Explain the Corporate Social Responsibility


Corporate Social Responsibility or CSR refers to a business practice that includes the initiatives taken by the organization for the benefit of the society. In other words, it is the initiatives taken by the organizations to assess & take responsibility for effects on the society & environment due to the operation of the company. Every organization has responsibilities toward the different stakeholder of society. There are two types of stakeholder in the company i.e. primary stakeholders and secondary stakeholders.  Primary stakeholders have a direct stake in the organization and its success and the examples of primary stakeholders are shareholders, investors, employees, suppliers, business partner etc. Secondary stakeholders have indirect stake in the organization and the most common example of secondary stakeholders are government bodies, civic institutions, social pressure groups etc.

Corporate Social Responsibility
 
The companies act, 2013 has mandated companies the formulate the Corporate social responsibility policy and spend at least 2 percent of its average net profits if the company has net worth of Rs. 500 Crores or more, turnover of 1000 Crores or more, or net profit of 5 Crores or more during a year. 

There are two theories that help us in the understanding of the different corporate social responsibilities associated with the organization.

•    The pyramid of corporate social responsibility
•    Triple Bottom Line

Let’s us discuss both of them in details.

1.    The pyramid of corporate social responsibility


The Carroll’s pyramid of corporate social responsibility is a four-layered model and it is called the pyramid of responsibilities.  These responsibilities are explained below.

Corporate Social Responsibility


•  Economic Responsibilities: The main responsibility of any organization is to gain profit. If the organization is not able to gain profit then it will not sustain for the longer time.

•  Legal Responsibilities: Company must obey all the laws of the country related to its activities where it is operational. It includes labor law, environment law etc.

•  Ethical Responsibilities: Company must do below mention activities in order to obey the ethical responsibilities like paying fair wages to the employees, refusing business with oppressive countries, try to use only those resources that are environment-friendly etc.

•    Philanthropic Responsibilities: Under this responsibility, the company can contribute toward the society like engaging in projects to aid the environment, donate some money to charitable trust etc.

2.    What is the Triple Bottom Line?


Triple Bottom line or TBL is the accounting framework that encourages the overall assessment of the company’s CSR activities on the basis of three parameters and the three parameters are Social (People), Environmental (Planet), & Financial (Profit). Triple Bottom Line or TBL was found by John Elkington in 1994.
 
Corporate Social Responsibility


Explanations of the 3P of the triple bottom line are as follows

•  Social (People): It refers to fair & beneficial business practices for the welfare of people, communities & region where an organization conducts business. Social measures refer to the social dimension of the community & include the measurement of education, quality of life, health & well being, unemployment rate, violent crimes per capita, relative poverty, median household income etc.

•  Environment (Planet): It refers to the sustainable environment practices. The organization must try to avoid all those activities that may impact our environment. If the organization is not able to do so, then organization must find out the solutions to reduce the impact as much as possible. Environmental measures includes air & water quality, energy consumption, natural resources, fossil fuel consumption, electricity consumption, solid waste management etc.

•  Financial (Profit): It refers to the economic value calculated by the organization after deducting the cost required for the operation. The main responsibility of any organization is to gain profit. If the organization is not able to gain profit then it will not sustain for the longer time. These measures deal with the flow of money. Specific examples are personal income, cost of unemployment, job growth, revenue contributing to state growth product.


Corporate social responsibilities Activities


•  The organization must provide fair wages, avoid the child labor and also take-care the safety of employees. Companies may provide the medical cards or insurance cards to take care of their health

•  Drive a campaign to educate our employees about the use the public transport if possible. Employees may share the personal vehicles with colleagues while commuting.

•  Plantation of trees at large scale in the society especially at manufacturing firms.

Corporate Social Responsibility


•  Climate change is also one of the major concerns of the world. The organization may drive a campaign to educate the employees & society about the drawback of climate change.

•  Organization may support the government for providing the education of youth. Companies can conduct the training programs to upgrade the skills of employees.

•  Use of less polluting & non-fossil fuel sources of energy like wind, solar etc. at the facilities. This would be one of the key corporate social responsibilities to minimize the carbon footprint.

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