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Having dealt with the importance of knowing some basic laws while running a business, we now come to the very important concept of Corporate Social Responsibility (or CSR). Corporate Social Responsibility is basically a form of self-regulation that the management build in their set-up so as to conform to the ethical standards, legal spirit and the international procedures being followed so as to ensure a safe environment with a profitable running of the business. The term was coined to mean that the organization has a responsibility towards all the stakeholders, and not only the shareholders. Stakeholders are the persons, who are directly or indirectly affected by the actions of the business, the likes of the customers, employees, communities and the environment at large too.

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Even though this form of self-regulation is imposed by the corporations on themselves so as to protect interests of stakeholders and shareholders, the efforts are always inclined in favour of the shareholders, and understandably so. Why wouldn’t someone who has invested in a business venture seek to maximise his profits? If a company is legally within constraints, it should be allowed to cater to its profits in whatever way they want. In such free market conditions it becomes necessary to have laws to protect the customers, employees, creditors, etc., in general and the environment at large.

For the same, various laws have been made by the Government of India, following some foreign set-ups. The Consumer Protection Act, 1986, Labour Laws such as the Trade Unions Act, 1926, the Industrial Disputes Act, the Payment of Wages Act, and the various Environment Laws have been enacted to ensure fair treatment of the various parties affected by the business of the organization. Any violation of these laws could lead to serious implications for the corporation. In order to ensure longevity and proper carrying out of business operations these laws have to be followed.

CSR
We know that it’s hard. But it’s for the best, really.

But apart from that, these laws have indirect implications for the business corporation. Though, they serve as a check on the harassment that can be caused by the management, adherence to them has favourable results for the profits of the business. By conforming to the various acts to protect interests of consumers, the quality of products and services lead to brand recognition. Paying attention to environment laws reduces waste and helps to cut costs apart from avoiding litigation. There are many Labour Laws in India, and efforts to individually comprehend and stick to them will be very tedious and exhausting. Therefore, the best thing will be to provide such a working environment to the employees so as to help them feel satisfied. It is important to remember that most people would prefer a healthy working environment over a bigger salary cheque. The Human Resource Departments set up in almost all big companies are tasked with the job of reviewing and raising the level of employees along with providing them with an environment best suited for their growth.

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Above all, the obedience to the law helps build a good reputation over time. We’ve heard time and again that to err is human. We can’t expect anything else even if they’re part of a corporation set-up. Accordingly, one step in violation of any law could adversely reflect on the reputation of the whole business corporation. It is impossible to list all the benefits a good reputation has on the business. It helps to attract more customers, ensures interest of investors, gets the business in the good books of the government, the management enjoy the support of the employees and above all, helps to maximise profits through the collection of all its benefits. By simply adhering to the mandatory laws, a corporation can go a long way in building a good reputation.

We live in a world that’s been repeatedly termed as a ‘global village.’ It is not only because of the ease with which one can reach any corner of this sphere. More important is the fact that every economy is interdependent on each other to thrive and to progress further. This interdependence has led to the rise of Multi-National Corporations, businesses across borders. They’re primary motive is to make profits. Even the projects undertaken by them to help the society or environment are aimed to draw profits in the long run. The idea of self-regulation seems to nearly die on them, even with all their resources and thousands of personnel.

Therefore, to ensure that no corporation is bigger than the society, many governments have now started to make Corporate Social Responsibility legally enforceable. It basically means apart from paying taxes and adding to the GDP, corporations will have to help build roads, hospitals and help protect the environment. In Australia, such a bill has already been passed, while in the US and certain African countries such a bill is in the drafting stages. It is yet to be seen whether this will be considered a boon or loss. Certainly, for the underprivileged it will be seen as a bonus on their allowances while the corporate will have a hard time digesting the same. In my opinion, in an economy where the corporate are not mitigated against the risks of the economy, it’ll be hard-pressing their resources to make it legally binding to fulfil social obligations as well. But seen from a different point of view, if every citizen in the country has a number of rights and corresponding duties towards the society, an artificial person like a corporate should be subject to some duties as well. As it has always been said, it’s totally about the morals.

Note: We at Inc42 take our ethics very seriously. More information about it can be found here.