Definition Of Corporate Social Responsibility Commerce Essay

Definition Of Corporate Social Responsibility Commerce Essay There is no single authoritative definition of CSR (ISO COPOLCO, 2002). Various definitions embracing a vast number of concepts traditionally frames as environmental concerns, public relations, human resources management and community relations were used to defined CSR. One of the most referred definition is by the World Business Council for Sustainable Development( WBCSD) ( 1999) that 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 Businesses not only have the economic responsibility of being profitable and the legal responsibility to follow the laws or ground rules that guide their ability to achieve their economic requirements, but they also have ethical responsibilities that include a range of societal norms, or standards (Carroll, 2000). CSR has been around for more than two decades. During the later half of twentieth century there arose the idea of the corporate social contract, which today underlies the CSR concept. Given the sometimes adverse effects of business decision making on society as well as corporate reliance on society, the notion of an implied corporate social contract was conceived by social and economic theorists. This contract spells out societys expectations of business as well as (although much less discussed) businesss expectations of society (Bowie, 1983). CSR means being a good steward of societys economic and human resources ( Journal of Consumer Marketing, 2001). In summary, CSR entails the obligation stemming from the implicit social contract between business and society for firms to be responsive to societys long-run needs and wants, optimizing the positive effects and minimizing the negative effects of its actions on society. To synchronize that organizational social responsibility concerns are treated in the same routine manner in which legal, financial, and marketing concerns are addressed, four theories of corporate social responsibility have been advanced in the literature. The four positions are the classical, stakeholder, social demandingness, and social activist theories. The classical theory is the oldest of the four, and is grounded in classical economic theory. Firstly business executives are said to be primarily responsible to the shareholders of the corporation and their primary goal is to promote efficiency and secure effective economic performance. Secondly managers are said to be responsible to respond to the shareholders demands. These views are often thought to coincide with each other, because it is usually assumed that the main demand of shareholders is to maximize economic performance. In addition, both versions agree that managers are to perform their corporate function according to the laws and, thus, to avoid such things as fraud and deception. Friedman (1970), points out Here the businessman self-selected or appointed directly or indirectly by stockholders is to be simultaneously legislator, executive, or jurist. He becomes in effect a public employee, a civil servant and even though he remains in name an employee of a private enter prise. This theory, albeit the oldest of the four theories, is still well and alive; it has many supporters and proponents among academicians and practitioners. The second theory is the stakeholder theory which integrates the main idea of classical theory, that is, corporate executives are responsible to stockholders. Nevertheless, what differs it from classical theory is that other groups are directly affected by the conduct and decision of the firm. These groups can employees, consumers, creditors, suppliers, and legal sub-systems who have a stake in the organisation and who might affect, in one way or another, the corporate decision making process. Furthermore, corporate executives have a direct responsibility to promote the interests of these groups. The main disagreement among stakeholder theorists, however, over whether stakeholder interests of these groups take precedence over the financial interests of stockholders or the stakeholder interests are the overriding ones. Social demandingness theorists argue that corporations have a responsibility to protect and promote certain interests of the general public. They agree with the stakeholder theorists that the interests of stakeholder groups are important, but they believe that these interests do not override non-stakeholders interests or demands for such things as safety, health, freedom, and prosperity. As with the stakeholder theory, this theory repudiates the notion that there is some balanced or sensible list of tangible responsibilities that corporate executives always have toward society. The list varies as the nature and ranking of the interests or demands of the public change. The fourth and final theory is the social activist theory which is distinctively the most socially and morally demanding of the four theories. While agreeing with the stakeholders and social demandingness theories that executives have responsibilities toward stakeholders groups and the general public, social activists theorists argue that corporate managers should sometimes strive to undertake projects that advance the interests of the public even when these undertakings are neither expected nor demanded by them. Social activists theorists contend that such projects should, for the most part, be in the area of corporate know-how, but they sometimes urge that executives deliberately take on social projects for which they have no special training or expertise 2.1 Types of CSR and Corporate Governance The notion that business has duties to society is firmly entrenched, although in the past several decades there has been a revolution in the way people view the relationship between business and society. Carroll (1979) and other researchers believe that we should judge corporations not just on their economic success, but also on non-economic criteria. Carroll (1979) proposed a popular four-part definition of CSR, suggesting that corporations have four responsibilities or four faces (Carroll, 2000b, p. 187) to fulfill to be good corporate citizens: economic, legal, ethical and philanthropic: Economic responsibility. Economic responsibility is to be profitable for principals, by delivering a good quality product, at a fair price, is due to customers. Legal responsibilities. Legal duties entail complying with the law and playing by the rules of the game Ethical responsibilities. Ethical duties overcome the limitations of legal duties. They entail being moral, doing what is right, just, and fair; respecting peoples moral rights; and avoiding harm or social injury as well as preventing harm caused by others (Smith and Quelch, 1993). Philanthropic responsibility. Interest in doing good for society, regardless of its impact on the bottom line is what is called altruistic, humanitarian or philanthropic CSR. Giving back time and money in the forms of voluntary service, voluntary association and voluntary giving is where most of the controversy over the legitimacy of CSR lies. CORPORATE GOUVERNANCE (CG) Moreover, CSR is closely linked with the Corporate Governance of the organization, be it hotel organization. Any of those types of CSR should start in the hotel organizations first and then move to external environment. The key people should be taken into consideration so the CSR practices should be geared towards the internal customers who will in turn become CSR delegates to reach the external customers and environment. Companies must improve their business models by bringing CSR and sustainability into their strategy. Shleifer and Vishny (1997) define Corporate Governance as the ways in which suppliers of finance to organisations assure themselves of getting a return on investment. Over the years, Corporate Governance has evolved from the traditional profit-centered model. By incorporating the community in which firms operate, the political environment, laws and regulations, and more generally the markets in which firms are involved. 2.3 Vision of the Government Concerning CSR For the past decades, CSR activities were practice by many organizations, but it was done on an unequal proportion. To this effect, The Minister of Finance, in his 2009 budget speech announced the legal creation of the CSR Fund. After amendments, the Income Tax Act (1995 Consolidated) stipulates, any company making a profit is required as per Section 50K and 50L to contribute 2% of its book profit. This helped to create a CSR Fund so as to finance the different CSR activities in which the company is involved. The Government of Mauritius designed a framework with the objective of mandating registered companies to pay 2% of their book profit towards CSR programs that contribute to the social and environmental development of the country. 2.4 Legal framework of Corporate Social Responsibility (CSR) The legalization of CSR, has designed a new framework whereby, any company adopting a CSR activity, should first seek for approval from the CSR Committee so as the program be accredited as an eligible one. Below, are the different changes brought in the legislation so as ease CSR practitioners. Key areas can be found in the Amended Income Tax Act (1995 Consolidated, Section 50K and 50L) which are as follows; Approved non governmental organization (NGO). The NGO should follow certain criteria. These criteria can be summarized as follows; The NGO should have a legal locus stand The NGO should be run on a non-profit basis. The cost involved in implementing the CSR program should not exceed 15% of the total cost. Proper records and books should be kept by the NGO and must summit certified audit reports. Special Purpose Vehicle (SPV). Any company whose CSR Fund exceeds Rs. 2 million can use a Special Vehicle to implement its CSR programs. The criteria for Special Purpose Vehicle and an approved NGO are the same. Corporate Partners. Sometime, companies call upon organizations which conduct CSR activities on behalf of the company. These organizations should follow the same criteria as above, to the exception that companies with a CSR budget less than Rs. 2 million, using a corporate partner should not spend more than 25% of the 2% CSR value budget in implementing the CSR programs. The CSR Committee has adopted two categories of CSR Fund: The 2% of the book profit is equal to Rs.2 million or above, that is, CSR programs are conducted with a CSR Fund of equal Rs 2 million or above. The 2% of the book profit is less than the Rs. 2 million, that is, CSR programsare conducted with a CSR Fund of less than Rs 2 million. Figure 1 and 2 below shows how fund are being channeled so as to harmonize CSR practices. Figure 1(Modalities for a company with book profit less than Rs 100 million) Figure 2(Modalities for a company with book profit above Rs 100 million) As seen above, figure 1 and 2 shows clearly, if any amount of unused fund from the CSR Fund should be remitted to the Mauritius Revenue Authority (MRA). All companies, remitting their return at the end of a tax year should submit a return on the different CSR activities undertaken by the company during the tax year. 2.5 CSR Fund This refers to the amount collected for implementing CSR activities. As seen above, in Figure 1and 2, programs can be either corporate or national. Corporate CSR programs are those activities internal to a company. The usual beneficiaries are the company employees. It may vary from size of the company to the number of employee within. Corporate programs are financed by the of the 2% book profit. National program are those programs, which are perceived as national inequalities. Example of National program can be: Socio Economic Development( fight against gender and human rights) Health Education and training( empowering women) Leisure and sports Environment Calamities intervention and support Eradicating absolute poverty Any amount left, unused in the corporate CSR Fund, is remitted to the MRA. This amount is deposited in the National CSR Fund which will be used to combat the above mention inequalities. The National CSR Fund is approximately of Rs 2 billion( CSO,2010). 2.6 The Hospitality Industry -Definitions Definitions of the hospitality have been approached from a number of different perspectives. Most of them combine physiological and psychological elements with security and levels of service. Hospitality is concerned with the provision of physiological and psychological comfort with defined levels of service. The satisfactions may be physiological (thirst, bed, warmth), economic (value for money), social (company, service) and psychological (self-esteem, status, security). C. Cooper, R. shepherd, J.Westlake (1994) Even if the approach to defining hospitality may shift according to the authors, there are a number of integral elements that are common to all. These are: Hospitality is a complex combination of tangible and intangible features and benefits Hospitality involves a satisfying interaction between the service provider and the customer Hospitality provides guests with security, psychological and physiological comfort by offering food, beverage and accommodation. Therefore, bearing in mind the above characteristics, a simpler definition of the hospitality industry may be: The Hospitality Industry is involved with providing accommodations, food, beverage, entertainment, comfort and recreation for travelers away from their usual residences and normal surroundings. The industry also naturally look forward to meet the customers needs for safety and support of their persons, property, modes of transportation, and even the varying purpose of their travel. Speaking generally, those who make use of hospitality services demand attainment of a professional level of quality consistent with world standards, although perhaps adjusted for local conditions. They anticipate the facilities will be clean, comfortable, safe and secure. They expect good food and beverage at a reasonable rate. Furthermore, they look for courtesy, friendliness, respect and identification from the host. Perhaps more importantly they demand honesty, truth and equity in their dealings with the operator and his employees. 2.7 Hospitality Industry In Mauritius HISTORICAL BACKGROUND In Mauritius, the first hotel was the Park Hotel in 1952 so as to accommodate the crew members coming at that time. Then came the Mauritius Hotel, the first beach hotel, built in 1954 at Le Morne followed by Le Chaland, another beach hotel in 1961. But the real development of tourism took place soon after Mauritius got its independence from the British. In early 1970`s the creation of Trou aux Biches Hotel by the Mauritius Hotels, the setting up of the Club Medità ©ranà ©e and the Saint Gà ©ran Hotel by the Southern Sun Hotels as well as the Merville Beach Hotel by the ex-British Colons who wanted to come back here during the winter months of England. The Mauritius Hotel is now the Beachcomber group and the Southern Sun Hotels is the Sun International Resorts Limited. At present there are 105 hotels in Mauritius (operational) and there are not less than 5 more under construction as per the registered list set by the Ministry of Tourism. The numbers of hotels, rooms and bed places have increased constantly from 1991. Moreover the Prime Minister has announced his vision to reach 2 million tourists in 2015. Consequently an average annual growth of 10% in tourist arrival is expected. In order to reach this target, an approximate number of 18500 rooms should be made available. This will bring about the creation of around 37000 direct jobs and double the amount in terms of indirect jobs. Due to the rapid growth of tourism and hospitality industry, government has introduced incentives for the private sector to bring in a sustainable development, namely by corporate governance and corporate social responsibility. This is achievable through proper public-private sector partnership. Overview of the Hotel industry IN MAURITIUS The hospitality industry in Mauritius has developed rapidly during the past 25 years. The coastal regions as well as the interior part of the island are constantly changing with the construction of the hotels and the increasing number of vehicles being used for the tourism industry. In 2007, the tourism industry was considered the third pillar of the economy after Sugar and Textile, and currently it plays a vital role in the economic growth of the country. The undoubted fall of 35% in the price of sugar and the removal of preference agreement with the EU market, has earmarked the tourism industry as the main industry capable of boosting the Mauritian economy. In April 2010, according to the last bulletin published by the Central Statistical Office (CSO), Mauritius welcomed 249,971 tourists as compared to 232,908 in corresponding quarter in 2009, registering a 7.3% growth. Net receipt of Rs 11,021 million, that is, a growth of 7.4% compared to Rs 10,265 million for the same period last year. Figure 3 below show the arrival of tourist compared to the same period last year. Figure 3; table of arrival of tourist till the end of March Source: CSO data dated April 2010 But after two decades of impressive growth, the need for responsible corporate governance has been felt in the country as the attitudes; mentality and knowledge of those working in that industry have not evolved at the same pace in terms of social responsibility and environmental awareness. Impacts of this rapid and somehow unplanned development are being experienced in the environment at large. Still, a lot has to be done to meet the competitive edge through proper campaign and involvement of all stakeholders so as to contribute towards sustainable development of the hospitality sector. In order to support its continuous growth, the Mauritian Tourism and Hospitality industry needs well-trained staff with full knowledge of their product while respecting the socio-economic and cultural environment in which the Mauritian tourism product is evolving. It is really important to maintain a high standard of efficiency and service so as to meet the requirements of an increasingly competitive and sophisticated global market. 2.8 CSR in the hotel industry In Mauritius Within the hospitality industry it has been agreed that there are increasing environmental and societal concerns. The big question is how to manage our environmental impact as demand grows against a backdrop of increasing vulnerability. As a result of demand for more sustainable destinations and travel preferences, management policies are being felt. Hotels practicing CSR look at the following areas: Workplace (where employees are treated equally and fairly) Marketplace (stakeholders) Environment (which has to be sustained for the future generation) Community Ethics Human rights Many hotels are now aware of CSR practices and have begun to use environmental-friendly products. Hotels in Mauritius are reducing the use of hazardous or non-degradable chemicals. Big hotel chains like Oberoi Mauritius recycle oil, water and plastic bottles while all hotels with more than 50 rooms are compel to recycle water as per the legislation. Hotels tend to purchase products that have a reduced environmental impact during their life cycle, from suppliers that demonstrate environmental and social responsibility to their customers and the society. Furthermore, Association des Hoteliers et Restaurateurs de L`Ile Maurice (AHRIM), is fully supporting the CSR initiatives initiated by the Mauritian Government. Through its members, they are actively putting forward the CSR activities on a regional basis all over the island. Stakeholders (employees, customers, shareholders, suppliers, business partners, government) are getting more and more involved the hotels CSR activities. Hotel employees are educated to make a conscious decision in favour of environment and social issues in their private and business lives. Hotel guests are informed about CSR activities and are asked to participate in responsible business activities within the hotels and to work together to find innovative solutions that satisfy the hotels economic, environmental and social objectives. Managers are asked to abide by local and EU legislation especially on labour laws, health and safety, human rights and the environment. A great deal can be done when developing a hotel property in order to make both the development process and the eventual operation more environmentally sustainable. One of the aims of CSR is to make the community benefit from the hotel industry. 2.9 Benefits of CSR in the hotel industry Hotels who adopt CSR into their operations and public image depend on the following factors: Size Level of diversification Research and Development Advertising Government Intervention Consumer Income Labour market conditions Stage of the industry life cycle However this differs for different hotel organization, for example, larger hotels like international hotel chains may operate a CSR program at a lower cost than a small hotel because of economies of scale. It is a method for organization to distinguish themselves from their competitors Firstly, hotels benefit from CSR as it helps to reduce operating cost such as implementing of recycling and energy saving programs. Secondly, their brand image and reputation are enhanced as consumers prefer companies with CSR programs. Another benefit derived by hotels is in terms of productivity and quality since productivity goes up whenever working conditions improve. Other beneficiaries of the CSR programs are immediate environment in which the company is evolving. It comprises of the local community, neighboring villages, employees who usually live in those areas, the hotel guests and the host country at large. Hotels are expected to have ethical and social commitments, valued connections with partners and consistency over time to build trust with the stakeholders. In doing so, the hotel organizations are also developing societal marketing concept, therefore beneficiate from it.