Corporate social responsiveness analysis

Corporate social responsiveness refers to how business organizations and their agents actively interact with and manage their environments. In contrast, corporate social responsibility accentuates the moral obligations that business has to society. Responsiveness and responsibility can be viewed as a balance in that responsiveness can be shaped or triggered by public expectations of business responsibilities. Generally speaking, these responsibilities implied by the term of the social contract, which legitimises business as an institution with the expectation that it provides a service whilst adhering to society’s laws and ethical norms. From this perspective, businesses are in a dynamic relationship with society of which responsiveness is a key aspect.

More broadly, there is the issue of why business should bother. After all, as neoclassical economists have long argued, business owes abstractions such as “society” nothing-shareholders are the owners of business and it is the organization’s obligation to do everything legal and legitimate to advance shareholder value, not waste it on well-meaning but irrelevant CSR projects. On the other hand, the stakeholder model of the firm would insist that shareholders are only one set of stakeholders and that there are plenty of other significant stakeholders, including customers; non-governmental organisations (NGOs); and communities more generally; as well as activist groups claiming to articulate the interests of the environment and climate change and other silent stakeholders.

If businesses serve only shareholder value interests in the short term and do so in such a way that jeopardises other stakeholder interests, this can have an adverse impact on the business by attacking its legitimacy or reputation. It may well be that in standard business practice that the primary responsibility of companies is to create wealth for their shareholders. The emergence of CSR and activists associated with it however adds another dimension, in order for companies to do well financially; they must also be good, ethically, by acting virtuously.

Civil society organisations have increased the energy they devote to directly lobbying and exposing the malpractice of companies, which has helped to change consumer preferences and citizen’s attitudes towards human rights, the environment, and exploitative relationships. This paper has been divided into several headings. The purpose of the paper is to discuss the state of corporate social responsibility at multinational corporations (MNC’s), using the examples of Shell and Emirates Airlines.

Introduction

Corporate Social Responsibility at MNCs

There have been increasing demands on multinational enterprises (MNC’s) to provide community development programmes and assistance to their host communities, particularly, in developing countries. In other words, meeting locally defined social and economic goals. This is mainly because developmental projects and other social infrastructures are lacking in most of these countries and most of all the time that are not provided by the government. For example, oil companies, particularly, those operating in developing countries are now constantly under pressure to be more open and accountable for a wide range of actions, and to report publicly on their performance in the social and environmental arenas. Because of their impact on politics, economics and society in host nations, they must be more attentive that others in demonstrating social responsibility through initiatives to reduce their negative impact.

Blowfield and Frynas (2005) mention that MNEs need to take account of the “social, ethical and environmental perceptions” of their operations and how these are likely to shape the future attitudes and actions of stakeholders. Following this argument, oil companies attach greater importance to their social and environmental impact and they engage more with local communities that they used to do in the past. Various community and environmental initiatives may be seen as a response to the threat of stakeholder sanctions (Blowfield and Frynas, 2005).

The purpose of the report is top discuss the state of corporate social responsibility at multinational corporations (MNCs) using the examples of Shell and Emirates Airlines in a comprehensive way. First the paper will start with a brief on each of these companies. Secondly it will go on to the Stakeholder Salience model and the Stakeholder Power Interest matrix followed by a basic chart illustrating stakeholder dynamics for both companies. The third section will focus on Corporate Social Responsibility at Shell and Emirates Airlines and

Shell Oil and Emirates Airlines

Launched in 1985 in Dubai with just two leased planes, the global air giant Emirates Airlines now consists of a fleet of over 120 planes and approximately 44,000 employees. The privately owned Emirates Airlines group consists of Emirates Airlines and a number of subsidiary companies including Emirates Airlines Holidays Limited. Emirates Airlines is one of the world’s leading airlines with a network that provides passenger and freight services to 149 destinations in 72 countries.

Shell’s head office is based in The Hague, Netherlands and the parent company of the Shell group is Royal Dutch Shell plc, incorporated in England and Wales. Shell currently operates in over 100 countries and employs 102,000 staff worldwide. Shell produces 2% of the world’s oil supplies and 3% of the world’s gas supplies.

Shell Stakeholder Power Interest Matrix

LOW INTEREST / LOW POWER

Sub-contractors

HIGH INTEREST / LOW POWER Country Leaders (if corrupt)

Employees

Proximate Communities

Future Generations

Community Initiatives

LOW INTEREST / HIGH POWER Government

Suppliers / Supply Chain

Customers

Shipping Industries

Oil Reserve Companies

HIGH INTEREST / HIGH POWER

Price Governing Bodies

Shareholders

Competitors

Petrol Price Governance

Environment Lobbying Groups

Legal Representation

Companies Marketing & Web Design

Emirates Stakeholder Power Interest Matrix

LOW INTEREST / LOW POWER

Government (as privately owned)

Future Generations

Price Governing Bodies

Sub-contractors

Community Initiatives

HIGH INTEREST / LOW POWER

Employees

Proximate Communities

LOW INTEREST / HIGH POWER

Suppliers / Supply Chain

Customers

Air Space Control

HIGH INTEREST / HIGH POWER

Shareholders

Competitors

Petrol Price Governance

Environment Lobbying Groups

Legal Representation

Companies Marketing & Web Design

Corporate Social Responsibility at Shell and Emirates Airlines

Shell Canada attempts to make all levels of management and corporate governance aware of these guiding Business Principles through strong Lines of communication between all organizational levels for the management of health, safety, environmental and social responsibility and must also consider having regard to the legal industry and community standards in those areas (Cannon, 1992).

In Shell Canada’s reports are regarded as their commitment to SD, and SD is used as an “overarching corporate goal, alongside growth and profitability, each essential to delivering long-term value to their shareholders.” The company’s reports are part of it’s commitment to two guiding principles, transparency and stakeholder engagement, which attempts to strengthen the linkages between its conduct, and society’s expectations. (Miles, Munilla and Darroch, 2006). Furthermore, decline in economic and social development in host communities due to neglect and lack of development initiatives from host governments, has sparked a global debate about the social responsibility of corporations. According to experts, stakeholders increasingly are looking to the private sector for help with a myriad of complex and pressing social and economic issues (Blowfield and Frynas, 2005). Similarly, it has been argued that it is good business to actively engage all stakeholders in the development of sustainable strategies that reflect both economic and socially responsible outcomes (Eweje, 2001).

Emirates mission is to deliver services that matter to people who value how they fly. To realise this, Emirates Airlines recognises the importance of working in partnership with its stakeholders. This has influenced its approach to corporate social responsibility (CSR). Its approach has also been influenced by the recognition that airlines generate major social and economic benefits, but also have significant impacts on the environment (for example, through noise and air quality) and on communities around airports. (needs referencing)

There are several reasons why Emirates Airlines chose to engage in CSR. The first is because it is a tool to help achieve the company’s long term strategic goals in providing growth opportunities around Heathrow airport. Secondly, improving business efficiency and reducing costs through waste and energy programmes provided a strong business case for CSR (Frynas, 2005).

The company also thought CSR could help them with risk management by identifying risks to health, safety and environment that could hinder its opportunity to attract investors and grow the business. Lastly, it recognised that it needed to act to enhance its corporate reputation, and customer feedback (both corporate and from the general public) revealed that they expected Emirates Airlines ‘to do the right thing’. (Warhurst and Mitchell, 2000).

Climate change is increasingly relevant to Emirates Airlines as aviation is a growing contributor to global carbon dioxide emissions, a main greenhouse gas, and consequently to climate change. The increase in emissions-stimulated by a rise in a passenger and freight travel-coincides with many politicians and civil society groups calling for industry to reduce carbon emissions. “this presented a problem for Emirates Airlines, especially when it seeks to be a leading player in the industry for environmental issues” (Eweje, 2001).

In response to this Emirates Airlines’ board decided to develop a programme of work on climate change. The programme first sough to identify ways in which the company could reduce its own impacts. By auditing its emissions and energy use, targets for reduction in these areas were developed-for example, a fuel efficiency target of a 30% improvement between 1990 and 2010. To date this represents a saving of 50m tonnes of carbon dioxide (CO2) emissions (Eweje, 2001).

Emirates Airlines set a target of total reductions in annual emissions of 125,000 tonnes of CO2, to be achieved over five years (Culverwell, Lee and Koziell, 2003).

One inhibiting factor has been the increase in fuel surcharges, which may have made passengers less interested in paying for other additional costs (Frynas, 2005).

Emirates Airlines has attempted to deal with these challenges by improving understanding of the issues, proactively leading and stimulating the debate through direct advocacy with government and participation at various fora (Miles, Munilla and Darroch, 2006).

Feedback from government and from experts on the environment has revealed that the climate change programme has positioned Emirates Airlines as a responsible airline. By becoming more involved in the debate, it has been able to steer that debate towards (in its view) the most sensible proposal of emission trading, rather than other interventions that could be expensive for the industry. In this way Emirates Airlines has been better able to manage its risks. The investment community has acknowledged this, and because of this it has enable Emirates Airlines to attract investment. A final benefit has been that, owing to its and other companies’ attitudes to environmental sustainability, there is a genuine prospect of expansion at Heathrow airport offering new opportunities for growth to Emirates Airlines (Warhust and Mitchell, 2000).

The climate change programme is CSR because it is about taking actions to reduce its impact on the environment. Growing threat to the environment and to societies everywhere. Emirates Airlines’ actions on climate change go beyond compliance demonstrating that it is taking voluntary actions to reduce its contribution to carbon emissions and better understand its impact on climate change (Eweje, 2001).

Emirates Airlines wishes to maintain its industry leadership position by continuing to develop policy and advocacy for cost effective instruments that benefit the environment. As part of this, it seeks to improve its customer engagement on climate change, to raise awareness and communicate Emirates Airlines’ work in the area. It will further develop its ground energy strategy to include actions to further reduce its internal impacts, for example, improving energy efficiency in its maintenance hangers. Lastly, it is continuing to develop and seek improvements in meeting its fuel efficiency target with a view to settting a new target for 2010 onwards.

In Nigeria today, the most critical issue that affects the oil and gas is the Niger Delta (oil-producing region). There has been enormous pressure on both the Nigerian government and the MNC’s to double their efforts and develop the region that contributes more that 80 per cent of Nigeria foreign earnings.

Experts such as Carson, 1993 argue that oil companies have initiated, and implemented significant community development schemes. For example, MNC’s “provide education, scholarships, and build roads in Nigeria. He also suggests that “global spending by oil, gas and mining companies on community development programmes in 2001 was over 500 million dollars (Carson, 1993). It could be argued that in economic terms, these are not the functions of businesses, but in less developed countries these roles, or rather duties, are expected from MNC’S.

Indeed, there have been times when local people in oil-producing regions have turned against MNE’s precisely because they feel, as Mitte the president of Movement of the survival of the Ogoni people. One of the communities in the Niger Delta put it: “they were not getting enough social and economic infrastructures/assistance from the MNEs that operate in their communities” (Carson, 1993). Regrettably, the lack of visible and positive impact of CSR initiatives in oil-producing communities has been questioned. Evidence suggests that there is a gap between the MNC’s stated CSR objectives and the actual results on the ground. What follows is the criticism of the community development initiatives of the companies because the host communities believe that MNC’s CSR initiatives are not addressing both the social and environmental problems they are intended to resolve (Cannon, 1992).

This assertion is somewhat similar to the argument of experts who suggest that numerous claims have been made about the contribution CSR can make to poverty alleviation and other development goals (Culverwell, Lee and Koziell, 2003). They further argue that “contributes to this issue have reached the conclusion that currect CSR approaches do not warrant such claims.” MNC’s CSR initiatives in the Niger Delta have many aspects which include employment issues, environmental issues and local community issues (Cannon, 1992).

MNC’s CSR Initiatives in the Niger Delta

In Nigeria, Charges of unethical behaviours include: “total neglect of the Niger Delta (oil-producing areas in Nigeria) and lack of educational facilities such as classroom, teachers, and scholarships which will enhance the literacy development of the indigenes of the communities” (Culverwell, Lee and Koziell, 2003).

Over the years, the oil exploration and producing companies witnessed “endless communal agitation, as the host communities have looked up to them for support and assistance in the provision of social and economic infrastructure and employment” The poorests parts of Nigeria are where these oil companies are, and this has heightened conflict” (Miles, Munilla and Darroch, 2006).

Recourse to violence has resulted in a lot of damage to property and casualties on both sides. In some instances, it has resulted in the withdrawal of operations by oil companies form some locations. While planned seismic and drilling activities have been abandoned in others (Miles, Munilla and Darroch, 2006).

In the past, the oil companies approach was to help or appease the communities whenever the need arose. More recently, however, they have established a more proactive and thoughtful approach to community assistance. This has resulted in the “emergence of a fully developed community relations department in each of the companies, solely set up to anticipate and plan the needs of the communities (Miles, Munilla and Darroch, 2006). The Nigerian Petroleum News, 1998, who understand better their own real needs and future aspirations. During interviews with senior managers of oil companies in Nigeria, it was confirmed that community relations departments were created solely to meet local needs and situational politics. The argument here supports the theoretical position of experts who argue that corporations tend to listen to the demand of powerful stakeholder groups. In this case, the MNC’s listen carefully to the demands of host communities and changed their approach towards them.

The host communities also demand social welfare projects from the MNC’s. In many developing countries, national and local governments have taken a more “hands- off approach” (Frynas, 2005) to regulating business due to such things as changing policies, the globalisation of commerce and shrinking resources. Against this background, companies are relying less on government for guidance, and instead they are pursuing their own policies with regard to such matters as environmental performance, working conditions and ethical marketing practices. This approach can be problematic. The secretary of the chief’s council of the oil-producing village of Bonny in the Niger Delta accused the oil companies of: Apartheid in its residential areas where all the state of the art welfare facilities including good water, constant electricity, good roads, super markets, schools with high-tech equipment, swimming pools and other facilities were in existence while the people of Bonny, the host community suffer absolute squalor and neglect (Frynas, 2005).

This is one example of a charge of double standard brought against multinationals in developing countries. The host communities believe they should have the same facilities that are on offer to the companies’ workers since the bulk of profits of the MNE’s comes from their land. As one observer pointed out:

Communities in the Delta area in particular, where most of the exploration and production activities take place, feel generally ill-treated in the entire process of oil prospecting and production and consider themselves as being at the end of only the adverse effects of these activities (Frynas, 2005). They believe that they have not received an equitable share of the tremendous oil revenues which are being derived from their land and territories, especially in the light of disruptive consequences on their health and sources of livelihood. Nor have they been recognised as the inhabitants of oil-producing areas who should benefit from the natural resource that abounds in their ancestral lands.

Trust and Discontent Issue

It is argued in this paper that issue of “trust” plays a significant role in the relationship between the host communities in the Niger Delta and the MNCs. The past behaviour of MNC’s for unfulfilling promises to the host communities has created a negative perception and mistrust. Hence, any CSR initiative no matter how laudable it is, does not always receive positive reaction in host communities. According to experts, managers can find a wealth of benefits from trust, including cost savings and enhanced organisational capacities. According to these researchers, what is evident is that the willingness of managers to create mutually trusting relationships is a matter of strategic choice. In other words, managers can, through their behaviour, help determine levels of trust in relationships between their firm and its various stakeholders. Trust is thus define as “an integral part of the strategy formulation process” (Warhust and Mitchell, 2000).

High figures suggests that the Nigerian government rakes billions of US dollars in form of revenue from the oil industry. However, the host communities in the Niger Delta are neglected; corruption and mismanagement is rife amongst officials hence some projects earmarked for the development of the region are never completed (Warhurst and Mitchell, 2000).

Charges of unethical behaviour include: “total neglect of the Niger Delta and lack of educational facilities such as classrooms, teachers, and scholarships which will enhance the literacy development of the indigenes of the communities.” Over the years, the oil exploration and producing companies have borne the brunt of “endless communal agitation, as the host communities have looked up to them for support and assistance in the provision of social and economic and infrastructure and employment.” The host communities believe they should have the same facilties that are on offer to the companies’ workers since the bulk of profits of the MNEs come from their land. On the issue of electrification of the communities, the companies are accused of neglecting the areas where they work by only “providing electricity to their installations. The communities do not benefit from the same developments that the companies undertake for their installations and workers” (Warhurst and Mitchell, 2000).

Conclusion

In short, the paper presents the examples of two multinational corporations and their responsiveness towards corporate social responsibility. The main points of the paper can be summarised that corporate social responsiveness, corporate social responsibility, and corporate social impacts are encapsulated in the phrase corporate social performance. Of these three concepts, responsiveness is the most forward looking, action-oriented, and malleable, since it is based on the precept that corporations have the capacity to anticipation and adapt to environmental factors. The potential is that corporate managers can learn to prevent or minimize the kind of unwelcome surprises that necessitate crisis management and government intervention while responding proactively to public expectations of how business can serve the greater good.