Stakeholders approach towards CSR

Stake holders can be divided in to two groups, internal stakeholders and external stakeholders. Each group has few key stakeholders like in internal; employees, directors and in external; creditors, customers, government, Society etc. Each stakeholder has specific role, responsibility and rights in the business.

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By Shweta Bapat

Stakeholders can be broadly described as any individual or a group who is affected or may give an impact on the achievement of an organization’s objectives. In other words a person or a group who has direct or indirect stake in the organisation can be called as stakeholders. Many times, mainly students get confused between shareholders and stakeholders because shareholders are also called as stockholders, but they can take a note that shareholders are one of the stakeholders along with many other important as well as few less important stakeholders. Stakeholders can affect or be affected by the actions, policies, strategies, and objectives of the organisation in a direct or indirect manner.

Stake holders can be divided in to two groups, internal stakeholders and external stakeholders. Each group has few key stakeholders like in internal; employees, directors and in external; creditors, customers, government, Society etc. Each stakeholder has specific role, responsibility and rights in the business.

As per Freeman’s stakeholders theory (2007) as management is responsible for providing a decent return on investment to shareholders; it is also responsible to look after the well-being of broader set of stakeholders like customers, suppliers, employees, community, and environment etc. Therefore Management of the organisation (though one of the stakeholders) needs to take care of the interest and needs of other stakeholders; and required to fulfil their expectations through effective business functioning because this has implications on corporate governance.

Though community and environment are identified as the stakeholders of the organisation and that is main part of CSR; but it is a bitter truth that CSR has been given secondary importance and primary focus was always on shareholders and customers. In fact the approach of these stakeholders towards CSR was not positive. CSR was viewed as cost centre because there are no direct economic gains possible from CSR activities of the organisations.

Most of the organisations were earlier denying the society as a stakeholder of business and were not interested in taking the social responsibility by saying ‘it is the responsibility of the Government to take care of society and we are paying taxes to the government as our responsibility’. Similarly investors were interested in profits and were not ready to permit the organisations to spend on CSR which will not generate any economic gains.

Recently we have witnessed a total change in this approach towards CSR. CSR has gained lot of importance due to legislative as well as non-legislative changes that took place in last 30 to 40 years all over world. The importance of CSR can be witnessed through various research studies that shows positive impact of CSR on financial performance, market performance and social performance of businesses.

It is noticed that the indirect gains of CSR can be seen in long run by the businesses who are sincerely taking efforts towards the development of the society. As these businesses are taking care of the society; society in return is giving benefits to them. Because of this give and take CSR is now viewed as profit centre and not a cost centre. And it is needless to say that the treatment to CSR is also changed with this changed approach of other stakeholders.

(About the Author: Mrs. Shweta Bapat, HoD Human Resource Management, Kaveri College of Arts, Science and Commerce, Pune)

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Disclaimer: The views expressed by the author in this feature are entirely her own and do not necessarily reflect the views of India CSR Network and its Editor.

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