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IMPACT OF CORPORATE SOCIAL RESPONSIBILITY OF A MULTINATIONAL OIL AND GAS COMPANY ON ITS HOST COMMUNITIES

CHAPTER ONE

INTRODUCTION

Overview of the Study

Business organizations, right from the inception of the human race, have been regarded as constructive partners in the communities in which they operate. Though they have been instrumental in creating employment, wealth, products and services, yet the pressure on business to play a role in social issues involving employees, stakeholders, society, environment, government etc. is continuously increasing. The society is questioning the existence of business organizations, especially in the wake of the scandals and scams conducted by the corporate organizations. In response to it, the organizations around the globe are forced to wake up to the need for being committed towards Corporate Social Responsibility (Sharma et. al.2009).

Over the years, the concept of Corporate Social Responsibility (CSR) has gained unprecedented momentum in business and public debate and has become a strategic issue crossing the departmental boundaries, and affecting the way in which a company does business. It has become so important that many organizations have rebranded their core values to include social responsibility. Almost all corporate websites, policies and reports talk about their endeavors for CSR which has become a way of ensuring that the organization is fulfilling all the obligations towards society and thus is eligible for the license to operate. It assures that the organization can grow on a sustainable basis (Malikarjunan K. 2006).

 In support of the above, Sharma et. al.(2009)  say these activities of CSR range from small donations to bigger projects for social welfare. Sustainable practices between organizations to organization depending on the resources available to an organization for undertaking sustainable practices. Business practices of big and successful companies, with plenty of resources at their disposal, have set the trend for being committed to sustainable practices. Such companies around the globe show their commitment to social responsibility. Examples include, Microsoft, ExxonMobil etc.

Corporations are encouraged to behave socially responsibly on a wide range of issues (Welford and Frost, 2006; Engle, 2006). However, in both the corporate and the academic world there is uncertainty as to how CSR should be defined. Some go as far as saying ‘We have looked for a definition and basically there isn’t one’ (Jackson and Hawker, 2001:3). This is not quite true; the problem is rather that there is an abundance of definitions, which are, according to Van Marrewijk (2003), often biased toward specific interests and thus prevent the development and implementations of the concept. The definitional confusion surrounding CSR might potentially be a significant problem. If competing definitions have diverging biases, people will talk about CSR differently and thus prevent productive engagements. Unfortunately, any attempt to develop an unbiased definition is challenging, because there is no methodology to verify whether it is indeed unbiased or not (Dahlsrud, 2005).

Davis (1960:70) suggested that social responsibility refers to businesses decisions and actions taken for reasons at least partially beyond the firm’s direct economic or technical interest. At about the same time, Eells and Walton (1961) argued that CSR refers to the problems that arise when a corporate enterprise casts its shadow on the social scene, and the ethical principles that ought to govern the relationship between the corporation and society. Drucker (2002) explains his position on the concept of corporate social responsibility saying thus, “A business that does not show a profit at least equal to its cost of capital is socially irresponsible; it wastes society’s resources. Economic profit performance is the base without which business cannot discharge any other responsibilities, cannot be a good employer, a good citizen, a good neighbor. But economic performance is not the only responsibility of a business. Every organization must assume responsibility for its impact on employees, the environment, customers, and whomever and whatever it touches. That is social responsibility.’’

Holme and Watts (2000) define corporate social responsibility as continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large. Corporate social responsibility has been defined as a ‘contract’ between society and business wherein a community grants a company a license to operate and in return the matter meets certain obligations and behaves in an acceptable manner (Woodward-Clyde, 1999)

CSR is about businesses and other organizations going beyond the legal obligations to manage the impact they have on the environment and society. In particular, this could include how organizations interact with their employees, suppliers, customers and the communities in which they operate, as well as the extent they attempt to protect the environment (Lea, 2002) In general, corporate sustainability and CSR refer to company activities – voluntary by definition – demonstrating the inclusion of Social and environmental concerns in business operations and in interactions with stakeholders (Van Marrewijk, 2003)

CSR is generally seen as the business contribution to sustainable development, which has been defined as development that meets the needs of the present without compromising the ability of future generations to meet their own needs, and is generally understood as focusing on how to achieve the integration of economic, environmental and social imperatives (Strategis, 2003). CSR is the voluntary assumption by companies of responsibilities beyond purely economic and legal responsibilities (Piacentini et al., 2000). CSR is the degree of moral obligation that may be ascribed to corporations beyond simple obedience to the laws of the state (Kilcullen and Kooistra, 1999)

Corporate social responsibility is operating a business in a manner that meets or exceeds the ethical, legal, commercial and public expectations that society has of business. It describes the body of management systems and tools that help companies minimize their environmental impact, adhere to international labor standards, contribute to their communities and manage toward a more economically sustainable world Dahlsrud (2005) Corporate social responsibility is about companies having responsibilities and taking actions beyond their legal obligations and economic/business aims. These wider Economic responsibilities cover a range of areas but are frequently summed up as social and environmental – where social means society broadly defined, rather than simply social policy issues. This can be summed up as the triple bottom line approach: i.e. economic, social and environmental (Commission of the European Communities, 2002)

At its best, CSR is defined as the responsibility of a company for the totality of its impact, with a need to embed society’s values into its core operations as well as into its treatment of its social and physical environment. Responsibility is accepted as encompassing a spectrum – from the running of a profitable business to the health and safety of staff and the impact on the societies in which a company operates        (Ethical Performance, 2003). Corporate Social Responsibility is a company’s sense of responsibility towards thecommunity and environment (both ecological and social) in which it operates.Companies express this citizenship through their waste and pollution reductionprocesses, by contributing educational and social programs, and by earningadequate returns on the employed resources.

The concept of CSR has become a business strategy to prevent and mitigate economic crisis, at the same time, preserving social relationships and environmental well-being (Dahlsrud, (2005). Another twist to the concept of CSR is that of EU’s Green paper which defines it as a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis. While McWilliams and Siegel (2001) define it as actions that appear to further some social good, beyond the interests of the firm and that which is required by law. The World Business Council for Sustainable Development as quoted by Swanson (2002:1) saw CSR as „the commitment of business to contribute to sustainable economic development, working with employees, their families, the local community and society at large to improve their quality of life‟.

Jones (1980:59-60) suggested that CSR is the „notion that corporations have an obligation to constituent groups in society other than stockholders and beyond that prescribed by law and union contract‟. Carroll (1983: 604) added that CSR is „composed of four parts: economic, legal, ethical and voluntary or philanthropic‟. Amaeshi & Adi (2007) have argued that CSR needs to be reconstructed in a neutral business language to enhance its permeation and embeddedness in organisations. While not disparaging normative expressions of CSR, the challenge for proponents of CSR from the normative perspective is either to dismantle the current capitalist system, which is rather much more inclined to instrumental rationality than normative rationality, or empty their CSR discourse of its overly moral constructions and reconstruct it in pragmatic business oriented expressions. Unfortunately, the possibility of the first option is remote and that of the latter as challenging as it is necessary. If not, CSR in practice will continue to be treated as something outside the business lingua and within the domain of non-for-profit. It could be noticed that where CSR has been fully embedded in organizational practices, such cases had to a large extent gained support of appropriate business expressions. Some examples of this include the “ecoimagination” programme of GE and Marks and Spencer’s Plan A programme (Amaeshi, 2010)

1.1  Objectives of the Study

This study aims to:

(1). Examine the effect of corporate social responsibility on human capital management performance.

(2). Establish if corporate social responsibility increases sales and customer loyalty.

(3). Identify if corporate social responsibility improves financial performance of the organization and attract more investment opportunities with immense economic value.

(4). Assess If corporate social responsibility improves ability to attract and retain employees.

 (5). Evaluate whether corporate social responsibility enhance brand image and reputation of the organization.

1.2  Research Questions

In view of the aforementioned problems and objectives, the research study will find answers to the following questions:

(1). Does corporate social responsibility have an effect on Human Capital Management performance?

(2). Does the practice of corporate social responsibility increase sales and customer loyalty to an organization?

(3). Does corporate social responsibility improve financial performance of the organization and attract more investment opportunities with immense economic value?

(4). Is there any relationship between Corporate Social Responsibility and; attraction and retention of employees in an organization?

 (5). Does Corporate Social Responsibility enhances brand Image and reputation of the organization?

1.3  Research Hypotheses

1.H0: Corporate social responsibility has no effect on human capital management performance.

 H1: Corporate social responsibility has effect on human capital management performance.

2.H0: There is no relationship between increased sales, customer loyalty and corporate social responsibility.

 H1: There relationship between increased sales, customer loyalty and corporate Social responsibility

3. H0: Corporate social responsibility has no effect on improving financial performance of the organization and does not attract more investment opportunities with immense economic value.

 H1: Corporate social responsibility has an effect on improving financial performance of the organization and does not attract more investment opportunities with immense economic value.

4. H0: There is no relationship between Corporate Social Responsibility and; attraction and retention of employees in an organization.

 H1:There is relationship between Corporate Social Responsibility and; attraction and retention of employees in an organization.

5. H0: Corporate Social Responsibility does not enhance brand Image and reputation of the organization.

   H1: Corporate Social Responsibility enhances brand Image and reputation of the organization.

6. Ho: Corporate Social Responsibility does not improve better relationship with host community.

1.4  Statement of the Problem

Business organizations have woken-up to the need for being more committed towards corporate social responsibility and still majority have taken up some form of philanthropic activities for its stakeholders. Although, 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.

However, there have been a number of studies on CSR in Nigeria (Amaeshi & Amao, 2008), most of which have, mainly, focused on multinational firms; the question therefore arises as to how these multinational firms perceive and practice CSR in Nigeria. Also, if there are structured procedures and policies that ensure the internalization of quality, ethics and excellence practice of Corporate Social responsibility in Nigeria. These are the major issues to this study.

1.5  Significance of the Study

The practice of Corporate Social Responsibility in Nigeria business institutions became of interest to this study due to the significant role it plays in the economy. It helps in stimulating economic growth and achievement of Millennium Development Goal (MDG) and vision 20; 2020 is anchored on the effective practice of Corporate Social Responsibility. This study will educate and enlighten the management and employees of Multinational Corporation, and Corporate organizations to take more advantage of Corporate Social Responsibility and see it as leverage for competitive advantage in their industry. The study will also benefit the individuals in the business environment and enhance seamless societal exchange relationship. Another import of this study is that it will be of immense aid to government policies and reforms.

1.6 Limitations of Study

This research was limited to one organization (TEPNG), rather than the entire industry. One obvious limitation to this study is inadequate time during which the research is required to be conducted. This is attributed to the restriction of the scope to TEPNG only.  Another major challenge is the accessibility of staff members and management of the Company. Though the survey will be made from TEPNG, it is expected that findings will not differ from opinions of staff of other organization since they have related experience, education and training.

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