CSR Strategy and its Impact on Emerging Economies
Due to the fact that major corporate ethical disasters make an impact on the environment, community and human resources, public companies highlight the demand for the CSR activity disclosure. As a result, Corporate Social Responsibility (CSR) has been rising higher and higher on the international agenda and becomes one of the major issues in the business world. A number of multinational companies find it necessary to develop programs of CSR to comply with societal expectations. A business that focuses their attention on CSR usually promotes social interest by encouraging growth and development of community and eliminating practices that harm the public sphere. CSR is one of the effective tools that synergizes corporate efforts and the agencies of social sector towards sustainable development and growth of societal objectives.
The CSR concept has become a common one in business practices and customers nowadays expect companies to be more socially responsible. In spite of the fact that CSR is considered to be very important for businesses, it has not been a very profitable approach for them. The process of CSR requires a high level of support and management vision. However, the results of CSR cannot be immediate and the same CSR initiative cannot be suitable for all types of businesses. Hence, CSR design needs a careful mechanism of planning and implementation.
The paper will study the main characteristics of Indian economy, in particular Coca-cola Company which presents huge potential for the Indian economy. India is known for its extremely enterprising and vibrant business community. The western hemisphere represents CSR as a nascent activity in the corporate sector of India. The 1990’s marked the rapid start of CSR activities in India which have become a medium for the majority of Indian corporations to contribute to inclusive Indian society growth. However, it has been a tradition among Indian businesses to take up socially relevant causes individually or collectively. Hence, the concept of CSR is not new to India as it has deep roots in the traditional fabric from immemorial times.Despite the fact that India is a fast growing economy, the country faces a number of social challenges like illiteracy, poverty, population growth and other issues. It is becoming more and more imperative for the companies which operate in India to implement CSR to facilitate and create an appropriate environment for equitable partnership between businesses and the civil society. Nowadays, CSR activities in India are usually classified as CSR activities undertaken by corporate giants and by small businesses. The level of transparency and commitment maintained in CSR activities lie in the basis for this classification.
CSR ensures that a company is accountable for the environmental and social impacts created for the society and the runs its business in an ethical manner. The sustainability efforts are seen by Coca-Cola as a continuation of responsible corporate citizenship that began 125 years ago. Being one of the largest multinational companies in the world, Coca Cola makes a concerted effort in carrying out its responsibilities in a manner that has a positive impact in the community it operates in. The mission statement of the company is to benefit those who have any relation to the business or company environment. Due to their CSR initiatives, Coca Cola has made large contributions towards improving the quality of the life, environment, waste and water management not just in India, but also in the countries where its other subsidiaries operate.
The Coca-Cola drink was invented in 1886 by Dr. John Smith Pemberton in the USA (Atlanta, Georgia). The bottling system of Coca-Cola became one of the largest production and distribution networks around the globe. Being the largest beverage system worldwide, Coca-Cola is a part of thousands of communities in over 200 countries. In the middle of the 20th century, the company saw a rapid international growth. Coca-Cola entered India in the 1970s.
When Janta Party came to power in 1977, it implemented policies that made foreign companies divest majority stake in the consumer sector in favor of domestic partners. Thus Coca Cola exited India soon after. However, in 1993, the liberalization policy of India opened the market up to foreign businesses. The same year, Coca-Cola, the Indian subsidiary of the US-based Coca-Cola Company, re-entered the Indian market with the Parle Exports 16 strategic alliance. It gave the company ownership of such Parle’s popular brands as Limca, Thums Up, Maaza, Gold Spot and Citra. Since re-entering India, the company has had a substantial amount of positive impact on the community and economy due to incorporation of CSR strategy.
As it is one of the largest companies is the Indian beverage sector, the company made CSR an essential and integral part of the Coca-Cola corporate agenda. It is said that the company was aware of the economic, social and environmental impacts caused by such a business and it resulted in the taking up of a variety of initiatives directed into the improvement of life quality and reduction of the company’s environmental impact. The company regularly supports health and educational intiviatives investing the building of schools and hospitals and increasing their levels. It also takes an active part in supporting Disaster Relief and Rehabilitation programs and has built Health Camps in rural areas and urban slum. In 2008, Coca Cola India was presented with the Golden Peacock award for its contributions towards local community development and water conversation. Although the company has received a lot of accolades and praises, it is not without its critics. However, there are a lot of claims that Coca-Cola India has a negative impact on the environment and society in general as it depletes and contaminates groundwater as well as pollutes environment. The company has also been blamed for water privatization which makes villagers drill deeper or travel long distances in search of water. The Indians say that Coca-Cola has negatively affected quality of water as it extracts waste that pollutes soil, ground and fresh water.
In spite of the fact that the company is considered to be socially responsible, it has faced worldwide controversy concerning its products and policies in the years before the Indian pesticide crisis. When Coca-Cola reached the Indian market sales dropped by 40%. It was caused by the fact that many leading retailers, clubs, restaurants across the country had stopped selling the product as the drink was considered to be toxic. It made an activist group in India (The Center for Science and Environment (CSE) focused on the issues of environmental sustainability, especially the effects of economic growth and industrialization.In order to improve the situation on the market and make authorities believe in the initiatives of the company, CCI invested over US$1 billion in India (1993-2003) and became one of the country’s largest international investors. Hence, CSR has always become a very essential part of the Coca Cola India’s vision. The company defines its CSR as making socially responsible products, making a commitment to the community and engaging in socially responsible relations among employees. Coca-Cola India treats CSR as a duty and a way of life. Therefore, the research will examine the incorporation of CSR by Coca-Cola India. The research defines the value of CSR according to the extent of its CSR active estimation by the company, the identification of important CSR activities in the Indian context and the issues of management.
The research will focus on the incorporation of CSR in Coca-Cola India and its impact on Indian economy and social well being of the community. The research questions are as follows:
1) What CSR strategy is adopted by Coca-Cola India?
2) What challenges and issues does the company face concerning its sustainability initiatives in the country?
3) What are the measures taken by Coke to address these issues and challenges?
4) What causes the criticism against Coca-Cola India? What are the ways of addressing the issue?
5) What is the aim of using CSR initiatives in developing countries?
6) What has the company done in order to outreach efforts in the sphere of CSR?
7) What are the best ways of CSR integration into business strategies and practice?
The aim of the research is to study the impact of implementing CSR Strategy in Emerging Economies, Case of Coca Cola - India (CCI).
The main purpose of the literature review is to study the already conducted relevant research in the field of CSRand its incorporation by emerging economies. In this study, we integrate organizational participation of emerging economies in CSR activities. Analysis of empirical literature has shown that there is lack of information the effects of CSR behavior in emerging economies.
The CSR evolution in the emerging economies shows controversial results. Chambers et al. study the CSR penetration in such Asian countries as Indonesia, India, Malaysia, Singapore, the Philippines, Thailand and South Korea. There is a hypothesis that CSR in developing economies still undergoes a very nascent stage and there are no sustainable mechanisms which may ensure that businesses incorporate CSR with anything else than a charitable outlook. The scientists show that the mean value for the analyzed countries is about 41% when compared to the United Kingdom with its 98%. However, the mean scores may be very different even in the developing countries, for example, India has 72% of CSR penetration whereas Indonesia only 24%. Thus, the CSR concept in the emerging economies presents a very different understanding.
There is an idea that companies would only engage in CSR activities in case they directly contribute to their profitability. It has been suggested that there are two major ways through which CSR contributes to a company’s strategic objectives, also relevant in emerging economies, including CSR as a means to enhance and maintain corporate reputation and CSR as a marketing tool.
The studies provided by Varadarajan & Menon, Hess et al., Rick & Williams suggest that corporate contribution into charity helps businesses to establish positive customer relations, offer extensive media exposure, reach marketing objectives, and thwarts negative publicity.
Business organizations which operate in different nations are usually embedded in different institutional environments and face different coercive pressure degrees to engage in CSR. Arya & Zhang study the impact and relevance of CSR in the capital markets of emerging economies. It has been stated that emerging economies have enacted specific regulations of CSR. In emerging economies, there is a dramatic change in the institutional environment as governments introduce a variety of new laws. It has been noted that the emerging economies tend to present a distinctive set of CSR agenda challenges. They are quite different from those which are in the developed world. It is explained by the fact that environmental and social crises are usually typical for emerging countries. At the same time, emerging markets are thought to be the markets characterized by high growth for global corporations and are marked by commercial significance.
It has been noted that some CSR active businesses in the emerging economies are usually more internationally active and hope to strategically draw on CSR to become competitive in the global market. However, CSR research on emerging economies still suffers from the limitations of CSR research in general. One of the main CSR practice indicators is CSR reporting by companies. Frynas follows the idea that this method is valuable in term of identifying initial trends CSR reporting raises as many questions as answers.
Mehra is convinced that the development of CSR domestic constituencies in emerging economies should be the most important area where efforts should be united to get long-term results. The CSR theoretical arguments and empirical study of the institutional and instrumental factors which affect CSR behavior in emerging economies have been examined by Luo & Zhang. They speak about CSR as a static event. It has been stated that the donation sequence is a key factor that helps to reveal the instrumental motivation of highly reputable firms.
CSR is considered to be a relatively young movement and it happens that people expect too much from it. According to the scientist, it is necessary to acknowledge that CSRhas been expanding in emerging economies in scope and scale. In spite of the fact that the corporate world is increasingly seen to be integrating social responsibility, there are still a lot of critics who continue to see CSR as a myth. It has been argued that CSR is not worth thinking about, discussed and debated.
The analyzed sources are of great scientific importance as they provide key concept which help to better understand the idea of CSR implementation and its impact on the emerging economies. Their finding will help us to study the incorporation of CSR and its impact on the emerging economies and emphasize the need for adopting ethical values in the business practices of multinational corporations in India.
To meet the research objective we have conducted qualitative research. However, some elements of quantitative research methods will also be used. Qualitative research has been defined as a systematic empirical inquiry into the meaning and involves a naturalistic and interpretive approach meaning that qualitative researchers study things and phenomena in their natural settings trying to interpret them in the same meanings as they are interpreted by people. Quantitative research helps to explain phenomena by collecting and analyzing numerical data. Quantitative data are considered to be any data that is in numerical form including percentages, statistics, etc.
Research is a process which defines problems that formulate suggested solutions hypothesis with the help of summarizing, collecting, organizing and evaluating different data with the aim to reach on solutions with careful testing. Hence, it refers to knowledge search, whereas methodology is considered to be a procedure or set of procedures that are used to find answers to problems.
Theoretical underpinnings on the research subject will be undertaken on the basis of a detailed survey of the available literature on CSR and its implementation in emerging economies. Herein, we establish the research approach and strategy which will be used to explain how the research question has been addressed and how the conclusion has been reached. The chosen methodology includes the scientific approach, the methods of data collection, chosen theories and their critique and key term definitions.
Qualitative interviewing is considered to be very flexible as it responds to the direction of an interviewee and adjusts to the research with the emphasis on the most important issues that might appear while interviewing. This type of interviewing provides a greater interest in the interviewee’s ideas and beliefs and reflects the researcher’s concerns. In the qualitative interview, the interviewee is encouraged to go off the topic as it helps see what point is the most interesting or important for the person and allows to reveal the nuances. Qualitative interviewing does not require following any schedule or guide. Interviewing is regarded to be an interchange between two or more people on a topic of mutual interest. It helps see the centrality of human interaction and emphasizes the social ‘situatedness’ of research data. The order of questions may be changed, and the questions may be even paraphrased. The question should motivate the respondent to give precise and full answers and avoid biases caused by conformity, social desirability, and other disinterest constructs. The respondents, who are workers of CCI will be interviewed in July/August. The interview questions will include “What does the company do to be sustainable in the market?”, “What initiatives are taken by the company to solve the environmental issues?”, “What strategies does the company implement to improve CSR?” and others. The interview answers will be noted by the interviewer (the researcher) and then analyzed. The interviewer will ask additional questions in case they arise in the process of interviewing.
As a survey is considered to be the way of gathering information about certain opinions, needs, or characteristics, we have decided to use this research method as well. Being a descriptive method, surveys are very useful in the process of data collection. In the survey, researchers select respondents and ask standardized questions. It can be done in a written form completed by a surveyed person, done online, using the phone, or face-to-face. Surveys give an opportunity to collect data from either a small number of people or a large group. One of the main benefits of a survey is that it completely elicits information concerning attitudes. The survey, as well as interviewing, will be carried out in July/August. The survey questions will be the same as of the interview, however, they will have possible answers. Hence, respondents will have to choose the most appropriate one. The survey will be anonymous as the data received from such kind of surveys are considered to be more truthful and realistic.
Secondary data analysis has been used to analyze the studies which have been made by others. Secondary data analysis includes any data that are relevant to the research question. In our case it is the analysis of existing literature on the research topic. Implementing secondary data analysis, the researcher analyses data collected by another researcher to address posing questions. Among the strengths of secondary data analysis is the ability to use search engines and web-based materials; it uses already existing information, and captures comprehensive information.
Internal data denote information that is useful in decision making. They are usually derived from the company staff, accounting system, Web site report, market reports, and previous studies. Collected information will relate to the incorporation of CSR by emerging economies, Coca-Cola India in particular. Hence, the data will be collected from surveys and interviews, different reports provided be CCI and previous studies.
Thus, in order to collect data for the research, we will conduct an interview and survey, analyze the existing literature on the topic, and study data provided by the company in the form of reports. In the process of determining the implementation of CSR by emerging economies, all the areas of knowledge were considered to have equal weight.