Generally, corporate philanthropy and corporate social responsibility are used interchangeably when the two concepts are not synonymous. A firm may be philanthropic without actually being socially responsible in the strictest sense of the term. Social responsibility does not mean responsibility to the distant society to the neglect of those segments of the society that are its immediate stakeholders.

That is, the customers, employees, creditors, suppliers, government, competitors, environment, and the community. The society follows next. While it is great for a business organisation to contribute to the wider society, fuller appreciation comes only against the backdrop of the quality of its relationships with its immediate stakeholders.

The organisation should first be providing quality products/ services at affordable prices with full disclosure to its customers. This will be possible only if it enters into a mutually beneficial exchange relationship with its other stakeholders. Its practices should not be anti-competitive. For, if they are anti-competitive, the customers will have a narrower range of products to choose from.

Since the choice and supplies will be restricted, the price charged will be higher and the firm will actually be engaged in rent-seeking or in making monopoly profits. The firm would then be gaining at the expense of the interest of consumers. Such a firm may donate heavily for education, healthcare, and community services but will not be socially responsible if its business practices are at odds with the interest of consumers. Such a firm would be philanthropic but not socially responsible.

A whole bunch of companies in the petroleum sector determined their own product prices in consultation with each other for too long. These pricing decisions benefited themselves but were found onerous by the commercial, industrial, and individual consumers. Such firms have a lot of surplus. On the basis of their generous community programmes, they may be called philanthropic only. Their social responsibility is suspect due to consumer surplus extraction. In addition, there are issues of adulteration and tampered meters that also need to be addressed if a firm wants to score high on the social responsibility scale.

Also, an energy firm may care for the community and, therefore, be philanthropic but it may not be allocating adequate resources for exploration to ensure energy supplies in the future. This is not social responsibility either if the country has to run from pillar to post, from Iran to Turkmenistan in search of gas supplies.

Also, firms may be doing very well financially as well as in the marketplace by providing superior quality products and services but if their size is big enough to go public and they do not fulfil this requirement, they do not score as high on the front of social responsibility as they would have if they were duly listed.

Business organisations may be running charity hospitals, schools, orphanages, and community centres. Such organisations are only philanthropic if they do not pay their taxes honestly and do not return their loans.

Parmalat of Italy is well-known for food products but the owners were hauled to prison due to fraudulent book keeping. Like Enron, Parmalat had developed reputation for being a good corporate citizen which did not bear out in any one of these cases as both these organisations were also engaging in corporate fraud at the same time.

So, to be a good corporate citizen on some scores and engaging in corporate fraud in some other cases, is a sure recipe for disaster. Arthur Anderson, World Com, and a South Korean conglomerate met the same fate. The outlook in our country is, “….see they do it too….” That is, ‘…if they do it, why cannot we?....’ This view can be strongly disputed on more counts than one.

If they, in the West, do something unacceptable, it certainly does not mean that we must follow suit. For, socially responsible behaviour on all counts alone leads to accumulation of “reputational capital” that can be turned over into sustainable and respectable business growth.

There is a tendency to build social image either on the basis of social services and/or on being environment-friendly. While the sphere of consumer interest has been discussed, responsibility to other stakeholders in general and the employees in particular must also be fulfilled. Fair compensation, safe and decent work environment, opportunity for growth and realisation of potential are all obligations towards the employees that business organisations must fulfil. Employees must also have an opportunity to contribute by way of ideas. This would help align the organisational direction that directly impacts the employees’ own future prospects as well. Employees would then feel effective in steering the course of the organisation in an agreed upon direction.

Unless empowered, employees would feel like cogs engaged in work that is least stimulating and engaging. In short, employees should be given a sense of ownership that would enable an organisation to be steered effectively in dynamic external environment.

Socially responsible organisations are also equal opportunity employers regardless of race, gender, and ethnicity. Developed organisations conduct social audits to determine how they are faring on these sensitive issues and what progress needs to be made further.

Cause-based partnerships between business organisations and NGOs are coming up to address social issues and organisational needs simultaneously. The UN struck a Global Compact with the MNCs to promote social responsibility at the organisational level. This is an effort towards harmonious existence of businesses with the civil society as some of its segments also interact directly and closely with business. In the absence of mutually beneficially exchange relationships, businesses are not likely to have sustainable growth. These relationships must, however, be struck with not just the society at large but first and foremost with those members of the society who are receiving business outputs and providing inputs directly to businesses. Then only will a business be viewed as socially responsible.