Fostering Corporate

Social Responsibility

in Sub-Saharan

Africa

by Eugene Nizeyimana

September 2011

1

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: Research@s-scg.com

W: www.s-scg.com

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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 30

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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

management’.1 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

economic, social and environmental value.”2

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: Sustainability

4

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.

5

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:

Figure 2 - The Hierarchy of Corporate Social Responsibilities3

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.66

•Be a good corporate citizen

•Contribute resources to the community

• Improve quality of life

Philanthropic Responsibilitie

s

•Be ethical

•Obligation to do what is right, just and fair

•Avoid harm

Ethical Responsibilities

•Obey the law

•Law in society's codification of right and wrong.

•Play by the rules of the game Legal Responsibilities

•Be profitable

•The foundation upon which all others rest

Economic Responsibilities

6

a way of categorising the motivations underlying firm’s CSR initiatives; in the

example above, the motivation is an economic one:

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.

MANIFESTATIONS OF CSR WITHIN THE PYRAMID OF CORPORATE SOCIAL RESPONSIBILITY

Economic Responsibility Public relations / Marketing

Quality Management (e.g. maintenance of supply chain relations, responding to consumer demand for ‘green’ products)

Legal Responsibility Compliance with competition law

Compliance with anti-corruption law

Ethical Responsibility Integration of civil society pressure groups’ demands (e.g. living wage campaigns,

Fairtrade)

Laying foundations for sustainable growth in future generations (e.g. sustainable forestry)

Signing up to voluntary industry ‘codes of conduct’

Philanthropic Responsibility

Provision of ‘public’ services such as hospitals, education, sports and arts provision in local communities

Discretionary (i.e.. non-strategic) poverty relief campaigns

Figure 3

7

3. INTEGRATING SUB-

SAHARAN AFRICA INTO

THEORIES OF CORPORATE

SOCIAL RESPONSIBILITY

8

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

pyramid that is “very simplistic and static.”4

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

world.56

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: PWC

9

success’ as a reason for CSR.7 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.29

10

Figure 4: CMI

11

3.2 Accounting for variation: Cultural

differences and CSR

Amaeshi et al. also find that “manifestation of CSR does not necessarily need to

follow a linear progression as predicted by Carroll.”8 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

extension of benefits beyond simply those directly involved in the firm.9 Visser

also draws attention to the impact of cultural expectations, stating that across

SSA “philanthropy is an expected norm.”10

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

involved in philanthropic CSR, the multinational firms are more strategic.”11

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.28

12

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).

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.

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

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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

population and to lay a basis for future economic growth.”12

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.222

14

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

Africa.”13

All mining companies have HIV/AIDS policies “with clauses regarding

nondiscrimination, confidentiality and disclosure, benefits, and retirement

treatment.”14

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

Africa.15

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,

Nigeria) has put pressure on the oil industry to extend its CSR initiatives.16

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

http://www.guardian.co.uk/environment/2011/aug/03/shell-liability-oil-spills-

nigeria?CMP=twt_gu

15

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

concentrated mostly in coastal areas and the province of Cabinda.17

17

Meridian Group International Inc., CSR in Africa: Internet Research Study, 2006:

Washington DC, p.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)

16

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

Tanzanian flower workers are non-permanent.18

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.16

17

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.

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 The

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

18

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

countries.19

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

sustainability within current cost structures.”20

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

http://www.tccaf.org/coca-cola-africa-foundation-health.asp 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,

http://siteresources.worldbank.org/INTEXPCOMNET/Resources/CSR_in_tourism_2005.

pdf

19

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:

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 the

Challenges for CSR in

SSA

Diffusing knowledge about CSR potential to

SMEs

Lack of concern for 'legal responsibility'

Gender inequality in CSR provision

Lack of concern for 'socially responsible production practices'

Monitoring and evaluation of CSR activity

Lack of consumer demand for CSR

Minimising the perceived trade-off

betweeen job creation and

improving working conditions/higher

wages

20

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-

21

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

(stockholders) and officers (management).21

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.10

22

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

Ghana.22

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 ASBL

23

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

activities of smaller firms.23

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

help.24

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.38

24

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

structures.”25

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: ICCSR

25

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

private and public organisations.26

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

critical for SMEs.”27

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

http://www.comminit.com/?q=africa/node/121995

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.26

26

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

four ways in which MDIs can foster CSR28

; 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 Development

27

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

sustainable, and not invest in the local community).29

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

return.”30

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.4

28

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,

prevention and treatment programmes.31

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

meant to arrive within 45 days of the 2009 deal.”32

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

http://www.ifc.org/ifcext/aids.nsf/Content/Projects 32

http://www.economist.com/node/21525847

29

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.

• •Promotion and advocacy

•Policy lobbying

•Financial support

•Evaluation and monitoring

•Training in management tools (EFQM Excellence Model, risk management, balance scorecard)

•Business schools

•Media

• Investment

•Reform of corporate governance frameworks

•Capacity-building of judiciaries

• Introducing conditionality for services

• as • Fiscal changes

• Increasing consumer awareness

• Increasing consumer capacity

Strengthening consumer

market pressures

Legal and policy reform

MDIs and NGOs

Management education

Figure 10: Fostering CSR in sub-Saharan Africa

30

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 will

31

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.