Mr President please don’t give Corporate Social Responsibility a bad name

by Kenneth Amaeshi, PhD

The recent national debate over a “gift” of a church building from an Italian company – Gitto Contstruzioni Generalli Nigeria Limited (CGC) – to the President Jonathan’s country home (Otuoke, Bayelsa State) raises a fundamental question about Corporate Social Responsibility (CSR) in Nigeria: Is CSR all about corporate giving or could there be more to it?
 

In a study I conducted recently with some colleagues (Amaeshi, Adi, Ogbechie and Amao., 2006 - Corporate Social Responsibility in Nigeria: Indigenous practices or Western influences?, Journal of Corporate Citizenship, 24: 83-99), we found that corporate philanthropy – also known as corporate community investments or corporate giving – was the dominant understanding of Corporate Social Responsibility (CSR) in Nigeria. That understanding is still very much the case today. As the name suggests, corporate philanthropy is mainly an act of giving back to the society at large. 

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.

A view that is rarely mentioned in CSR discourse in Nigeria is the idea that CSR is a business philosophy, which takes the positive and negative impacts arising from corporate activities that are borne by some third parties who are unconnected to the business, seriously. These impacts could be at the production, sale or consumption point.  A good example of a negative impact is the pollution arising from a production plant, which causes some health hazards to residents not involved in the business transaction. Another example could be the impacts of binge drinking on the society, which is not factored-in in the production and sale costs of alcohols. In such instances, the social costs (including health costs arising from the use of alcoholic products) are borne by the society. These negative impacts on the society are hardly accounted for in the profit and loss statements of most companies, and neither do they have such in their balance sheets. In other words, the firms have externalised some of their costs by free-riding on some public or common resources. Other possible negative corporate impacts on the society as a whole include: child labour, bribery and corruption, corporate connivance with oppressive government regimes to sell their products and services (companies involved in arms and ammunitions are often accused of such deals), human rights abuses, et cetera. Agreeably, businesses do not only generate negative impacts. 

They also create many positive externalities, which include jobs, tax contributions, contributions to economic development, and investments in human capital development, production of quality goods and services, profits et cetera. In some cases, firms voluntarily incur some extra costs to go beyond the minimum expected by regulation, or the provision of education and other social infrastructure by firms through philanthropic or other citizenship activities.

Traditionally, the burden of governing corporate impacts has always been borne by the State. In order to curtail negative impacts, the State uses such regulatory mechanisms as taxes, subsidies and quotas. But these regulatory mechanisms are not foolproof, not least, due to information asymmetries between businesses, as generators of impacts, and the regulators, as governors of impacts. If these information asymmetries are not properly addressed, the society at large suffers. And this is where true CSR, as a form of self regulation, serves as a very potent mechanism for addressing information asymmetries between businesses and the regulators. It is a form of self-regulation that should be completely voluntary and driven by the values and philosophy of a business.

From a best practice perspective, therefore, a true CSR ought to be a sincere and genuine corporate commitment to reducing its negative impacts and increasing its positive impacts on its different stakeholder groups (e.g. customers, shareholders, employees, regulators, the government, unions, local communities, et cetera). It is a business orientation and culture that recognises the firm as an entity embedded in a network of relationships with different stakeholder groups; and to be successful and sustainable, a business should be genuinely committed and responsive to these stakeholder groups. It should afford any firm that is truly committed to it a richer and more advanced paradigm to continuously challenge its business purpose and align itself with its core values, aspirations and mission. It is a way of maintaining the legitimacy of a firm’s actions in the larger society by bringing its stakeholder concerns to the foreground and minimizing information asymmetries between actors.

CSR should not undermine the role of the government or other public governance modes in regulating corporate impacts. Rather, it affirms the co-existence of a plurality of governance modes, where CSR complements the existing public and informal governance modes, and thus creates a better chance that both the public and private governance modes will compensate for each other’s weaknesses in the governance of corporate impacts. The ultimate goal of a true CSR is to contribute to a better society.

By implication, the dominant view of CSR as corporate philanthropy amongst most Nigerian businesses needs to be seriously challenged. The idea of CSR as corporate philanthropy is the most basic and lowest expression of CSR. Whilst corporate philanthropy is an ‘activity’ – e.g. a project, a grant, et cetera, a cutting-edge thinking of CSR is the view that CSR is a ‘business paradigm’, a culture that should permeate all facets of business decisions. It is a way of life – the ‘how’ of “how we do business”. Therefore, there is a need for most Nigerian businesses to progress from this narrow understanding of CSR as corporate philanthropy to the understanding of CSR as a business culture.

Gitto’s operations in Nigeria should be thoroughly subjected to this broader test of CSR, and not the narrow view of corporate philanthropy, which can sometimes share a thin border with corruption.

***Dr. Amaeshi is the Director of the Sustainable Business Initiative, at the University of Edinburgh, UK, and a Visiting Faculty at the Lagos Business School, Pan-African University, Nigeria. He is also a member of Thought Leadership Forum, Nigeria (Email: kenneth.amaeshi@ed.ac.uk).