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Need For Companies To Embrace CSR

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The 21st century business environment has placed an enormous task on companies to give back to the societies they are operating in through Corporate Social Responsibility (CSR). ZAKA ABD-KHALIQ writes.

Apart from the fact that 21st century is characterised with technological advancement, it also led to influx of industries who came to provide basic needs of man in the form of products and services across the world.

Different companies emerge to provide solutions to people’s problems, looking for where their respective services are needed and setting up their factories or companies there.

For improved profitability, companies had to site their offices in regions where their products or services are highly in demand.

To this end, multinationals continue to eye developing markets such as Africa and especially, Nigeria, to set up their outfit because of the huge business potentials therein.

Though, these companies were able to create jobs for the indigenes of the communities they are operating from, increases government revenue and enhances economic growth, all these also come with its attendant effects.

In the east, oil spillage has rendered lands useless for farming while water is not safe for drinking as a result of oil exploration by various multinational oil firms in the eastern communities.

In communities where cement production takes place, the villagers had to inhale chemicals, thereby, contributing health hazard to people living in such communities.

The fact is, most manufacturing firms use chemicals that causes air pollution, thus, harmful to those living within these areas.

Despite all these, the society still continue to tolerate the operation of these companies. To reciprocate this gesture, the word Corporate Social Responsibility (CSR) emerged in the business cycle.

CSR is defined as a company’s sense of responsibility towards the community and environment in which it operates, expressed by contributing educational and social programme and by earning adequate returns on the employed resources.

The 2015 Cone Communications/Ebiquity Global CSR Study found that a staggering 91% of global consumers expect businesses to operate responsibly to address social and environmental issues. Furthermore, 84% say they seek out responsible products wherever possible.

As the above statistics show, consumers are increasingly aware of the importance of social responsibility, and actively seek products from businesses that operate ethically. CSR demonstrates that you are a business that takes an interest in wider social issues, rather than just those that impact your profit margins, which will attract customers who share the same values. Therefore, it makes good business sense to operate sustainably.

In Nigeria, sustainability reporting has become a mainstream movement that companies  spend billions to support, yet it has its challenges as some stakeholders and Nigerians have become critical of the effect on companies’ profits.

Gains Of CSR

The Chairman of Omolayole & Associates, Dr. Michael Omolayole, while speaking on CSR, said corporate organisations need to understand that they have definite responsibilities towards their many stakeholders.

He listed the major group of stakeholders to include; shareholders, employees, customers/consumers, suppliers, transporters, government authorities/regulators, trade associations and communities in which the companies operate.

According to him, “It is a special responsibility for companies to give back something to those communities. It is a kind of ‘love your neighbour’ in action and this is the essence of corporate social responsibility in the private sector.”

On the other hand, he said, the public sector is entirely set up to carry out actions devoted towards helping all the citizens that make up the nation, through governance procedure

Stressing that social responsibility was the main purpose of government and the public sector, he added that the public sector exists solely to serve the citizens and the society.

“There is something discretionary about the obligations of the private sector towards corporate social responsibility where it is absolutely compulsory in the public sector by laws and statutes. The conventional wisdom in approaching corporate social responsibility in both the private and public sectors is that every organisation must perform very well, its assignment under its mandate,” Omolayole said.

Former governor of Anambra State, Mr. Peter Obi said CSR is what is expected from a good corporate citizen, adding that if one is a citizen of any nation, he was expected to contribute to make it work.

According to him, the reverse was the case in Nigeria because majority of the citizens always commend a government that is not doing well rather than drawing attention to areas of needs in a constructive manner.

“As a citizen, the more you can contribute to the economy, the better it will be for all. But unfortunately, in the country, the citizens hardly say the truth. You can hardly see a citizen telling a governor, for instance, that you are not well. I am urging all of us to be involved in the governance of the country so that we can have better economy,” he pointed out.

Executive Director, CSR in Action, Bekeme Masade said the  practice of CSR as a standard for firms and businesses to follow has evolved. This evolution, he said, has become necessary due to several problems that we face which have changed the environment under which firms operate. Some factors driving companies to pursue a CSR agenda, according to him, are consistent across the corporate world while some are company or industry-specific.

“CSR is also becoming an important yardstick for investors before putting their resources in organisations because it demonstrates that the company takes keen interest in wider social issues that have no direct impact on profit margins and these issues may be local, national or global,” he emphasised.

However, he said, a concern for the education, health and wellbeing of people and the environment are some of the most important markers that investors consider.

To him, “Some of these criticisms can be levied only in the way it is often interpreted; narrowly, and reduced to a form of risk mitigation, compliance and “egocentric” philanthropy, or at how it gets instrumentalised as a new marketing technique, to build or protect a brand or corporate reputation. It is the result of these corporate scandals which have created lack of trust and because of that shareholders and stakeholders need more transparency.”

IS CSR A Curse?

Some market observers have expressed dissatisfaction with corporate social spending by companies, claiming that CSR is reducing tax payment to government and dividend to shareholders. They also claim that the involvement of companies in CSR is a waste of resources, as not all CSR projects are relevant in some communities.

The Managing Partner at Mazari Enterprises, Iteku Village, Lagos–Badagry Expressway, Lagos, Augustine Mabogunje, who has shares in some Fast Consumer Moving Goods (FCMG) companies said: “CSR is affecting tax to government and shareholders’ dividends, by way of reducing their share dividend. The involvement of companies in CSR is a waste of government revenue, though good, but not all CSR projects are necessary in some communities.”

Babafemi Yusuf, on his part, said CSR would have been a good way to complement government efforts on infrastructural development, but unfortunately this has been defeated. “I keep wondering why there are still many developmental project scattered all around if the companies are doing so much with the big amount quoted on CSR in annual reports,” he said.

Moses Nwaoboshi who withdrew his shareholding from a multinational company because of the free fall of stocks some years back, said the amount sometimes spent  by companies on CSR are not commensurate with  some projects.

THE WAY FORWARD

While there are many examples of companies using strong CSR performance as a brand-building and product marketing strategy, Tobias Webb, founder and managing director of the Innovation Forum, said, far too many corporate executives still rely on the old financial and hierarchical models of yesteryear as the basis of their own planning.

The biggest and most influential companies, according to him, also tend to be the most reliant on the ‘conventional way’ of doing business.

“What is happening, however, is a broad transition to the adoption of external multi-stakeholder processes – in the form of multi-stakeholder sustainability standards and labels – as a way of outsourcing the stakeholder engagement process, ” he pointed out.

Whether a force for good or an exercise in brand enhancement, experts said, what cannot be denied is that CSR is very much an integral part of the global business landscape, of which Nigeria remains a major player.



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