Drivers of Corporate Social Responsibility

Drivers of Corporate Social Responsibility

If India wants to attract more FDI for developing business, it is essential that it should review its business practices and see that it does not create externalities.

While being quality conscious in manufacturing products or delivering services businesses should develop systems and processes which contribute towards preserving the environment, protecting human rights, avoiding corrupt practices, and promoting transparency & accountability for developing sustainability.

Major Drivers of Corporate Social Responsibility (CSR)

• Meeting Changing Expectations of Stakeholders
  
• Shrinking Role of Government
  
• Increased Customer Interest
  
• More Competitive Labour Markets
  
• Increasing Supply Chain Responsibility
  
• Growing Investor Pressure
  
• Demands for Increased Disclosure
  
• New and Emerging Issues

Meeting Changing Expectations of Stakeholders

Various stakeholders are increasingly looking to the private sector to help them with myriad complex and pressing social and economic issues.

There is a growing ability and sophistication of activist groups to target corporations they perceive as not being socially responsible, through actions such as public demonstrations, shareholder resolutions, and even “denial of service” attacks on company websites. These efforts emphasise the issue of accountability to stakeholders when doing business (BSR 2001).

Shrinking Role of Government

In many countries, national and local governments have taken a more hands-off approach to regulating business, due to the globalisation of commerce and shrinking resources.

As a result, companies and multinational companies in particular are relying less on government for guidance, and instead, adopting their own policies to govern such matters as environmental performance, working conditions and ethical marketing practices (BSR 2001).

Increased Customer Interest

The growing interest in CSR comes from both business-to-business customers and consumers. In the former, there is a significant move by many companies, governments, universities and other institutions to align their purchasing decisions with social criteria, particularly those related to companies’ environmental and human rights performance.

Example: Corporates like Tata’s and L&T have developed a policy to purchase recycled paper. Starbucks Coffee sources coffee beans from fair trade labelled suppliers.

More Competitive Labour Markets

In a tight labour market, many workers especially professional, technical or highly skilled employees are looking beyond pay checks and benefits to seek employers whose philosophies and operating practices align with their own beliefs.

Example: Some companies have found that having “family friendly” policies or being identified as an employer of choice have given them a competitive advantage in attracting and retaining employees.

At the same time, companies are finding that they need to turn to non-traditional labour pools – including economically disadvantaged, non-English-speaking, and physically or mentally challenged individuals – to meet current and future demands for both skilled and entry-level employees (BSR 2001).

Increasing Supply Chain Responsibility

As stakeholders take a growing interest in companies’ corporate social responsibility, many companies are finding that they are responsible not only for their own CSR performance, but for that of the companies “upstream” and “downstream” – that is, a company’s suppliers as well as its customers.

The result is that some companies are imposing codes of conduct on both their suppliers and customers to ensure that other companies’ policies or practices do not reflect unfavourably on them. This has a cascading effect along the entire supply chain, encouraging suppliers to adopt socially responsible business practices (BSR 2001).

Example: Toyota has designed a manual of CSR for its suppliers, which they are supposed to adhere to.

Growing Investor Pressure

The growth of socially responsible investing has accelerated in recent years, with investor groups increasingly pressurising companies on social issues.

Many of these investors are using the shareholder resolution process to pressurise companies to change policies and increase disclosure on a wide range of CSR issues, including environmental responsibility, workplace policies, community involvement, human rights practices, ethical decision-making and corporate governance.

Activist groups are also buying shares in targeted companies to give them access to annual meetings and the shareholder resolution process (BSR 2001).

Demands for Increased Disclosure

Customers, investors, regulators, community groups, environmental activists, trading partners and others are asking companies for more and more detailed information about their social performance.

In response, leadership companies are responding with a variety of reports and/or social audits that describe and disclose their social performance on one or several fronts.

As part of this move toward greater disclosure, many companies are putting increasingly detailed information about their social and environmental performance – even when it may be negative – onto their publicly accessible websites (BSR 2001).

New and Emerging Issues

Recent years have seen growth in the breadth of topics considered under the “corporate social responsibility” umbrella.

Included among these are corporate governance issues, such as how boards of directors are chosen and compensated; religious freedom in the workplace; “cyber ethics” issues of access to and privacy linked to information technology, both for consumers and employees; consumer concern over the use of genetically modified organisms in agriculture; and the new demands brought about by the increased interest in environmental sustainability (BSR 2001).