Importance Of Corporate Social Responsibility

Corporate social responsibility (CSR) is rapidly gaining importance for businesses all over the world. Over the decades, the concept of corporate social responsibility (CSR) has continued to grow in importance and significance. It has been the subject of considerable debate, commentary, theory building and research. In spite of the ongoing deliberations as to what it means and what it embraces, it has developed and evolved in both academic as well as practitioner communities worldwide. The idea that business enterprises have some responsibilities to society beyond that of making profits for the shareholders has been around for centuries. For all practical purposes, however, it is largely a post-World War II phenomenon and actually did not increase in importance until the 1960s and beyond. therefore, it is largely a product of the past half century.

The late 1980s saw a change in expectations when pressure was exerted by some environmental activists on entities that were seen as being environmentally irresponsible. Events such as the explosion at Union Carbide in Bhopal, India in 1984 and the oil spillage in Alaska in 1989 all but added weight to why corporations must be forced to treat the environment in a more responsible manner (Idowa 1989). The effect of the explosion in Bhopal of 1984 is still being felt by the unlucky residents nearly 20 years after the incident, Union Carbide on other hand, are still paying the legal costs of the incident up till now. It did not take much persuasion for companies and investors to accept that the environment is very important and any irresponsible damage to it will cost them dearly.

The fact that many companies in recent times issue annual CSR reports clears the doubts one may harbour as to whether or not these companies consider that a duty of responsibility is owed to the public, be it local, national, or international. Ramanathan (1996) contended that there is a social contract between organisations and society. Jaggi and Zhao(1996) also supported the social contract view when they argued that organisations do not exist in vacuum, but are part of the society which creates and supports them. Society will not deal lightly with any company which fails to recognise and support important social values. However, organisations are aware that society will not hesitate to punish them of any irresponsible act or omission they commit.

The concept of CSR means different to different writers and scholars, some claim that it is good and ethical for organisations to be socially responsible in the community in which they operate, others are of the view that it is not right for organisations to embark on corporate social responsibility practices, to them the objective of a business organisation is to make profit and nothing else. CSR is a voluntary form of self-regulation that seeks to handle issues relating to human rights and labour standards to limiting carbon dioxide emissions which might lead to climate change. Some writers on this concept believe that, corporate social responsibility (CSR) is a philanthropic responsibilities placed on companies by stakeholders the society at large beyond economic, legal and ethical responsibilities (Carroll,1779, 1991). However, McGuire (1963,p144) believes that the idea of social responsibilities supposes that the business organisation has not only economic and legal obligations, but also certain responsibilities to society which go beyond these obligations.

This piece looks at Tullow Oil’s ethical and corporate social responsibility policies and practices and implications these have for the strategic, operational and governance arrangements in the organisation.

Corporate social responsibility (CSR)

The concept of corporate social responsibility (CSR) has over the years continues to grow in importance and significance. It has been the subject of debate, commentary, theory building and research. In spite of much talk about of what CSR means and what it embraces, it has evolved in both academic as well as practitioner communities worldwide. However there is not a single definition for CSR, many writers and academicians have different definitions. Johnson (1971, p.51,52.) defined CSR as “a socially responsible firm whose management adjust a variety of interests, instead of struggling only to maximise profit for stakeholders, a responsible enterprise also looks its employees, suppliers, local communities and the nation as a whole”. It is important to note here that, Johnson’ s definition hits at the possibility of stakeholder approach as he made reference to a “multiplicity of interests” and names several of these interests groups specifically. He further reiterated that, in this approach, social responsibility in business is the attainment of socioeconomic objectives through the elaboration of social standards in stated business roles, or business conducted within a socio-cultural system that clearly show through standards and business roles particular ways to respond to particular situations and outline in detail the manner to conduct business affairs

Johnson(1971) gave a second view of CSR that ” social responsibility states that business organisations carry out social programmes to add to profits to their organisations”(p.54). in this view, social responsibility is seen as long-run profit maximisation.

The committee for Economic Development (CED) also made an important contribution to the concept of CSR in its 1971 publication Social Responsibilities of Business Corporations. The CED got involved into this topic by observing that “business functions by public consent and its basic goal is to attend the needs of society-to satisfy of society”(p. 11). However, the CED pointed out that the social contract between business and society was transforming in stable and important ways: business organisation is being asked to offer much more responsibilities to society than ever before and to attend to a wider range of human worth. organisations, in effect, are being asked to offer more to improve the quality of the society than just providing of goods and services. Inasmuch as business exists to serve society, its future will depend on the quality of management’s response to the changing expectations of the public. (p. 16).

According to a survey by Opinion Research Corporation in 1970, two thirds of the respondents were of the view that business had ethical duty to assist other major institutions to accomplish social progress, even if it affects profitability, the CED formulated a three common circles definition of social responsibility: The inner circle includes the clear-cut basic responsibilities for the efficient economic performance

function-products, employment and economic improvement. The intermediate circle include responsibility to carry on with this economic function by creating awareness of evolving societal principles and priorities: for example, with respect to environmental care; employment and relations with employees; and more stern eager anticipation of customers for information, fair treatment, and security from injury. The outer circle shows newly developing and still undefined responsibilities that firms should undertake to become more totally involved in actively changing the social environment into excellent condition. (For example, poverty and urban blight). (p. 15)

The interesting thing about the CED’s view of CSR is that the CED is composed of business people and educators and thus reflects an important practitioner view of the emerging social agreement that subsist between business and society and businesses’ newly developing social responsibilities. Carroll, (1979, p. 500) believes, “the social responsibility of business include the economic, legitimate, moral and discretionary expectations that business organisations are expected to do at a particular point in time by the society”. This definition was constructed after Carroll asserted that her previous definitions of CSR did not go beyond profit making and obeying the laws. Carroll argues that business has a economic responsibility in nature and that “before anything else, the business institution is the basic economic unit in our society. As such, it has a duty to produce goods and services that society wants and to sell them at a profit. All other business roles are predicated on this assumption.” (Carroll, 1979, p. 500)

The economic component of the definition suggests that society look up to organisations to produce goods and services and sell them at a profit. This is how the capitalistic economic system is structured and functions. Just as society expects business to make a profit for its efficiency and effectiveness, society expects business to obey the law. The law represents the basic “rules of the game” by which business is expected to function. Society expects business to fulfill its economic activities within the framework of legal requirements set forth by the society’s legal system. Thus, the legal responsibility is the second part of the definition (Carroll, 1979, p. 500). The ethical responsibility represents the kinds of behaviours and moral standard that society wants organisations to adhere to . These extend to behaviours

and practices that go beyond the legal requirement. Although they seem to be always expanding, they nevertheless exist as expectations “over and beyond legal requirements” (Carroll, 1979, p. 500). In later writings (Carroll, 1981, 1991), Carroll touched on the ethical responsibility component, which was seen as growing in importance. Finally, there are discretionary responsibilities. These are voluntary roles that business undertakes but for which society does not provide as clear-cut an expectation as it does in the ethical responsibility. These are left to individual managers’ and corporations’ judgment and choice; however, the expectation that business perform these still exists. This expectation is driven by social norms and required by law. The specific activities are guided by businesses’ desire to engage in social roles not or required by law. Examples of these voluntary activities, included making philanthropic contributions, conducting in-house programs for drug abusers, training the hard-core unemployed, or providing day-care centers for working mothers (Carroll, 1979, p. 500). These discretionary activities are similar to the CED’s third circle (helping society).

Stakeholder engagement

At issue for CSR are societal expectations of corporate behaviour. In a stakeholder view, CSR means that the business has an obligation towards its stakeholders, who can affect, or affected by corporate politics and practices (Bloom et al 2000: Lantos,2001). The fit between company performance and stakeholders’ values is important in the sense that stakeholders who disagree with the organisation’s course of action may have the power to replace management, or prevent the execution of corporate strategy (Brammer and Pavelin, 2004). Since stakeholders have many preferences in respect of organisation’s actions, processes and outcome (Fombrun and Shanley,1990), it is a problem to manage and balance the bulk of stakeholder expectations and their conflicting values(Nill and Shultz, 1997). This means that the agendas and expectation of stakeholders need to be identified so as to actively manage and sustain proper differentiation between them (Knox and Maklan, 2004). To achieve the successful implementation of CSR, managers must build bridges with their stake holders through formal and informal dialogue and engagement practices in the pursuit of common goals and convince them to support the firm’s chosen strategic course. (Andorif and waddock, 2002).

Organised, stakeholders groups have an opportunity to address the gap between the stakeholders’ goal and values and real company behaviour, by making the company aware of dubious incidents ranging from workplace harassment to environmental offences and corruption etc.

Arguments for and against CSR

The case against the concept of CSR begins with the classical economic argument pushed forward by the Milton Friedman (1962). Friedman held that management has one responsibility and that is to make the profits for the owners. He argued that social issues are not what a business is established to engage in and that these issues should be solved by the unrestrained activities of the free market system. Further, this view holds that, if the free market cannot solve the social problems, it falls not upon business, but upon government and legislation to do the job. A second objection to CSR has been that business is not capable to handle social activities. This position asserts that managers are oriented towards finance and operations and do not have the necessary expertise to make socially oriented decisions (Davis 1973). A third objection to CSR is that it dilutes businesses’ primary purpose and so to adopt CSR would put business into fields of endeavour that are unrelated to their ‘proper aim’ (Hayek 1969). A fourth argument against CSR is that business already has enough power, and so why should we place in its hands the opportunity to exercise additional power, such as social power (Davis 1973)? A fifth argument is that, by pursuing CSR, business will make itself less competitive globally. It should be noted that the arguments presented here were introduced decades ago, though some people still hold them, and that the oppositions to the concept of CSR applied when the idea was once more narrowly conceived.

However those in favour of CSR do not agree with the position against CRS, they are of the conviction that if business is to have a healthy climate in which to operate in the future it must take actions now that will ensure its long-term viability. A second argument in favour of CSR is that it will ‘ward off government regulation’. This is a very practical reason, and it is based on the premise that future government intervention can be forestalled to the extent that business polices itself with self-disciplined standards and fulfils society’s expectations of it. Two arguments in favour of CSR include ‘business has the resources’ and ‘let business try’. These views maintain that, because business has a good number of managerial ability, functional knowledge and resources, and because others have tried and could not solve social problems, business should be given the chance (Davis 1973,p. 316). Another justification for CSR holds that proacting is better than reacting. This basically means that proacting (anticipating, planning and beginning) is more pragmatic and cost effective than simply responding to social problems once they have occurred (Carroll and Buchholtz 2009). Finally, it has been argued that business should engage in CSR because the public strongly supports it. Today, the public believes that, in addition to its pursuits of profits, business should be responsible to their workers, communities and other stakeholders, even if making things better for them requires companies to sacrifice some profits (Bernstein 2000). Many of these arguments for and against CSR have been around for decades. They certainly present the legitimate perspective that there are, indeed, two sides of the argument with respect to almost any concept.