Tuesday, 17 January 2012

CSR: A Concept Often Confused and Misused in Bangladesh

It seems CSR or ‘Corporate Social Responsibility’ has become a buzzword in Bangladesh. We often make confusion over charity and CSR, and are indulging in several activities in the name of CSR. I once heard the chief executive officer (CEO) of a bank terming their sponsorship of 'Indian Idol' singers in a social club as part of their CSR. Yet another CEO termed their compliance with regulatory norms as CSR. A chamber leader, at a TV talk show, repeatedly urged reducing the SME loan interest rate, as part of the bank's CSR. Of course, at height of everything the mid ranking defense personnel wrote to the banks to allocate a portion of their CSR funds for the development of their golf course.

Corporate social responsibility goes far beyond charity. It is not just about making contributions towards good causes or charitable organizations. But it is also an all year round responsibility that companies should accept to serve the community. It must integrate with corporate values, cultures, business strategy and add to future sustainability too.

An organization's profits should reflect core values and adherence to the best practices. CSR is in fact more than charity for the sheer engagement of a company in the local community. It is also for the recognition that brand names do not depend on only quality, price and uniqueness. Other factors include the cumulative effects of how companies interact with its workforce, community and the environment.

A company's performance is judged not only by the inputs but also by its outcomes: the difference we make to the world everyday, every week or year, and the contribution we make towards sustainable development.

CSR often calls for finding a niche as an ethical organization. To translate this into a business perspective, how can competitive advantage be created or even a niche product developed, through approaches to CSR?

Successful innovation will come by looking ahead at environmental and social trends and planning to create opportunities in that new environment. To spot a future niche, a business has to be a constant trend-watcher, alert to its environment and ready to spot the product-client mix to which it is uniquely adapted to.

Even today, CSR is construed to be a part of charity. But it is in fact the reverse. Charity can be an important part of CSR, which signifies a corporation's contribution to the community where it does business. CSR creates a bigger picture when a company voluntarily integrates a complete range of economic, social, and environmental concerns in its business and communicates with its stakeholders.

Again, many companies have different concepts of serving the community. It can be a part of CSR or a part of 'Corporate Citizenship'. For many big companies, these initiatives are a commitment to being responsible corporate citizens and an industry partner, working with businesses, communities and governments. CSR will help advance economic and social well-being and enable people around the world to realize their full potential.

Corporate governance also goes alongside CSR. It affects how companies act within a set of regulations and how companies manage business processes to produce an overall positive impact on society. CSR and social reporting is the same as corporate governance in action, looking at whether companies do business in responsible ways, how they are perceived by their clients, regulators and relevant stakeholders, whether the company supports the country's visions for overall economic and social development and whether they are addressing the right causes in the name of charity.

Although the debate on CSR has continued to grow, we remain a long way from reaching a consensus on what it means and its value. We often find that it is just about glossy reports and public relations. Some see it as a source of business opportunity and improved competitiveness. Others see it as a distraction or a threat. But is there any particular framework for a planned CSR?

Very often, the relationship between CSR and a company's core business seems to depend largely on the views of the CEO or the chairman. There are still companies that conduct CSR by just donating money, while many organizations contribute to society by donating their own unique knowledge, know-how and resources. The main differences between large corporations, on one hand, and medium-sized and small ones, on the other, lie in the method chosen for CSR and the underlying motives. CSR is often not publicly communicated and there may be some interesting underlying business concepts.

But clearly, the ways that individual companies take up the challenges of CSR must reflect their particular circumstances. The approach, challenges and opportunities would be very different between each company, local or multinational. For many companies, the focus is on 'doing' CSR, rather than reporting it.

A bank with common owners donating a vehicle to an education institute (may be its' client too) can't be treated as ‘CSR’. In the same way, ‘rural financing’ or even ‘financial inclusiveness’ will remain a fluid exercise, if we only treat these as part of commercial banks' ‘CSR’. CSR is beyond these - giving back to the community, where we make money from.

CSR has continued to develop well beyond its philanthropic and community roots with a growing focus on the business case, making the business a socially responsible one and different from the crowd and serving the core values of the society or community the corporation or company works in.

Mamun Rashid is a Professor and Director at BRAC Business School, BRAC University in Bangladesh. He holds a masters in Economics from Bangladesh and masters in Business Administration from U.K. He is the immediate past CEO of Citibank, N.A in Bangladesh.

This article appeared in The Financial Express (Bangladesh) on January 10, 2012. 
Republished with permission from author.

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