CORPORATE SOCIAL RESPONSIBILITY A NECESSITY TO NIGERIA BUSINESS ORGANIZATIONS

CHAPTER TWO

REVIEW OF RELATED LITERATURE

Introduction

The review of literature centered through the following sub-topic: definition of Corporate Social Responsibility, Drivers of Corporate Social Responsibility: why are companies engaged in Corporate Social Responsibility, Planning and Implementing Corporate Social Responsibility, Marketing in Corporate Social Responsibility, Consumers and Corporate Social Responsibility, Social Marketing Concept, Societal Marketing Concept, Emergence of Ethical and Social Responsibility, Goals of Corporate Social Responsibility and Pitfalls of effective Corporate Social Responsibility in Nigeria.

Definition of Corporate Social Responsibility

Corporate social responsibility has had very varying meanings for different people over time. Stakeholders use different definitions according to their norms, values and beliefs. Definitions vary according to a company‟s size, the perceptions of the employees who are in charge of corporate social responsibility within the company, which stakeholder groups are engaged in the company, and so on (Jiyoung, 2007:8).

For a long time, academics and practitioners have been striving to agree on a single definition of Corporate Social Responsibility. Corporate Social Responsibility is defined and regarded as a social obligation. Bowen (1953:6) defines Corporate Social Responsibility as the obligation “to pursue those polices, to make those decisions, or to follow those lines of action which are desirable in terms of the objectives and values of our society”. Later, Carrol (1979:501) buttressed the view of Corporate Social Responsibility as a Social obligation. In addition, he emphasized different types of social obligation. Davis (1960:72) suggests that social responsibility refers to business‟ “decisions and actions taken for reasons at least partially beyond the firm‟s direct economic or technical interest”. Eells and Walton (1961:18) disagree that Corporate Social Responsibility refers to the “problems that arise when corporate enterprise casts its shadow on the social scene, and the ethical principles that ought to govern the relationship between the corporation and society”.

In the 1970s, some academics emphasized social responsiveness rather than social responsibility. They pointed out the shift from social responsibility to social responsiveness and argued that actions or performances were being neglected compared to societal obligations. As a result, a new question was raised about how to integrate a firm‟s economic interest with social responsibility. In this regard, a more comprehensive definition of Corporate Social Responsibility was called for. Carroll (1979:501) one of the advocate of Corporate Social Responsibility which included economic, legal, ethical and philanthropic obligations. He suggested that firms should be judged not only by their economic and legal obligations but also their ethical and discretionary (philanthropic) responsibilities.

However, some academics claimed corporate social responsibility to be a stakeholder obligation. Stakeholders are those who directly or indirectly affect or are affected by the firm‟s activities (Clarkson, 1995:103; Donaldson and Perston, 1995:66, Jones and Kahaner, 1995:17; Wood and Jones, 1995:226). Henriques and Sadorsky (1999:26) grouped stakeholders into four main categories: organizational stakeholders, community, regulatory bodies, and media. Notwithstanding, The World Business Council for sustainable Development (WBCSD, 1999) offered that “Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large to improve their quality of life. The organization for economic co-operation and development, OECD, (2000:151) stressed the need for both governments and companies to demonstrate their corporate social responsibility by pursuing sound environmental and socially based policies

These guidelines include:-

1. To ensure that the operations of these enterprises are in harmony with government policies.
2. To strengthen the bases of mutual confidence between enterprises and the stakeholders which they operate
3. To enhance the contribution to sustainable development made by indigenous manufacturing companies.

This has challenged indigenous manufacturing companies to implement best practice polices for sustainable development that seek to ensure coherence between social, economic and environmental objectives.

In their own view Adirika, et al (1997:10) see Corporate Social Responsibility as one of the proper solutions to the many problems posed to marketing/marketers today. Black (1989:112) and Kotler (1997:35) see it as an organizational employment of moral or ethical principles in her dealing with others. In a related development, Corporate Social Responsibility, as Nwosu (2001:496), observes, demands that social institutions should “identify with the problems and achievements of the communities in which they operate;. Working with other members of the community to achieve set objectives which are in the overall interest of the community and all its members”. Nwodu (2003:48) reinforces this view when he says: “successful organizational image building and sustenance require strict commitment to ethical imperative and social responsibility‟. In addition, Nwodu (2007: 330) further emphasis that: in practical terms, it is the responsibility of a corporate organization to carry out infrastructure development of its host community as a way of compensating the community for the damage caused it by the organizational activities.

According to Okiyi (2003:21), corporate social responsibility stems from an organization feeling obliged and with a conscience to put back into society and at most times its immediate environment what is has taken from it, without the expectation of a reward or social consideration while executing her other obligations in the environment.

Having stated this clearly, the publics of Guinness Nigeria Plc to whom they ought to be directing they social responsibility practices would therefore include their internal and external publics. While the internal publics include: the employees, the workers union, the management team, the board of directors, the shareholders etc, the external publics would include: the community, the customers, the suppliers/contractors, the press, the government, financial institutions, interest groups, Standard Organization of Nigeria (SON), e.t.c. Guinness Nigeria Plc‟S ability to meet up their obligations to these various publics or satisfy their diverse interests/aspirations would then be the yard stick for the measurement of the (success or failure) of their corporate social responsibility practices.

Drivers of Corporate Social Responsibility

Why are Companies Engaged in Corporate Social Responsibility?

Changing environment enables consumers to involve social issues more than ever. Due to advanced technology, their concern reaches out of borders and form global movements by disseminating relevant information e.g boycott in case of consumers.

Changing Environment

Today‟s ever changing world puts pressures on businesses and provide reasons for taking Corporate Social Responsibility as a strategy. The business environment has changed dramatically and corporate social responsibility is one of the main drivers that reshapes the relationship between business and society (Jiyoung 2007:13). Now, Corporate Social Responsibility is recognized as a new, emerging, and rapidly growing financial and non-financial risk factor. If it is mismanaged, a firm‟s corporate reputation will be penalized and direct or indirect negative impact on its financial outcomes may result.

In this new environment, companies have discovered that their post experiences are no longer valid for providing a reliable solution to what today‟s marketing faces. For example, many corporations realize that criticism reaches even areas that of their business. For example, in the early 1990s, Nike faced a substantial boycott after the media reported on “Sweatshops” in Asia. Pharmaceutical companies such as GlaxoSmithKline (GSK) realized that they had to take responsibility for the HIV/AID epidemic in Africa. When the Shell Oil Company decided to skin the Brent Spar, Greenpeace protested aggressively. Now firms have become well aware of the risks that are entailed when they do not take social responsibility seriously.

Globalization and Technology

Today, advanced technology empowers media, one of stakeholder groups, to not only disseminate information to the public but to arouse public opinion by drawing attention to the bad social deeds of companies or the companies who neglect their social responsibility. Additionally, the internet, one of the greatest extended and most

owerful forms of media enables consumers to organized collective action such as to buy or boycott globally. So, the negative impact can be more damaging especially to Multinational Companies that operate globally. As well as avoiding the negative impact on business, as many surveys underline, there are critical drivers of corporate social responsibility for companies.

Table 1: Drivers for Corporate Responsibility

Source: KPMG International Survey of Corporate Responsibility Reporting (2005)

New Pattern of Consumption: Emergence of ‘Conscience Consumers’ Consumers expect more from the companies whose product or service they purchase. The numbers of these conscious - consumers are new increasing. They want to be convinced that their purchasing behavior will bring social benefit harming the environment. That is, they want companies that not only make good products or brands but also do good as well. This new pattern of consumption drives companies to find a marketing strategy which is more relevant to social responsibility. Consumers are now looking closely at companies who make claims regarding the involvement in social issues (Bronn and Vrioni et al, 2001:208).

Trend: Affluence

Many companies have established their own corporate social responsibility strategies and plans. As a result, reporting has increased substantially. These drivers make corporate social responsibility an important business strategy.

Planning and Implementing Corporate Social Responsibility

Having identified the importance of corporate social responsibility in the business cycle, it is highly essential to plan, devise strategies and enforce implementation of perceived corporate social responsibility by business organization so as the target objective.

In this regard, endorsement of the Corporate Social Responsibility concept Senior Management is important if it is to be successful and Carroll (1991) in Edoga and Izute (2008:238) recommends seven key quest to ask management while planning corporate social responsibility strategies.

• Who are our stakeholders?
• What are their stakes?
• What do we need from each of our stakeholders?
• What corporate social responsibility(economic, legal, ethical and philanthropic) do we have to our stakeholders?
• What opportunities and challenges do our stakeholders?
• How important and/or influential and different stakeholders?
• What strategies, actions or decisions should we take to best deal with these responsibilities?

However, four strategies of response have been identified to stakeholders perspective on corporate social responsibilities (CSR) as follows by Tench and Yeomans (2006:16).

An Inactive Strategy: Resisting societal expectations and sometimes government regulation.

A Reactive Strategy: Responding to unanticipated change after the significant change has occurred.

A Pro-active Strategy: Attempting to “get ahead‟ of a societal expectation or government regulation (often coupled with efforts to influence the outcome).

An Interactive Strategy: Anticipating change and blending corporate goals with those of stakeholders and societal expectations. Thus, an interactive strategy is often accomplished by managements‟ commitment to a serous dialogue with stakeholders.

Marketing in Corporate Social Responsibility

“Companies that exclude marketing from decisions on CSR are exposing themselves to huge risk, just as those that put sole emphasis on it are Marketing is about communicating with consumers and changing behavior, so marketers must take more responsibility for communication the effects of corporate decision-making.”

Nell Jones, Commercial Director, Carat Insight from the Marketing Society Forum, 2006.

CSR is not a brand new emerging concept of the twentieth century. The concept was observed much earlier. However, the modern era of social responsibility (SR) is deemed to be around to beginning of the 1950s. In the 1960s, and then into the 1970s, academics focused on the marketing function conducting social duties rather than the whole organization‟s social role (Kotler and Levy, 1969). Until quite recently, companies have not taken substantial responsibility in the social sector. This can be inferred from the changes in terminology used. In most studies done before the 1980s and 1990s, Social Responsibility was mainly used rather than CSR. In 1980s, a study (Quinn and Rohrbaugh, 1983) determined 17 score organizational effectiveness criteria. In the study, even CSR or business ethics have failed to be identified.In spite of this failure, marketing has developed much knowledge and experience of CSR and business ethics, and has tried to integrate social responsibility into its decision-making process (Robin and Reidenbach, 1987; Singhapakdi, Vitell, Rallapalli, and Kraft, 1996). However, it had been considered only as a limited adoption of social responsibility by marketing in the early stages.

Ethical and socially responsible business practices have been emphasized by both academics and practitioners. However, the business practices are not likely to receive criticism when they try to closely connect ethics and social responsibility to marketing activities (Singhapakdi, et al., 1996: 1131). Regarding this kind of connection, (Drumwright, 1996:71) even mentions non-economic – oriented marketing activities as “Marketing‟s most unabashed exploitation”. As a result, in the early stages, practices were an extremely cautious and very limited adoption of social responsibility and business ethics by marketing strategic planning process (Robin and Reidenbach, 1987). At the time, marketing was only regarded as an element of a secondary trade-off with economic-oriented action (Handelman and Arnold, 1999). For instance, when companies linked their marketing activities to CSR initiatives, it was easily exposed as target for cynicism or criticism by the public rather than respected.

Many researchers have studied and then suggested a group of solutions in order to avoid these negative reactions by the public or stakeholders. There have long been conflictions between non-economic-oriented marketing activities, meeting social demands and economic-oriented marketing, pursuing business purpose. There are a group of studies that believe that marketing may reconcile this deep-seated historical conflict (Robin and Redicenbach, 1987; Menon and Menon, 1997; Handelman and Arnold, 1999; Maignan and Ferrell, 2004).

As solutions, many studies propose that non-economic-oriented marketing activities should be integrated with economic-oriented marketing activities at the strategic level (Menon and Menon, 1997; Robin and Reidenbach, 1987). Some studies have empirically examined such strategic marketing as a moderate power of negative impact on business (Handelman and Arnold, 1999). In their seminal work, Robin and Reidenbach (1987) point out the lack of integrated approach for making social responsibility and ethics part of the strategic marketing planning process and recommended organizations‟ incorporate these concepts into their strategic marketing planning process. In their paper, they suggested a „Parallel Planning Approach,‟ which still remains valid.

Figure 1: Parallel Planning Approach

Robin and Reidenbach (1987) suggest a methodology for intergrating social responsibility into the marketing planning and process. Recently, Vargo and Lusch (2004) have suggested that there is a new emerging logic of marketing, which exists to contribute not only economic but also social processes.

According to kotter & Keller (2009:67), the effects of marketing clearly extend beyond the company and the customer to society as a whole. Marketers must carefully consider their role in broader terms, and the ethical, environmental, legal, and social context of their activities. Increasingly, consumers demand such behviaour, as starbucks chairman Howard Schultz has observed. We see a fundamental change in the way consumers buy their products and services… consumers now commonly engage in a cultural audit of providers. People want to know your value and ethics demonstrated by how treat employees, the community in which you operate. The implication for marketers is to strike the balance between profitability and social consciousness and sensitivity… it is not a program or a quarterly promotion, but rather a way of life. You have to integrate this level of social responsibility into you operation.

Table 1:Corporate Social Initiatives

Source: Philip Kotler and Nancy Lee. Corporate Social responsibility: doing the Most Good for Your Company and your cause (Holsoken. N.J. Wiley, 2004): Copyright @ 2005 by Philip Kotler and Nancy Lee, by Permission of John Wiley & Sons, Inc.

Consumers and Corporate Social Responsibility

Any business can not neglect consumers in any way. In terms of CSR, companies recognize consumers as a pressure group. Consumers have been a substantial subject especially in the retail market place. Sometimes, companies are criticized because of the unbalanced weight between consumers and other stakeholders. There are myriads of studies related to consumer‟s behaviour and their responses. In the consumer behaviour area, CSR is the influential element to affect consumers purchasing decisions. However, in this thesis, consumers are focused on as being one of CSR drivers rather than scrutinizing how they make decisions according to any CSR association. Table 4 shows the evidence examined.

Conscious Consumer

Today, consumers are concerned about the issues that affect them directly as well as indirectly (Maignan and Ferrell, 2004). They are more demanding of social responsibilities from companies than ever before. There is a number of groups of consumers who try to make a difference in society through their purchasing decisions. They are called „conscious consumer(s).‟ In this thesis, we investigate them. The growing number of conscious consumers are forming social pressure groups and emerging as an influential stakeholder group. From the company‟s perspective they can be the target audience of their marketing strategy incorporating CSR initiatives as well as a pressure group. Studies related to the consumer have distinctive meanings in the context of CSR. Some studies have identified that positive world of mouth and a good reputation may result a competitive advantage (Handelman and Arnold, 1999). A good of studies have suggested that a good reputation can create brand differentiation which contributes to a company‟s benefit (Bronn & Vrioni, 2001).

Positive word of mouth and good reputation are mainly triggered by consumers. In this context, consumers are regarded as one of main reasons why companies engage in CSR. This area is one of the most rigorously studied areas by both academics and practitioners.

Studies also demonstrate that CSR shortcomings can have a harmful effect on the company‟s reputation and performance as a whole. This kind of damage lasts longer than ever before due to the Internet, conscious consumers and activists. On the other hand, consumers reward those companies with a good CSR association. According to the Cone/Roper Benchmark Survey on Cause-Related Marketing and IEG Sponsorship Report, when a company is associated with a cause they care about:

78% of adults said they would be more likely to buy a product;

78% of adults said they would be likely to switch brands;

62% of adults said they would be likely to switch retailers; and

54% of adults said they would pay more for a product.

Consumers extend their buying power to the social concerns and urge companies‟ engagement.

Social Marketing Concept

Kotler and Keller (2006:6) social marketing is a societal process by which individuals and groups obtain what they need and want through creating, offering, and freely exchanging products and services of value with others.

Social marketing is the use of marketing principles and techniques to advance a social cause (Adirika, et al, 1987:152). It seeks to increase the society‟s acceptability of a social idea cause or practice. Example of social marketing outlined by Adirika et al (1987) include:

Publics health campaigns to reduce the spread of AIDS, to reduce smoking, alcoholism, drug abuse etc.

Environmental campaigns to reduce deforestation, environmental pollution and to promote conservation of natural resources.

Other campaigns such as family planning, emancipation of women, helping the poor and the disabled in the society, population control, etc.

The social marketers, they added though research could try to understand why people use drugs, the problems they get from using drugs and the difficulties they have when trying to stop using drugs. These information they would use in developing an effective marketing plan aimed at stopping people from abusing drugs, so social marketers advocate the use of marketing to further social goals. The primary objective of social growth in the society. Hence, it should have a place of priority in every organizations social responsibility practices.

In the view of Nwosu (1996:181) while the marketing concept can be described as a philosophy of business which states that the customers want satisfaction is the economic and social justification of any organization concerned to make reasonable profit for its survival.

In view of Subhash (1990:54) sees marketing concept generally constitute eight “core values” in business organization and also show the corporate public and their concerns in the following:

Emergence of Ethical and Social Responsibility

According to Edoga (1997:195) though every society is concerned with ethical and social responsibilities, but the emergence as corporate concepts in marketing has been traced to 1950. At this stage in the development of marketing, marketing people were concerned with adjusting to consumer behavior, the modern marketing concept, quantitative methods, and marketing management. However, it was from the mid- 1960s that more serious concern was shown on ethical and social responsibilities. Many articles on this issue were being published (Spratlen, 1973).

What gave impetus to the development of ethical and social responsibilities of business and salesman? The reason was that a lot of vices were being committed by businessmen which brought about the reaction of consumers and the public. Serious indictments and criticism were made by the affluent and educated society against business organizations as a result of unethical practices and lack of responsibility. In fact, even after the adoption of the modern marketing concept (after the Second World War in 1945) marketers erroneously believed that their role was limited to the satisfaction of consumers and the consequent generation of profits for their organizations. Businessmen and marketers did not give attention to the interests and needs of the general public. For instance, they were not concerned with the effects which their products had on the environment.

When businessmen and marketers were criticized and condemned on their bad business practices many launched a counter-attack and denied all the allegations made against them at first. However, a few executives that were prudent changed their minds and started preaching to their colleagues. Soon ethical and social responsibilities became a major concern and programme of business organizations (Levitt 1983:88).

Furthermore, in the light of the above submission Stanton (1984) identified the practical reasons for the emergence of ethical and social responsibilities in business (and marketing).

To reverse the declining public confidence in business resulting from bad and unorthodox practices and lack of regard for the welfare of the society.

To pay the price of economic freedom and flexibility. Social problems affect both the firm and its customers, and it is therefore in the interest of business if these problems are attended to.

To balance the power-responsibility equation. Marketers exert a great deal of influence on consumers and the economic policy of a nation. Lack of social responsibility on the part of marketers may lead to the erosion of their social power.

To enable the marketing department represent the company very well and so present a good corporate image before the customers and the public at large.

Goals of Corporate Social Responsibility

In view of definition of corporate social responsibility, there is little doubt that its practice is a viable business. Viable in the sense that operating in an investment climate that is hostile to a corporate citizen will certainly impede the realization of the goal of the organization. Businesses must therefore operate in a social climate that is peaceful, friendly and accommodating for them to make progress, consolidate their profit base and by extension, contribute to the overall development of the host communities (Nwodu, 2007:231).

In the execution of Corporate Social Responsibility (CSR) therefore, “the company giving funds does not attempt to gain any advertising benefit or undueidentification… The Company is content with “a warm glow” and the belief that social responsibility is good business” (Black, 1989:10). The important is that when an organization contributes meaningfully in solving its host community‟s development problem, the community in turn will contribute to the growth of company by offering the organization safe investment climate that will guarantee the realization of organization‟s corporate goal.

Baumole (1970:10) offers meaningful insights for proper understanding of the goal of corporate social responsibilities where he argues that: The company pays a high price for operating in a region where education is poor, where living conditions are deplorable, where health is poorly protected, where priority is unsafe, and where cultural activity is all but dead. These circumstances are all more expensive than corporate giving.

However, a checklist presented by Adirika at el (1987:158) of what constitutes areas of Corporate Social Responsibility goal(s) includes:

In creasing the efficiency of marketing operations, so as to lower distribution costs and selling prices.

Properly interpreting and anticipating consumer demand.

Refusing to do business with unethical suppliers.

Reducing the marketing problems of low income consumers.

Increasing product safety

Minimizing defective products.

Developing more informative packaging and labeling.

Elimination of malpractices in the market place.

Supporting the consumer education.

Supporting the cause of social justice

Cooperating with government in its effort to increase consumer well being.

Reducing environmental pollution and hazards.

Participating in community welfare and improvement

Efficient (or economic) use of energy and natural resources.

Maximizing job content and satisfaction for the workers

Instituting a programme for living and training the disadvantaged and the unemployed.

The important is that the goal of Corporate Social Responsibility is enmeshed in the philosophy underlying the concept –a give and take phenomenon. The company, give social – cum – welfare packages to the community and the community in return gives cordial and harmonious operational social climate to the company (Nwodu, 2007: 232). Thus, the goals of corporate social responsibility as prescribed by Black (1989:8) are categorized as:

Enterprise: Supporting and Developing Initiatives to nurture budding entrepreneurs and to boost enterprise.

Education: Helping to bring new horizons into the lives of young people.

Arts and Culture: Providing assistance to a range of artistic activities and bringing communities together.

Environment: Encouraging efforts to safeguard the environment and improve the quality of life.

The bottom line is that corporate social responsibility goal(s) should aim at promoting social change that touches on all aspects of community life. To act in a socially responsibility manner therefore means that a corporate organization should do the following:

Embark on Sound Community relations by learning about the host communities, and relating well with the members and groups in such communities.

Obey and respect policies, laws and legislations aimed at protecting community welfare, safety and environment.

Execute and champion infrastructure, economic, and physical development of its host communities like construction of roads, hospitals, schools etc.

Engage in social development programme like free education to citizens of the host communities and creation of jobs.

Identify, with the socio-cultural value of the host communities by observing the communities cultures and often times sponsoring the dominant cultural festival of the community.

Participate in civic responsibilities by identifying with less privileged in their host communities.

Pitfalls of effective Corporate Social Responsibility in Nigeria

Corporate Social responsibility practices, especially in developing nations like Nigeria, often hit the rock. (Even when companies make claims of living up to their social responsibility billings, series of conflicts between some companies (especially there in oil sector) clearly indicate that there is problem with corporate social responsibility practice at least, in Nigeria (Nwodu, 2007:233). For example, shell is accused of its dysfunctional development programme in communities in Nigeria. Critics state that shell‟s community development programme is too closely associated with the company‟s commercial activities.

In addition, Adirika at el (1987:158) stated that there are other anti corporate social responsibility practices by bad corporate citizens which includes;

Poor remuneration of workers.

Poor and or harsh working conditions for workers.

Unethical and unlawful system of recruitment.

Managerial crushing of workers unions or associations.

False declaration of profits in or to deceive task assess or under invoicing of import bills in order to evade or under pay custom duties.

Connivance with dubious or corrupt customs/excise officials to cheat the government.

Neglect of their environment and engagement in environmental pollution activities.

Turning deaf ears to the outcries of the needy and less fortunate members of the society.

Lack of support for community development projects.

Close door policy to their external public.

Disobedience to the law of the land.

Deaf ears students request for research grants, scholarship, programmes sponsorship and welfare packages and infrastructural development.

However, it is for this reason that Udeagha (1999:235) that business concerns in developing nations especially Nigeria, pay insignificant attention to their social responsibility roles except when forced. Our contention however, is that even when they are forced, their social responsibility action hardly tame their host communities from waging war against the companies. Several, factors are responsible for this ugly situation. Some of these factors include:

Corporate bodies hardly sponsor research efforts through which the core need and interest of host communities can be ascertained and prioritized according to degree of importance. Nwodu (2003:185) reinforces this view where he argues that “a situation whereby oil companies vis-à-vis concerned government agencies embark on development projects on the mere assumption that such projects would meet the development needs of the Niger Delta communities tends to insult people‟s sensibilities and by extension, lead to social friction”.

Due to poor utilization of research, projects that often receive priority attention of the corporate bodies are hardly needed by the community members. This situation is both worrisome and pathetic. (Nwodu 2003:185) argues, “Social responsibility packages must address realistic priority needs of the targets in order to be effective”.

What some companies call social responsibility packages many a time fall short of expectations. The reason being that such package is often designed to further the companies‟ business interest rather than alleviating the sufferings of the host communities.

There are occasions where some powerful click in the community can collide with a section of management team of corporate organizations to divert the social welfare packages to the detriment of the poor and needy in the community.

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