The Nigerian Sustainable Banking Principles: a new CSR dawn in Nigeria?

By KennethAmaeshi, PhD

I have followed the development of Corporate Social Responsibility (CSR) in Nigeria for over a decade now. In those years, there was never a time I was more captivated than I was with the recent joint statement of commitment by members of the Nigerian Bankers Committee to develop and launch a voluntary set of Nigerian sustainable banking principles. The commitment is a very bold step and a sharp departure from the view of CSR as corporate philanthropy in corporate Nigeria. According to the public announcement of the commitment, which is here paraphrased, the principles will include an over-arching set of guidelines relating to the banks’ direct impact on communities and the environment as a result of their business operations; as well as the indirect impacts on communities and the environment arising from their lending and investment activities. The principles will also offer sector-specific guidelines, with priority on oil and gas; power (with a focus on renewable energy); agriculture and related water resource issues. Finally, the banking principles will include a commitment to raising awareness and developing meaningful and lasting local capacity to manage emerging environmental and social risks and opportunities within their internal operations, as well as to relevant financial sector government agencies, learning institutions and service providers (see the Financial Times, Monday November 21, 2011 for details).

Prior to this announcement, CSR amongst Nigerian banks has mainly focussed on corporate community investments or corporate giving – which has been the dominant understanding of CSR in Nigeria. This has included donations to schools, hospitals, local communities, prisons and orphanages; construction of roads and decoration of public spaces; economic empowerment and poverty alleviation. Whilst these are laudable corporate activities, they appear to distort the true and broader meaning of CSR. The emphasis on corporate philanthropy gives the broad CSR agenda a poor characterisation and invariably an underserved negative reputation.

It is a truism that different firms operate from different mindsets and worldviews; and these, to a large extent, influence and determine their strategies. On one extreme, a profit-dominated corporate mindset is most likely to ignore societal expectations of businesses as long as the bottom line looks good. It is a good strategy for such a firm, no matter how short-lived. On the other extreme, the society-oriented corporate mindset will tend to evaluate the success or otherwise of its strategies from their overall or systemic impact on the firm, employees, and the society at large – a mindset not common in the Nigerian private sector; possibly because of the dominant view that “…the business of business is business”; and as such, business profitability is incompatible with ‘doing the right thing’.

The true and broader goal of a genuine CSR orientation is to contribute to a better society through creative and innovative entrepreneurship. This perspective of CSR is vociferously reflected in the Bankers Committee’s public commitment: “As leaders in the Nigerian financial sector, we are uniquely positioned to further economic growth and development in Nigeria through our regulatory, lending and investment activities across a diversity of segments and sectors of the Nigerian economy…. We believe that such an approach, one of sustainable banking, is consistent with our individual and collective business objectives, and can stimulate further economic growth and opportunity as well as enhance innovation and competitiveness” (Financial Times, Monday November 21, 2011).

The current global financial crisis and the threats of globalisation and global warming are, no doubt, the tipping points that will change the global financial services sector.  These changes will include new regulatory and governance regimes, as well as new market opportunities. The quest for sustainability – i.e. the consideration of environmental, social and governance issues in investment and financial decisions – is beginning to redefine the global competitive landscape. As such, the global market is shifting and business models are adjusting to meet the demands of the new world economy. Most global financial sector players, like Goldman Sachs through its GS Sustain are beginning to take advantage of the new opportunities. Sustainability is the now and the future, and Africa presents enormous market opportunities in this new world economy.

But for CSR – as sustainable business strategies – to be successful, the larger society has to provide the enabling environment for it to thrive. For example, if a firm tries to reduce its negative impacts, these efforts can only be sustained where customers also accept applicable adjustment in prices, NGOs help make standards visible, and governments have disclosure rules that affect competitors. In such an enabling environment, CSR affords firms and managers the opportunity to adjust their means of production in a way that gives them competitive advantage and enhances their long term sustainability. These adjustments are expected to enhance social benefits and reduce social costs simultaneously.

By implication, the dominant view of CSR as corporate philanthropy amongst most Nigerian businesses is being seriously challenged. And the Bankers Committee has set a laudable step for other sector leaders to graciously emulate. The idea of CSR as corporate philanthropy is the most basic and lowest expression of CSR. There is a need for most Nigerian businesses to progress from this narrow and basic understanding of CSR to the understanding of CSR as a holistic business culture – i.e. “how” profit is made and used. In this regard, the often touted corporate social responsibility credentials of Nigerian banks may include the need to assess the footprints of their strategies on the moral consciousness of the Nigerian society.

It is obvious that we are yet to see the heydays of sustainable banking in Nigeria. However, I am cautiously optimistic that given the innovation and institutional entrepreneurship that revolutionised this sector’s customer services in the 1990s, the financial services industry could revolutionise the understanding and practice of CSR in Nigeria and indeed within Africa. Nonetheless, the industry leaders should ensure that they mean what they say and say what they mean by adhering to their public commitment. Their words should be their bond. Otherwise, they would have inadvertently set themselves up for failure, given that the reputation risk bar is now higher than ever.  The commitment, whilst laudable, has also forearmed interested industry stakeholders. So the least expected of the Bankers Committee is to honour its commitment with dignity. This is pertinent, because today’s successful strategies may become tomorrow’s pitfalls; and only organizations with foresight and integrity can take advantage of this, even whilst they grapple with today’s challenges.

*Published in The Nigerian Guardian Newspapers, on Thursday, December 8, 2011.

***Dr. Amaeshi is the Director of Sustainable Business Initiative at the University of Edinburgh Business School, UK; a visiting faculty at Cranfield School of Management and the Lagos Business School, respectively. Email the writer here