Fostering corporate social responsibility in sub saharan africa


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An evaluation of Corporate Social Responsibility (CSR) development and activities in Africa. Despite the obvious relevance of such issues to a dynamic and fast-growing region of the world such as sub-Saharan Africa, only recently has the literature on CSR begun to be re-evaluated in this different context.

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Fostering corporate social responsibility in sub saharan africa

  1. 1. Fostering CorporateSocial Responsibility in Sub-Saharan Africa by Eugene Nizeyimana September 2011
  2. 2. ABOUT SUB-SAHARAN CONSULTING GROUP Sub-Saharan Consulting Group (SSCG) is a management consulting firm that provides innovative business solutions to organisations and institutions in emerging economies such as Sub-Saharan Africa. Our solutions are focused at promoting private sectors & SMEs development, empowering entrepreneurs and start-ups growth in the continent through entrepreneurship, innovation, investment and intra-regional trade. SS.C.G offer cost effective solutions and approaches to commercial gaps, while inspiring entrepreneurs and promoting sustainable economic development in Africa. Contact Us 7200 The Quorum, Oxford Business Park North OXFORD, OX4 2JZ, United Kingdom T: + (44) 01865 589022 F: + (44) 01865 481482 E: W: www.s-scg.com1
  3. 3. CONTENTS: 1. Summary 3 2. Theories of corporate social responsibilities 4 3. Integrating Africa into t theories of CSR 7 4. Current CSR initiative in Africa 13 5. Policy implications 19 6. Conclusion 302
  4. 4. 1. SUMMARY It is increasingly recognised that ‘developmental’ models of aid and the public sector alone are insufficient in responding to the urgent economic and social challenges that face sub-Saharan Africa today. In parallel to this recognition has been a growing awareness of the need to engage and utilise the full potential of the private-sector in contributing to development. The idea of ‘corporate social responsibility’ (CSR) and related concepts have thus stepped into the foreground in the fields of political economy, governance, legal studies, financial services, international trade, and development. The plethora of connected and often overlapping terms is testament to Moon’s description of CSR as an “essentially contested” concept; CSR covers a broad range of labels including (but far from limited to) ‘business ethics’, ‘legal compliance’, ‘philanthropy’, ‘sustainability’, ‘community investment’, ‘environmental management’, ‘respect for human rights’, and ‘stakeholder 1 management’. Some analysts of CSR dispute the inclusion of some of these terms, but for the purposes of this discussion, a broad definition will be adopted to avoid ‘defining out’ of the discussion some important challenges specific to Africa and bring out some of the tensions in the literature with relation to emerging markets. Sustainability defines CSR as: “An approach to business that embodies transparency and ethical behaviour, respect for stakeholder groups, and commitments to add 2 economic, social and environmental value.” Despite the obvious relevance of such issues to a dynamic and fast-growing region of the world such as sub-Saharan Africa, only recently has the literature on CSR begun to be re-evaluated in this different context. 1 Moon, J., Corporate Social Responsibility: An Overview, In C.Hartley (Ed.), The International Directory of Corporate Philanthropy, 2002, First ed.: 3-14. London and New York: Europa Publications 2 Sustainability, Gearing Up: From Corporate Responsibility to Good Governance and Scaleable Solutions, 2004, London: Sustainability3
  5. 5. Figure 1: Green Life CSR 2. THEORIES OF CORPORATE SOCIAL RESPONSIBILITY It is important to review the theory of CSR in order to accurately convey the particular forms CSR takes in sub-Saharan Africa (SSA) and the challenges it faces. The literature on CSR has been dominated by two approaches to understanding CSR. By conceptualising CSR we can determine more precisely the exact motivations firms have to adopt CSR, the individuals and organisations that are impacted by CSR, and therefore suggest more pragmatic ways to foster corporate responsibility in the region.4
  6. 6. The first approach to understanding CSR is Carroll’s ‘Pyramid of Corporate Social Responsibility’, which identifies four types of responsibility that collectively constitute CSR and has dominated analysis of CSR: Philanthropic • Be a good corporate citizen Responsibilitie • Contribute resources to the community s • Improve quality of life • Be ethical Ethical • Obligation to do what is right, just and fair Responsibilities • Avoid harm • Obey the law Legal Responsibilities • Law in societys codification of right and wrong. • Play by the rules of the game • Be profitable Economic Responsibilities • The foundation upon which all others rest 3 Figure 2 - The Hierarchy of Corporate Social Responsibilities By organizing a firm’s responsibilities hierarchically, Carroll suggests that: i) responsibilities at the bottom of the pyramid count for more (or at least are of more immediate concern to firms) than those at the top. ii) there is a linear development of responsibilities that firms undertake (i.e. firms will turn to legal responsibilities before ethical responsibilities and finally philanthropic – elsewhere described as ‘discretionary’ responsibilities). In practice these categories of responsibilities will overlap and be hard to distinguish. For example, ‘strategic’ CSR may lead a firm to fully discharge its ethical responsibilities as a marketing campaign to boost consumer demand and therefore maximise profits, coincidentally discharging its economic responsibilities towards its shareholders. What the model does usefully provide is 3 Adapted from Carroll, A., The Pyramid of Corporate Social Responsibility: Toward the Moral Management of Organizational Stakeholders in A. Crane, D. Matten and L. J. Spence (eds.) Corporate Social Responsibility, 2008: London and New York: Routledge, p.665
  7. 7. a way of categorising the motivations underlying firm’s CSR initiatives; in the example above, the motivation is an economic one: MANIFESTATIONS OF CSR WITHIN THE PYRAMID OF CORPORATE SOCIAL RESPONSIBILITY  Public relations / Marketing Economic Responsibility  Quality Management (e.g. maintenance of supply chain relations, responding to consumer demand for ‘green’ products)  Compliance with competition law Legal Responsibility  Compliance with anti-corruption law  Integration of civil society pressure groups’ demands (e.g. living wage campaigns, Ethical Responsibility Fairtrade)  Laying foundations for sustainable growth in future generations (e.g. sustainable forestry)  Signing up to voluntary industry ‘codes of conduct’  Provision of ‘public’ services such as hospitals, education, sports and arts provision Philanthropic in local communities Responsibility  Discretionary (i.e.. non-strategic) poverty relief campaigns Figure 3 In the Western economies of the USA and Europe, these categories have proved useful in understanding firm’s CSR initiatives and motivations. This is partly due to stable social foundations upon which firms can maximise profits; that is to say, social capital and resources are exogenous to firm’s profit-maximising calculations, encouraged by the state’s provision of high quality public education, healthcare, and infrastructure. As a result, the (relative) abundance of rich social capital makes fostering that social capital less of an economic necessity than in developing countries, resulting in a clear(er) distinction between economic, ethical, and philanthropic responsibilities.6
  9. 9. 3.1 Accounting for variation: socio- economic differences and CSR However, the boundaries between these responsibilities are especially blurred in SSA. Both Visser and Amaeshi, Adi, Ogbechie and Amao’s analyses of CSR in Africa question the usefulness of Carroll’s model. Wayne Visser, Founder of CSR International, concludes that in Africa “the interconnections between Carroll’s four levels are so blurred as to seem artificial or even irrelevant”, resulting in a 4 pyramid that is “very simplistic and static.” What the CSR literature has neglected is the impact of unique socio-economic and socio-cultural contexts on the priorities given to different forms of CSR. SSA faces particular socio-economic challenges in the form of, for example, lack of social capital (i.e. a healthy, educated workforce), infrastructure (i.e. roads and telecommunications), and weak institutions (i.e. rule of law). The commonplace nature of CSR initiatives to combat HIV/AIDS – which may be seen as an ethical or philanthropic gesture in the West – can therefore be seen as a response to an economic imperative to maximise profits. Where multiple stakeholders benefit from such initiatives (e.g. shareholders from maximised profits, workforces from direct protection from HIV and treatment of AIDS symptoms, and community members from ‘herd immunity’ effects), CSR initiatives defy being categorized. The specific socio-economic context of a developing country and therefore the unique challenges facing business is “what makes corporate responsibility important,” and thus we can see different CSR priorities in different regions of the 56 world. Complicating things further, African CEOs often cite philanthropic reasons for why they undertake such work, and not the expected ‘strategic’ motivation of economic responsibility. Amaeshi et al.’s survey of indigenous CEOs and Senior Executive Personnel of Nigerian firms showed that whereas 46% of those questioned gave ‘local needs’ as a reason for CSR, only 31% gave the ‘firm’s 4 Visser, W., Revisiting Carroll’s CSR Pyramid: An African Perspective, in A. Crane & D. Matten (eds.), Corporate Social Responsibility: Three Volume Set, London: Sage, pp.195-212 5 Blowfield M, Murray A, Corporate Responsibility: A Critical Introduction, 2008: Oxford: OUP, p.178 6 PricewaterhouseCoopers, Corporate Responsibility: Strategy, Management and Value, 2006: London and NY: PWC8
  10. 10. 7 success’ as a reason for CSR. Clearly ‘PR misuse’ by those surveyed is a danger in such subjective research, and thus methodologies need to be tightened to be more precise in the conclusions they yield in future. Nonetheless, such a low response rate for a core business responsibility of firms’ CEOs (i.e. acting in the firm’s interests) is remarkable given it would go against shareholder’s expectations. 7 Amaeshi K, Adi B, Ogbechie C, Amao O, Corporate Social Responsibility (CSR) in Nigeria: western mimicry or indigenous practices?, 2006: Nottingham: International Centre for Corporate Social Responsibility, p.299
  11. 11. Figure 4: CMI10
  12. 12. 3.2 Accounting for variation: Cultural differences and CSR Amaeshi et al. also find that “manifestation of CSR does not necessarily need to 8 follow a linear progression as predicted by Carroll.” They cite cultural and sociological differences in Nigeria as being responsible for the widespread citation of philanthropic motivations as taking priority over economic and legal responsibilities. The Nigerian concept of ‘extended kinship’ fosters a “communal philosophy of life and concern for the less privilege” that necessitates an 9 extension of benefits beyond simply those directly involved in the firm. Visser also draws attention to the impact of cultural expectations, stating that across 10 SSA “philanthropy is an expected norm.” 3.3 Accounting for variation: differences between MNCs and SMEs and CSR If cultural factors do have an impact on the form CSR takes – a thesis supported by current research – then we could expect to see a divergence in the attitudes of multinational companies (MNCs) and indigenous small and medium-sized enterprises (SMEs). MNCs might be expected to import cultural norms of self- help and individualist-contractarian justice from their home countries whereas indigenous SMEs may be more influenced by cultural norms of ‘extended kinship’. In Nigeria, Amaeshi et al. do find that “while indigenous firms are more 11 involved in philanthropic CSR, the multinational firms are more strategic.” 8 Amaeshi K, Adi B, Ogbechie C, Amao O, Corporate Social Responsibility (CSR) in Nigeria: western mimicry or indigenous practices?, 2006: Nottingham: International Centre for Corporate Social Responsibility, p.32 9 Ibid. p.18 10 Visser, W., Revisiting Carroll’s CSR Pyramid: An African Perspective, in A. Crane & D. Matten (eds.), Corporate Social Responsibility: Three Volume Set, London: Sage, p.12 11 Amaeshi K, Adi B, Ogbechie C, Amao O, Corporate Social Responsibility (CSR) in Nigeria: western mimicry or indigenous practices?, 2006: Nottingham: International Centre for Corporate Social Responsibility, p.2811
  13. 13. Alongside cultural determinants of differences in CSR between MNCs and SMEs is economic capacity; one would expect MNCs to dedicate more resources per employee to CSR initiatives than smaller firms due to their increased organizational networks, the economies of scale and their monopsony status as often the only employers in an area (therefore entailing greater ethical obligations to provide for a larger share of communities). SUMMARY: EXISTING THEORIES OF CSR IN A SUB-SAHARAN AFRICAN CONTEXT Existing theories of CSR fail to sufficiently capture the particular dynamics of CSR in Africa. Carroll’s ‘hierarchy of CSR’ model appears oversimplified when applied in the context of SSA;  The ‘hierarchy of CSR’ overlooks the role of economic development in determining the priority given to different forms of CSR and the motivation behind them.  The ‘hierarchy of CSR’ overlooks the role of sociological practices and cultural norms in determining the drivers of CSR and the form CSR takes.  The existing literature therefore suggests a linear development of CSR responsibilities that does not match the empirical evidence from SSA.  The case of SSA suggests that SMEs have a valuable role to play in CSR, but that their responsibilities are defined not in economic terms as much of the existing literature suggests  Due to the significant disparity between the role of MNCs and SMEs in different sectors, the level of CSR activity in SSA would seem to vary largely between sectors.given their limited capacity, but in philanthropic terms. Figure 5: EXISTING THEORIES OF CSR IN A SUB-SAHARAN AFRICAN CONTEXT The varying impact of MNCs and SMEs on CSR initatives should be revealed in the variation of CSR in different sectors; those sectors that are constituted mostly by MNCs (e.g. extractives and much of agriculture) would be expected to have more established and larger CSR initiatives than those sectors constituted by SMEs (services and manufacturing). The existing literature on CSR in SSA lacks any quantitative study that explores this issue, but qualitative and anecdotal evidence does indicate such a divergence in CSR.12
  14. 14. 4. CURRENT CSR INITIATIVES IN AFRICA In the 1980s, the relationship between the private sector and society was re- evaluated on a grand scale in sub-Saharan Africa. Following years of post- colonial ‘developmental’ states that saw the state as the key driver in fostering growth, the economies of nearly all SSA countries went into freefall in the 1980s. The structural adjustment programmes proposed by IMF and World Bank as a necessary but painful remedy to Africa’s economic woes entailed a huge shrinking of the state apparatus, ranging from subsidies for domestic production to “reducing spending on health and educational facilities, even if they recognise[d] that these are essential to meet the needs of an expanding 12 population and to lay a basis for future economic growth.” Combined with the spread of the HIV/AIDS epidemic in the early 1980s and environmental disasters in extractive industries throughout the 1990s (e.g. Royal Dutch Shell and Chevron in Nigeria), this put the spot-light on the need for private sector responsibilities beyond simply profit-maximization. Globalization has accelerated MNC’s responses to these challenges as consumers incorporate the need for responsible management of the supply chain into their demands. As a result of all these factors, it became increasingly evident to foreign firms that they would need to reassess how they do business in SSA and introduce CSR initiatives. As regards SMEs, CSR initiatives do exist but are limited as a result of economic capacity and managerial training. Below a brief overview of CSR in major sectors will be given along with some examples of specific initiatives – many of the initiatives are administered by ‘foundations’ established by firms specifically to promote CSR: 12 Williams, Gavin, Why Structural Adjustment is Necessary and Why it Doesn’t Work, in Review of African Political Economy, 1994: Oxford: ROPAE Publications Ltd., p.22213
  15. 15. 4.1 Extractives CSR has been a particular concern for the extractives industries in SSA due firstly to the increased environmental implications of its operations and also its role in conflict zones across the region. The Meridian Group International cite mining, oil and gas as having “by far the most advanced CSR programs in 13 Africa.” All mining companies have HIV/AIDS policies “with clauses regarding nondiscrimination, confidentiality and disclosure, benefits, and retirement 14 treatment.” Evidence has been put forward suggesting the increased vulnerability of the extractives industries – particularly mining – to the HIV/AIDS epidemic; factors such as the concentration of single-sex hostels (fostering “a thriving commercial sex industry”) and abundance of migrant labour (undermining efforts to prevent the spread of the virus) have been suggested as potential problems that have contributed to the limited success of these policies in the past, as in Campbell’s study of the Summertown township in South 15 Africa. Often these HIV/AIDS worksite programmes are run as public-private partnerships – for example the £50 million five year Angola Partnership Initiative between ChevronTexaco and the Angolan government. The widespread environmental degradation resulting from the oil sector has led to companies monitoring the environmental impact of their work and investing in education, health and often sport initiatives for locally affected groups. Local opposition represent a potentially destabilising stakeholder in the extractives industry. A twin attack involving armed conflict (e.g. Movement for the Emancipation of the Niger Delta) and legal battles, often taken back the company’s home-country (e.g. most recently resulting in Royal Dutch Shell Plc’s admission at UK’s High Court of responsibility for huge oil spills in Ogoniland, 16 Nigeria) has put pressure on the oil industry to extend its CSR initiatives. One problem is that the extractives industry seems mostly reactive to events, rather than proactive, and as a result CSR is often seen as compensation rather than a genuine desire to engage its stakeholders in a meaningful way and listen to their concerns. 13 Meridian Group International Inc., CSR in Africa: Internet Research Study, 2006: Washington DC, p.25 14 Ibid. 15 Campbell, Catherine, Letting them DieL Why HIV/AIDS Prevention Programmes Fail, 2003: Oxford: James Currey, pp.12-13 16 The Guardian, Shell accepts liability for two oil spills in Nigeria, 3rd August 2011 nigeria?CMP=twt_gu14
  16. 16. SMEs IN THE EXTRACTIVES INDUSTRIES: SANDALI WOOD INDUSTRIES LTD. (TANZANIA) The high level of CSR activity in the extractives industry is partly due to the well-established organisational structures that MNCs, who dominate the sector, can provide. However, extractive SMEs can and do engage in CSR. In the journal ‘CSR Africa’ Laura Hampson details the case of the Sandali Wood Industries Ltd in Tanzania, which won the ‘Most Ethical and Responsible Business Practice for Supply Chains’ award at the East African CSR Awards. Recognising the danger of environmental degradation, the health hazards involved in transporting and milling wood, and the wasted off-cuts of wood, Sandali has invested in training local people to undertake selective harvesting of commercially viable trees, thereby minimising waste and environmental degradation. With increased investment in locals, workers’ safety was an increased concern, and so mechanical lifting tools were introduced to transport logs rather than the more risky conventional method of carrying logs by hand. This ensures minimal harvesting and maximum pay for workers’ labour (as workers do not waste time delivering inadequate logs). Figure 6: SMEs IN THE EXTRACTIVES INDUSTRIES: SANDALI WOOD INDUSTRIES LTD. (TANZANIA) Due to an inevitable government monopoly on the distribution of rights for many resources in the extractives industry, corruption remains a serious problem. A major voluntary multi-stakeholder initiative is the Extractive Industries Transparency Initiative (EITI), which as the name suggests works with various organizations including MNCs, NGOs, the IMF, UK Government, and World Bank to promote transparency around government deals and contracts in member states (of which there are five African members, with more holding only candidate status). Where oil is concerned there is also a danger of huge export revenues crowding out other sectors and resources, whether as a result of upward pressure on exchange rates (thereby disadvantaging local producers aiming at the export market) or detracting from the need for CSR initiatives in non-oil producing regions; both of these are a significant challenge for the oil industry in Angola, where oil constitutes over 90% of its foreign exchange earnings and is 17 concentrated mostly in coastal areas and the province of Cabinda. 17 Meridian Group International Inc., CSR in Africa: Internet Research Study, 2006: Washington DC, p.1615
  17. 17. 4.2 Agriculture The labour-intensive nature of agriculture in SSA and its direct contact with consumers in the developed world has led to a range of CSR initiatives mostly aimed at employee relations, one of which is the Fairtrade Foundation’s campaign that seeks to promote higher wages and better working conditions for farmers in the developing world. Again, the labour intensive nature of agriculture and its seasonal variations (which encourage the employment of seasonal workers) have led to a vulnerability to HIV/AIDS; a problem the sector takes very seriously. Brooke Bond Kenya Ltd, a tea growing firm in Kenya, has one of the larger schemes that reaches over 80,000 people (equivalent to the extended network of its 20,000 employees) focusing on peer education, counselling, anti- retroviral drugs and condom distribution. The seasonal nature of work results in a large proportion of workers being employed only on a ‘casual’ basis, and therefore lacking access to the range of services that firms offer through their HIV/AIDS workplace schemes. This is particularly true of the horticultural business; 65% of Kenyan and 85% of 18 Tanzanian flower workers are non-permanent. Of these, a large majority are women, raising issues of gender inequality – women are not entitled to benefits and are likely fired if they become pregnant. In the cocoa industry the use of child labour and abuse of migrant workers has been a focal point of concern, leading to the creation of the West Africa Cocoa Agriculture Program to Combat Hazardous and Exploitative Child Labour (WACAP) in 2003. Such initiatives are complemented by those that seek to secure fair prices for local growers, since profits can thereby be sustained without needing to reduce production costs by seeking cheap child labour. Both the tea and coffee growing sectors are governed by a plethora of sometimes overlapping voluntary codes of conduct, such as SA800 (a broader standard working across sectors), EurepGAP, the Ethical Tea Partnership, the Utz Kapeh Code of Conduct, and the Fair Trade Label. A wider problem for the tea, coffee and banana-growing sectors is the lack of CSR penetration to smaller farms. 18 Meridian Group International Inc., CSR in Africa: Internet Research Study, 2006: Washington DC, p.1616
  18. 18. 4.3 Manufacturing, Electronics and Bottling Manufacturing, electronics and bottling represent a diverse group of sectors that would generate intense CSR interest in the developed world due to the risk of exposure to hazardous materials and equipment. However, perhaps due to the proliferation of SMEs involved in these sectors and lack of industry coordination, there is little evidence of significant CSR concerns from these sectors. That there is little data collected centrally is of course not evidence of a lack of CSR, but its exposure – should it exist – seems limited. What is notable is the lack of CSR exposure in a sector that draws significant attention in developed countries. DIFFERENCES IN CSR PRIORITIES BETWEEN THE DEVELOPED AND DEVELOPING WORLD: VODAFONE AND VODACOM Based in South Africa, Vodacom is the pan-African subsidiary of UK-based mobile telecoms company Vodafone, which took majority ownership of the company in 2008. Despite being in the same sector and owned by the same company, the CSR priorities in two companies are completely different. In the developed world, much of the CSR initiatives in the telecoms industry are aimed at researching and educating about the potential health complications posed by radiofrequency (RF) signals, preventing access by children to unsuitable information and products via their mobile phones, recycling chemical components of mobile phones (partnering with WWF to achieve this) and privacy protection. In recognition of its CSR efforts, Vodafone was ranked as the world’s most accountable business by London thinktank AccountAbility in 2006 and by CSRNetwork in 2008. Figure 7 There are, however, notable exceptions to the lack of CSR initiatives, as demonstrated by the cases of Vodacom (see box above) and the work of The17
  19. 19. Coca-Cola Africa Foundation (TCCAF) in providing HIV/AIDS-related services to the families of its 60,000 employees through a partnership with UNAIDS and support of a further 123,000 HIV/AIDS orphans and vulnerable children across 8 19 countries. 4.4 Tourism CSR has a mixed record in the tourism industry. Codes of conduct are becoming more common; although not legally binding, the Global Code of Ethics for Tourism (created by the World Tourism Organisation) is notable due to its enforcement mechanism under Article 10. Individual hotels’ often have CSR policies, but Dodds and Joppe find in their 2005 study that “there is little overt demand for sustainable tourism” and that “if the consumer and the industry are driven by price then there is a need to re-think the strategy of how to include 20 sustainability within current cost structures.” Indicative of the lack of CSR awareness is the fact that two hotel chains with a major presence in SSA, Hilton and Sun Africa, do not publicise their CSR activities through their websites; The Serena Hotel Group is a notable exception. Few safari tour operators and tourist destinations publicise CSR initiatives. Where CSR policies do exist, their monitoring and evaluation remain weak. 19 20 Dodds, R and Joppe, M, CSR in the Tourism Industry: The Status of and Potential for Certification, Codes of Conduct and Guidelines, 2005: World Bank, pdf18
  20. 20. 5. POLICY IMPLICATIONS The above overview of current CSR initiatives in sub-Saharan Africa is necessarily brief given the summary nature of this report. However, the cases and examples have been chosen to demonstrate some of the challenges that CSR in SSA faces and how the priorities of and obstacles to CSR vary between sectors: Diffusing knowledge about CSR potential to Minimising the SMEs perceived trade-off betweeen job Lack of concern for creation and legal responsibility improving working conditions/higher wages Challenges for CSR in Lack of consumer SSA Gender inequality demand for CSR in CSR provision Lack of concern Monitoring and for socially evaluation of responsible CSR activity production practices Figure 8: Key Challenges for Corporate Social Responsibility in sub-Saharan Africa Finding effective solutions to these problems will be difficult, especially given the relative infancy of research into CSR in sub-Saharan Africa and the lack of data with which to work and evaluate the success of CSR initiatives. However, this report highlights four areas in which much can be done to foster CSR in the19
  21. 21. region; these are based around i) the strengthening of consumer awareness and capacity, ii) legal and policy reform, iii) management education (especially for SMEs), and iv) the deployment of international finance institutions (IFIs), multilateral development institutions (MDIs) and non-governmental organisations (NGOs). 6.1 Strengthening consumer awareness and capacity As outlined above, one of the key challenges for the extension of CSR in the region is the lack of consumer demand for products and services that have been produced in a socially responsible corporate environment. Strengthening this demand will encourage firms to increase CSR by acting firstly on their economic responsibility to maximise profit (which will now be served by supplying CSR- produced goods) and secondly the ethical responsibility to integrate consumers’ demands by establishing public norms of what is ‘expected’ of firms even where profit will not be maximised. This has two components:  Increasing consumer awareness A key obstacle to achieving change in consumers’ attitudes is a lack of knowledge of problems, and where problems are acknowledged there is often no realization that the private sector has the power (and often desire, if only it were economically viable) to support local communities in tackling problems. The following measures will support this change:  Incorporating business education into the curriculums of educational institutions  A media with minimal corporate influence (e.g. newspapers, radio, television)  NGOs and civil society organisations publicly holding local businesses to account  Increasing consumer capacity Without a credible capacity to change their consumption habits, even consumers with an awareness of and desire to support CSR to change will be unable to pay a premium for CSR and therefore realize change in firms’ behaviour. A history of poverty alongside weak market forces and civil society organizations in SSA means this is a particularly important challenge to overcome:  Creation of a policy environment that encourages entrepreneurship and innovation, which will raise employment and spread wealth in African communities; particularly in less resource-rich areas that draw less investment from MNCs (see Sub-20
  22. 22. Saharan Consulting Group’s other work into promoting entrepreneurship and innovation in SSA) – these involve increasing access to (micro)finance, decreasing the costs of attaining legal certification, improving infrastructure etc. 6.2 Legal and policy reform Although CSR is organised and implemented mostly by the private sector (whether for profit or not for profit), the public sector clearly has an important role to play in establishing the institutional structures conducive to CSR activities. Of particular note is the public sector’s role in fostering legal responsibility, which is currently lagging behind other sorts of responsibility in SSA:  Reform of corporate governance frameworks: Amaeshi, Adi, Ogbechie and Amao’s research into CSR in Nigeria highlights the contrasting impact of ‘contractarian’ and ‘enlightened shareholder value’ frameworks of corporate governance. The current US-inspired ‘contractarian’ law “essentially reflect[s] the shareholder supremacy and shareholder wealth maximization goal” by drawing the memorandum and articles of association as a triadic relationship between the company, its members 21 (stockholders) and officers (management). In contrast, an ‘enlightened shareholder value’ framework, as reflected in the UK in its Company Law Reform Bill (2006), requires companies to “report on the impact of their operations on other stakeholders such as employees, suppliers, communities and the environment.” Thus the authors suggest a change in the corporate governance framework would trigger firms to re-evaluate their purpose and impact on other stakeholders – both insofar as they can influence the company’s operations and therefore profits, and as they exert ethical demands on the company.  Capacity-building of judiciaries: 21 Amaeshi K, Adi B, Ogbechie C, Amao O, Corporate Social Responsibility (CSR) in Nigeria: western mimicry or indigenous practices?, 2006: Nottingham: International Centre for Corporate Social Responsibility, p.1021
  23. 23. Firms’ relative lack of concern for legal responsibility may also stem from the weak power of judiciaries in SSA to produce neutral rulings that can be effectively enforced. Furthermore, the lack of credible ‘threat’ from judiciaries make it is less likely that firms integrate legal liabilities into their calculations regarding economic responsibility. Many of the most pressing CSR priorities – such as compliance with international law regarding child labour, respect for communal property rights, environmental sustainability etc – require faith in the rule of law to be taken seriously. Corruption and lack of monitoring agencies undermine the influence of judiciaries in this regard. Tackling corruption may involve reviewing the appointments procedures to judiciaries, increasing their accountability through transparency initiatives and stronger civil society groups, and reviewing salaries and training. Government sponsoring of Alternative Dispute Resolutions (ADR) has also been suggested as a way of minimising the cost of litigation and therefore extending access to justice, as in 22 Ghana.  Introducing conditionality for services: South Africa has experimented with increasing CSR (or corporate social investment/CSI as it is referred to there) by imposing conditions on companies in exchange for access to public services. In order to be listed on the Johannesburg Stock Exchange (the largest SE in Africa), companies must comply with the principles of King Code on Corporate Governance, most recently revised in 2009. Requirements include the production of an annual integrated report that “focuses on the impact of the organisation in the economic, environmental and social spheres” (in place of the usual financial report), formal risk management processes, internal audits, a written assessment of the company’s internal financial controls, and performance reviews of long- standing directors. Since the requirement was introduced, South Africa has become a world-leader in sustainability reporting. The Integrated Reporting Committee was established in 2010 to set standards and provide support to firms compiling these reports. It is possible that similar introductions of conditionality could be applicable elsewhere in SSA. 22 Adjabeng S, Using ADR to reduce judicial corruption and the cost of accessing justice in Ghana, 2010: Brussels: Effectius ASBL22
  24. 24.  Fiscal changes Governments have an important role to play in fostering CSR through their fiscal policy:  Tax structure: many analysts have considered the impact of the structure of the tax system on CSR. Though most agree that tax breaks given to companies that can demonstrate a commitment to CSR would incentivise giving (for example as tax breaks given to corporate foundations that oversee external CSR projects and philanthropy), doubts have been expressed over the ability of the tax structure to influence the CSR 23 activities of smaller firms. This is partially as a result of the difficulty in establishing objective criteria for eligibility (presumably based on the success of companies’ CSR initiatives), but also the weakness of sub- Saharan African governments’ tax collecting agencies; if tax is not already being collected, then a tax break will do little to 24 help.  Expansion of the formal economy: the large informal economy in SSA is an obstacle to CSR. Policy changes that would make entrance into the formal economy easier would thereby encourage CSR either directly (e.g. giving registered workers rights in the workplace) or indirectly (e.g. increasing the impact of other policy changes that only affect those firms in the formal economy, such as tax breaks). Such policy changes include lowering barriers to entry for firms and offering a broader range of government support and opportunities for registered firms (thereby increasing the opportunity cost of staying in the informal economy).  Subsidies: in most cases subsidies are provided through public-private partnerships, most of which are currently between MNCs and IFIs, MDIs or NGOs (see below). But in reality if local 23 Petkoski and Twose (eds.), Public Policy for Corporate Social Responsibility, 2003: World Bank, p.13 24 Williams, D, Tax and Corporate Social Responsibility, 2007: London: KPMG, p.3823
  25. 25. communities are going to take ownership over the promotion of CSR and governments are to synchronise public policy with firms’ CSR priorities, government will need to make strategic partnerships with the private sector to realise their aims. Further research is needed in this area, but it is plausible that governments’ lack of organizational capacity and networks in delivering services can be made up for by working with firms. Corruption is of course a real issue with public-private partnerships, thus ensuring transparency would be a key objective of any such arrangements. 6.3 Management education Alongside the lack of consumer capacity and potential for public policy changes, there remains a lack of awareness about the potential benefits of CSR and skills necessary for its implementation in the firms themselves. This is particularly true of SMEs, whose senior executives may be working too much in the business to work on the business and recognise the broader strategic potential of CSR. The following may therefore be useful measures in solving this:  Training in management tools: Senior executives frequently lack the awareness of CSR opportunities and skills associated with those opportunities. Several studies have studied the potential of management tools implemented in SMEs to focus attention on CSR- associated activities. For example, in a European-based 2007 study, Ascigil finds that “by linking operational and non-financial corporate activities within causal chains to the firm’s long-term strategy, EFQM Excellence Model provides an opportunity for alignment of performance on social issues with decision-making strategies and 25 structures.” Informed use of risk management tools can aid firms by identifying stakeholders (defined as those who have an interest in and can effect the operation of the business) and therefore enable a firm to institute a considered policy that respects the sensitivity of business to changes in stakeholder behaviour. 25 Acsigil S, Towards Socially Responsible SMEs? Quality Award Models as a Tool, 2007: Nottingham: ICCSR24
  26. 26. How can such management tools be taught? Business schools, as incubators of entrepreneurship and innovation, certainly have a role to play. Inclusion of management tools that have yet to be employed in most of SSA in the curriculum, in addition to the study of CSR itself, would foster CSR for the future. The media also presents an important avenue for the dissemination of business information and debate. For example, in Uganda the Nekolera Gyange (I Run My Own Business) radio programme broadcasts technical advice and business linkage opportunities to (mostly) self- employed people. The project was so successful that it was extended to Ghana, and is now supported by over six other 26 private and public organisations. NGOs can also help disseminate management advice, as the ILO’s Coop Africa scheme seeks to do.  Investment: Ascigil’s study also highlights a difference in CSR between independent and dependent SMEs, (where dependent SMEs are companies that have at least 25% of their shares owned by a holding group or company). His suggested explanation is that equity investment stimulates an influx of expertise into management systems and provides contacts, and that “having access to [such] expertise on development of management systems to enable informational diffusion is 27 critical for SMEs.” Furthermore, he suggests that financial shortages in independent SMEs may make those firms “slower in adopting CSR”, and that the contacts provided by investors can help the firm overcome staff related inadequacies that may prevent CSR being implemented. 26 Meridian Group International Inc., CSR in Africa: Internet Research Study, 2006: Washington DC, p.22 27 Acsigil S, Towards Socially Responsible SMEs? Quality Award Models as a Tool, 2007: Nottingham: ICCSR, p.2625
  27. 27. 6.4 Deployment of MDIs Figure 9: Vivo Energy The role of multinational development institutions (e.g. the World Bank Group, IFC, UNAIDS, DFID, ILO, African Development Bank) and non-governmental organisations cannot be overlooked when tracing the rise of CSR in the developing world. Such organisations have been pivotal in promoting CSR and holding private enterprise to account in the face of a weak civil society. Antonio Vives identified 28 four ways in which MDIs can foster CSR ; NGOs clearly fill similar roles:  Promotion and advocacy A recurring theme in this report has been the challenges posed by a lack of awareness at all levels – from executives in SMEs to government bureaucrats – of the potential of CSR to add (economic) value to business and mitigate persistent social and environmental problems. MDIs and NGOs, in importing new ways of thinking and modes of operating, and due to their perceived independence, are in a strong position to promote CSR within the business community. 28 Vives, A, The Role of Multinational Development Institutions in Fostering Corporate Social Responsibility, 2004: Society for International Development26
  28. 28. Promotion can also come in the form of partnership facilitation. Rather than taking an active role as a member in a bilateral partnership that supports CSR initiatives, MDIs and more localised NGOs can broker partnerships between different actors in the same private sector supply chain, or between the private sector and other MDIs. Two examples of this ‘partnership brokering’ stand out. In Kenya The Ufadhili Trust networks on behalf of SMEs who lack the resources and time to dedicate towards developing those contacts with institutions willing to support their CSR programmes. In Zambia The Partnership Forum has been doing similar work in facilitating partnerships that correlate with CSR objectives. For example, The Partnership Forum have helped Shoprite, a South African supermarket chain, source their food locally following their expansion into Zambia, rather than import food from South Africa (which would be more costly for Shoprite, less environmentally 29 sustainable, and not invest in the local community). This application of local expertise to solve business problems is a promising development in emerging markets that have yet to develop integrated communications networks.  Policy lobbying Achieving the legal and policy reforms referred to above necessitates people and organisations to lobby governments to adopt these changes. Again, MDI’s global knowledge of other countries’ policy environments and their perceived independence make them potentially useful advisors to government ministries. MDIs can also expand the drivers for CSR indirectly through their other activities; for example “by supporting the development of financial and capital markets, MDIs are making available a vehicle for investors and lenders to express their preference for responsible firms through the demand for the firm’s financial products, which, in turn, will affect their costs and rate of 30 return.” Furthermore, NGOs can represent the interests of those who lack the resources (time, money, expertise, contacts) to represent themselves in the policy-making process – for example in campaigning for improved working conditions and compliance with international human rights law. 29 Kivuitu, M, Yambayamba, K, and Fox, T, How can Corporate Social Responsibility Deliver in Africa?, 2005: International Institute for Environment and Development 30 Vives, A, The Role of Multinational Development Institutions in Fostering Corporate Social Responsibility, 2004: Society for International Development, p.427
  29. 29.  Financial support Alongside ‘partnership brokering’ (above), MDIs can take an active role in the partnership itself. The ‘IFC Against AIDS’ campaign (2001-2010) is an example of such support, in which it partnered with companies such as K-Rep (Kenya) and Odebrecht (Angola), supplementing existing finance and providing expertise in designing HIV/AIDS awareness, 31 prevention and treatment programmes. In 2006 Odebrecht received further support from USAID and the National Institute to Fight AIDS to set up the Business Committee to Fight HIV/AIDS Alongside partnerships, thanks to the large presence of MDIs and NGOs in SSA, they can put pressure on suppliers through their procurement policies by favouring firms that can demonstrate strong CSR.  Evaluating CSR success and reporting This report demonstrates that CSR is becoming established in SSA, and that many governments, organisations and firms actively promote CSR. But in having so many bodies with overlapping agendas and responsibilities, and a lack of broader government infrastructure to coordinate and monitor such organisations, CSR initiatives are in danger of becoming poorly executed, unaccountable and thereby ineffective. Often CSRs are promised, reported, but not followed through on, or alternatively are abandoned once the company’s activities and interests shift elsewhere. For example, The Economist reported that the China International Fund (a Hong Kong based mining company “shrouded in secrecy”) in Africa “failed to meet many of the obligations it took on to win mining licences. Zimbabwe is still awaiting even a fraction of its promised infrastructure. Guinea never received the 100 public buses that were 32 meant to arrive within 45 days of the 2009 deal.” MDIs and NGOs must play an important role in monitoring the success of CSR projects given the lack of basic government capacity in even the most basic services. Again, perceived independence from special interests makes MDIs suited to this task. Furthermore, the research expertise of MDIs and NGOs is ideal for undertaking comparative analysis of projects with similar aims; currently, the literature on how effective different HIV/AIDS worksite 31 32
  30. 30. schemes (and other forms of CSR) are is sparse. Comparative research undertaken by MDIs would increase the accountability and effectiveness of those schemes by exposing failures and suggesting solutions. These four categories suggested as identifiable ways in which CSR can be fostered in sub-Saharan Africa are summarised in Figure 10. • Increasing consumer • Reform of corporate governance awareness frameworks • Increasing consumer capacity • Capacity-building of judiciaries • Introducing conditionality for services • as • Fiscal changes Strengthening consumer Legal and market policy reform pressures Management MDIs and education NGOs • Training in management tools • •Promotion and (EFQM Excellence Model, risk advocacy management, balance scorecard) • Business schools • Policy lobbying • Media • Financial support • Investment • Evaluation and monitoring Figure 10: Fostering CSR in sub-Saharan Africa29
  31. 31. 6. CONCLUSION: THE FUTURE OF CSR IN AFRICA AND THE IMPORTANCE OF DYNAMIC APPROACHES This study has examined how CSR in sub-Saharan Africa differs from CSR in other parts of the world, and highlighted the challenges that CSR in Africa faces. The suggestions for fostering CSR outlined in the previous section are not comprehensive. Despite earlier drawing attention to the importance of cultural influences on CSR (Section 3.2), the practical discussion has focused on ways of extending and encouraging the legal and economic drivers of CSR. What is more challenging is identifying and encouraging the cultural drivers of CSR, for example identifying businessmen’s ethical convictions and creating a CSR structure that can adapt to local ethical and philanthropic perceptions. To an extent, cultural perceptions of CSR and the implementation of CSR are mutually reinforcing; as an increasing number of firms recognise the legal and economic potential of CSR, ethical perceptions of what is ‘due’ and ‘expected’ of firms will be strengthened through the creation of social norms. In the long term, as social and economic conditions for Africa’s poorest improve, we might expect philanthropic (i.e. ‘supererogatory’) motivations to decline and be replaced by ethical responsibilities. CSR must remain dynamic in sub-Saharan Africa. Globalisation has introduced a series of new challenges that firms must overcome, with new pressures from above and below to review their business challenges. Furthermore, there are an increasing number of organisations involved in CSR. Of particular note is the broad range of firms with a stake in the economies and societies of SSA. Perhaps the most pressing concern as regards CSR is the rise of para-statals undertaking economic operations on an enormous scale – especially ‘land grabs’ from the Middle and Far East. Understanding para-statals’ behaviour in SSA will30
  32. 32. require a re-evaluation of the theory of CSR – and indeed a re-assessment of whether the concept of corporate social responsibility is applicable to state- owned corporations based outside of their home country. For example, power relations between countries will inevitably lead to differences in the way para- statals are treated by their host governments, and motivations extend beyond simply financial profit. Furthermore, CSR must become localised in the face of globalisation; evidence of this localisation (i.e. responding to local stakeholders and concerns) has been demonstrated above, but CSR agendas ought to be tailored at a community level rather than an ‘African’ level; challenges and priorities will of course vary between countries and sectors, and thus the concept of CSR must be able to adapt to its surroundings rather than become a ‘one size fits all’ stereotype. Rapid social change within those same communities (e.g. urbanisation, changes in expectations) and economic growth further increase the need for a dynamic approach to CSR. This report has not compared the relative strengths and weaknesses of the measures suggested above in facing up to these challenges. It is a preliminary investigation that highlights the main issues and reviews existing and potential strategies that could be used to foster CSR in the region.31