Corporate Social Responsibility

CORPORATE SOCIAL RESPONSIBILITY

Prepared for: Mrs Sadaf Siraj

Prepared by: Abhishek Sachan (IB-02) Neeraj Sharma (IB-17) Prashant Rampuria (IB-29) Kawanlpreet Singh (IB-47) Jimmy Aggarwal (IB-61)

29-September-2008

1

Acknowledgements It is a great opportunity for all of us to work on the topic Corporate Social Responsibility. We are extremely grateful to those who have shared their expertise and knowledge with us and without whom the completion of this presentation report would have been virtually impossible. We would like to thank our subject teacher Mrs. Sadaf Siraj who has been a constant source of inspiration for us during the completion of this presentation report. She gave us invaluable inputs during our endeavor to complete this report. We are also extremely grateful to Mr. Amit Gupta, Asst. Manager Adani Energy, to have given us this opportunity to gain valuable insights into the CSR. We are indebted to all those who have kept our spirits surging and helped us in delivering our best.

Abhishek Sachan (IB-02) Neeraj Sharma (IB-17) Prashant Rampuria (IB-29) Kawanlpreet Singh (IB-47) Jimmy Aggarwal (IB-61) Asia Pacific Institute of Management PGDM (IB), 2008-10

2

CONTENTS 1. Summary

4

2. Introduction

5

3. Development

5

4. Areas on which organization are taking initiatives •

Health

•

Education

•

Livelihood advancement business school

6

6

4. Potential Business Benefits

6

5. The business benefits by CSR for a company

7

 In human resource

7

 In risk management

7

 Brand differentiation

7

 License to operate

8

6. Examples of CSR

8

 At international level  In India 7. The four concepts of Social Responsibilities

9

 Stake holder responsibility

10

 Profit responsibility

11

 Cause marketing

12

 Green marketing

15

8. Bibliography

18

List of Illustrations 3

1. Illustration 1: Concept of CSR

4

Summary Corporate social responsibility means whereby organisation consider the interest of the society by taking responsibility for the impact of their activities on the stakeholders, environment & future generation. The following are the possible Benefits of CSR:  Goodwill.  Branding.  Improved Perception about Company. Concept of CSR There are four concept of CSR. The concept of CSR can be explained through a diagram:

CSR

STAKEHOLDER RESPONSIBILITY

PROFIT RESPONSIBILITY

CAUSE MARKETING

GREEN MARKETING

ILLUSTRATION 1: Concept of CSR

4

Corporate social responsibility Introduction CSR(corporate social responsibility) is a concept in which organizations consider the interests of society by taking responsibility for the impact of their activities on customers, suppliers, employees, shareholders, communities other stakeholders, future generation and on environment. The organizations voluntarily taking advance steps to improve the quality of life for employees and their families as well as for the local community and society. There are so much debate and criticism on CSR. Proponents argue that there is a strong business case for CSR, in that corporations benefit in multiple ways in long term run with high profits. Critics argue that CSR distracts from the fundamental economic role of businesses; others argue that it is an eye wash by big organizations; some other says by this governments watch as a watchdog over powerful multinational corporations

Development The term CSR came in to common use in the early 1970s firstly it was taken as corporate stake holder responsibility. The term stakeholder, meaning those impacted by an organization's activities, it was used to describe corporate owners beyond shareholders from around 1989. An approach for CSR that is becoming more widely accepted is community-based development projects, such as the Shell Foundation's involvement in the Flower Valley, South Africa. Here they have set up an Early Learning Centre to help educate the community's children, as well as develop new skills for the adults. Marks and Spencer is also active in this community through the building of a trade network with the community - guaranteeing regular fair trade purchases. Some other approaches of CSR is the establishment of education facilities for adults, as well as HIV/AIDS education programmers. The majority of these CSR projects are established in Africa. A general approach of CSR is giving aid to local organizations and impoverished 5

communities in developing countries. Some organizations do not like this approach as it does not help build on the skills of the local people, whereas community-based development generally leads to more sustainable development.

Areas on which organization are taking initiatives An essential component of corporate social responsibility is to care for the community. Organizations take initiative to make a positive contribution to the underprivileged communities by supporting a wide range of socio-economic, educational and health initiatives. HEALTH: Health has identified as a primary objective in the community development process. As a part of the healthcare initiatives weekly clinics, counselling sessions, health camps are regularly held to promote general health in the community. The health threats in the community are too many and in order to treat some minor ailments and casualties, community members have identified and are learning to treat minor ailments. EDUCATION: Education too has been a primary focus area for the organizations, and a number of initiatives have been designed to promote non-formal education in the community. Akanksha, a non governmental organization that focuses on developing strong educational foundations, deep sense of self-esteem and facilitates fun activities for underprivileged children has been identified to facilitate education and awareness. PMC schools have been given computers to promote IT education in the neighbouring area of Chandan Nagar. LIVELIHOOD ADVANCEMENT BUSINESS SCHOOL (LABS): A unique program to create more opportunities for less privileged youth. Pune Corporate Consortium for LABS was inaugurated on April 4, 2006. LABS, a flagship program of Dr. Reddy’s Foundation (DRF), promotes customized programs for youth and women in the age group of 18-30 years from economically weaker sections of society, and empowers them to gain access to opportunities for sustainable livelihoods and growth in the New Economy.

Potential business benefits

6

Corporate Social Responsibility (CSR) agenda of a corporation shows of its social conscience and commitments to the community and society in which it operates. It is not viewed as a liability on corporate resources. More and more Companies have increasingly realized that it is an investment with multiple benefits for the corporate sector. Various empirical research findings clearly pointing to a strong positive correlation between CSR and corporate profitability have further provided the impetus. There are a lot of potential benefits of CSR for any organization. The scale and nature of the benefits of CSR for an organization is different and depending on the nature of the enterprise. It is difficult to quantify. However, businesses may not be looking at short-run financial returns when developing their CSR strategy. The definition of CSR used within an organization can change from the strict "stakeholder impacts". CSR may be based within the human resources, business development or public relations departments of an organization.

The business benefits by CSR for a company In Human resources Any organization can take CSR programme on recruitment and retention.mainly in the competitive graduate student market. Potential recruits often ask about a firm's CSR policy during an interview, and having a comprehensive policy can give an advantage to organization. CSR can also help to improve the way of thinking of a company among its staff. In Risk management Risk Management is a central part of many corporate strategies. The Reputations that take decades to build up can be ruined in hours through incidents such as corruption scandals or environmental accidents. These events can also draw unwanted attention from regulators, courts, governments and media. Building a genuine culture of 'doing the right thing' within a corporation can decrease these risks. Brand differentiation

7

In crowded marketplaces where competition is very high, companies looks for a unique selling proposition which can separate them from the competition in the minds of consumers. CSR can play a role in building customer loyalty based on ethical values. Several major brands, such as The Co-operative Group and The Body Shop are built on ethical values. Business service organizations can take benefit from building a reputation for integrity and best practice. License to operate Corporations are keen to avoid interference in their business through taxation or regulations. By taking right voluntary steps, they can persuade governments and the wider public that they are taking issues such as health and safety, diversity or the environment seriously, and in this way they can avoid intervention. And organization can improve its profit.

Examples of CSR There are a lot of organizations which are deeply involved in corporate social responsibility.

At international level The biggest example of this is Gramin bank in Bangladesh. It is the world’s great example of CSR. Automobile giant FORD-This organization is providing health care programme for deprived children since 1957 and also concerned about the women health programme. Microsoft group-this group is working at international level for education programme for all society and basically in rural areas. Steel maker Andrew Carnegie is contributing in education and charity.

In India Tata group is most benevolent organization who is very focussed for welfare of society from very initial. They are working at a great scale they are working on these areas •

Child health care

8

•

Women education

•

Working groups of women

•

Environment issues such as global warming

Mahindra’s - They provided hearing aid to nearly deaf child. The Zensar Foundation has been working with various NGOs on multiple social programs for Pune. It is associated with NGOs such as NFBM Jagruti School for blind girls, Surajya Sarwangeen Sewa Sanstha, Sahitya Rangabhoomi Pratishthan, Saathi, Kagad Kach Patra Kashtakari Panchayat, Maher etc for development and social benefit. Adani group is operating a school for deprived children at Ahmedabad. Other Initiatives: The Tsunami Relief operation at Zensar was an outstanding success story of solidarity and support. The overwhelming response to the appeal of employees donating a day’s salary went on to building a Tsunami Relief fund which is being used for a sustained three-year Tsunami Rehabilitation Program. Through the Centre for Youth Development Activities (CYDA) the fund is being utilized to support the education of 120 students from Nagapattinam who were worst affected by the calamity ITC group has introduced e-choupal in remote areas to improve education condition. Hindustan lever limited initiated Shakti group for women.

Four concepts of social responsibility 1. Stakeholder Responsibility 2. Profit Responsibility

3. Cause Marketing 4. Green Marketing

9

Stake Holder Responsibility Stakeholders A person, group, organisation, or system who affects or can be affected by an organisation’s actions.

Types of stakeholders Internal stakeholders: Shareholders: Shareholders are owners of a particular company's Stock or of a Mutual Fund. The unit of ownership is called a share Employees: Any person providing paid or volunteer services for a certifying agent. Management : Management comprises planning, organizing, resourcing, leading or directing, and controlling an organization (a group of one or more people or entities) or effort for the purpose of accomplishing a goal.

External stakeholders: Consumers: are individuals, households, organisations, institutions, resellers and governments that purchase the products offered by other organisations. Suppliers: Individuals or businesses that provide resources needed by a company in order to produce goods and services. Creditors: Individuals or corporations that have supplied credit (lent money) to a firm. Competitors: individuals or species that each requires the same limited resource to survive. Community: Group of people sharing a common understanding who reveal themselves by using the same language, manners, tradition and law.

Responsibilities of Stakeholders The stakeholder responsibilities often involve moral and citizenship duties requiring collective action. In general the responsibilities of stakeholders separate into four general categories: 1. With the firm 2. Among stakeholders themselves

10

3. Common pool resources (especially nature) 4. The commonwealth A stakeholder must consider proper conduct.

The most obvious instances of stakeholder responsibility involves The global natural environment – environmental protection The global labour standards – minimum wages, working hours Basic human rights – right to live, follow religion, choose occupation etc.

Corporate stakeholder responsibility requires Procedural justice integrating the values of them into the development and implementation of a firm’s strategy.The stakeholders are integrated in the strategic processes by either providing or receiving benefits or providing or bearing risks. Distributive justice Acknowledges that all stakeholders who make (voluntarily or not) firm-specific investments either by providing benefit or bearing risks should have the right to the residual claim analogous to the shareholders’ firm-specific investment and their right of residual claim based on their risk bearing function.

Profit Responsibility An organisation work with profit motive. An organisation works within a society & needs to check the impacts of its activities on the society. It cannot work in isolation & hence also need to work for the welfare of the society. But this does not mean that it invest all its profit for the benefit of the society. It is not a Philanthropy organisation which can give away its profits for Charity. Hence an organisation undertaking CSR activities need not to work philanthropy.

11

Cause Marketing Cause-related marketing (CRM) is defined as the public association of a for-profit company with a nonprofit organization, intended to promote the company's product or service and to raise money for the nonprofit. CRM is generally considered to be distinct from corporate philanthropy because the corporate dollars involved in CRM are not outright gifts to a nonprofit organization, hence not tax-deductible. Cause-related marketing was first used by American Express in 1983 to describe its campaign to raise money for the restoration of the Statue of Liberty. American Express made a one-cent donation to the Statue of Liberty every time someone used its charge card; the number of new card holders soon grew by 45%, and card usage increased by 28%. Cause marketing is about businesses supporting social causes they believe in to connect with their customers. Companies, big and small, are using it as a tool to win customers and their loyalties, to present themselves as a responsible organizations, to boost employee morale and loyalty, and, of course, to generate funds for social causes. Getting associated with a cause through popular non-profit organizations gives them free publicity and increased sales-not to mention a tax-deductible expense.

Cause marketing principles, cautions, and trends: There are seven principles about cause marketing as following – 1. Unbalanced - Having a cause-marketing relationship that is too one sided, selfserving, and/or commercial. 2. Dishonest - Having advertising that is not sincere, honest, or gives the perception of non-profit endorsement and not handling criticism with open and honest communication. 3. Evasive - No managing expectations on both sides. Be aware of and clearly explain what you can and can’t deliver to your corporate partner. Ensure your own internal team understands what is and isn’t being achieved by a cause-marketing relationship. 4. Jeopardize - Not protecting the integrity of the organization’s brand and visual identity. Non-profits must take care as to use of logo, wording, and approach. 5. Disrespectful - Not recognizing those nonprofits have valuable assets to contribute and must receive compensation to reflect this value.

12

6. Carelessness - Not doing due diligence, risk assessment, receiving

institution wide

support and ensuring you fulfil best practices (Better Business Bureau) and any legal requirements. 7. Insincere - Not working with a corporation that walks the talk. The program must be part of larger corporate citizenship.

Types of cause marketing  Product, service, or transaction specific  Promotion of a common message  Product licensing, endorsements, and certifications  Local partnerships  Employee service programs

In their efforts to diversify and enhance their funding base nonprofits have embraced CRM. The practice has evolved to include a wide range of activities from simple agreements to donate a percentage of the purchase price for a particular item or items to a charity for a specific project, to longer, more complex arrangements. Corporations too have been drawn to CRM due to the competition of the expanding global marketplace and the need to develop brand loyalty. CRM has become a controversial topic among grant seekers, as nonprofits entering into CRM activities debate the ethics of lending their name and reputation to corporations. Some of the common criticisms of CRM are that it undermines traditional philanthropy, that nonprofits are changing their programs in order to attract CRM dollars and that only well-established, noncontroversial causes can attract CRM dollars.

Benefits:  The possible benefits of cause marketing for nonprofit organizations include an increased ability to promote the nonprofit organization's cause via the greater financial resources of a business, and an increased ability to reach possible supporters through a company's customer base.

13

 The possible benefits of cause marketing for business include positive public relations, improved customer relations and additional marketing opportunities.

Examples: • Mercedes-Benz is selling Sedan model to raise funds for Sakes Fifth Avenues key to the cure, a women’s cancer initiative developed in partnership with the Entertainment Industry Foundations Women Cancer Research Fund. Mercedes-Benz expects to contribute $1million through the sale of these vehicles. The campaign urges consumers to by a car, yet pollutants found in car exhaust have been linked to breast cancer.

• One example of cause-marketing would be the partnership of Yoplait's "Save Lids to Save Lives" campaign in support of the Susan G. Komen Breast Cancer Foundation. The company packages specific products with a pink lid that consumers turn in, and in turn Yoplait donates 10 cents for each lid.

• An example of a nonprofit certification of a product (business) includes the American Heart Association's stamp of approval on Cheerios, the popular breakfast cereal. •

Launched in early 2006, Product Red is an example of one the largest cause-related marketing campaigns to date given the number of companies and organizations involved as participants as well as its reach worldwide. It is also an example of a cause marketing campaign that is also a brand on its own. Product Red was created to support The Global Fund to Fight AIDS, Tuberculosis & Malaria (The Global Fund) and includes companies such as Apple Computer, Motorola, Giorgio Armani, and The Gap as participants

14

Green Marketing Green marketing involves developing and promoting products and services that satisfy customer's want and need for Quality, Performance, Affordable Pricing and Convenience without having a detrimental input on the environment.

Evolution of Green Marketing The green marketing has evolved over a period of time. According to Peattie (2001), the evolution of green marketing has three phases. They are:  "Ecological" green marketing - During this period all marketing activities were concerned to help environment problems and provide remedies for environmental problems.  "Environmental" green marketing - The focus shifted on clean technology that involved designing of innovative new products, which take care of pollution and waste issues.  "Sustainable" green marketing - It came into prominence in the late 1990s and early 2000.

Why Green Marketing? As resources are limited and human wants are unlimited, it is important for the marketers to utilize the resources efficiently without waste as well as to achieve the organization's objective. So green marketing is inevitable. There is growing interest among the consumers all over the world regarding protection of environment. Worldwide evidence indicates people are concerned about the environment and are changing their behaviour. As a result of this, green marketing has emerged which speaks for growing market for sustainable and socially responsible products and services. Companies that develop new and improved products and services with environment inputs in mind give themselves access to new markets, increase their profit sustainability, and enjoy a competitive advantage over the companies which are not concerned for the environment.

15

Adoption of Green Marketing There are basically five reasons for which a marketer should go for the adoption of green marketing. They are  Opportunities or competitive advantage  Corporate social responsibilities (CSR)  Government pressure  Competitive pressure  Cost or profit issues

4 P's of Green Marketing Every company has its own favourite marketing mix. Some have 4 P's and some have 7 P's of marketing mix. The 4 P's of green marketing are that of a conventional marketing but the challenge before marketers is to use 4 P's in an innovative manner. Product The ecological objectives in planning products are to reduce resource consumption and pollution and to increase conservation of scarce resources (Keller man, 1978). Price Price is a critical and important factor of green marketing mix. Most consumers will only be prepared to pay additional value if there is a perception of extra product value. This value may be improved performance, function, design, visual appeal, or taste. Green marketing should take all these facts into consideration while charging a premium price. Promotion There are three types of green advertising: Ads that address a relationship between a product/service and the biophysical environment (National Geographic, Discovery Channel, etc.) Ads that promote a green lifestyle by highlighting a product or service (Khadi Gram Udhyog) Ads that present a corporate image of environmental responsibility (ITC) Place The choice of where and when to make a product available will have significant impact on the customers. Very few customers will go out of their way to buy green products. 16

Strategies The marketing strategies for green marketing include:  Marketing Audit (including internal and external situation analysis)  Develop a marketing plan outlining strategies with regard to 4 P's  Implement marketing strategies  Plan results evaluation

Challenges Ahead •

Green products require renewable and recyclable material, which is costly.

•

Requires a technology, which requires huge investment in R & D.

•

Water treatment technology, which is too costly.

•

Majority of the people are not aware of green products and their uses.

•

Majority of the consumers are not willing to pay a premium for green products.

Some Cases  McDonald's restaurant's napkins, bags are made of recycled paper.  Coca-Cola pumped syrup directly from tank instead of plastic which saved 68 million pound/year.  Badarpur Thermal Power station of NTPC in Delhi is devising ways to utilize coalash that has been a major source of air and water pollution.  Barauni refinery of IOC is taken steps for restricting air and water pollutants.

Conclusion Green marketing should not neglect the economic aspect of marketing. Marketers need to understand the implications of green marketing. If a marketer think customers are not concerned about environmental issues or will not pay a premium for products that are more eco-responsible, then he must think again. He must find an opportunity to enhance his product's performance and strengthen his customer's loyalty and command a higher price. Green marketing is still in its infancy and a lot of research is to be done on green marketing to fully explore its potential. 17

Bibliography Web link

http://www.wikipedia.org/ http://www.coolavenues.com/know/mktg/sanjit-green-marketing-1.php Both sites accessed during September, 2008 Print media India today, March 2008. Economics times, 17-April-2007. Energy beats by Adani group, May 2008. The Times of India, 17 August, 2008.

18