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Corporate Social Responsibility (CSR) and Sustainability

Corporate Social Responsibility (CSR) Definition - What Is CSR?

Definition: Corporate Social Responsibility (CSR) refers to operating a business in a manner that accounts for the social and environmental impact created by the business.Corporate Social Responsibility CSR policy functions as a built-in, self-regulating mechanism whereby businesses monitors and ensures its active compliance with the spirit of the law, ethical standards, and international norms. The goal of Corporate Social Responsibility is to embrace responsibility for the company's actions and encourage a positive impact through its activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere. (wiki) This defines social responsibility.

Sounds straight forward? Business social responsibility is not that easy. What is Corporate Social Responsibility really? The problem with corporate social responsibility (CSR) is that nobody is very clear about what exactly it encompasses. Several governments have been trying to make it mandatory for companies to spend at least 2% of net profits on Corporate Social Responsibility. Facing strong criticism, they gave up the effort and made the spending voluntary. But the debate continues. (Chart from Wiki)

If the proposed rule had come into play, the government would have had to spell out what constitutes CSR and social responsibility definition. That would have gone some way in removing the vagueness that exists about the term. Today, CSR to some companies means providing lunch to employees. To others, it's about tackling global warming and environmental issues.

In the 2009 guidelines were released and noted that though  business sector has generated wealth for shareholders for decades, it continues to grapple with problems of poverty, unemployment, illiteracy and malnutrition. While the government undertakes extensive developmental initiatives through a series of sectoral programs, the business sector also needs to take the responsibility of exhibiting socially responsible business practices that ensure the distribution of wealth and the well-being of the communities in which the business operates.

A report from global accounting and consulting firm Grant Thornton that used data collected in late 2010 and 2011 noted that CSR activities across the world have increased dramatically in recent years as "businesses realize their value not only commercially, but also in terms of boosting employee value, attracting staff and cutting costs." Incidentally, "Saving the planet" came in sixth in the survey of drivers of CSR. The Grant Thornton International Business Report was launched in 1992 and now covers over 11,000 respondents per year in 39 economies.

Despite this seemingly irreconcilable divergence, some management thinkers feel a meeting of minds is possible. In a 2006 Harvard Business Review article titled, "The Link between Competitive Advantage and CSR," authors Michael E. Porter and Mark R. Kramer argue that creating shared value (CSV) should take precedence over CSR. "CSV should supersede CSR in guiding the investments of companies in their communities," they wrote. "CSR programs focus mostly on reputation and have only a limited connection to the business, making them hard to justify and maintain over the long run. In contrast, CSV is integral to a company's profitability and competitive position. It leverages the unique expertise and resources of the company to create economic value by creating social value."

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