What is Corporate Social Responsibility?

Corporate social responsibility (CSR) is a broad term used to describe a company’s efforts to
improve society in some way.

These efforts can range from donating money to nonprofits to implementing

environmentally-friendly policies in the workplace.

CSR is important for companies, nonprofits, and employees alike.

Corporate social responsibility is not a mandated practice in the United States; instead, it is
something extra that companies do to improve their local and global communities.

India is widely regarded as a country in which corporate social responsibility has long played an
important role. National and international nongovernmental organizations and UN agencies are
involved in the public debate in the business community and the media. However, the
involvement of the business community is concentrated among a few long-established family-
owned companies that contribute a significant amount in the field of CSR, in both theory and
practice. The Indian subsidiaries of German companies are bound by their parent companies’
guidelines for socially responsible behavior, but how these guidelines are actually implemented
is left up to each subsidiary. Their CSR activities focus on their employees (providing training
and improving social security), the environment and aid efforts within India or in the region,
which are currently concentrating on providing help to tsunami victims. Public policymakers are
seeking to achieve inclusive and sustainable growth, and calling on private enterprise to
contribute its share.

There is no evidence of CSR activities in the informal sector of the Indian economy, which is
responsible for slightly less than half of GDP and employs some 93 percent of India’s workforce.
Indeed, workers in this sector are afforded no rights or protections whatsoever, and all
indications are that no efforts are being made to fight poverty, promote education or health,
protect the environment or encourage employee participation in business development.

The UN Global Compact seeks to promote the CSR activities of businesses in India. However, it
has not succeeded in involving important NGOs, or most importantly, the unions. The UN
Global Compact is not well known within the business sector or the NGO community. For some
time now, German development organizations (GTZ, InWent) have been cooperating closely
with the country’s important trade associations. The Indo-German Chamber of Commerce has
developed its own approach to CSR, and provides conceptual and advisory support for German
companies in India.

While CSR is not at the top of the agenda of German political foundations, some of them are
starting to devote more attention to this area. The German government, represented by
the Ministry of Labor, is working to achieve greater international cooperation on CSR under the
Heiligendamm Process, which includes India as one of five outreach countries. Talks have been
held in the context of a formalized partnership between Germany and India. Representatives of
the German business community meet with embassy officials at least once a year, during their
monthly business lunches, to discuss CSR.

Source: German Embassy, New Delhi

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18/07/2010 9.00PM
Corporate social responsibility (CSR) also called corporate responsibility, corporate citizenship,
responsible business and corporate social opportunity is a concept whereby organizations
consider the interests of society by taking responsibility for the impact of their activities on
customers, suppliers, employees, shareholders, communities and other stakeholders, as well as
the environment. This obligation is seen to extend beyond the statutory obligation to comply
with legislation and sees organizations voluntarily taking further steps to improve the quality of
life for employees and their families as well as for the local community and society at large.

The practice of CSR is subject to much debate and criticism. Proponents argue that there is a
strong business case for CSR, in that corporations benefit in multiple ways by operating with a
perspective broader and longer than their own immediate, short-term profits. Critics argue that
CSR distracts from the fundamental economic role of businesses; others argue that it is nothing
more than superficial window-dressing; still others argue that it is an attempt to preempt the role
of governments as a watchdog over powerful multinational corporations.

OBJECTIVE:
The objective of this paper is to examine the nature and extent of corporate social responsibility
(CSR) initiatives under taken by Indian companies and to study its relevance in business.

Overview
Corporate social responsibility is necessarily an evolving term that does not have a standard
definition or a fully recognized set of specific criteria. With the understanding that businesses
play a key role on job and wealth creation in society, CSR is generally understood to be the way
a company achieves a balance or integration of economic, environmental ,and social imperatives
while at the same time addressing shareholder and stakeholder expectations. CSR is generally
accepted as applying to firms wherever they operate in the domestic and global economy. The
way businesses engage/involve the shareholders, employees, customers, suppliers, governments,
non-governmental organizations, international organizations, and other stakeholders is usually a
key feature of the concept. While business compliance with laws and regulations on social,
environmental and economic objectives set the official level of CSR performance, CSR is often
understood as involving the private sector commitments and activities that extend beyond this
foundation of compliance with laws.
From a progressive business perspective, CSR usually involves focusing on new opportunities as
a way to respond to interrelated economic, societal and environmental demands in the
marketplace. Many firms believe that this focus provides a clear competitive advantage and
stimulates corporate innovation.

CSR is generally seen as the business contribution to sustainable development which has been
defined as “development that meets the needs of the present without compromising the ability of
future generations to meet their own needs”, and is generally understood as focusing on how to
achieve the integration of economic, environmental, and social imperatives. CSR also overlaps
and often is synonymous with many features of other related concepts such as corporate
sustainability, corporate accountability, corporate responsibility, corporate citizenship, corporate
stewardship, etc..

CSR commitments and activities typically address aspects of a firm’s behaviour (including its
policies and practices) with respect to such key elements as; health and safety, environmental
protection, human rights, human resource management practices, corporate governance,
community development, and consumer protection, labour protection, supplier relations,
business ethics, and stakeholder rights.

Corporations are motivated to involve stakeholders in their decision-making and to address

societal challenges because today’s stakeholders are increasingly aware of the importance and
impact of corporate decisions upon society and the environment. The stakeholders can reward or
punish corporations. Corporations can be motivated to change their corporate behaviour in
response to the business case which a CSR approach potentially promises. This includes:

1. stronger financial performance and profitability (e.g. through eco-efficiency),

2. improved accountability to and assessments from the investment community,

3. enhanced employee commitment,

4. decreased vulnerability through stronger relationships with communities, and

5. improved reputation and branding.

Criticisms and concerns

Critics of CSR as well as proponents debate a number of concerns related to it. These include
CSR’s relationship to the fundamental purpose and nature of business and questionable motives
for engaging in CSR, including concerns about insincerity and hypocrisy.

Critics concerned with corporate hypocrisy and insincerity generally suggest that better
governmental and international regulation and enforcement, rather than voluntary measures, are
necessary to ensure that companies behave in a socially responsible manner. CSR could prove to
be a valuable asset in an age of Mergers & Acquisitions, as it helps firms spread their brand
name
INDIAN SCENARIO
Even much before the issue became a global concern, India was aware of corporate social
responsibility (CSR), due to the efforts of organisations such as the Tata Group. (Around 66 per
cent of Tata Sons, the holding group of the Tata Group, is today owned by a trust).

Corporate companies like ITC have made farmer development a vital part of its business
strategy, and made major efforts to improve the livelihood standards of rural communities.
Unilever is using micro enterprises to strategically augment the penetration of consumer products
in rural markets. IT companies like TCS and Wipro have developed software to help teachers
and children in schools across India to further the cause of education. The adult literacy software
has been a significant factor in reducing illiteracy in remote communities. Banks and insurance
companies are targeting migrant labourers and street vendors to help them through micro-credits
and related schemes.

In June 2008, a survey was carried out by TNS India (a research organization) and the Times
Foundation with the aim of providing an understanding of the role of corporations in CSR. The
findings revealed that over 90 per cent of all major Indian organizations surveyed were involved
in CSR initiatives. In fact, the private sector was more involved in CSR activities than the public
and government sectors. The leading areas that corporations were involved in were livelihood
promotion, education, health, environment, and women’s empowerment. Most of CSR ventures
were done as internal projects while a small proportion were as direct financial support to
voluntary organizations or communities.

In a survey carried out by the Asian Governance Association, which ranks the top 10 Asian
countries on corporate governance parameters, India has consistently ranked among the top three
along with Singapore and Hong Kong, for the last eight years.

In another study undertaken by automotive research company, TNS Automotive, India has been
ranked second in global corporate social responsibility. State-owned Bharat Petroleum and
Maruti Udyog were ranked as the best companies in India. Bharat Petroleum and Maruti Udyog
came on top with 134 points each, followed by Tata Motors (133) and Hero Honda (131). The
study was based on a public goodwill index and India received 119 points in the index against a
global average of 100. Thailand was at the top slot with 124 points.

Several foundations run by corporate houses plan to devise a common strategy to ensure
transparency in their social and community development operations, such as tracking spending in
and progress of such projects in their annual reports.

The effort is significant because it brings together a wide range of Indian companies to share
ideas on innovating sustainable programmes. Among them are Multi Commodity Exchange of
India Ltd, Anil Dhirubhai Ambani Group and media company Bennett, Coleman and Co. Ltd,

Audit firm KPMG will partner with them to offer guidance on evaluating corporate social
responsibility or CSR programmes-a trend companies are slowly embracing as India’s expanding
economy contrasts sharply with growing local protests over land for future industrial projects.
The network alliance stems from the first sustainability summit that was organized in January by
the Associated Chambers of Commerce and Industry of India.

CSR could prove to be a valuable asset in an age of mergers and acquisitions, especially as it
helps companies spread their brand name, The new network will also serve as a common ground
to lobby with the government for tax exemptions and safeguard other interests in the future.

Indian companies have made little progress in reporting development projects. And only 48
companies have so far given their commitment to support the United Nations Global Compact, a
charter for improving the global business environment through standards, such as labour rights
and fighting corruption.

Addressing business leaders in May last year, Prime Minister Manmohan Singh said “Corporate
social responsibility must not be defined by tax planning strategies alone. Rather, it should be
defined within the framework of a corporate philosophy, which factors the needs of the
community and the regions in which a corporate entity functions.”

Some say companies have an inherent “mental block” in reporting development programmes. A
recent KPMG study among 27 Indian companies showed that a mere 8% mentioned their social
expenditures in their annual reports, and only 25% filed CSR reports at all. But a quarter of them
are also signatories of the Global Reporting Initiative, a 10-year-old movement started by an
NGO called Coalition for Environmentally Responsible Economies (CERES) and the United
Nations Environment Programme. This encourages companies to make voluntary disclosures and
lays down framework on improving reporting principles.

“Most companies tend to give to charities than make long-term development commitments.
When a company voluntarily opens up for self-evaluation, it creates value for shareholders when
competing with other companies,” said Parul Soni, associate director of KPMG’s Aid and
Development Services.

An estimated 100 corporate foundations and 25 foreign firms are involved in CSR activities in
India, but statistics on input and output are elusive.

According to Times’ Pandey, the Indian corporate sector spent Rs30,000 crore on social
expenditure during the last financial year, up from Rs17,500 crore the previous year. Quoting
from a government report, he said, companies drew a total exemptions of Rs5,500 crore under
income-tax laws last year. These figures, an analyst said, sound improbable as Indian companies
still do not distinguish between philanthropy and internal practices to benefit stakeholders such
as employees and community.

Companies, too, continue to rely on different models to earmark its social expenditure, making it
difficult to measure the overall impact.

For instance, the Steel Authority of India Ltd (SAIL), the country’s largest steel company, spent
Rs100 crore on CSR last year; this was 2% of its profit after tax, exclusive of dividend tax,
according to SAIL spokesperson N.K. Singhal. Yet others, such as Tata Steel Ltd, which runs a
850-bed hospital and rural projects in 800 villages around Jamshedpur, spends an average of
Rs150 crore as part of its annual revenue expenditure.

What eventually makes up for CSR of a company ultimately depends on leadership; as part of
company decision, about 66% of Tata Sons, the holding group of the Tata group, is today owned
by a trust.

Pharmaceuticals company Jubilant Organosys Ltd, already runs an anti-tuberculosis programme

with the government of Uttar Pradesh. Apart from schools and hospitals that are run by trusts and
societies, the government, too, is exploring to widen the scope of public-private partnerships to
build and maintain schools and hospitals in return for a fixed annuity payment.

CONCLUSION
The concept of corporate social responsibility has gained prominence from all avenues.
Organizations must realize that government alone will not be able to get success in its endeavor
to uplift the downtrodden of society. The present societal marketing concept of companies is
constantly evolving and has given rise to a new concept-Corporate Social Responsibility. Many
of the leading corporations across the world had realized the importance of being associated with
socially relevant causes as a means of promoting their brands. It stems from the desire to do good
and get self satisfaction in return as well as societal obligation of business.

The Indian corporate sector spent US$ 6.31 billion on social expenditure during 2007-08, up
from US$ 3.68 billion spent during the previous fiscal. The Steel Authority of India Ltd (SAIL),
the country’s largest steel company, spent US$ 21.05 million on CSR last year; Tata Steel Ltd,
(which runs a 850-bed hospital and rural projects in 800 villages around Jamshedpur), spends
about US$ 31.58 million as part of its annual revenue expenditure. Now there are plans to also
introduce CSR in the small and medium enterprises (SME) sector to increase its reach in remote
areas.

The concept of corporate social responsibility originated in the 1950s in USA and the concept
came into prominence in public debate during the 1960s and 1970s. During 1980s to 2000,
corporations generally recognized a responsibility to society and weighed against the demands of
being competitive in a rapidly changing global economy. Corporate social responsibility is
fundamentally a philosophy or a vision about the relationship of business and society. It is a
process of continuous improvement which begins small, grows and expands over a period of
time. It has been referred to as caring capitalism in contrast to financial capitalism. Corporate
Social Responsibility (CSR), also known as corporate responsibility, corporate citizenship,
responsible business and corporate social performance is a form of corporate self-regulation
integrated into a business model. Ideally, CSR policy would function as a built-in, self-regulating
mechanism whereby business would monitor and ensure their adherence to law, ethical
standards, and international norms. Business would embrace responsibility for the impact of their
activities on the environment, consumers, employees, communities, stakeholders and all other
members of the public sphere. Furthermore, business would proactively promote the public
interest by encouraging community growth and development, and voluntarily eliminating
practices that harm the public sphere, regardless of legality. CSR is the deliberate inclusion of
public interest into corporate decision-making, and the honoring of a triple bottom line: People,
Planet, and Profit.

Corporate Social Responsibility (CSR) is a concept that encourages organizations to consider the
interests of society by taking responsibility for the impact of the organization’s activities on
customers, employees, shareholders, communities and the environment in all aspects of its
operations. This obligation is seen to extend beyond the statutory obligation to comply with
legislation and sees organizations voluntarily taking further steps to improve the quality of life
for employees and their families as well as for the local community and society at large.The
practice of CSR is subject to much debate and criticism. Proponents argue that there is a strong
business case for CSR, in that corporations benefit in multiple ways by operating with a
perspective broader and longer than their own immediate, short-term profits. Critics argue that
CSR distracts from the fundamental economic role of businesses; others argue that it is nothing
more than superficial window-dressing; others argue that it is an attempt to pre-empt the role of
governments as a watchdog over powerful multinational corporations.

Social responsibility is an ethical or ideological theory that an entity whether it is a government,

corporation, organization or individual has a responsibility to society. This responsibility can be
“negative”, meaning there is a responsibility to refrain from acting (resistance stance) or it can be
“positive,” meaning there is a responsibility to act (proactive stance).There is a large inequality
in the means and roles of different entities to fulfill their claimed responsibility. This would
imply the different entities have different responsibilities, in so much as states should ensure the
civil rights of their citizens, that corporations should respect and encourage the human rights of
their employees and that citizens should abide with written laws. But social responsibility can
mean more than these examples. Many Non-governmental organizations (NGOs) accept that
their role and the responsibility of their members as citizens are to help improve society by
taking a proactive stance in their societal roles. It can also imply that corporations have an
implicit obligation to give back to society.

Many businesses in emerging markets are realizing benefits from corporate social responsibility
initiatives, with quantified improvements in revenue and market access, productivity, and risk-
management. While emerging-market companies tend to focus more on short-term cost savings
and revenue gains, intangibles, such as brand value and reputation issues, are more significant
for companies in developed countries. The contemporary corporate social responsibility agenda,
however, is relatively immature in all countries. Despite widespread rhetoric, its impact is still
patchy. In practice, implementation of this agenda by many companies is shallow and
fragmented. Governments are beginning to view corporate social responsibility as cost-effective
means to enhance sustainable development strategies, and as a component of their national
competitiveness strategies to attract foreign direct investment and position their exports in global
markets. There is a significant opportunity for the public sector to harness business enthusiasm
for corporate social responsibility to help achieve its goal of reducing poverty. The challenge
today for the public sector in developing countries is to identify corporate social responsibility
priorities and incentives that are meaningful in their national context, and to play a role in
strengthening appropriate local initiatives.
Corporate social responsibility is not a new concept in India. However, what is new is the shift in
focus from making profits to meeting societal challenges. Now-a-days, employees are actively
participating in the social activities even on holidays. This is mainly because employees feel a
sense of pride when they are involved in such activities. Moreover, companies are having
dedicated departments for CSR. CSR taken up by various range of companies primarily focuses
on poverty alleviation, environmental protection and sustained development. Companies are
taking initiatives for developing infrastructure in rural areas. TVS Electronics was involved in
CSR during the Tsunami to provide relief measures to the victims. They have also participated
with the government to improve sanitation in a village called Tiruvidenthai. Such initiatives will
help in improving the conditions of rural people. Satyam Foundation of Satyam Computer
Services Ltd., Infosys Foundation of Infosys Technologies Ltd., GE Foundation of the General
Electric Company are exemplary instances of the benevolent commitment of the corporate sector
in India. Irrespective of the profits they make, these foundations are aiming at uplifting of the
poor and enhancing the standard of life in the rural sector.

The companies which implemented CSR in rural India are discussed below

RURAL ELECTRIFICATION CORPORATION LTD

The approach of REC towards Corporate Social Responsibility is oriented to identify and
formulate projects in response to felt societal needs in diverse areas and to implement them with
full involvement and commitment in a time bound manner. As a responsible corporate entity,
Rural Electrification Corporation is consistently strive for opportunities to meet the expectation
of its stake holders by pursuing the concept of sustainable development. The major activities in
rural area are to facilitate demonstration of commercially viable rural electricity delivery models
with appropriate intervention and support on a selective basis such that they can be replicated
elsewhere. REC provides promotion of rural enterprise and livelihood including skill
development and training, Provides development support to common facility centres / production
centres in rural areas. REC Promotes development of rural technologies for micro enterprise and
also Promotes sports and games.

LAFARGE CEMENT

Lafarge worldwide gives prime importance to sustainable development for sustainable economic
performance. Lafarge is committed to the communities where it operates. In India Lafarge
has undertaken a number of initiatives under its corporate social responsibility programme. The
major initiatives are Project Employability, Project Low Cost Housing, and Project Education.
Project Employability focuses on creating sustainable livelihoods for local communities. The
concept of the project is to build communities that are more skilled and capable of sustaining
themselves independently by capitalizing on the company’s expertise, knowledge and
competencies, rather than merely providing continued financial support. It directly provides
solutions to the critical community problem of unemployment, through a method, which is
“development” oriented and lays the foundation for long term success of the society.

Project Employability provides professional training in masonry to the illiterate and unemployed
youth in these communities making them employable. The objective of Low Cost Housing is to
promote and enhance the use of cement in houses in order to provide safe and comfortable
habitats. Since a large part of India (70%) lives in rural areas, the project is largely geared to
meet rural housing needs. Project Low Cost housing, which we initiated during 2004
incorporating modern technology, has become our priority area. The goal of the project is to
design safe houses, which are replete with basic amenities and provide a platform for its
replication across geographies. Lafarge at present is conducting Computer Education classes,
free of cost, for over 1500 girl children in about 10 middle schools in Jharkhand and
Chhattisgarh in the part of its Project Education. Lafarge also has plans to broaden the scope and
escalate the activities of Project Education further under the aegis of

BPCL

BPCL initially started working in Mahul, the village located in the vicinity of its Mumbai
refinery since 1986. The habitants of Mahul, essentially from the fishing community, were rich
because they possessed marine wealth but as far as education, health, etc was concerned, they
needed help. BPCL volunteered and the initial success brought such gratification that
immediately it adopted another village (this time an interior one) called Karjat, developments
with selfless intentions helped introspect about the future role BPCL should adopt in its aim to
contribute to this effort, then there after there was no looking back. As a corporate responsibility,
today 37 villages across India have been adopted. This includes making substantial investments
for nearly a decade and a half in them to make them fully self reliant, providing them fresh
drinking water, sanitation facilities, medical facilities, enhancing their income standards by
imparting vocational training and agricultural innovations. However, BPCL also firmly believes
that the only vehicle for raising the villagers from their present state is by educating the young
and the old, a focus on providing grants for opening schools and opening adult literacy camps as
well.

INDIAN OIL

Indian Oil has a concerted social responsibility programme to partner communities in health,
family welfare, education, environment protection, providing potable water, sanitation, and
empowerment of women and other marginalised groups. Indian Oil has always been in the
forefront in times of national emergencies. Indian Oil People have time and again rallied to help
victims of natural calamities, maintaining uninterrupted supply of petroleum products and
contributing to relief and rehabilitation measures in cash and kind. Indian Oil’s community-
focussed initiatives include allotment of petrol/diesel station dealerships and LPG
distributorships to beneficiaries from among Scheduled Castes, Scheduled Tribes, physically
handicapped, ex-servicemen, war widows, etc. The Corporation has also unveiled kisan seva
kendras as small-format retail outlets to reach quality products and services to people in the rural
areas. Indian Oil has also set up the Indian Oil Foundation (IOF) as a non-profit trust to protect,
preserve and promote national heritage monuments. The Corporation also supports a variety of
endeavours in arts, culture, music and dance, apart from organising programmes on its own
under the banners of Indian Oil Art Exhibition, Indian Oil Sangeet Sabha and Indian Oil Kavi
Sammelan.

ACC
ACC has undertaken social volunteering practices almost from its inception, – long before the
term corporate social responsibility was coined. The company’s earliest initiatives in community
development date back to the 1940’s in a village on the outskirts of Mumbai while the first
formal Village Welfare Scheme was launched in 1952. The community living around many of
our factories comprises the weakest sections of rural and tribal India with no access to basic
amenities. Its community development activities revolve around the under-privileged community
that lives in the immediate vicinity of the cement plants. The range of activities begins with
extending educational and medical facilities and goes on to cover vocational guidance and
supporting employment-oriented and income-generation projects like agriculture, animal
husbandry, cottage industries by developing local skills, using local raw materials and helping
create marketing outlets .At all our cement factories ACC share amenities and facilities with
members of the local community. This includes sharing education and medical facilities, sports,
recreation, access to Bore Wells, drinking water and the usage of colony roads.

COLGATE’S PROJECT JAGRUTI

In the year 1998 Colgate started project Jagruti , the rural hygiene drive along with the Indian
dental Association. This project covers 60 lakh people in 20,000 villages, out of which 15,000
villages had no experience to the availability of toothpaste and tooth powder. The aim of the
drive is to promote the brand in rural areas but the overall strategy is also spreading the vital
information of oral hygiene among the lesser aware rural people.

CHAMBAL FERTILISER’S UTTAM BANDHAN

Uttam Bandhan , the community welfare initiative launched by the K.K. Birla group’s flagship
company Chambal Fertilisers and chemicals ltd (CFCL) in Rajastan in the year 2000. Under this
programme , CFCL trains unemployed rural youth as extension workers known as krishi sewaks,
who interact with the farmers and advise them .

HUL’S VINDHYA VALLEY PROJECT

In the year 2000 HUL helped state owned Khadi Board through an advisory relationship with the
government of Madhya Pradesh. It helped the board to brand local produce from villages and
tribal areas such as natur

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Social and Ethical Issues in Advertising

Advertising is criticized of manipulating the buyers to make a decision against theirwill or
interest. Playing on the sub-conscious mind, motives and various form of appeals. Theappeals
generated by the advertisements are sometimes so strong that the consumer fullybelieve in them
and does not apply his/her mind to make a decision and buys it without muchthought.

Advertising has also been criticized to be in bad taste because of:

  Moral concerns about advertising of harmful products—Tobacco, Alcohol etc.
 Objection to over emphasis on sex—sex appeals.
 Objection to occasion of exposure when children are present with the adults.
 Objection to advertising strategy of excessive repetition of the Ad.
 It is accused of attaching too much importance to the material aspects of life.
 It promotes certain individuals as stereotypes. Women are always shown in the roleof a
mother or a housewife, instead of business executives except in few cases. Similarly,
business executives are shown with a cigar. Women are shown to create a
romanticsituation.
 Too much advertising on children is considered a matter of great concern.
 Advertising provides sensitivity to price. It shows differentiation among
closelyresembling brands.
 Advertising causes insecurity by making people worry about tooth decay, body odours,
lack of self-confidence. It creates fear in the mind of the consumer e.g. ,

L.I.C. “Get your selfinsured for the future is not known”.

“We will all get old one day—Let us help each other”.

In spite of the above criticism, the advertisement has come to stay in the system. It
communicates and makes goods available. It promotes purchases and stimulates consumption. It
is an essential part of marketing strategy. It promotes a number of social issues and
bringsawareness in the masses. The subject of family planning, health care, prevention of
accidentsare the major themes. If certain codes, rules and regulations are followed advertising
benefitsoverweigh those of criticism. The Ad must be legal, honest, truthful and decent. This will
ensure the expansion of the advertising both in India and abroad.

Ethics means a set of moral principles which govern a person’s behavior or how the activity is
conducted. And advertising means a mode of communication between a seller and a buyer.

Thus ethics in advertising means a set of well defined principles which govern the ways of
communication taking place between the seller and the buyer. Ethics is the most important
feature of the advertising industry. Though there are many benefits of advertising but then there
are some points which don’t match the ethical norms of advertising.

An ethical ad is the one which doesn’t lie, doesn’t make fake or false claims and is in the
limit of decency.

Nowadays, ads are more exaggerated and a lot of puffing is used. It seems like the advertisers
lack knowledge of ethical norms and principles. They just don’t understand and are unable to
decide what is correct and what is wrong.

The main area of interest for advertisers is to increase their sales, gain more and more customers,
and increase the demand for the product by presenting a well decorated, puffed and colorful ad.
They claim that their product is the best, having unique qualities than the competitors, more cost
effective, and more beneficial. But most of these ads are found to be false, misleading customers
and unethical. The best example of these types of ads is the one which shows evening snacks for
the kids, they use coloring and gluing to make the product look glossy and attractive to the
consumers who are watching the ads on television and convince them to buy the product without
giving a second thought.

Ethics in Advertising is directly related to the purpose of advertising and the nature of
advertising. Sometimes exaggerating the ad becomes necessary to prove the benefit of the
product. For e.g. a sanitary napkin ad which shows that when the napkin was dropped in a river
by some girls, the napkin soaked whole water of the river. Thus, the purpose of advertising was
only to inform women about the product quality. Obviously, every woman knows that this
cannot practically happen but the ad was accepted. This doesn’t show that the ad was unethical.

Ethics also depends on what we believe. If the advertisers make the ads on the belief that the
customers will understand, persuade them to think, and then act on their ads, then this will lead
to positive results and the ad may not be called unethical. But at the same time, if advertisers
believe that they can fool their customers by showing any impractical things like just clicking
fingers will make your home or office fully furnished or just buying a lottery ticket will make
you a millionaire, then this is not going to work out for them and will be called as unethical.

Recently, the Vetican issued an article which says ads should follow three moral principles -
Truthfulness, Social Responsibility and Upholding Human Dignity.

Generally, big companies never lie as they have to prove their points to various ad regulating
bodies. Truth is always said but not completely. Sometimes its better not to reveal the whole
truth in the ad but at times truth has to be shown for betterment.

Pharmaceutical Advertising - they help creating awareness, but one catchy point here is that the
advertisers show what the medicine can cure but never talk about the side effects of that same
thing or the risks involved in intake of it.

Children - children are the major sellers of the ads and the product. They have the power to
convince the buyers. But when advertisers are using children in their ad, they should remember
not to show them alone doing there work on their own like brushing teeth, playing with toys, or
infants holding their own milk bottles as everyone knows that no one will leave their kids
unattended while doing all these activities. So showing parents also involved in all activities or
things being advertised will be more logical.

Alcohol - till today, there hasn’t come any liquor ad which shows anyone drinking the original
liquor. They use mineral water and sodas in their advertisements with their brand name. These
types of ads are called surrogate ads. These type of ads are totally unethical when liquor ads are
totally banned. Even if there are no advertisements for alcohol, people will continue drinking.

Cigarettes and Tobacco - these products should be never advertised as consumption of these
things is directly and badly responsible for cancer and other severe health issues. These as are
already banned in countries like India, Norway, Thailand, Finland and Singapore.
Ads for social causes - these types of ads are ethical and are accepted by the people. But ads like
condoms and contraceptive pills should be limited, as these are sometimes unethical, and are
more likely to loose morality and decency at places where there is no educational knowledge
about all these products.

Looking at all these above mentioned points, advertisers should start taking responsibility of self
regulating their ads by:

 design self regulatory codes in their companies including ethical norms, truth, decency,
and legal points
 keep tracking the activities and remove ads which don’t fulfill the codes.
 Inform the consumers about the self regulatory codes of the company
 Pay attention on the complaints coming from consumers about the product ads.
 Maintain transparency throughout the company and system.

When all the above points are implemented, they will result in:

 making the company answerable for all its activities

 will reduce the chances of getting pointed out by the critics or any regulatory body.
 will help gain confidence of the customers, make them trust the company and their
products.

ETHICS IN ADVERTISING

Advertising’s visible social role makes it a target for criticism. Some of today’s customers
believe that a great deal of advertising is unethical because:

 It adds to the price of the products

 It is untruthful
 It tricks people
 It targets vulnerable people

Numerous advertising-related issues are often left to the discretion of the advertisers and are
based on ethical concerns:

Advocacy à Advertising tries to persuade the audience to do something that is not correct. It is
not objective or neutral.

Accuracy à Subtle messages trouble critics, especially when aimed at groups such as children,
the elderly or the disabled.

Acquisitiveness à Consumers are continually persuaded that they continually need more and
more new products. However, consumers make the final decision.
ETHICAL ISSUES PREVELANT IN ADVERTISING

Even though a section of the media and the public lambasted the advertisers and the advertising
agencies for the falling scores of decency and taste in advertising, such advertisements raged on
and they have now become the order of the day. Brands that were far-fetched from carnality have
started showing all-consuming lust in their advertisements.

This trend is prevalent in India as well. It began when on 23rd July 1995, a Mumbai tabloid
published a photograph of an advertisement for Tuff shoes that showed models Milind Soman
and Madhu Sapre, posing in the nude with a python wrapped around them, just about covering
the vitals. The protests and controversy dragged on for a long time. The nation pooh-poohed the
audacity of the couple, while the advertisement agencies defended their creative rights.

The slogan of advertisers now-a-days is “Love it. Or Hate it. Or think it is offensive. But you
have to notice it.”

Advertising is largely criticized since selling carries a stigma. Centuries ago, Anacharis had said,
“the market is a place set aside where men may deceive each other”. Even to this date despite the
significant rise in consumerism and despite the efforts to counter market deception, buyers are
still gullible and are not particularly on the guard against deception.

Under intense competition and declining profits, the perspective of organizations shifts from
what is best for the society in the long run, to what is best for the company in the short-run. The
advertisers claim that ethics are fine for the secure however all the slipping that a company needs
is the desire for a greater market share.

Since advertising pertains to a large audience, it belongs refers to the 4th quadrant of the grid
shown below. Thus, the question to be asked by advertisers is, “What makes a good society?”
Advertising thus must address the most controversial, collective level welfare issues.

ADVERTISING AREAS THAT COME UNDER THE SCRUTINY OF ETHICS

Advertising ethics affects both the practice of our lives and of business, in subtle as well as
prominent ways. Ethics in advertisements concern us all in one way or the other. The areas under
the scrutiny of the critics are:

TYPES OF ADVERTISEMENTS

For sex related products

Instead of generating awareness among people about the necessity of safe sex and the benefits of
birth control, condom advertisements continue to intrigue the audience and especially the youth
with the unique feel that it has to offer.

E.g. Moods Condoms

For health care and professional services

The slimming centres which promise miraculous weight reduction and the cosmetic surgery
clinics which assure a permanent solution to all beauty problems.

E.g. VLCC Slimming Centre

For vices with fatal effects

 Tobacco chewing ads

 Commercials of alcoholic beverages that tempt the non-alcoholics to have a sip
 Gambling

In early 2001, the Government of India announced that it would table a bill banning the tobacco
companies from advertising their products and from sponsoring sports and cultural events. This
example brings to the fore both the commercial and ethical dimensions of such a ban. It helps us
to understand the role of ethics in a business decision and to understand where to draw the line in
making decisions, which involve both ethical and commercial considerations.

The element of social responsiveness as well as social responsibility attached to a business ethics
dimension results in corporate strategy or even in formulating a business policy.

Thus, we see that the connotation of ethics goes beyond the illegal acts of professional managers
or even entrepreneurs. It covers the entire gamut of business operation, including ethics in
advertising.

PUFFERY

Puffery refers to the exaggerated claim of a product’s superiority or it could also be the use of
subjective/vague statements that may not be true in the literary sense.

The Uniform Commercial Code is responsible for standardizing sales and business practices
throughout the U.S. It makes a distinction between puffery as well as any specific or quantifiable
statement about the product quality or the performance that constitutes an “express warranty.”

For example, a diner advertisement promoting what it claims to be the “world’s best cup of
coffee” would classify as puffery. Such a claim would be almost impossible to substantiate, and
no reasonable consumer would fall for it and take such an exaggeration at its face value. Puffery
often makes use of the superlative form of a word, like “best” or “greatest”. Puffery might also at
times exaggerate the advertised effects of a particular product.

SUBLIMINAL ADVERTISING

One that is transferred in such a way that the receiver is not consciously aware of receiving it.
Subliminal means something that registers below the level of the conscious human mind. The
brain perceives all the information in theory however the mind does not interpret the information
for a meaning. Numerous studies indicate that quite often, we actually do perceive information at
the subliminal level.

A good example would be as to how often one would notice when the speedometer in the car is
about to roll over to a bunch of zeroes. One doesn’t consciously notice the mileage on the car
ever so often, but the zeroing does make us pay attention. While driving to work, how many cars
do we pass? What makes and models were they a part of? The only ones that we paid particular
attention to were most probably the really neat cars or those cars which were driven by the
people we recognize.

If we notice something consciously, then it ceases to be subliminal anymore.

Inserting subliminal messages in advertisements is an inherently misleading action. It involves

an attempt to manipulate the thinking of a person, without the person even realizing it. The West
has seen a considerable number of subliminal advertisements and related hullabaloos. This is
primarily because the advertisement, marketing and the regulating media themselves have been
quite active while raising such issues. During the US Presidential elections of the year 2000, it
was found that a political advertisement for the candidature of George W. Bush subliminally
flashed the word ‘RATS’ while criticizing candidate Al Gore’s plan for prescription medicine.
While the ad maker was prompt in denying that the quickly flashed word was in fact a subliminal
message designed to sling mud at Gore, a large number of people, however, had concluded that
‘RATS’ was indeed inserted with the surreptitious intention of subliminally causing the viewers’
to associate Al Gore with vermin. The questionable word appeared on the screen only for a
microsecond, thus passing by so fast that it was almost not recognizable to the conscious mind,
especially when the mind was already passively lulled by television. As per the theory of
subliminal advertising, the image would, actually register in the viewer’s subconscious mind,
thus causing the viewer to negatively associate candidate Al Gore with a rat/rodent.

TYPES OF APPEALS IN ADVERTISEMENTS

Use of questionable appeals

The advertisements that bank on negative appeal and fear like neighbour’s envy, feud, jealousy
etc. are part of this category.

Nimbus’ Neo Sports (Neo) had bagged the telecast rights for the India-West Indies and also the
India-Sri Lanka series to be held in India.

In January 2007, an ad campaign was launched by Nimbus with the pay-off line being ‘It’s tough
being a West Indian in India’. One of the advertisements in this series showed a West Indian
desperately searching for some water to quench his thirst, as his palette is unable to handle the
spicy Indian food. However, the Indians put their dirty fingers and their dentures into the water
in order to deny him from having a drink.
Another advertisement showed a West Indian couple along with an Indian boatman, on a boat-
ride. On reaching the centre of the deep lake, the boatman throws the oars into the lake and then
disrobes; giving the impression that he would assault the girl. Then, he jumps into the lake
leaving the distraught couple stuck in the middle of the lake.

Media experts have opined that what according to Nimbus was a creative way of showcasing the
competitive spirit in India, as well as creating hype around its new sports channel, had actually
trod the fine line between creative and unconventional advertising and respecting the ethical
sensibilities of the people.

It was felt by some critics that the two advertisements that were shown in the campaign, were in
bad taste and also was offensive, since it showed people being mistreated, on the basis of
colour/nationality. The advertisements were also criticized for showing Indians in bad light as
India has always been known for its hospitality.

Stereotypical appeals

This includes sexual or racial stereotyping. Advertisements that imply that a woman, whether in
the kitchen or in the boardroom, must look sensuous and inviting under any given circumstances,
is an apt example of advertisements creating stereotypes. The fairness creams are also
responsible for stereotyping the dusky women as being socially less desired for marriage.

Other stereotypes that are often portrayed and concretized through advertisements are:

 Racial & Ethnic Stereotypes

 Senior Citizens
 Gay & Lesbian Consumers

LARGER EFFECTS ON THE SOCIETY

Given their wide reach and influence on the audience, we must realise that advertisements have
significant impact on society in the long run:

Value formation

Advertisements are responsible for moulding society and the material wants of the people. The
advertisements which display scantily clad female models in effect commoditize women.
Moreover, the deluge of advertisements that increase ones propensity of consumption makes one
feel that it is essential to possess a certain commodity in order to show that one belongs to a
particular section (generally, higher echelon) of the society.

Media content

This refers to the information content of advertisements. Those advertisements which suggest the
usage of preserved food items without even the slightest mention of the fact that many of the
preservatives used have been proved to have carcinogenic effects are part of this category.
Use of deception

The advertisements of brands which conceal their negative aspects are included in this category.
An example of this is the advertisements of cosmetics which say nothing at all about the long-
term effects of using their products on a regular basis. Also, the advertisements of various
educational institutes that wrongly claim to provide 100 percent placement to their students fall
into this category.

Advertisements targeting children and adolescents

The advertisements that target the vulnerability of the adolescents and the children result in the
creation of role models whom these kids are expected to emulate. This in turn shapes their
dreams and aspirations in a truly unbecoming way.

ADVERTISERS’ CONCERN

Voice/Tone of the advertisement

Comparative advertisements that thrive on inflicting vitriolic attacks on rivals are an example of
this category. Copying of ideas and plagiarising of advertisements in the ad world is another such
menace.

Impediments to research on Ethics in Advertising

There exist certain impediments to research on advertising ethics:

Lack of practitioner interest

Research is often impeded by the inapplicability of published findings to the business operations.
Another reason for the same might be the disinterest of corporations in sponsoring research on
advertising ethics as also is the funding constraint that cause researchers to rely only on a
convenience sample.

Lack of sound measures and framework

Research is also impeded by a lack of psychometrically sound measurement scales and also a
lack of theoretical frameworks in the field of advertising/marketing.

Lack of relevant theories in related disciplines

Research is also sometimes hampered by theoretical shortcomings in the fields of psychology,

sociology, anthropology, management, philosophy and advertising/ marketing.
Lack of academic interest

Research is often impeded by the lack of a journal editor and the difficulty that researchers face
when trying to relate ethical issues to the traditional advertising issues.

Why be ethical?

During the 83rd Annual Management Conference of the American Association of Advertising
Agencies, Keith Reinhardt, the Chairman and the Chief Executive of the US $15-billion
company DDB Worldwide Communications Group, quoted the legendary co-founder of DDB,
Bill Bernbach: “All of us who professionally use the mass media are the shapers of the society.
We can vulgarize that society. We can brutalize it. Or we can help lift it onto a higher level.”

It might be misconstrued that Reinhad is against the edgy and the unconventional advertising
means, however, that is not the case. He is against prurient sex, filthy humour and violence in
advertisements. By making a success story out of the advertisements that are offensive to public
decency, the message being put forth is disturbingly clear: the more rude and shocking you can
be, the more successful you will be in advertising your product. Moreover, such advertisements
send out faulty signals to the youngsters who represent and shape the future of our society. The
people to blame for this are young creative directors who take pride in their eccentric thought
process. Not only this, but the advertising industry also encourages this through machineries
from Cannes to Clios that help place such creations on the pedestal. Passion is, without doubt,
the most important ingredient in creative achievement. However, its flame need not necessarily
leap for bullets, obscenity and falsehoods alone. It is essential to reinforce the virtue of positive
passion in today’s advertising world. It is imperative that ethics is a part of advertising, since we
have a duty to live a good and fulfilling moral life. This duty is equally applicable to our
business lives as well as our private lives. Marketing professionals also know that strong ethics
do bring in good business.

REGULATORY FACTORS AFFECTING ADVERTISING

LEGISLATION

The Federal Trade Commission’s main focus regarding advertising is to identify and eliminate
advertisements that are deceptive or those that mislead the consumer. The key areas of concern
in this regard are:

Deception

The current policy on deception contains three basic elements:

 Where there is omission, practice or representation, there must be a high probability that it will
mislead the consumer
 A “reasonable customer’s” perspective is used to judge deception
 The deception must lead to material injury
As is evident from these basic elements, deception, in most cases becomes difficult to prove.
Thus, even though an advertisement might be indulging in deceptive practices that do not strictly
fall under the purview of the above mentioned elements, it cannot be prohibited.

Reasonable basis for making a claim

The reasonability of a claim is decided on a case-by-case basis. The following factors are taken
into consideration in this regard:

 Type & specificity of the claim made

 Type of product
 Possible consequence of the false claim
 The degree of reliance by consumers on the claim made
 The type and accessibility of the evidence available for making the claim

Comparative Advertising

Comparative advertising refers to an advertisement in which a particular product/service

mentions the name of the competitor for the purpose of showing why the competitor is inferior to
the product which is naming it. Comparative advertising by companies are on some occasions
used to put down products of rival firms, without any basis or facts. This leads to unhealthy
competition in the marketplace. Comparative advertising is considered deceptive unless:

 Comparisons made are based on facts

 The differences that are being advertised are statistically significant
 The comparisons made involve meaningful issues
 The comparisons are made to meaningful competitors

In the 1980s – during the period that has been now referred to as thecola wars,the soft
drinkmanufacturerPepsiran a series of advertisements in which t showed people caught on
hidden camera, and administered a blind taste test, chose Pepsi over arch rivalCoca-Cola.

Endorsements

An endorser or a testimonial refers to any advertising message that consumers believe reflects
the opinions, beliefs or experiences of an individual, a group, or an institution.

Endorsers must:

 Be qualified by experience or training to make judgements

 They must actually use the product
SOCIAL RESPONSIBILITY

As per Phillip Kotler, “An organization’s Task is to determine the needs, wants and interests of
the target markets and to deliver the desired satisfactions more effectively and efficiently than its
competitors in a way that preserves or enhances the consumer’s and the society’s Well-Being.”

Thus we see that organizations do have a responsibility towards society, apart from achieving
their individual profit targets.

An organization can exhibit two levels of social responsibility:

 Level One à Being socially responsible is a business philosophy

 Level Two à The advertiser is engaged in Pro-social Messaging
 An organization also exhibits different approaches to social responsibility:
 Obstructionist Stance à Organization does as little as possible i.e. exhibits a low degree of social
responsibility
 Defensive Stance à Organization does only what is legally required
 Accommodative Stance à Organization meets legal & ethical requirements and sometimes also
goes beyond what is required
 Proactive Stance à Organization seeks opportunities to be socially responsible i.e. exhibits a high
degree of social responsibility

There are also different levels of Self Regulation that are often seen in organizations:

1. Self-Discipline à An organization develops, uses and enforces the norms by itself

2. Pure Self Regulation à The industry is the one which develops, uses and enforces norms
3. Co-Opted Self Regulation à Industry voluntarily involves non-industry people in the
development, application and enforcement of norms

UNETHICAL ADVERTISING ON THE INTERNET

http://www.rubak.com/article.cfm?ID=13

CONCLUSION

Thus, we have seen the various types of advertisements that fall under the purview of unethical
advertising, and have also seen the far reaching effects of the circumvention of ethics and morals
on the society at large. Wherever freedom of speech and communication exists, it is then largely
up to the advertisers themselves in order to ensure that ethically responsible practices are being
conducted in their profession. Besides avoiding abuses and falling out of line with the ethical
dimension of advertising, the responsible advertiser should also make it a point to undertake the
repair and the harm sometimes caused by advertising. Since unethical practices have become
commonplace, conscientious advertisers must take it upon themselves to make significant
personal sacrifices in order to correct them. However, people who want to do things that are
morally right must be prepared to suffer loss and also at times personal injury, rather than doing
what is wrong. This does not mean that advertising, as we know of it today, be eliminated from
the contemporary world. Advertising is an integral element in modern day society, especially
with regards to the functioning of a market economy, which is becoming more and more
widespread.

Moreover, as described in the report earlier, advertising can, and often does play a fairly
constructive role in the exchange of information, economic growth, and the ideas, and also in the
fostering of solidarity among groups as well as individuals.