Academic journal article IUP Journal of Corporate Governance

CSR and Global Compact: The Indian Perspective

Academic journal article IUP Journal of Corporate Governance

CSR and Global Compact: The Indian Perspective

Article excerpt


Over the last decade and a half, we have seen a revolutionary shift in the relationship of private sector with the state and civil society. The prospects of consumers, employees, investors, partners and local communities in the context of the functions of businesses in the society and towards the society are rapidly changing. Every small- or large-scale firm has its stakeholders with both positive and negative encroachments in the society. Globalization has highlighted the strategic concern of stakeholder relationship, brand rapport and other such issues which have become crucial for conducting the business ethically and morally. The presence of roadblocks to global trade and investment has led to a more structured, integrated and interdependent paradigm of international trade. Globalization, privatization and liberalization have drafted new lines between the state and the market that have changed the private sector, which is expected to contribute towards the civil society. The relationship between firms and the civil society is continuously moving from traditional philanthropy to the reassessment of the purposes, rights and obligations of business to the society. Enormous propagation of Corporate Social Responsibility (CSR) thought and its uses have been prompting the firms to adopt a code of conduct of social responsibility. Today, the common goal of the domestic and international business community seems to be bringing forth wealth in a socially and environmentally responsible way.

CSR - A Concept

CSR, which is nowadays associated with several terms and phrases like corporate responsibility, corporate accountability or ethics, corporate citizenship, triple bottom line, and Environmental Social and Governance (ESG) norms, is becoming progressively integrated into advanced business patterns and exercises. There is an upcoming trend of referring to it as 'responsible competitiveness' or 'corporate sustainability'. Defining CSR is elusive, as it is a dynamic and ever evolving concept (Pinkston and Carroll, 1996). There is no unanimity among the researchers on what CSR is and what the corporate or business entities need to do to fulfill their social responsibilities.

CSR apparently is divided into two broad approaches-micro and macro. Under the micro approach, every company is expected to consider the social obligations and contribute generously towards their fulfillment. Under this approach, each business unit at the micro level must come forward, along with the government and other such entities, and work for social advancement. Theorists like Ackerman and Carroll believe in the micro approach and advocate the individual responsibility of business units towards the society. Contrary to this, the believers in the macro approach of CSR reject the concept of individual responsibility of business units towards society and advocate that it is the government, not business units, that should work on social welfare programs and achieve the country's social goals. Theorists like Milton Friedman and Theodore Levitt are the proponents of this approach, who advocate and highlight that the business unit has nothing to do with social objectives and must concentrate only on the economic responsibilities. The concept coined by Milton Friedman, no doubt, gained ground in the earlier times, but in the changing scenario, micro approach is being accepted by the business globally, and social objectives have received attention of business strategists, who believe that expenditure on social issues is not an expense but investment, the benefits of which will certainly accrue to them in future.

Milton Friedman proposed a general (macro) CSR theory, stating that the only responsibility of business (corporate) is to use its resources and perform activities that would increase profits within the rule of the game. He was of the view that if managers spend corporate funds for social purposes, they are essentially stealing from the share of stockholders (Friedman, 1962). …

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