Should CSR fill the governance and development gaps?

There is a growing concern that as governments of many developing countries are failing to deliver promises to improve living conditions of their people, corporations are expected to use their Corporate Social Responsibility (CSR) strategies to fill the gaps.

Such proponents of CSR see it as ‘an alternative to government’ that is frequently advocated as a means of filling gaps in governance which have arisen with the acceleration of global economic liberalisation.

A survey by the World Business Council for Sustainable Development (WBCSD 2000) illustrates this perspective: when asked how CSR should be defined, respondents in Ghana stressed that ‘building local capacity’ and ‘filling in when government falls short’ should potentially be the role of CSR in socio-economic development.

 

Challenges of CSR

In fact, the challenge for CSR in developing countries is framed by a vision that was distilled in 2000 into the Millennium Development Goals — “A world with less poverty, hunger and disease, greater survival prospects for mothers and their infants, better educated children, equal opportunities for women, and a healthier environment” (UN, 2006).

The question then was, what is the role of business in tackling the critical issues of human development and environmental sustainability in developing countries? More poignant is the anticipated role of CSR in the newly-agreed Sustainable Development Goals (SGDs). The UN Sustainable Development Goals (SDGs) were introduced in 2015 to build on the MDGs and complete what they did not achieve. A new timeline has been set for these to be achieved by 2030.

CSR is normally understood from one of two conflicting views. Blowfield and Frynas,

2005; in Hanlon, 2009) emphasised two factors — the ethico‐political case and the business case. The ethico-political case suggests that as ‘corporate citizens’ of the country, it is in the interest of corporations to contribute toward stable societies in order to gain the social licence to operate.

The business case suggests that CSR is good provided it does not damage profitability and that the corporation’s primary obligation remains its shareholders. Protagonists, however, argue that CSR is or is not good for profitability – and it is this profitability that will ultimately decide the issue. According to Matten and Crane (2005), these corporate citizens engage in CSR for self‐interest and hence their ethical contribution is perhaps somewhat tarnished (Hanlon, 2009).

In CSR and development discourse, it is generally accepted that Multinational Enterprises (MNEs) have the potential to bring economic development to poorer countries where they operate. In fact, in some cases MNEs are bigger and more stable than the countries they are operating in. MNEs have the political and economic power to influence the domestic and international policies of their host nations.

This makes the nature and impact of their operations very significant – and creates the potential to positively shape the lives of millions of people. Sadly, it is the human rights abuses and destruction of livelihoods that have often dominated the relationship between MNEs and their host communities. In adopting the Philadelphia Declaration, the ILO enjoined MNEs to work in harmony with the development priorities and social aims of countries wherein they operate.

 

Contested concept

CSR is still an emerging and equally contested concept (Moon, 2002b, in Visser, 2009). In fact, literature on CSR suggests it is only in the last decade that businesses have begun to exhibit serious evidence of CSR in their strategic management and stakeholder social reporting.

That notwithstanding, one emerging notion is how CSR in developing countries can be used to represent “the formal and informal ways in which business makes a contribution to improving the governance, social, ethical, labour and environmental conditions of the developing countries in which they operate, while remaining sensitive to prevailing religious, historical and cultural contexts” (Visser et al., 2007).

 

The rationale for focusing on CSR in developing countries as distinct from

CSR in the developed world is fourfold:

  1. Developing countries represent the most rapidly expanding economies, and hence the most lucrative growth markets for business (IMF, 2006);
  2. Developing countries are where the social and environmental crises are usually

most acutely felt in the world (UNDP, 2006);

  1. Developing countries are where globalisation, economic growth, investment and

business activity is likely to have the most dramatic social and environmental

impacts (both positive and negative) (World Bank, 2006); and

  1. Developing countries present a distinctive set of CSR agenda challenges which are collectively quite different to those faced in the developed world (Visser, 2009).
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Socioeconomic Priorities

There is a powerful argument that CSR in developing countries is directly shaped by the socio‐economic environment in which firms operate and the development priorities this creates. Amaeshi et al. (2006), for example, argue that CSR in Nigeria is specifically aimed at addressing the socio‐economic development challenges of the country including poverty alleviation, health‐care provision, infrastructure development, and education. This, they argue, stands in stark contrast to many Western CSR priorities such as consumer protection, fair trade, green marketing, climate change concerns, or socially responsible investments.

Michael Spicer, CEO of the South Africa Foundation and former senior executive for the mining conglomerate Anglo American, argues that having CSR guided by the socioeconomic priorities of the country or region is simply good business. Furthermore, he suggests companies in developing countries have to actively shape the socioeconomic and political landscape in order to create an operating environment that is conducive for business (Middleton, 2005).

The justification for an expanded role of CSR in socio-economic development is that some of the world’s biggest corporations are those which operate in poor and developing countries, and often come into contact with some of the world’s poorest people. As stated earlier, human rights abuses and the loss of lands and livelihoods often accompany operations in all forms of business. As a result, there are both internal and external pressures for good corporate practices. Internal drivers refer to pressures from within the country, while external drivers tend to have a global origin.

However, there are many critics of this approach. Hamann et al. (2005) argues that CSR is an inadequate response to these governance gaps, and that more proactive

involvement in moving local governance towards accountability and inclusiveness is necessary.

There are also serious questions about the dependencies this governance-gap approach to CSR creates, especially where communities become reliant for their social services on companies – whose primary accountability is to their shareholders. Hence, multinationals may cut expenditure or disinvest from a region if the economics dictate that they will be more profitable elsewhere.

In addition to being encouraged to step-in where once only governments acted, Matten and Crane (2005) also suggest that companies enter the arena of citizenship – especially where government has not as yet administered citizenship rights; for example, financing the schooling of child labourers in the absence of legislation requiring this.

 

Global Compact

The UN Global Compact states that CSR and corporate sustainability starts with a company’s value system and a principled approach to doing business. This means operating in ways that, at a minimum, meet fundamental responsibility in the areas of human rights, labour and environment to mention a few.

The Compact points out that responsible businesses enact the same values and principles wherever they have presence; and know that good practices in one area do not offset harm in another. Thus, by incorporating the Global Compact principles into their policies and procedures, and establishing a culture of integrity into their operations, businesses are not only upholding their responsibilities to the people but also setting the stage for long-term success, as well as contributing to socio-economic development.

In the context of this article I will shed more light on Compact Principle Number 5, which specifically deals with child labour. According to the Principle, businesses should uphold the effective abolition of child labour in all its forms. Child labour is a form of exploitation that is a violation of human rights and is recognised and defined by international instruments.

While the term ‘child’ covers all girls and boys under 18, it has been agreed that in some circumstances not all under-18s should be removed from work. The basic rules under international standards distinguish what constitutes ‘acceptable work’ for children at different ages and stages of their development. Child labour becomes a concern when it deprives the victims of dignity and education.

Several case-studies in development advocacy have proved that a company’s association with child labour will clearly damage its reputation. This is especially true for transnational corporations that have extensive supply and service units, where economic exploitation of children can damage a brand image and have a strong repercussion on shareholder value.

A brand reputation is defined as the collective representation of a brand’s past actions and results that describes the brand’s ability to deliver valued outcomes to multiple stakeholders (Harris, 2001, in Visser, 2009). Thus, damage to the brand’s reputation from bad-press can be long-lasting, as has been case with boycotts of some beverage products in Europe due to the use of child labour.

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The complexity of child labour puts enormous pressure on companies to address it, with the ultimate aim of abolishing it within their sphere of influence. Companies, as key stakeholders, need to be aware that without their support children could be forced into worse circumstances…such as prostitution. However, the global Compact has been criticised as having no teeth to bite since it is not compulsory; and some companies’ commitment to eradicating child labour can only pass as a public relations gimmick.

That said, it is emerging that the responsibility of corporate management no longer stops with growing profits. Management now has a responsibility to other stakeholders – to social, environmental and ethical goals. Increasingly, large corporations are placing CSR at the centre of policy; as well as building brand identity through CSR claims.

Cadbury’s, for instance, provides a good example of an organisation that in the nineteenth century pursued philanthropic ideals. It is one of few corporations that reported on environmental sustainability, setting out detailed ethical business principles. Cadbury’s also developed an international human rights and ethical trading policy and issued its own ethical sourcing standards and was one of the signatories to the UN Global Compact. For a long time, it has been engaged in community action, working to support communities in Ghana where cocoa – the raw ingredient used in Cadbury’s chocolate – was sourced.

 

CSR and cocoa

 

The cocoa and coffee trades in Africa have longstanding reputations for the forced employment of young children on plantations.

In response, in 2011, eight companies in the chocolate and cocoa industry – ADM, Barry Callebaut, Cargill, Ferrero, The Hershey Company, Kraft Foods, Mars, Incorporated, and Nestlé – pledged US$2million to a new Public-Private Partnership (PPP) with the International Labour Office (ILO) to combat child labour in cocoa-growing communities of Ghana and Côte d’Ivoire.

Since signing of the Harkin-Engel Protocol in 2001, particular attention has been paid toward elimination of the worst forms of child labour in the cocoa supply chain of West Africa. Ghana and Côte d’Ivoire are the world’s largest cocoa producers, accounting for 60 percent of global production.

In both countries, unacceptable labour practices on cocoa farms mean large numbers of children are performing hazardous farming tasks or working at the expense of attending school. Child labour’s multiple causes are all to be found in household poverty and limited access to education.

The US$2million contribution was expected to strengthen the capacity of governments, social partners and cocoa farmers to combat the worst forms of child labour in cocoa growing communities; supporting the development and extension of community-based child labour monitoring systems; and enhancing the coordinating role of tripartite national child labour steering committees to those ends.

The initiative of the chocolate industries toward combatting child labour is a clear demonstration of how CSR can be used to solve a social problem. Thus, CSR is not only the right thing to do, it is also a prudent business decision.

 

References

CRANE, A., and MATTEN, D. 2005. ‘Can Corporations be Citizens? Corporate Citizenship

as a Metaphor for Business Participation in Society’. Business Ethics Quarterly

 

Hanlon, G. (2009) Rethinking Corporate Social Responsibility and the Role of

the Firm—On the Denial of Politics. Oxford Handbooks Online.

 

HAMANN, R., KAPELNS, P., SONNENBERG, D., MACKENZIE, A., and HOLLESEN, P. 2005. ‘Local

Governance as a Complex System: Lessons from Mining in South Africa, Mali and

Zambia’. Journal of Corporate Citizenship

 

Levy, D.L., and Kaplan, R. (2009) Corporate Social Responsibility and Theories of Global Governance. Oxford Handbooks Online.

 

MIDDLETON, C. (2005). ‘Interview with Michael Spicer, Chief Executive, South Africa Foundation’. Journal of Corporate Citizenship.

 

MATTEN, D., and CRANE, A. 2005. ‘Corporate Citizenship: Toward an Extended Theoretical

Conceptualization’. Academy of Management Review, 30(1): 166–79.

Kuhn, T.R., and Deetz S. (2008) Critical Theory and Corporate Social Responsibility. Oxford Handbooks Online

 

Visser, W. (2009). Corporate Social Responsibility in Developing Countries. Oxford Handbooks Online

 

(***The writer is a Development and Communications Management Specialist, and a Social Justice Advocate. All views expressed in this article are my personal views and do not, in any form, represent those of any organisation(s).

(Email: safoamos@gmail.com. Mobiles: 0202642504/ 0243327586/0264327586)

FIN

 

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