People, Planet and Profit

Socio-Economic Perspectives of CSR

Samuel O. Idowu, Abubakar S. Kasum

• Editore: Routledge
• Anno: 2016
• ISBN:
  9781317082590
• Edizione: 1
• Argomento: Negocios y empresa
• Categoria: Ética empresarial

It is no longer the case that it's only society which benefits from CSR actions. A corporation actually helps itself when operating sustainably and does well because of its triple bottom line actions. The editors of People, Planet and Profit believe that whilst Corporate Social Responsibility is by now a familiar concept to academics or practitioners, insufficient attention has been paid to the end product of CSR in practice, which they define in terms of social and economic developmental effect. The contributions in this edited volume explain the developmental aspect of CSR from a conceptual perspective and provide empirical evidence of the impact of CSR delivery on stakeholders in different corners of the World. The emphasis is on what corporations take from and give back to their stakeholders whilst trying to behave in a corporately responsible fashion. Stakeholders, including employees, customers, host communities, governments and NGOs have diverse interests and expectations of CSR. This gives rise to questions about whether the activities corporations support are the ones today's stakeholders need; whether the CSR programmes being delivered are adequate; and about the relationship between the corporations' view of what constitutes CSR and that of the supposed beneficiaries. This book offers thoughtful answers to these questions and assesses the outcomes of corporate activities both in developed and developing countries and regions, in terms of economic progress and social and political advancement.

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PART I
Multinational Corporations and CSR

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CHAPTER 1
Multinational Corporations and CSR in the Nigerian Oil and Gas Sector

TAIWO OLUFEMI ASAOLU AND TAJUDEEN JOHN AYOOLA

Abstract

This study assesses the corporate social responsibility (CSR) activities of multinational corporations (MNCs) in the Nigerian oil and gas sector using international standards such as the Global Reporting Initiative (GRI), the UN Global Compact principles, ISO 26000, the Accountability AA 1000 Standards, and the Organisation for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises. The study adopted the use of secondary data in its scope. All companies operating in the oil sector of the Nigerian economy constituted the population, while the sample consisted of the six major oil multinationals which account for over 50 per cent of the oil exploration in Nigeria. Content analysis of CSR documents and established scoring criteria were adopted for the analysis of data. The results show a substantial variation in the level of attention and extent of disclosure of CSR by the multinationals. The prevailing approaches to CSR are seen as fragmented, cosmetic and disconnected from business strategy. These variations could be resolved by the institution of a mandatory CSR framework in the Nigerian oil and gas sector.

Introduction

A conventional view held by advocates of corporate business is that the purpose of the corporation is to make a profit for its shareholders (Minch, 2011; Friedman, 1962), so that traditional financial statements principally report to shareholders, to the detriment of other stakeholders (such as environmentalists, non-governmental organizations, immediate community, etc.). In the past decade however, there has been a consistent pressure from other stakeholders from the standpoint that traditional financial reporting which focuses on shareholders’ interests does not adequately represent the multiple dimensions of corporate value today (Simnet, Vanstraelen and China, 2009). Pressure as a result of concern for environmental degradation, social ills and global financial crisis has resulted in a call for better corporate governance, transparency, accountability and shareholder value creation situated within new financial and non-financial measures of corporate performance appraisal. This call has justified the need for interdisciplinary reporting that reflects a simultaneous integration of economic, environmental and social factors into corporate behaviour with the aim of sustaining resources for future generations (Quick, 2008). Corporate Social Responsibility (CSR) has emerged in an attempt to respond to the demands for interdisciplinary reporting.

The concept of CSR is associated with other terms such as ‘corporate responsibility’, ‘corporate citizenship’, ‘responsible business’ and ‘corporate social performance’. Despite a growing body of CSR literature, no definition has been universally accepted (Matten and Moon, 2008). The absence of a widely agreed framework on CSR which specifies minimum outcome-based standards of social performance has created an enabling milieu for socially harmful companies which externalize many of their costs to pass themselves off as socially responsible (Fooks et al., 2013). Even though there is no legally binding obligation for companies to report on their social responsibilities, more and more companies publish reports that address these issues under wide-ranging names such as ‘social responsibility report’, ‘sustainability report’, and ‘environmental, health and safety report’. This social report states what contributions companies have made to the society or what efforts they have taken to protect the environment (Gossling and Vocht, 2007). CSR means different things in different places to different people at different times (Campbell, 2007), and this is as a result of national divergence and cultural divergence perspectives on the CSR diffusion process around the globe (Yin and Zhang, 2012). The concept refers to organizational conduct that proactively integrates the voices of parties affected by business activities in corporate decision-making. This type of conduct typically reaches beyond the firm’s economic and legal obligations in order to satisfy and sometimes exceed its stakeholders’ expectations (Heugens and Oosterhout, 2002; McWilliams and Siegel, 2001; Husted, 2000).

CSR is evolving into a core business function, central to a firm’s overall strategy and vital to its success. Specifically, CSR addresses the question of whether companies can perform better financially by addressing both their core business operations and their responsibilities to the broader society (Basu and Palazzo, 2008; Vogels, 2005). Consequently, many companies have realized that having a socially responsible corporate image is a valuable strategic asset. Several studies have shown that firms that perform socially responsible activities enjoy benefits such as customer satisfaction and favourable customer and positive community evaluations (Carroll, 2004; Luo and Bhattacharya, 2006).

In Nigeria, the oil and gas industry is critical to the survival of the country, as it accounts for over 95 per cent of the country’s foreign exchange earnings, 40 per cent of her gross domestic product (GDP) and 85 per cent of the Federal Government’s collectable revenue (Uwakonye, Oshoand Anucha, 2006; Aghalino, 2004). The government charges a flat-rate 50 per cent tax on profits and a royalty of 0–12 per cent depending on the location (OECD/AFDB, 2009). The major oil companies operating in the Nigerian oil and gas sector are Shell Petroleum Development Company of Nigeria Ltd., Mobil Producing Nigeria Unlimited, Chevron Nig. Ltd., Nigerian Agip Oil Company Ltd. Elf Petroleum Nig. Ltd. and Texaco Overseas Petroleum Company of Nigeria Unlimited. These multinationals participate in the petroleum industry in joint ventures with Nigeria National Petroleum Corporation (NNPC), as operators/contractors in the deep water under production-sharing contracts (PSC). All of the crude oil comes from numerous small producing fields located in the swamps of the Niger Delta region. According to the Ministry of Niger Delta Affairs (2009), the region comprises nine states: Delta, Rivers, Bayelsa, Cross Rivers, Akwa Ibom, Edo, Imo, Abia, and Ondo state, with a total of 185 local government areas. The region hosts a population of approximately 30 million, settled in around 13,000 small communities. The region covers a land area of approximately 75,000 square kilometres, making up 12 per cent of Nigeria’s landmass. There are about 600 oilfields producing from around 5,000 wells, and although production is focused in limited areas, the region is criss-crossed by approximately 10,000 kilometres of pipelines.

These multinationals have initiated, funded and implemented community development schemes in the name of CSR, such as schools, hospitals, microcredit schemes, scholarships, etc.; however, the effectiveness of such CSR initiatives is being increasingly questioned, and there is mounting evidence of a gap between the stated intentions of the multinationals and the impact on the communities where their operations are domiciled (Frynas, 2005). The relationships between the multinationals and their host communities have been affected by the degradation of the environment through oil spillage, gas flaring and pollution. The relationship has been unfriendly owing to different perceptions of the role that multinationals are expected to play in the development process of their host communities. On the one hand, the host communities claim that the multinationals are not doing enough considering the amount of oil wealth taken away from their lands; while the multinationals, on another hand, believe that they have gone even beyond the realm of normal CSR. In the face of conflicting perceptions of the issues in contention, crises have erupted in the oil-producing region (Alabi and Ntukekpo, 2012; Aghalino, 2004). It is in the light of the above that it has become imperative to examine the claims of the multinationals with regard to CSR efforts, using internationally acclaimed corporate, social, and environmental performance indicators. Thus, the objective of this study is to attempt to examine the CSR of the multinational firms in the Nigerian oil and gas sector using international accepted standards.

Review of the Literature

CSR

CSR has been broadly defined as the responsibilities of a business towards the economic and social development of the communities where they operate, which are affected by its corporate policies and practices (Brown and Forster, 2012; Lahdesmaki and Suutari, 2012; Smith, 2003). It enables organizations to take responsibility for the impact of their activities on their shareholders, society and the environment. This ensures that organizations behave ethically and responsibly in improving the quality of life for the stakeholders. It is of increasing concern and holds strategic implications for companies across industry, as it helps a company to differentiate its product and service by creating a positive brand image and this safeguards the firm’s reputation (Hsu, 2012; Ketola, 2005). The essence and manifestation of CSR lies at the discretion of each business, thus depending not only on the core competencies and stakeholder interests but also on the cultural and institutional context of the business (Crane and Matten, 2004). The business case for CSR argues that there are legitimate reasons for a corporation to invest in CSR activities. From an economic standpoint, there is theoretical logic and some inconclusive empirical evidence that engaging in socially responsible activities can reduce costs and risks to the firm, build firm competitive advantage, enhance reputation and legitimacy, and create synergies (Salazar and Husted, 2008, quoted in Brown and Forster, 2012). However, CSR cannot be seen solely through the lens of the business case, as the expectations of what CSR could potentially accomplish are much broader. From society’s point of view, it is important to assess the contribution that companies can make to development (Frynas, 2005). CSR has been variously conceptualized: Schwartz and Carroll (2003) posit economic, legal and ethical obligations, collapsing the fourth dimension of philanthropy into the ethical component. Windsor (2006) delineates it into ethical, economic and corporate citizenship.

The increased industry attention and researchers’ enthusiasm for CSR led to the development of fragmented theories and approaches aimed at understanding how, and with what impact, CSR strategies can contribute in creating competitive advantage and superior performance (Torugsa, O’Donohue and Hecker, 2012; Porter and Kramer, 2006). The three common approaches are: stakeholder-driven approach; performance-driven approach; and motivation-driven approach (Hsu, 2012; Basu and Palazzo, 2008). The stakeholder approach is the extent to which businesses meet the economic, legal, ethical and discretionary responsibilities placed on them by their various stakeholders (Maignan, Ferrel and Hult, 1999). CSR is seen as a response to the demands of external stakeholders about general social concerns for the firm’s operations. Without CSR activities, this group might withdraw their support from the firm (McWilliams, Siegel and Wright, 2006). The performance-driven approach concerns the link between CSR, corporate strategy and requisite performance. These led scholars to focus on determining activities to implement CSR and then measuring their effectiveness. CSR activities include incorporating social concerns into products, adopting progressive human resource management practice, focusing on environmental performance and advancing the goals of community organizations (McWilliams, Siegel and Wright, 2006; Amit and Schoemaker, 1993). The motivation-driven approach examines the extrinsic reasons for a firm’s CSR engagement or the intrinsic rationale to advance notions of its obligations and responsibilities (Basu and Palazzo, 2008). While the extrinsic reasons concern favourable outcomes towards the focal company, such as enhancing reputation, consumers’ resilience to negative information and managing risk, the intrinsic rationale draws on philosophical concept (Hsu, 2012). CSR has also been viewed from other angles: one is CSR as integrated into business strategy. If CSR is accepted as embedded in everything a company does, then CSR is part of good business strategy, thus, embedding socially responsible principles in corporate management is called ‘before-profit’ obligation (McElhaney, 2007). A second view sees CSR as a residual, that is, an add-on set of projects that are not part of the core business strategy. CSR is thus seen as an ‘after-profit’ obligation. The consequence is that if companies are not profitable, they do not have to behave responsibly (Hopkins, 2004; Kang and Wood, 1995).

INTERNATIONAL CSR PERFORMANCE INDICATORS

UN Global Compact principles

The United Nations Global Compact is a voluntary initiative to encourage businesses worldwide to adopt sustainable and socially responsible policies, and to report on them. The ideology is built on the following four areas and ten principles of global compact:

1. Human rights

– Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights; and

– Principle 2: make sure that they are not complicit in human rights abuses.

2. Labour standards

– Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining;

– Principle 4: the elimination of all forms of forced and compulsory labour;

– Principle 5: the effective abolition of child labour; and

– Principle 6: the elimination of discrimination in respect of employment and occupation.

3. Environment

– Principle 7: Businesses should support a precautionary approach to environmental challenges;

– Principle 8: undertake initiatives to promote greater environmental responsibility; and

– Principle 9: encourage the development and diffusion of environmentally friendly technologies.

4. Anti-corruption

– Principle 10: Businesses should work against all forms of corruption, including extortion and bribery.

ISO 26000

ISO 26000 provides practical guidelines to implement social responsibility, identify and engage stakeholders, and enhance credibility of reports and claims made about social responsibility. It contains:

a) A definition of social responsibility.

b) Seven principles, which are: accountability for the organization’s impacts on society and the environment; transparency in the organization’s decisions and activities that have an impact on society and the environment; ethical behaviour at all times; the obligation to respect, consider and respond to the interests of the organization’s stakeholders; accept that respect for the rule of law is mandatory; respect international norms of behaviour, while adhering to the principle of respect for the rule of law; and respect human rights and recognize both their importance and their universality.

c) Seven core subjects which should be addressed in order to identify the issues and priorities that are relevant for the organization. They are: organizational governance; human rights; labour practices; environments; fair operating practices; consumer issues; and community involvement and development.

ACCOUNTABILITY AA 1000 STANDARDS

Accountability’s AA 1000 series are principles-based standards to help organizations become more accountable, responsible and sustainable. They address issues affecting governance, business models and organizational strategy, as well as providing operational guidance on sustainability, assurance and stakeholders’ engagement.

OECD GUIDELINES FOR MULTINATIONAL ENTERPRISES

These guidelines are recommendations addressed to multinationals for the provision of voluntary principles and standards for responsible business conduct in a variety of areas including employment and industrial relations, human rights, environment, information disclosure, competition, taxation, science and technology. The guidelines are:

a) Concepts and principles: set out the principles which underlie the guidelines such as their voluntary character, their application worldwide and the fact that they reflect good practice for all enterprises.

b) General policies: contain the first specific recommendations, including provisions on human rights, sustainable development, supply chain responsibility, and local capacity-building, and more generally call on enterprises to take full account of established policies in the countries in which they operate.

c) Disclosure: recommend disclosure in all material matters regarding the enterprise such as its performance and ownership; and encourages communication in areas where reporting standards are still emerging such as social, environmental and risk reporting.

d) Employment and industrial relations: address major aspects of corporate behaviour in this area including child and forced labour, non-discrimination and the right to bona fide employees’ representation and constructive negotiation.

e) Environment: encourage enterprises to raise their performance in protecting the environment, including performance with respect to health and safety impacts.

f) Combating bribery: cover public and private bri...

Indice dei contenuti

• Cover Page
• Half Title page
• Title Page
• Copyright Page
• Contents
• List of Figures
• List of Tables
• About the Editors
• Notes on Contributors
• Foreword
• Preface
• Acknowledgements
• Developmental Perspective of CSR: An Introduction
• Part I Multinational Corporations and CSR
• Part II CSR and Socio-economic Progress
• Part III CSR in the General Environment
• Index