Assignment -1

Assignment -1The Downside of Corporate Social Responsibility

Submitted by:Chinmai VermaSanjolly DabraShreya GuptaSiddhant BabbarSuchismita Panda

SCHOOL OF BUSINESS, PUBLIC POLICY AND SOCIAL ENTREPRENEURSHIP AMBEDKAR UNIVERSITY DELHI

Table of Contents

Corporate Social Responsibility 03

Issues 05Corporate Philanthropy Issues 05Ethical Issues 06Legal Issues 10Good Corporate Citizenship Behavior Issues 14

Corporate Social ResponsibilityOrganizations in India have been quite sensible in taking up CSR initiatives and integrating them in their business processes. It has become progressively projected in the Indian corporate setting because organizations have recognized that besides growing their businesses, it is also important to shape responsible and supportable relationships with the community at large. Companies now have specific departments and teams that develop specific policies, strategies and goals for their CSR programs and set separate budgets to support them. Most of the time, these programs are based on well-defined social beliefs or are carefully aligned with the companies business domain.

Enlisted are some examples of responsible corporate social responsibility behaviour:1. Aptech

Aptech is a leading education player with a global presence that has played a broad and continued role in encouraging and nurturing education throughout the country since its inception. As a global player with complete solutions-providing capabilities, Aptech has a long history of participating in community activities. It has, in association, with leading NGOs, provided computers at schools, education to the deprived, and training and awareness camps.

2. Mahindra & Mahindra

At Mahindra & Mahindra, The K. C. Mahindra Education Trust was established in 1953 with the purpose of promoting education. Its vision is to renovate the lives of people in India through education and financial assistance across age groups and across income strata. The K. C. Mahindra Education Trust undertakes a number of education plans, which make a difference to the lives of worthy students. The Trust has provided more than Rs. 7.5 crore in the form of grants, scholarships and loans. It promotes education mostly by the way of scholarships. The Nanhi Kali (children) project has over 3,300 children under it and the company aims to increase the number to 10,000 in the next two years by reaching out to the underprivileged children, especially in rural areas.

3. InfosysInfosys is aggressively involved in a variety of community growth programs. In 1996, the company created the Infosys Foundation as a not-for-profit trust to which it contributes up to 1 percent of profits after tax every year. Moreover, the Education and Research Department at Infosys also works with employee volunteers on community development projects.The management team at Infosys continues to set examples in the area of corporate citizenship and has involved itself vigorously in key national bodies. They have taken initiatives to work in the areas of research and education, community service, rural outreach programs, employment, healthcare for the poor, education, arts and culture, and welfare activities undertaken by the Infosys Foundation.

But, corporate social responsibility has become a strategy upon which organizations put a premium for brand and business value, and more and more CEOs, as the faces of their companies,are eager to tout good work and citizenship. Boasting about CSR is a way for CEOs to show the public that they are not just about profits and they want to make a difference in the world.Firms that engage in socially responsible behaviour towards their stakeholders are subsequently more likely to engage in socially irresponsible behaviour towards their same stakeholders at a later point. We would be taking up various cases in order to understand the types of issues organizations come across during practice of Corporate Social Responsibility.

ISSUES

CORPORATE PHILANTHROPY Reliance Industries LimitedThe Reliance Group founded by Dhirubhai H. Ambani, is Indias leading Private sector enterprise, with businesses in energy and material value chain. Across different companies, the group has a customer base of over 100 million, the largest in India and a shareholder base of over 12 million, among the largest in the world. Through its products and services, the Reliance Group touches the life of 1 in 10 Indians every single day. It has a business presence that extends to over 20000 towns and 4.5 lakh villages in India, and 5 continents across the world.CSR InitiativesReliance Foundation a non-profit organization looks after the CSR projects of Reliance in India. It is headed by Nita M. Ambani, the chairperson and founder of Reliance Foundation. The Organization works with some of the most vulnerable and marginalized communities across India, with the objective of integrating them into the mainstream development process of the country. The Foundation focuses its efforts on five core pillars of Rural Transformation, Education, Health, Urban Renewal and Arts, Culture & Heritage. And work in building the community in a sustainable manner. Reliance has been in the news for its successful CSR initiatives in the field of education and has received many awards and recognition .It has a number of projects running in the development of the society in rural and Urban India, from setting primary educational institutes, Hospitals, Arts, Culture & Heritage.Philanthropy Issues One of the philanthropy moves by Reliance Foundation is to inspire youth to play and for that it has installed basketball hoops across Mumbai. The organization has a partnership with National Basketball Association for the programme, which aims to teach basketball to more than 100,000 youth and train 300 coaches and physical education instructors to implement a turnkey NBA curriculum in India. The Foundation took step to train the students and for that it asked NBA star Muggsy Boguesfor one-day programme in Mumbai. It incurred all the expenses to bring him to India and additional expenses of promoting the event, hence covering the stars programme. Now, this philanthropy move by the organization doesnt convince its real purpose, as the event was turned out to be a pure marketing gimmick than a philanthropy work. Also, a press statement issued by reliance outlined that all the activities that Nita has been involved in, making for her suitability for the position. Such a statement shows that the action behind the philanthropy work is more towards advertising the organization rather than the real cause behind it.

ETHICAL ISSUESIt is in the own interest of business to give importance to CSR and ethics, and more fundamentally it is the right thing to do. Good ethics is good business, and companies that do the right thing often do better as a result. But are organizations taking into account ethical issues while practising CSR?1. Johnson & JohnsonJohnson & Johnson spread its roots into India in 1947 marketing Johnsons Baby Powder which was manufactured by a local company in Mumbai. Registered in September 1957 as Johnson & Johnson Limited, the company today employs more than 2000 people and the businesses span Consumer, Medical Devices & Diagnostics, Pharmaceuticals and Vision Care.

CSR Initiatives

Micro projects are designed to reach into the interiors of the country and are initiated by the Johnson & Johnson Location Committees. These projects call for a high degree of employee involvement and participation and help to spreadOur Credo values organization-wide.

Micro Projects span the following four pillars: Saving & Improving Lives of Underprivileged Women and Children Building Healthcare Capacity Preventing Diseases, Reducing Stigma and Disability Community ResponsibilityThe keen interest and involvement of Johnsonians in a spectrum of Micro Projects has contributed towards a large number of underprivileged children gaining access to quality education and health care.Ethical IssuesThe famous cosmetic brand manufacturer Johnson & Johnson lost its license inIndiadue to an ordered case by the Food and Drug Administration after 15 batches of baby powder products were found sterilized by an irritant and cancer-causing component. Food and Drug Administration or FDA cancelled the license of Johnson & JohnsonIndiato produce the product at their Mulund plant. The order came to effect on June 24, 2013 and according to the FDA officials, ethylene oxide was found in 15 batches of baby powder produced which is labeled as carcinogenic and an irritant. The company did not bother to carry out a test after the process to check the amount of residue in the product. The products are used for new born babies. It is must for the company to follow all measures, and distribute products ensuring it has met all safety standards.It is a must for a company to follow all measures, but not abiding by these laws, Johnson and Johnson has legally and ethically violated the norms. 2. NIKE

NIKE, Inc.based near Beaverton, Oregon, is the world's leading designer, marketer and distributor of authentic athletic footwear, apparel, equipment and accessories for a wide variety of sports and fitness activities. Wholly-owned NIKE subsidiaries include Converse Inc., which designs, markets and distributes athletic lifestyle footwear, apparel and accessories and Hurley International LLC, which designs, markets and distributes surf and youth lifestyle footwear, apparel and accessories.

CSR Initiatives

Nike has a well defined code of ethics which it ensures is internalized and practiced by their employees and have been advocating that the ethics benchmarks be observed by their suppliers as well (Nike Inc, 2009). Nikes efforts to reduce waste to conserve the environment saw them win the Gigaton Award which is an award given to organizations to recognize their efforts in reducing carbon emission and making a difference in climate change. In a nutshell, Nike strives to ensure sustainable production that causes least negative impact on the environment while ensuring the well being and safety of their employees. Nike also embraces social responsibility and engages in community giving in order to improve the welfare of the communities around them. Nike has a global workforce of about 100 employees who are fully dedicated to fuelling innovation and transition of company policies and practices to be in line with their Corporate Social Responsibility goals (CSR International, 2010).

Ethical Issues

Nikebuilt its empire on shoes made with cheap foreign labour .Nike was a subject of heated criticisms in the 1990s because of its Asian labour practices. Though it seems to have taken someenvironmentally-sound steps in some of its recent initiatives, it may look like green-wash when considered next to policies that some Nike contractors are implementing. In 2008, for example, an undercover investigation by a British news channelshowed that a Malaysian contractor was confiscating migrant workers' passports and forcing them to sign contracts to work off their immigration 'debt' -- in effect, as indentured slaves. And in 2010, former employees in Honduras alleged thatNike still owes 1,700 workers in $2.2 million in severance payafter it closed three factories, two of which had begun to unionize.

3. GAP

Gap Inc. is a leading global retailer offering clothing, accessories, and personal care products for men, women, children and babies under the Gap, banana republic, Old Navy, Piperlime, Athleta and Intermix brands. Fiscal year 2012 net sales were $15.7 billion. Gap Inc. products are available for purchase in more than 90 countries worldwide through about 3,100 company-operated stores, over 300 franchise stores and e-commerce sites.

CSR Initiatives

According to the company website At Gap Inc., social responsibility isn't just a catchphrase or a feel good initiative, it's a reflection of who we are and how we operate as a company. To us, being socially responsible means striving to embed our values and ethics into everything we do from how we run our business, to how we treat our employees, to how we impact the communities where we do business."

In 2003 Gap Inc. was the first retailer to release a social responsibility report, offering a comprehensive overview of their approach to social responsibility. The report was broadly lauded for its willingness to be open and honest about both the successes and failures in this arena. In fact, this report won Business Ethics magazine's Social Reporting Award for "unprecedented honesty in reporting on factory conditions." Their 2004 Social Responsibility Report continued that discussion and provided new information on their progress, challenges, and new initiatives.

Ethical Issues

In 2007 a raid on a Delhi factory found out that children below the age were sewing clothes for GAP Inc. Similarly in 2000, a Senate subcommittee hearing revealed that the Gap was contracting work out to Chinese and Korean-owned factories on the U.S. territory of Saipan. The factories employed mainly young Chinese women to work in poor conditions and forced pregnant workers to get abortions in order for them to keep working.

LEGALCompanies, these days are facing high expectations to know and show that they are taking appropriate steps to manage the human rights impacts associated with their business activities.1. Amway IndiaAmway is one of the worlds largest direct selling companies. Founded in 1959 by Jay Van Andel and Rich DeVos, Amway operates in more than 80 countries and territories on six continents. Amway offers the opportunity for people to have a business of their own based on retailing beauty, nutritional, wellness and household products and sharing the opportunity with others who will do the same.

CSR Initiatives

Amway opportunity foundation (AOF), a non-profit organization looks after the CSR projects of Amway in India. Presently, the AOF heads two projects National Project for Blind and National Project for Children. All its CSR initiatives are based on volunteerism. Amways distributers act as the volunteers and participate in various activities of AOF. The main focus of both the projects is on children. Globally Amways CSR campaign is known as One by One. The vision is to enable the less privileged child to lead a better life and the mission is to be the front-runner in providing opportunities for child education and health to attain economic independence, with special focus on the blind child. Amway has been in the news for its successful CSR initiatives in the field of education and has received many awards and recognition. It was awarded the Asian leadership award in the support of education improvement category.

Legal Issues

The Chief Executive Officer (CEO) of Amway India was recently arrested by the Andhra Pradesh Police on allegations of unethical ways of money circulation. The Enforcement Directorate (ED) found that the company had repatriated Rs 8,000 crore to the United States from India. The Enforcement Directorate said that the agency was probing FEMA (Foreign Exchange Management Act) violations against Amway. But the main focus of the investigating agencies in the case has been the alleged violations of provisions of 'The Prize Chits and Money Circulation Schemes (Banning) Act, 1978.

2. Sahara India Pariwar

Sahara India Pariwar is an Indian conglomerate headquartered in Lucknow, India with business interests in finance, infrastructure & housing, media & entertainment, consumer merchandise retail venture, manufacturing and information technology. It was founded by Subrata Roy who is also the Managing Worker and Chairman. Sahara India Pariwar is a major promoter of sports in India and has been the sponsor of the Indian Cricket team and was also the owner of the now defunct Indian Premier League team Pune Warriors India.

Corporate Social Responsibility

The Sahara Group has undertaken various initiatives under CSR. Sahara India Pariwar follows a philosophy of Collective Materialism. The first priority is given to emotional aspect and with perfect blending of materialism with emotionalism results in continuous collective growth for collective sharing and caring. Sahara carries out its CSR initiatives through the Sahara Welfare Foundation. It is engaged in social welfare projects, alleviating people's sufferings and bringing to them new rays of hope and a brighter tomorrow. The projects of Sahara Welfare Foundation focus on women and disabled who are socially and economically deprived and hence marginalized. It aims to initiate and facilitate such processes and initiatives where socially & economically marginalized and deprived people and communities irrespective of age, caste, class, gender or race are able to participate actively in the process of their development so that they may lead a life of dignity and respect.

Major programs undertaken by the welfare foundation include: Sahara Gram: A rehabilitation project of the village Bhimasar-Chakasar located in Kutch which was badly affected during the earthquake. Sahara has adopted this village and its people for their rehabilitation. Adoption of families of Kargil Martyrs Financial Assistance to the families of Mumbai Martyrs Programs for Handicapped (Sahyog): Has established a center for the handicapped aims at identifying the types of problems faced by the disabled persons, providing early identification guidelines, assessing disability, providing management & guidance for guardians of disabled. Sakshar Bharat: A literacy program having an aim to to help children and adults residing in slums of cities develop their overall personality and a functional understanding of aspects that affect their day-to-day lives.There are many more programs run by the Sahara Welfare foundation .In addition to these social initiatives Sahara also promotes various sports in India and owns teams in various sporting leagues. Moreover the chairman and founder of the sahara group promotes and propagates collective materialism which involves giving higher priority to qualitative aspects rather than quantitative aspects i.e. profit. Legal IssuesThe CSR initiatives of Sahara group and its philosophy of collective materialism and giving profits the second priority have been discussed above but in spite of all this Sahara has been accused of fooling investors and amassing huge amount of money for them and for which the chairman is already in the jail. The case started with Sahara Prime City, a real estate venture of the group, filing a Draft Red Herring Prospectus (DRHP) with SEBI on September 30, 2009.Sebi sensed certain large-scale fund raising exercises by two Sahara firms Sahara India Real Estate Corp Ltd (SIRECL) and Sahara Housing Investment Corp Ltd (SHICL). SEBI received two complaints one on December 25, 2009 and the second on January 4, 2010 alleging illegal means used by these two firms in issuance of certain bonds, called OFCDs (Optionally Fully Convertible Debentures), to the public throughout the country for many months. Eventually, SEBI passed an interim order against the two companies on November 24, 2010, asking them to refund the money collected from investors and later it filed a final order. The Sahara group went to the SAT against the order, but the tribunal upheld the order. The group then moved to the Supreme Court, which also passed a historic order on August 31, 2012, asking the two companies to deposit outstanding amount of over Rs 24,000 crore with SEBI for refund to the investors. SEBI again moved the Supreme Court alleging non- compliance by the group to the earlier orders, pursuant to which the apex court passed another order on December 5, 2012, and asked the two firms to deposit the money in three installments beginning with an immediate payment of Rs 5,120 crore.While the group paid the first installment, it failed to meet the deadline for other two payments and rather claimed to have already paid more than Rs 20,000 crore directly to the investors.Unconvinced with Saharas' claims, SEBI passed orders on February 13, 2013, to attach bank accounts and other properties of the group and later issued summons for personal appearance of Subrata Roy and three directors. Finally Subrata Roy was arrested on Feb 27 2014 and is still lodged in Tihar Jail and is under trial.GOOD CORPORATE CITIZENSHIP BEHAVIOURCorporate citizenship is the extent to which businesses are socially responsible for meeting legal, ethical and economic responsibilities placed on them by shareholders. The aim is for businesses to create higher standards of living and quality of life in the communities in which they operate, while still preserving profitability for stakeholders.1. Starbucks Tata Starbucks Ltdis a 50:50 joint venture company, owned byStarbucks CorporationandTata Global Beverages, that owns and operatesStarbucks outlets in India. The outlets are brandedStarbucks "A Tata Alliance". Starbucks, through an agreement withTata Coffee, serves coffee that is 100% locally sourced and roasted.

CSR Initiatives

Starbucks strengthened their processes for identifying, prioritizing, and managing their CSR initiatives, including forming a CSR Executive Committee that provides overall direction on important issues. Starbucks drafted sustainable purchasing guidelines for cocoa, an important ingredient in many of their products. Starbucks continues to advance their three pronged emissions reduction strategy which includes purchasing renewable energy certificates, focusing on energy conservation measures and advocating the need for collaborative action.Starbucks began directing a significant portion of their community investments to education programs focused on youth and projects that bring clean water to children and communities where it is needed most.

Good Corporate Citizenship Behaviour Issues

Starbucks is the worlds biggest coffee chain, worth 25billion and it attempts to gain a foothold in the sub-continent by opening its first three outlets in Mumbai. Starbucks is paying staff below living wages in the new Indian cafes

On its website, it claims it has dedicated itself to earning the trust and respect of our customer, partners and neighbours by being responsible and doing things that are good for the planet and each other.

But fair wage campaigners accuse the company of not putting its money where its mouth is.In a report, the UK's Mirror alleged that the chain pays its cleaners Rs.21.88 an hour at its stores in India.The paper wrote, "The pittance falls far below the country's official living wage". The paper also claimed "even the baristas (bartenders) who serve coffee were being paid only Rs.49 an hour."That would add up to nearly 300 rupees a day and overRs.8,600 a month - considerably higher than theRs.5,000 set as minimum wage by the labor commissioner in Maharashtra for a skilled worker in a hotel or restaurant. So, the wages provided by Starbucks abide by the law.But the Indian 'living wage' - the amount people need to eat, drink and pay the bills - is set at Rs 58.63 an hour.

The report quotes fair wage campaigner Murray Worthy against paying less than half a living wage as saying that all workers should receive a wage that can feed their families, put a decent roof over their heads and pay for essential health care. He claimed, citing statistics from other campaigners and trade unions that a living wage in India would have to be Rs 12,000 a month to over the bare necessities of life.

Anannya Bhattacharjee, of Asian Floor Wage which calculates the living wage for India, said: Starbucks lack of commitment to even a minimum living wage, which would not even create a noticeable dent in its profit margins, is alarming. This type of business practice is singularly responsible for the extreme rise in inequality we see in the world and in India.

While Starbucks is not violating labor laws, the report in the Mirror has triggered a debate over whether a cup of coffee -Rs.140, for example- should cost what an employee would earn in three hours.

Starbucks paying much below the living wage to its Staff in Indian cafes despite being the most profitable coffee chain in the world raises questions about its responsibility towards its employees and is an example of poor corporate citizenship behaviour.

2. McDonalds

The McDonald's Corporation is the world's largest chain of hamburger fast food restaurants, serving around 68 million customers daily in 119 countries across 35,000 outlets. In 2012, McDonald's Corporation had annual revenues of $27.5 billion, and profits of $5.5 billion. McDonald's primarily sell hamburgers, cheeseburgers, chicken, french fries, breakfast items, soft drinks, milkshakes, and desserts.

CSR Initiatives

McDonalds has made it a part of their social commitment to support Dr.Shroff's Charity Eye Hospital's endeavours to eradicate preventable Childhood Blindness from our country. To facilitate contributions from patrons, for Dr.Shroff's Charity Eye Hospital's (SCEH) Pediatric Eye Care program, it has created multiple fund raising channels. The funds raised through these are used for treating avoidably blind children across India.

Good Corporate Citizenship Behaviour Issues

Fast-food kids meals have become nearly synonymous with promotional giveaways brightly coloured toys promoting a hit TV show or newly released feature film, most of which get lodged between couch cushions or forgotten about just in time for the next toys release. This cycle has been criticized for grooming children into an unhealthy fast-food lifestyle, with a recent study finding that fast-food ads care far less about getting kids to eat the restaurants food than they care about getting them to play with the toys. In 2010, more than one-third of all children and adolescents were either overweight or obese.

Out of the commercials targeted to kids, 79 percent of the 25,000 advertisements aired on four networks alone Cartoon Network, Nickelodeon, Disney XD, and Nicktoons. Visual branding, the team noted, was even more prominent in childrens ads than adults, as 88 percent of kids advertisements displayed food packaging while only 23 percent of adults ads did.

"Fast-food companies use free toys and popular movies to appeal to kids, and their ads are much more focused on promotions, brands and logos not on the food," said study leader Dr. James Sargent, pediatrics professor at the Geisel School of Medicine at Dartmouth College, in a news release. "These are techniques that the companies' own self-regulatory body calls potentially misleading."

As far as legality is concerned, fast-food companies have limits on what they can claim and display through their advertisements. The Beverage Business Bureau runs as Childrens Advertising Review Unit (CARU) that prescribes fair practice guidelines to companies for how to market their products to children. CARU asserts that children often have difficulty parsing out advertisement from food service, which means a double cheeseburger pales in attractiveness compared to the toy beside it.

Targeting children through advertisements when child obesity is continuously increasing throughout the world raises questions about corporate citizenship behaviour of McDonalds.

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