking responsibility for its actions. Social accounting, a concept describing the communication of social and environmental effects of a company's economic actions to particular interest groups within society and to society at large, has thus become an important element of CSR and corporate accountability.
Another dimension of CSR has also acquired importance for corporations. As corporations pursue growth through globalisation, they are encountering new challenges that impose limits to their growth and potential profits. Government regulations, tariffs, environmental restrictions and varying standards of what constitute "labour exploitation" are viewed as problems that can cost organisations millions of dollars. Accordingly, some within the corporate world view ethical issues as simply a costly hindrance. This sometimes encourages some companies to use CSR methodologies as a tactic to gain public support for their presence in global markets, helping them to sustain a competitive advantage by using their social contributions to provide a subconscious level of advertising.
Keen to avoid interference in their business through taxation or regulations, they now believe that by taking substantive voluntary steps, they can persuade governments and the wider public that they are interested in issues such as health and safety, diversity, and the environment. They want to convey that as good corporate citizens, they respect not only labour standards but also are careful about the possible impact of their activities on the environment. This, they believe, will raise their reputation with the public and the government.
Some critics however term such CSR efforts as corporate hypocrisy and insincerity and generally suggest that better governmental and international regulations and enforcement, rather than voluntary measures, are necessary to ensure that companies behave in a socially responsible manner.
The main principles of corporate social responsibility involve several dimensions - economic, legal, ethical and discretionary. On one side, a corporation needs to generate profits, while operating within the laws of the state. On the other, the corporation also needs to be ethical, but has the right to be discretional about the decisions it makes. Consequently, levels of corporate social responsiveness to an issue might include being reactive, defensive, responsive or interactive. All the above are issues that might affect management. One must not forget in this regard that selecting when and how to act can make a difference in the outcome of the action taken.
Non-governmental organisations (NGOs) today are taking on an increasing role, leveraging the power of the media and the Internet to increase their scrutiny and collective activism around corporate behaviour. Through education and dialogue, the development of community awareness in holding businesses responsible for their actions is growing. This is now sometimes described as the Creating Shared Value (CSV) concept.
CSR has inspired national governments to include CSR issues into their national public policy agendas. The increased importance driven by CSR has prompted governments to promote socially and environmentally responsible corporate practices. In recent years, the government of Bangladesh, guided by the initiatives of the Bangladesh Bank, has attempted to portray CSR as a public issue that requires national governmental involvement to address the very issues relevant to CSR. The heightened role of the government in CSR has facilitated the development of numerous CSR programmes and policies. The Bangladesh Bank and the government have cooperated to try and set the agenda for social responsibility by the way of regulations that will allow a business to conduct its activities more responsibly. This matrix now includes all these actors - government, corporations and civil society.
Increasingly, corporations are being motivated to become more socially responsible because their most important stakeholders - customers, consumers, investors (particularly institutional investors), and communities in the areas where the corporation operates its facilities, regulators, academics, and the media expect them to be so and address the social and community issues that are relevant to them.
Dr. Atiur Rahman, Governor Bangladesh Bank, has recognised that poverty-related deprivations in health, education and asset ownership are major causes of financial and social exclusion. It has also been identified that physical and mental disabilities, discrimination by gender, social disruptions from prolonged conflicts (the Chittagong Hill Tracts) are among other causes of financial and social exclusion. We need to remember in this regard that financial inclusion of the different sections of the population enhances growth potential and subsequently contributes towards the growth of the gross domestic product (GDP).
It is now widely acknowledged that CSR expenditures by banks and financial institutions and other important players from the corporate industrial sector through passive and one-off donations to voluntary/civil society organisations and their continued active involvement as a beneficiary can reduce these poverty-related deprivations. In particular, one needs to note here that some organisations are already receiving funding through CSR to assist in vocational training among the rural youth. This is enabling them to get employment in urban areas and also benefit from skilled expatriate employment, particularly in the Middle East and Malaysia. This in turn is proving to be an effective tool for development and is resulting in inclusive growth.
Social economists in Bangladesh and South Asia have quite correctly pointed out that CSR resources need to be particularly focused on techniques and technologies that will help to reduce environmental degradation. Community education towards this end will eventually ensure a better and sustained response to the effects of climate variability. CSR in Bangladesh should give attention towards improving in our rural hinterland and in our urban slums aspects related to basic hygiene, nutrition and sanitation. There should also be CSR participation in programmes that will enhance female leadership within the community and in the female population being able to move forward as small entrepreneurs.
There are many challenges that still exist regarding the proper functioning of CSR within our paradigm. This will need careful planning and the leadership for this need to come from within the financial and trading community. The different chambers of commerce, both at the central as well as the district levels, need to be associated with this process in an integrated manner. If this happens we will succeed.
