What is CSR?

'In a truly great company profits and cash flow become like blood and water to a healthy body: they are absolutely essential for life but they are not the very point of life.' - Jim Collins

I think this saying holds the true core of what corporate social responsibility is all about. Profits might be the life line of a company, but thats not all which makes it strong. Profits and financial returns do not strengthen a company alone, nor do they build a company's reputation. So what else is required for it's success? It's the drive to strive for not only the benefit of a company's owners, but also it's workers, it's customers,..all the people it affects and the environment also. This can be achieved if all economic, moral, legal, philanthropic and environmental responsibilities are properly fulfilled. All these things are the essence of CSR and it's values. They can lead a company to true levels of greatness. As Winston Churchill used to day, and I think it applies here as well,

'Responsibility is the price of greatness'

Corporate Social Responsibility has become a very important phenomenon in the corporate world nowadays. However, it really gained popularity in the early 21^st century, when numerous corporate scandals, frauds and the excessive negative impact of industrial activities on the environment came to the surface due to the heightened awareness amongst the people of the world.

The Global Financial crisis of 2007 is one of the prime examples of corporate greed and fraud.

According to the World Bank (2004), "CSR is the commitment of businesses to contribute to sustainable economic development working with employees, their families, the local community and society at large to improve their quality of life in ways that are both beneficial for business and good for international development."

CSR urges the corporate giants and businessmen to base their business activities along the ‘triple bottom line – profit, people and planet’. 

CSR forces corporations to not only be concerned with their financial returns but to also care about the people they affect. In short, a company must look after not only its shareholders but it’s stakeholders too. 

Pyramid of Corporate Social Responsibility:

What does it mean for a company to be socially responsible? What responsibilities is the entire idea of CSR encouraging?

In my opinion, it is best explained by Archie B. Carroll's pyramid of corporate social responsibility given below.

•  Economic responsibilities i-e a company’s first and foremost priority must be to be getting positive financial returns, making profits, minimizing costs etc. This is because if a business is not making money, the employees will probably lose their jobs. Furthermore, without money, the company will not be able to meet the rest of the responsibilities.
•  Legal responsibilities i-e a company must obey the laws, rules and regulations of the state. 
•  Ethical responsibilities i-e responsibilities that are not obligatory yet they are fulfilled because of moral value or because the owner might justify it as the right thing to do e.g environmental friendly activities, or paying fair wages to workers etc.
•  Philanthropic responsibilities i-e indulging in giving charities to the less fortunate, scholarships to students etc

CSR & Triple Bottom Line:

What is the Triple Bottom Line?

That is best explained by only three words - People, Planet & Profit!

The triple bottom line approach:

CSR urges corporate giants to work according to the triple bottom line. That means that company's must be concerned with their profits but at the same time they should also keep in consideration how they impact the people around them and whether their activities affect the planet in a harmful way or not.

The triple bottom-line is a wide set of economic, environmental and social parameters used to encourage and then observe how valuable a firm is as a corporate citizen. The concept basically gives us a mechanism to measure what value  businesses add to the world around them.
People:
The people that are basically affected by a firm's activities are the stakeholders so let us see who the stakeholders of a firm really are:

Planet:
What sorts of environmental responsibilities must businesses consider in CSR?

·         Ex Situ and In Situ conservation

·         Greenhouse gases and Global warming

·         Soil and water contamination

·         Treatment and reduction of waste water

·         Eco-efficiency

·         Recycling and reuse of materials

·         Protection of forest resources

·         Tree plantation

·         Reclaiming waste land

·         Proper disposal of waste products

Profit
Well, profits are the basis of any successful business and if you really think about it, a company will not be able to do any good if it is not getting any financial returns. No profits...no finances...no resources for raw materials... no raw materials, no products...no products, no earnings..no earnings, no employees and it goes on and on. Hence, a company first major concern must be a good financial base.

CSR: Good for People, Planet and Firms!

CSR is a very good thing and it can bring several benefits to businesses and the communities. It is important for businesses because it reaps several corporate benefits like building a strong corporate reputation, image and brand positioning. If the workers are kept happy, they will have high motivations and will work with more zeal for their employers which will cause better production. It also reduces risks. A good product reputation amongst people will increase attraction for investors. Furthermore, building strong community relationships with organizations and agencies that provide technical expertise will also impact business in a positive way. 

Why should companies practice CSR?

Innovations: CSR encourages companies to resort to ways of production which promote sustainability and environmental protection. This causes companies to look for ways which are beneficial to not only the environment but their financial returns too. Sustainability of resources would lead to lower cost of production and a good reputation in the corporate world as well. For example, in 2004, Unilever launched a detergent in India known as 'Surf Excel Quick Wash' which was to use half the water as compared to other detergents, saving an estimated 14 billion liters of water each year. This wouldn't have been possible without the concepts of CSR, sustainability and triple bottom line.

Brand Positioning: The rapidly spreading concept of corporate social responsibility has increased the competition between firms that produce substitute products of one another. Such firms are adopting various ways in which they can be more friendly to the environment so that they can out do the other. For example, coke and pepsi, both are use eco friendly packaging for their water bottles etc and are constantly trying to win over the consumer base.

Consumers Prefer CSR: Neilson's 'Doing Well by Doing Good' survey said,

55% of the consumers will pay for products and services from companies committed to positive social and environmental impacts/ 52% check product packaging to ensure sustainable impact

Furthermore, the Global CSR Survey, 2013 stated the expectations consumers had of firms and businesses.

 Employees Prefer CSR: According to Forbes;

• 32% of employees would seriously consider leaving their job if their company gave no/little money to charity
• 65% would seriously consider leaving their job if their company harmed the environment
• 83% would seriously consider leaving their job if their employer used child labor in sweatshop factories
• CSR practices are seen as important to employee morale (50%), loyalty (41%), retention (29%), recruitment of top employees (25%) and productivity (12%)

Lower Production Costs: Sustainability and careful business practices lead to considerable cut downs in production costs. For example, Tetra Pak Pakistan, conducted a scientific research studying their energy usage and costs of production at the Lahore factory. They found that they had a yearly electricity consumption of 20,545, 500 kwh and the head office was consuming 536, 880 kwh yearly. That is equivalent to 10.40 kilotons and 242 tonnes of carbon dioxide footprint. The yearly expenditures at both places was Rs. 257, 747, 300 and Rs. 6, 312, 122. After that they devised a plan to take sustainable steps to become more environmentally friendly and sustainable in their production processes which included using alternative sources of energy, regulating air conditioner usage etc. If all the recommendations are followed up, the savings in energy consumption, carbon footprint and costs will be substantial, at 1,961,184 kwh, 986.4 tons and Rs. 25, 652, 840 respectively. So by this, it is evident that sustainability and CSR can also cut down production costs.
(complete study of Tetra Pak Pakistan can be viewed at www.tbl.com.pk)

Top Companies with the best CSR Reputations!

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Companies with best CSR reputations in Pakistan:
(Click to read for a fullscreen view)

Conclusion:

CSR has several driving forces for companies which help them keep in check. These include environmental organizations and human rights organizations like NGOs etc. Enough pressure from such organizations is what makes companies indulge in philanthropic activities.  Furthermore, certain policies from the government can also help in the implementation of CSR. For example, if the government was to design policies which would make it imperative for businesses to give back to their communities or to form alliances with the government so both forces can give back to the people and planet would be a suitable way to encourage CSR practices. As it can be seen above, many companies in Pakistan strive to become valuable corporate citizens. They should be given more recognition for their activities so they continue to do good.