• Wednesday, May 29, 2024
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Corporate social responsibility (CSR) of corporations to host communities


The issue of Corporate Social Responsibility (CSR) in developing countries should form part of the business strategic plans of organisations, because host communities’ expectation and awareness now influence the operation of Multinational and Local Companies. There has been a growing demand for companies to offer community development initiatives to the communities within which they are carrying out their operations. The failure of some governments of developing countries to provide adequate basic social infrastructures to their citizenry has put corporations especially the Multinational Companies (MNCs) operating in these countries under pressure. In particular, oil exploration in developing countries, where the main source of livelihood for the residents is from fishing and farming, has resulted into high unemployment of the residents in the community. Oil activities have polluted the water and the fertile land destroyed by oil spills and gas flares. It has been argued that business should take account of the ‘social, ethical, and environmental perceptions of their operations’.

For instance the rising incidence of hostage, conflicts and oil pipe vandalisation  in the Niger Delta of Nigeria has been portrayed as originating from the lack of corporate social responsibility (CSR) benefits from the multinational corporations (MNCs) operating in the region. MNCs operating in developing countries have the potential ability to have a positive impact to the growth of local communities by creating jobs, technology transfer, and others through CSRs centred on sustainable development.

The theory of CSR refers to the general principle assumed by public that every business has responsibilities to their host society beyond their commitments to the shareholders of the corporation. This commitment is to create income for the stakeholders and to take full advantage of the long-term wealth of shareholders. The stakeholders of corporations, aside from its primary owners, include: employees; customers; government; the natural environment and the host community at large. CSR is particularly essential to business as poor management of the concept from the angle of stakeholder theory could endanger and damage the reputation of an organisation. Several business entrepreneurs have pointed out that the actions of organisations do have an impact on its immediate external environment. Therefore organisations should be responsible to a larger audience than simply its owners.

For businesses to thrive, they must conduct their operations in such a way as to add value, rather than detracting from the economic and social infrastructures of their host communities. Firms must take an active part in the social development of such area as well as the residents. The CSR concept is essential to organisations as a condition for brand quality and growth of business. All organisations have their stakeholders, who in one way or the other affect the business and upon whom the business depends on for its existence. Stakeholder theory states that businesses have a social responsibility to all stakeholders for allowing their continuation based on a social bond. Organisations stakeholder theory must be analysed in order to gain results from its CSR initiatives. Stakeholder strategy and the audit process analysis uncover the relative importance of stakeholders and their effectiveness with threat to the corporate goal of an organisation. In other words, stakeholder theory is about value creation.

A closer look at the the Niger Delta area of Nigeria confirmed the region as an oil-rich region with a land mass of approximately 70,000 square kilometres and accounts for over 92 per cent of earnings through exports. The region also contributes more than 65 per cent of revenues to Federal Accounts of the Nigerian governments and has a recorded current population figure of approximately 32 million. But the region is still languishing in the abject poverty created by total neglect and oil exploration, which has polluted the region’s land mass and water. This damage often leads to conflicts between the oil firms and the host communities because the main sources of livelihood of residents in the region, which are fishing and farming, have been polluted and destroyed. A published report stated that ‘The inhabitants of the region are among the poorest in the country’. Also the gross national product (GNP) per capita of the people in the area was below the national average of $280, according to a World Bank study published in the recent time. The mineral resources in the region account for 10 per cent of US oil imports and about 22 million tonnes are supplied to the European Union (EU) (Newsbabe, 7/7/2014). The lack of stability in the region has occurred due to the lack of basic social amenities like good roads, pipe-borne water, hospitals, schools and others, which has led to sabotage and hostage of expatriates in the oil industry. The environmental issue is now a national problem and in fact a global attention in the form of criticism. Several withdrawal or loss of foreign investments has been witnessed in the past before the Amnesty program of the Yar Adua/ Goodluck Jonathan’s administration. Yet peace stability of the region is still worrisome.

CSR can however be acknowledged as a system for corporations to voluntarily incorporate social and environmental concerns into their operations and relations with the public, which are beyond their economic and legal obligations. According to the European Commission in 2001, being socially responsible does not mean an organisation is legally accountable but that it must go beyond fulfilment in developing its human resources; society and its interactions with stakeholders. The practice of CSR involves the idea of a firm being proactive in its relationships with stakeholders and going beyond its duty of profit oriented. CSR according to a published work “is the voluntary integration of environmental and social considerations into business operations, over and above legal requirements and contractual obligations”.

The implementation of CSR is not only about doing the right thing but also offers some benefits to business. According to Michael Porter, the great Marketing Professor, firms today must invest in CSR initiatives as part of the business strategy to become more competitive. Similarly, an organisation must be seen as proactive in its CSR to gain competitive advantage in terms of reputation and brand building. Any boost to the reputation of a business can be worth its weight in gold.  Coca Cola’s brand value is worth $79.2 billion (US dollars) according to the latest ranking by the Interbrand of Omnicom Group published in the Los Angeles Times (30/09/2013). CSR affects an organisation’s tangible and intangible assets and the building of its market shares.

Organisations that invest in CSR will gain the following: decrease and limited litigation; protecting brand image; improving customer satisfaction; reducing absenteeism and employee turnover. Increase in the ability to retain talented employees; in other ways the implementation of CSR creates profitability for organisations; gives strong reputation and improvement on corporate brand; allows the firm to be seen as responsible by its stakeholders; achieves brand loyalty; and increase government and community relations.

Business is said to contribute to society if it is capable, profitable, and socially responsible, though CSR is a voluntary obligation but inevitable to business community. Every organisation seeks to retain their corporate identity, while sustaining social and environmental measures at the same time. The influence of MNCs on social cohesion and CSR initiatives vary. Some of the drivers of CSR as identified by research are: expectations from citizens; consumers; public authorities and investors in the context of globalisation and large-scale industrial change; transparency of business activities brought about by the media and modern information technology.

As profit making is paramount to profit oriented organisations, so the environmental development of an area – socially, physically, and economically – is to the people of the community hosting an organisation. CSR theory is now a global paradigm that has gained momentum as a result of globalisation in the sense that business transactions and relationships are created on the condition of CSR reporting and compliance. Study reveals that Multinational corporations need to show a high level of CSR tolerance before gaining licence to operate from the authority and social licence from the host communities. In addition, stakeholder mapping and stakeholder disclosure must be set as priorities by corporations in order to operate successfully in a developing country. Most developing countries are still underdeveloped despite their abundant natural resources, and the environment bastardised as a result of oil operations of the MNCs. Residents of the oil polluted and gas flare areas are living in impoverished condition and unemployed due to the aftermath of oil production activities mentioned above.

The reputations of some organisations are still questionable in some aspects like the Shell Petroleum Company in Ogoni Land. Though Corporations in the oil region have spent billions of dollars in terms of donation, supports etc to host communities but these gestures goes into wrong hands or diverted unchallenged due to the corruption which has eaten deep our society. Therefore CSR issues should be given a strategic attention by every business entity.