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CSR Salad: Is Corporate Social Responsibility a fad diet or nutritional staple?

This week in Street Talking on NEXT, I argue that the corporate social responsibility initiatives by companies on the Nigerian Stock Exchange ought to aim further than philanthropic gestures to a broader set of objectives of significance to socially responsible fund managers.

The story I am about to recount is not intended as a joke. Just the other day, I stopped at my roadside vulcanizer’s to peak my tire pressure. Fill done, I brought out my wallet to pay. As I made to pay, Musbau, the head vulcanizer, smiled at me and announced with all the benevolence he could muster, ‘Oga, no worry. Today, na free as part of my own corporate social responsibility.’ Corporate social what? Obviously, my shock at his familiarity with the term failed to register. ‘Yes, I don decide make I dash my customers free air today as part of Christmas appreciation,’ he beamed.

Musbau’s generosity has got me thinking about the motives of CSR among companies on the Nigerian Stock Exchange. Should public companies use the same arbitrary standards of an oil-dripping mechanic, however endearing, in determining their CSR efforts? In fact, is discretionary gifting a core component of CSR?

CSR, like other fuzzy terminologies, has several definitions. I like Geoffrey Heal’s definition best because it places CSR at the vortex of interactions where the company enjoys social subsidies in the process of creating private benefits for shareowners. Heal defines CSR as ‘a program of actions taken to reduce externalized costs and avoid distributional conflicts.’ His categorization of CSR programs as debts paid and obligations due and not the ‘thank you to our customers and community’ they are frequently presented as is spot on.

However, through an insidious twist in meaning, CSR among Nigeria companies has come to be almost exclusively identified with donations and sponsorships. This one-dimensional conception of CSR as patronage reflects the expectations of demand communities around the company. A sunken borehole, refurbished school library, repainted dispensary block, food items for an orphanage, support for a cultural event and a new police patrol vehicle are a few examples of responses to such expectations.

The relentless focus on giving is evident in the public debate over the introduction of a controversial bill by Senator Uche Chukwumerije (PPA – Abia North) to legislate CSR through the creation a CSR Commission and requirement that companies spend 3.5% of their gross profit on CSR initiatives. According to the senator, ‘companies deriving benefits and maximizing profits from communities are not appropriately responding to needs of host communities through strategic philanthropy, environmental protection, and community development.’ Both partisans and critics of the bill have fixated on the level of giving demanded by the bill rather than on the quality and scope of CSR as a wider set of values which do not show up in the P&L statement.

Although companies on the Nigerian Stock Exchange spend several millions and non-trivial management time on such community outreach programs, very few have any coherent publicly accessible policies that guide their engagements. Notable exceptions are Access Bank and Total which, in addition, publish their CSR reports on their websites even though the thrust of their efforts is still overwhelmingly aimed at philanthropy. As commendable as these commitments are, the often random selection process and allocation decisions may one day be challenged as misguided, unproductive or profligate.

CSR is about far much more than widely publicized displays of the value-laden label ‘good corporate citizenship’. KLD Research & Analytics, publisher of the KLD400 Index, the leading benchmark on environmental, social and governance metrics for public companies and global authority on social research for institutional investors, lists eight indices for assessing CSR performance: community relations, corporate governance, diversity, employee relations, environment, human rights, product quality and safety, and controversial business issues. Until now, most local CSR initiatives have focused on community relations, and specifically, donor activities. Examples include Zenith Philanthropy, Ecobank Cares and the Dangote Foundation. By extension, local CSR ratings like those published by SIAO, the consulting, tax, audit and HR firm, have emphasized such donor preoccupations. Reporting on the other seven indices is negligible.

In developed country markets, CSR has moved beyond the prevalent cosmetic do-gooder profiling to a set of stringent investment screening criteria judged according to these seven themes. Ethical funds and socially responsible money managers want to see much more than pictures of staff members clearing blocked drains or a company branded manicured lawn at a city center roundabout.

These investors recognize that socially responsible organizations also tend to be well-run institutions. Over time, the sustained demand for a company’s securities by these funds and investors will raise its valuation, therefore shareholder returns, and more than make up for any prior costs in responsible behavior. The task at hand for companies is to learn these criteria and work towards inclusion in the selection universe of these money managers. This is the business case for CSR. Everything else is dash.

The original article may be read here on the NEXT website.

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