Impact of Corporate Social Responsibility on Corporate Sustainability: A Study of the Indian Banking Industry

By Saxena, Manisha; Kohli, A. S. | IUP Journal of Corporate Governance, October 2012 | Go to article overview

Impact of Corporate Social Responsibility on Corporate Sustainability: A Study of the Indian Banking Industry


Saxena, Manisha, Kohli, A. S., IUP Journal of Corporate Governance


(ProQuest: ... denotes formulae omitted.)

Introduction

A well-aware society today does not subscribe to Friedman's principle that the business of business is to do business. It keeps a keen eye on the socially responsible investments made by organizations, thus, literally forcing corporates to include all their multiple stakeholders in order to be successful and sustain it in this scenario of high competition (Robbins and DeCenzo, 2006 in Saxena, 2012). The increasing appetite of a conscious society for socially responsible investments made by organizations demands that organizations be more responsible to the environment they operate in. Corporate Social Responsibility (CSR) is a tool used by the Generation Next (GeNxt) organizations or corporate to live up to people's demand that organizations be more responsible to the environment they operate in and to manage their own sustainable development. Though the CSR approach dates back to the mid-20th century, it still finds difficulty in comprehension by managers when it comes to its implementation and implication.

To ensure sustainable development, CSR needs to be integrated with the important activities of the business (Sharma, 2011). The main objective of the paper is to understand the impact of CSR on Corporate Sustainability (CS) in the Indian banking industry. After performing a systemic review of the available authentic documents in the concerned area along with information given on the websites of the banks and their annual reports, correlation and regression analysis have been used to achieve the aforesaid objective.

CSR and CS: The Connection

The World Business Council for Sustainable Development defines CSR as "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" (Holme and Watts, 2000). The European CSR model focused more on operating the core business in a socially responsible manner as it not only invests in communities but also is more sustainable as it believes that social responsibility is an integral part of the whole wealth creation process.

Brundtland Commission of the United Nations defined sustainability and sustainable development as "Development that meets the needs of the present without compromising the ability of future generations to meet their own needs." CS creates both consumer and employee value by integrating every dimension of business with the social, cultural, economic and natural environment for longevity. Kanji and Chopra (2010) exemplify the fact that CSR failures can prove to be too costly for firms, like in the case of Bhopal Gas Tragedy, General Electric failure to clean up Hudson River of organic pollutants, Exxon Valdez incident in Alaska, recall of millions of toys globally by toy giant Mattel for using lead poisoning paint, etc. This proves, as they further reinstate, that often it takes a crisis to precipitate attention to CSR. Some more recent examples are recall of some Nanos, Honda Citys, Toyotas, etc. for one reason or the other. Figure 1 depicts the incorporation of all the concerned aspects for a sustainable growth by the GeNxt organizations.

Not everything can be incorporated by an organization, hence different organizations have different priorities and values that determine how the business acts. CSR is the purposeful inclusion of society's needs into corporate planning thus impacting the triple bottom line (3Ps): People (social bottom line), Planet (ecological bottom line), and Profit (economic bottom line). CSR has been identified as a tool to contribute directly or indirectly to the company's bottom line and to ensure its long-term sustainability as stated by Bihari and Pradhan (2011) and the same is reiterated in Kanji and Chopra (2010). They claim that recent studies have revealed that organizations involved in CSR activities continue to exist for much longer durations in comparison to those not involved in such activities in their attempt to qualitatively relate the banks' profit after tax over a period of time with its CSR initiatives. …

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