CSR and the evolving role of business in society

There is so much debate these days on the role of the company. So I decided to go back to the beginning – the definition of a company. The Webster dictionary defines a company as “an association of persons for the purpose of carrying on some commercial or industrial enterprise or business.”

When I look around at my young colleagues and their infectious enthusiasm merging their professional lives with their personal values and beliefs, I don’t think they would agree with this narrow definition. They see a company as an integral part of the society they live in. An enterprise that has as much responsibility towards the development of the community it operates in as it does to its own business growth.

As a matter of fact, I too believe that it might be time to rethink this definition.

The main trigger for this change is the evolving definition of Corporate Social Responsibility. Over the years, it has transformed from charity or philanthropy to corporate responsibility, corporate citizenship, and more recently to responsible corporate behaviour and sustainability.

Each step in this journey has stemmed from evolving expectations of stakeholders, including customers, employees, investors, shareholders, government and society at large.

Once again today, as we emerge from one of the worst economic crises the world has witnessed in recent times, we are witnessing a change in these expectations.

Not only is our millennial generation looking to work for responsible employers, according to research, customers too are increasingly willing to switch brands in favour of socially responsible companies.

Even the government is expecting more involvement by business in partnering social development measures. In India, the Companies Bill 2009, which is likely to be tabled in the forthcoming budget session, has proposed that companies will have to earmark 2% of their average net profits during the preceding three years for corporate social responsibility spending - or disclose to their shareholders if they fail to do so.

Internationally too, there is growing demand for corporate social responsibility. We have recently seen the International Organization for Standardization launch a new ISO standard on social responsibility-ISO SR26000, a voluntary guidance standard applying to organizational governance, human rights, labour practices, environment, fair operating practices, consumers, community involvement and development.

Clearly, as society changes, we must constantly rethink how we do business. An instance of this is the development of hybrid cars by the automobile industry, a move towards sustainability - that will assist its own growth in an environment plagued by the growing concern about emissions.

Yet, I believe that CSR goes further than sustainability. It is simply good business. And, it is the only way forward. Doing good for others means integrating broader societal concerns into business strategy and performance - as part of the company’s business model. This is common sense – as our own interests can be realized by incorporating the interests of all those with whom we have a mutually dependent relationship.

This is the new reality. In the words of Klaus Schwab, Founder and Executive Chairman of World Economic Forum, who believes that companies will have to start thinking of stakeholders rather than shareholders: “More than ever, the new reality underscores the need to create new bonds rather than new boundaries. We need new partnerships and alliances between public, private and civic life to tackle the problems that lie ahead.”

What do you think? What are the principles that should guide the role of business in society today?