Corporate Social Responsibility in India – An Empirical Research

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Introduction:

India has become one of fast growing economies of the world. It is growing at the rate of 9 per cent p.a. As an emerging market all are looking at India from an international perspective. At the stage when India is set to acquire a global position, it is essential to gauge whether the economic growth is due to successful business operations. Organizations must realize that government alone will not be able to get success in its endeavor to uplift the downtrodden of society. The present societal marketing concept of companies is constantly evolving and has given rise to a new concept-Corporate Social Responsibility. Many of the leading corporations across the world had realized the importance of being associated with socially relevant causes as a means of promoting their brands. Cause-related marketing and corporate social responsibility has provided companies with a new tool to compete in the market. CSR refers to the corporation’s obligation to all the stakeholders. It stems from the desire to do good and get self satisfaction in return as well as societal obligation of business. This could be a strategic marketing activity a way for a company to do well by doing good-distinct from sales promotion, corporate philanthropy, corporate sponsorship, corporate Samaritan acts and public relations. Now, it is assumed to be responsibility of the business houses too.

Nothing builds brand loyalty among today’s increasingly hard to please consumers, like a company’s proven commitment to a worthy cause. Other things being equal many consumers would do business with a company that stands for something beyond profits. In nutshell, CSR and cause related marketing results in increased sales, visibility, and consumer loyalty and enhanced company image along with positive media coverage.

Rural India has a population of 700 million people spread across 6,38,000 villages. Thus more than 60 per cent of India’s total population is rural by nature. A report by National Council of Applied Economic Research (NCAER) shows that rural consumers comprise more than 50% of consumers and are a prime market for consumer goods and essential services. Culture is the pillar of our country and if the pillar has strength, then it can raise our country to a top level. Organizations are helping to sustain as well as revive the rich culture of the country through their programs. Today, India’s literacy rate stands around 65 per cent, up from 52 per cent in 1991. (NSSO Survey) Considering the rate of increase, it would take some 20 to 25 years to clear this problem. Hence, the CSR agenda of corporate consider rural development as one of the important dimension.

On the other hand, a nonprofit organization is an organization, which exists for providing some benefit or assistance or a sort of self-help group. Like the name suggests, the organization will have all the properties of a profit-making organization, i.e. a mission statement, a vision, offices, infrastructure etc., but the objective will not include making a profit out of its operations. However, to run any organization, funds are needed, and this has to come in to the non-profit in terms of financial i.e. grants, subsidies, donations etc or services in terms of staff support or infrastructure support.. The sources for these funds could be individuals, the government or other charitable institutions and finally companies. These business houses through their CSR (Corporate Social Responsibility) initiatives contribute to the mission of social progress and growth of India.

Defining Corporate social responsibility

Definitional issues regarding “corporate social responsibility” (CSR) have been debated since many years. Early CSR models was initiated in the early 1960s.It showed the “social” aspect of CSR as referring directly to those responsibilities above and beyond economic and legal obligations (Carroll, 1979; Waddock, 2004; Matten and Crane, 2005). Many considered corporate social responsibility synonymous with voluntary and philanthropic acts by business organizations which are designed to alleviate social ills or in order to benefit a disadvantaged group chosen by the corporation’s managers.

The World Business Council for Sustainable Development in its publication “Making Good Business Sense” by Lord Holme and Richard Watts, used the following definition. “Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large”

“CSR is about capacity building for sustainable livelihoods. It respects cultural differences and finds the business opportunities in building the skills of employees, the community and the government” “CSR is about business giving back to society.

Traditionally, CSR has been defined much more in terms of a philanthropic model. Companies make profits, unhindered except by fulfilling their duty to pay taxes. Then they donate a certain share of the profits to charitable causes. It is seen as tainting the act for the company to receive any benefit from the giving.

According to Philip Kotler, “Corporate Social Responsibility: Doing the Most Good for your Company and Cause” does a terrific job of describing the range of corporate social initiatives and suggests best practices for choosing, implementing and evaluating them.

Thus, corporate social responsibility has been a topic that has received a lot of attention in recent years (Sethi, 1995).

Need for study:

The basic aim of the study is to gain familiarity or formulating a problem or to achieve new insights into it. In this particular study, an attempt has been made to comprehend and gain insight into behavior or attitude of companies towards various aspects of social contribution. This study deals with the behavior of the corporates. It tries to identify complex behavior and set patterns in it. The present study relates to the attitude of 50 companies in India so as to predict the behavior.

Why will any company give funds or services to a non-profit? The government will provide for funds and or services as it is responsible for the social welfare of the people. Similarly a charitable institution will do the same as it is their objective to help the social cause. An individual may donate to a nonprofit due to reasons of philanthropy, or in memory of some person etc, but why does a commercial organization contribute for a social cause? The basic objective of a commercial organization is to make profits. Why will it divert substantial funds to a nonprofit if there is no return on that investment?

Objective of the study:

The objective of the study was to try and understand why an organization contributes to a social cause and what it expects to gain in the process. Is it philanthropy, is it a feeling of obligation to the society in general or is it for financial benefits in terms of tax exemptions, etc.

Research design process:

To understand the reason why an organization contributes to a social cause, it was necessary to get an insight into the organizations’ view of the business, its views , its policies , the reasons why it contributes and its objectives and relationships with all its stakeholders i.e. employees, customers, suppliers, shareholders and society. The questionnaire was designed accordingly to get the relevant information from the respondents.

In this study the researchers have adopted convenience sampling. Population of study includes companies located in India.

Sources of Data Collection:

The research consists of the application of both primary and secondary data. Primary data was collected by administering questionnaire.

The secondary data was collected through websites and from various journals and magazines. Reasons for contribution to CSR by organizations were a sensitive issue. Hence the researchers had to gain the confidence of the management otherwise a study of this nature was impossible.

The questionnaire was administered to various companies. Anonymity of responses was promised. While it was sent to about 70 companies, only 50 companies responded. The responses were obtained through the human resource departments of the company or indirectly through the concerned department or official handling the area. The questionnaire was coded into SPSS and then the data from the questionnaire entered into the database. While frequency and cross tabulations were used for most of the data analysis, factorization was used to group attributes, which were important reasons for contributing to a social cause.

The Analysis and Findings:

Views towards business: 82.4% of the companies seem to strongly agree that business means maximizing benefits, making money and doing your work well. No company disagrees on this point. 17.6% more agree than disagree to the same. 76.5% says that business is making money. 88.2% strongly agree as well as agree that it is all about social responsibility while 17.8% more disagree than agree.

Place for ethics in business: 88.3% believe that there is place for ethics in business. However, a small majority, 11.8% strongly feel that there is no place for ethics in business.

Business & Economic attitude: 82.3% believe that business needs only an economic attitude while 17.7% respondents felt that business does not need an economic attitude, balance feel it is needed.

Social policies: 70.6% of the corporates connect to the community through social activities, and 23.5 % through specific NGO. Only half (52.9%) have a clear-cut policy on social development. 64.7% feel that their social responsibility is towards both the community and their employees. 29.4% feel that their social responsibility is only towards their employees. 35.3% have not adopted any village or social organization. The participation of the company in various activities is mixed, with no clear-cut trend emerging.

Donations: 70.6% feel that giving a donation will not increase the image of the company. However, 29.4% give donation to benefit from tax.

However, cross tabulation of these two parameters revealed that only 71.4% respondents who said that donations do not improve its image while 28.6% respondents say that giving donations improves image building. About 50% contribute to a social cause, invest as a long-term investment. 70% responded that they do not donate for tax.

Credo of the organization:

Principal Component Factor Analysis methodology was used with varimax method to identify the relevant factors which has been consistently identified as primary by the respondents. The rotated component matrix was used, as it would be easier to determine which variables are loaded on which factor.

Factor analysis shows that 4 main factors used by organizations as their credo. The first factor 1 as company value: internal stakeholders which include humane approach, employee and customer satisfaction, quality of life.

Factor 2: Profit Maximization, which include team work and profit maximization.

Factor 3: Social Responsibility, which combines with hard working behavior.

Factor 4: Ethical Practices

CSR: Objectives and Relationships with stakeholders:

Customers: 47.1% have their objectives towards the customer as satisfying them by providing quality, and within this, 50% term their relationship as friendly. Another 29.4% objective is to give good value and satisfactory service.

Shareholders: 41.2% objectives are more towards good returns and 35.3% express the real picture of the company, while 23.5% assure profit to its shareholders.

Employees: 64.7% feel that their objective towards the employees is to motivate to achieve goals and rewards, 23.5% satisfy by fulfilling needs while 5.9% feel that their relationship is that of family feeling and another 5.9% provide them with an opportunity for self development.

Suppliers: 5.9% have their objective as mutual benefits, which also explain that it feels its relationship is that of a teammate (29.4%). Balance is equally divided in terms of relationships. Almost 47.1% company’s objective vis-à-vis suppliers are quality and price of product related.

Community: Over 52.9% of the companies have social welfare as the objective towards the community. 11.8% companies have stated that their relationship with the community is that of a family member so as to provide help to the target group who needs it and 17.6% have stated that their relationship is cordial and friendly. They are sensitive to the needs of the community and another 17.6% include community welfare in the objectives of the company

Attributes as important reasons for contributing to social causes:

The present study of the researchers is to study the reason of the company’s corporate social responsibility. The variance chart and the scree plot show that 4 components explain 83.03% of the variance. The principal component analysis was used using varimax rotation method. The rotation converged in 5 iterations. The resultant rotated component matrix was analyzed. The constituents of the four factors are identified as

Factor 1: (Customer oriented)

Customer goodwill .966

Customer loyalty .966

Philanthropy .752

Factor 2: (Ethical oriented)

Projecting the company as one with explicit moral judgment .873

Projecting an upright character of the company .944

Contributing to a specific cause .637

Bottom-line benefits .618

Factor 3: (Community oriented)

Helping the community .894

Social responsibility .889

Factor 4: (Humane oriented)

To remove the image of the company as a faceless institution. .903

Bottom-line benefits – .542

Philanthropy in the first component and bottom-line benefits in the second component seem to be out of line of the components. Else the first component talks about customer relationships, the second on moral character of the company and the third on social responsibility. Bottom-line also plays an important role.

Conclusion:

The study was conducted to find out the company’s reasons towards corporate social responsibility on cause related and its impact on the company’s brand image and sales. The important factors that influence the company to contribute are: Customer oriented, Ethical oriented, Community oriented, Humane oriented.

Financial benefits in terms of tax benefits also are important, though the responses to this issue seem to be guarded.

Companies must generate awareness to the various stakeholders regarding its contribution to corporate social responsibility through its affiliation with social cause through event management (Mumbai marathon events) & company websites as it is directly related to increase in sales and brand loyalty. India being a developing country with over 250 million strong middle class families has a large potential for any marketer & at the same time it can support quiet a good number of causes which benefits the society at large. e.g. due to operation of CRY’ a NGO 89244 children lives were permanently transformed 1013 communities experienced 100% school enrollment, 159 primary health centers began functioning and long term rehabilitation program were initiated in almost 100 tsunami affected villages in Tamilnadu, Andhra Pradesh and Kerala and earth quake relief & rehabilitation programs were initiated in 11villages in Jammu & Kashmir. So we can conclude that corporate social responsibility and cause related marketing is beneficial both for company and the society.

Limitations:

While companies have responded, 25% of them (spokesman) have requested that the source should not be mentioned – i.e. the company should not be identified. The sample size being very small, the result of the study may not represent the whole population.

References:

Carroll, A.B. (1979), “A three-dimensional conceptual model of corporate performance”, Academy of Management Review, Vol. 4 No. 4, pp. 497-505.

Matten, A. and Crane, D. (2005), “Corporate citizenship: toward an extended theoretical conceptualization”, Academy of Management Review, Vol. 30 No. 1, pp. 166-79.

Sethi, S.P. (1995). “Introduction to AMR’s special topic forum on shifting paradigms: Societal expectations and corporate performance.” Academy of Management Re view, 20, pp.18- 21.

Waddock, S. (2004), “Parallel universes: companies, academics and the progress of corporate citizenship”, Business and Society Review, Vol. 109 No. 1, pp. 5-42.

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Source by Bernadette Dsilva