CORPORATE SOCIAL RESPONSIBILITY
Influences on Social Orientation
Key factors shaping companies' social orientation:
Promoters and Top Management: Their values and vision strongly
influence orientation, as Tata and Birla examples show.
Board of Directors: As policy and resource allocation decision-makers,
their attitude affects social orientation.
Stakeholders and Internal Power: Their diverse interests and
relationships require balancing through tradeoffs, as per Halal's model.
Societal Factors: Society's development level and expectations
influence local involvement. Resourceful firms in poorer areas are
expected to contribute more.
Associations: Industry/trade associations shape orientation via codes,
education and collective decisions.
Government and Laws: Laws codify acceptable conduct, varying by
nation. Government policies like incentives and persuasion also play a
role, besides enforcement.
Political Pressures: Interest groups and media exert pressures to control
business practices through lobbying, campaigns etc.
Competition: One firm's social initiative prods others to follow or try to
outperform. Lawsuits and public exposure of misdeeds also have an
effect.
Resources: Social involvement depends on financial health and firm
resources. Even progressive firms like Tata Steel cap such spending.
Ethics: Explicit ethical codes and decision frameworks shape conduct. But
no consensus exists on appropriate social responsibility.
Key Responsibilities
Despite differing views, some generally accepted corporate
responsibilities are:
Shareholders: Safeguarding capital, reasonable dividends, profitability
for growth, strong public image - primary obligations as owners.
Shareholders must also guide policies constructively.
Employees: Fair wages, good working conditions, welfare facilities,
training, grievance handling, participation in decisions - to ensure high
morale and productivity. But spending limits apply.
Consumers: Improving efficiency and quality, smooth distribution, new
products, reasonable prices, after-sales service, safety, addressing
genuine grievances - key to customer satisfaction and sales. But
consumers remain largely dissatisfied due to business apathy,
necessitating consumerism.
Community: Preventing pollution, assisting locality development,
resource conservation, operational efficiency, R&D, small scale industry
promotion, education etc. - vital obligations going beyond shareholders to
society's welfare.
ARGUMENTS FOR AND AGAINST SOCIAL INVOLVEMENT
Arguments favoring corporate social involvement:
Firms depend on societal resources, so must be socially responsible
As part of society, business must address varied societal needs
Resourceful firms have a greater responsibility
Social involvement fosters mutual benefit and business-society
harmony
Some social efforts like recycling may be financially beneficial
Social responsibility discourages more government
regulation/intervention
It can build a favorable public image and attract customers, talent
and investors
Arguments against social involvement:
Business should focus on core business; government and NGOs can
handle social aspects
It may hurt profitability and enterprise health
If costs are passed on to consumers, there may be a net societal
loss
Tax exemptions actually drive some social spending
It can affect competitiveness through higher costs and prices
It increases business dominance over society
Social Audit
Social audit systematically assesses and reports on the social impacts of
organizational activities. Key aspects are:
Identifying activities with potential social impacts
Assessing associated social costs and benefits
Measuring the social costs and benefits
Reporting on social performance
Objectives and benefits:
Evaluate and improve social performance
Increase visibility
Boost image through positive audit results
Methods include:
Social process audit for better program management
Financial statement audit in conventional formats
Macro-micro indicator audit against national policies
Constituency audit against stakeholder criteria
Partial audit of specific aspects like energy conservation
Comprehensive audit of total performance
External evaluation by groups like NGOs
Obstacles to social audit include lack of standard methodology, resistance
in firms, difficulty quantifying social costs/benefits etc. But it is a powerful
tool to promote corporate social responsibility.
CONSUMERISM AND CONSUMER PROTECTION
Growth of Consumerism
Consumerism, though still nascent in India, is growing with rising
awareness. Active consumer organizations like CGSI and CERC conduct
product testing, expose quality issues and adulteration, and demand
regulatory action. CGSI’s efforts led to mandatory ISI certification of food
colors.
Since 1993, CERC's CERS has done comparative product testing and
publicized results, enabling consumers to evaluate brands. Media publish
findings. Manufacturers can no longer be complacent.
Consumer movement is growing slowly in India but may gather
momentum from exploited consumers and unresponsive firms. Many
products fail quality norms and sellers ignore genuine grievances.
Demand for effective consumer protection is rising.
Consumer Rights
Consumers in developed nations are far more aware of their rights than in
India. Presidents Kennedy and Johnson emphasized consumer rights,
energizing the US consumer movement.
Key consumer rights are:
Protection from unfair trade practices
Product health/safety
Information on standards, ingredients, side effects etc.
Being heard on grievances/suggestions
Redressal for genuine complaints
Choosing from alternatives
Quality environment
But most rights are denied currently.
Consumer Exploitation
Consumers face widespread restrictive and unfair practices:
False/deceptive advertisements
Fictitious bargains
Misleading partial truths
Behavioral manipulation
No quality/safety risks despite misrepresentation
Monopolistic and restrictive practices
Consumerism represents the failure of business and government to ensure
consumer rights and is a collective movement for protection from such
exploitation.
Consumer Protection
Effective consumer protection requires:
Socially responsible business, beyond profits to quality, efficiency,
restrained pricing and smooth supplies. Advertising and marketing
should be ethical. Voluntary fairness is better than legislation.
Government intervention through legislations like mandatory quality
standards, penalties for violations, powers to demand substantiation
of claims etc. Assistance for rural availability of essentials.
Expeditious and inexpensive consumer redressal systems.
Strong consumer movement to pressure business and government
for responsibility and regulation. Global and local consumer groups
like Consumers International empower consumers.
Benefits include responsive business, useful feedback to implement
marketing concept, and proactive government regulations/institutions. It
makes marketers incorporate social/ecological considerations for
consumer welfare and legitimizes the societal marketing concept.
UN GUIDELINES FOR CONSUMER PROTECTION
The United Nations adopted the Guidelines for Consumer Protection in
1985 after years of advocacy by consumer groups like Consumers
International. These guidelines aim to strengthen consumer protection
globally through measures focused on seven key areas:
Physical Safety - making sure products are safe for normal use
Economic Interests - enabling consumers to get the most value from their
money
Standards - developing quality and safety standards at national and
international levels
Essential Goods and Services - ensuring access to basics, especially in
rural areas
Redress - providing ways for consumers to get fair, fast, inexpensive
resolution of issues
Education and Information - informing consumers of their rights and
responsibilities
Health - protecting consumers from health hazards like unsafe food or
medicine
The guidelines recognize consumers often face imbalances in economic
power and information compared to sellers. So the aim is to assist
countries in achieving adequate consumer protections tailored to local
needs and conditions. The desired outcomes include responsive
production and distribution, high business ethics, curbing abusive
practices, and facilitating independent consumer groups and international
cooperation.
Plight of the Indian Consumer
Indian consumers face many challenges that highlight the need for
stronger government intervention and consumer movements:
Shortages of essential goods and services lead to evils like profiteering,
hoarding, corruption. Though better due to competition from liberalization,
supply is still insufficient.
Lack of competition gives consumers fewer choices and makes it easier
for sellers of low-quality or defective goods.
Many imported products are still new and unfamiliar to much of the
population.
Low literacy and information access mean many consumers are unaware
of their rights.
Legal processes are slow, discouraging consumers from seeking redress.
Consumerism is not well organized or developed, and mainly urban.
The public sector, despite its welfare objective, has often performed
poorly as a supplier. Some public sector bodies even show unfair
practices.
Consumer protection laws exist but are not effectively implemented and
enforced.
This situation calls for stronger government intervention and growth of an
organized consumer movement to ensure consumer rights.
Consumer Issues in India
One major problem for consumers worldwide is fake or counterfeit
products. In India, counterfeits use brand names and trademarks of
originals while pass-offs use similar names and packaging.
The impact of fakes is huge - loss of taxes for government, violation of
laws, harm to India's investment credibility. For consumers, ingesting fake
food can seriously damage health, especially for children.
To guard against fakes, vigilance is needed from companies, government
and consumers. Consumers should buy from reputed shops, check brands
carefully, avoid unusually cheap items, return fakes unopened, retain
evidence, inform companies and consumer groups, and report to
authorities.
Legal options exist under intellectual property, food safety, product
standards, weights and measures and other laws. A welcome proposal is
to empower customs and excise to crack down on counterfeits.
Government Measures for Consumer Protection
The Indian government uses two main approaches to protect consumers:
Statutory regulation of business - laws like the Competition Act, Essential
Commodities Act, Prevention of Food Adulteration Act, etc. regulate
production, pricing, quality, sales terms, monopolies and more. But
implementation of these laws is often considered weak.
Public sector growth - public sector bodies aim to increase production,
improve efficiency and distribution, make goods affordable, curb private
monopolies and more. But performance has been mixed, with quality and
fairness issues in some cases.
Other measures like the public distribution system for essentials and
proposals to strengthen laws are welcome but need effective execution.
Consumerism in India
Consumerism is still in early stages here. Urban consumer groups have
seen occasional mass demonstrations and activism, but rural involvement
is limited. Consumer organizations are few, with only a couple
demonstrating real impact.
Vibrant consumerism is essential to protect rights through:
Consumer education on prices, expectations, practices, grievance
redressal, etc.
Product testing and ratings to inform purchase decisions.
Liaison with government and producers to ensure consumer interests are
served.
With strengthened consumerism and public sector performance, the
challenges facing Indian consumers can be better addressed.
