Need for Corporate Social Responsibility Practices

Dr. Md. Moniruzzaman

10th August, 2019 11:41:58 printer

Need for Corporate Social Responsibility Practices

Corporate social responsibility (CSR) has a long history, which evolved with the development of business and has been meeting the emerging needs of the society. Howard R. Bowen is one of the pioneers who attempted to conceptualise and define CSR. Bowens’ initial definition of CSR was, “Obligation of business to pursue those policies, to make those decisions, or to follow those lines of action which are desirable in terms of the objectives and values of our society”. Scholars and Academics (Heald 1957, Davis 1960, Walton 1967, Johnson 1971, Eilbert and Parket 1973, Sethi 1975, Jone 1980, Freeman 1984, Hopkins 1990, Moir 2001, European Commission 2002, Bakkar 2005, Jamali and Miurshak 2007) during the last few decades have conducted extensive study on the subject and tried to identify the dimensions of CSR. Ten major dimensions identified by these scholars are obligation to society, stakeholders’ involvement, improving the quality of life, economic development, ethical business practice, law abiding, voluntariness, and human rights, protection of environment and transparency and accountability (Rahman 2011). All these dimensions may not be equally important always and everywhere. It is therefore essential to understand the specific dimensions that need to be addressed in a particular society in a particular time dimension. For example, natural disasters are a regular phenomenon in Bangladesh and millions of people are severely affected every year. It is also not possible and financially feasible for all business entities to address all the dimensions simultaneously. We need to articulate the specific dimensions that are most pertinent for Bangladesh.

CSR concepts and practices in Bangladesh have a long history of philanthropic activities from time immemorial. Family owned first generation Small and Medium Enterprises (SMEs) made donations to charitable organisations, poor people and religious institutions without having any definite policy regarding the expenses or any concrete motive regarding financial gains (CSR Bangladesh 2009). CSR practices in Bangladesh in its modern global concept are still in its formative stage. Lack of enforcement of industrial laws and regulations, weak unions, absence of consumer rights groups and high level of corruption within the regulatory bodies make CSR violations rampant in Bangladesh (website: http://www.csrbangladesh.org). A detail study is necessary to identify the impediments of implementing proper CSR activities in Bangladesh and determine how these impediments can be successfully negotiated.

There has been a significant increase in interest in Corporate Social Responsibility in recent years (Young and Thyil, 2009; Park and Lee, 2009; Gulyas, 2009; McGehee et al, 2009) and it is now regarded to be at its most prevalent (Renneboog et al, 2008) representing an important topic for research (Burton and Goldsby, 2009). Recent corporate scandals have attracted public attention and highlighted once more the importance of CSR (Angelidis et al, 2008; Evans and Davis, 2008). Not only has this topic received academic attention (Burton and Goldsby, 2008) but is also becoming a mainstream issue for many organisations (Renneboog et al, 2008; Nijof and Brujin, 2008).

Jorgensen and Knudsen, 2005 described the relationship between CSR and financial performance and represents the most questioned area of CSR (Angelidis et al, 2008). While a lot of research points in favour of a mild positive relationship (Orlizky et al, 2003), this connection has not been fully established (Neville et al, 2005; Prado-Lorenzo et al, 2008; Park and Lee, 2009) and the mechanisms through which financial performance is enhanced by CSR is not well understood (Jawahar and McLoughlin, 2001; Doh et al, 2009). This research uses a more detailed method of analysis than that which has been previously used to assess the relationship between CSR and financial performance.

Recent definitions of CSR focus on a firms’ responsibility toward its various stakeholders. According to Perrini (2006: 305) one frequent question of CSR is ‘to what theory should general knowledge be developed’, the answer provided is that research on CSR should be based on stakeholder theory. In July 2001, the European Union presented a Green Paper ‘Promoting a European Framework for Corporate Social Responsibility’; in it CSR was defined 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’. This represents, according to Amaeshi and Adi(2005), one of the most common definitions of CSR and is consistent with the most recent academic literature (Pivato et al, 2008).

A central element of CSR initiatives is the readiness to respond to legitimate expectations of stakeholders (Nijhof and Bruijn, 2008; Turker, 2009a). Carroll (1991) argued there is a natural fit between the idea of CSR and organisation’s stakeholders. Arguing that the term ‘social’ in CSR has been seen by some as vague and lacking in specificity as to whom the corporation is responsible, Carroll (1991) suggests that the stakeholder concept personalises social responsibilities to specific groups. Thus, the stakeholder theory ‘put names and faces on the societal members or groups who are most important to business and to whom it must be responsive’ (Carroll, 1999:43), which according to Wood (1991) brings the abstract idea of ‘society’ closer to home. Spence et al (2001) similarly proposed that the concept of stakeholder cooperation is a more realistic alternative. According to Valor (2005) CSR and stakeholder theory complement and reinforce each other.

Representing a more practical alternative to CSR, stakeholder management is central to putting any conception of CSR into practice (Jones, 2005). The idea that stakeholder theory is imbedded in CSR has become widely accepted (Vaaland et al, 2008; Hopkins, 2003; Turker, 2009b). From an Irish perspective, Whooley (2004: 74) argues ‘in practical terms, CSR translates into the integration of stakeholders’ social, environmental and other concerns into a company’s business operations’. Despite the absence of a universally accepted definition of CSR, there is no doubt that it concerns the way a company governs the relationships with its various stakeholders.

In addition, many recent definitions draw attention to the financial benefits obtained through CSR. For example, Vaaland et al (2008: 931) define CSR as ‘management of stakeholder concern for responsible and irresponsible acts related to environmental, ethical and social phenomena in a way that creates corporate benefit’. While Mittal et al (2008: 1437) define the concept as ‘a business approach that views respect for ethics, people, communities and the environment as an integral strategy that improves the competitive position of a firm’. The idea that CSR can have bottom line benefits draws attention to the motivation for CSR. Are managers guided by a moral conscience to undertake CSR or is the ultimate aim enhanced profitability? (Cooper et al, 2001).

Ackerman and Bauer (1976) were among the first to articulate a preference for the term corporate social responsiveness as opposed to responsibility. Frederick (1994) defined Corporate Social Responsiveness as the capacity of a corporation to respond to social pressures and gave it the popular shorthand name, CSR2. Frederick (1994: 150) described this new term as a conceptual transition from the ‘philosophical – ethical concept of corporate social responsibility…to the action oriented managerial concept of corporate social responsiveness’, in other words, from moral contemplation to responsive action (Litz, 1996). It represents ‘an effort to treat as a management issue one which had been predominantly treated as a social and/or ethical issue’ (Ackerman and Bauer, 1976: 7). It is argued that corporate social responsiveness provides an action counterpoint to the principled reflection of corporate social responsibility (Vallentin, 2009). Sethi (1979) argued that a responsive company was by definition also responsible and responsiveness was an appropriate concept to replace the ill-defined responsibility. Carroll (1979) observed, however, that responsiveness is conceptually inadequate to replace responsibility, a concept that permits action without reflection or responsibility is not a refinement over a concept that merely encourages responsibility (Wood, 1991). As Jones (1980) points out, it is conceivable that a corporation may be responsive and irresponsible. Conceptually, CSR is part of the broader framework of CSP (Windsor, 2001). CSP represents a shift in emphasis from obligations and motivations to corporate action and implementation of CSR.    

Alam S.M.S, et. al. (2010) in a paper entitled “Corporate Social Responsibility of Multi National Corporations in Bangladesh: A Case study on Grameen phone” pointed out that CSR is still an evolving concept that enables corporate executives to create and apply self determined policies to best meet the needs and demands of its stakeholders. Azim et al. (2011) in a study named “Corporate Social Disclosure in Bangladesh: A Study of the Financial Sector”, Corporate social responsibility is not the only ethical dilemma that financial institutions face in an atmosphere of corrupt corporate practice.

Bangladesh has a long history of philanthropic activities from time immemorial. These philanthropic activities included donations to different charitable organisations, poor people and religious institutions (Miyan 2006). The CSR World Wide portal concludes that, in Bangladesh Civil society, businesspeople and politicians view CSR in terms of philanthropy, particularly in the schools and the healthcare sector. This focus is also rooted in the country’s Islamic tradition of calling upon those with more resources to help the disadvantaged. Accordingly, companies are expected, most of all, to engage in charitable works, for example by providing donations or in-company training programs (The CSR World Wide portal, 2012).Till now, most of the businesses in Bangladesh are family owned and first generation businesses. They are involved in community development work in the form of charity without having any definite policy regarding the expenses or any concrete motive regarding financial gains in many instances. Moreover, most of the SMEs fall under the informal sector having low management structure and resources to address the social and environmental issues. The discussions on CSR practices in Bangladesh in its modern global terms, is relatively new. In general, it is true that in Bangladesh, the status of labour rights practices, environmental management and transparency in corporate governance is not satisfactory, largely due to poor enforcement of existing laws and inadequate pressure from civil society and interest groups like Consumer Forums. Globally, as CSR practices are gradually being integrated into international business practices and hence is becoming one of the determining factors for market accesses, it is becoming equally instrumental for local acceptability. A focus on CSR in Bangladesh would be useful, not only for improving corporate governance, labour rights, work place safety, fair treatment of workers, community development and environment management, but also for industrialisation and ensuring global market access. By now, many CSR dimensions are practised in Bangladesh (Miyan 2006, Mondol, 2009). Though CSR is a relatively new concept in Bangladeshi corporate culture, awareness of corporate social reporting has rapidly increased. All companies need to consider their CSR for two basic reasons. Firstly, there is intensifying pressure from stakeholders to do so (Belal, 2001 cited Azim 2011). Any company that does not develop and promote its CSR policy to all stakeholders will face increasing threats to its reputation. Secondly, because it makes sound business sense, CSR enhances the reputation of an organization, brings in new business and improves stakeholder return (Kabir, 2003 cited Azim 2011). The government of Bangladesh has not imposed or proposed requirements for disclosure of social and environmental performance. The Bangladesh Companies Act 1994 sets the general framework for corporate financial reporting. However, no provisions regarding CSR exist in the Companies Act 1994 (GoB, 1994). Until recently, there has not been a separate Bangladesh Accounting Standard (BAS) regarding social and environmental reporting (IASCF, 2003). In Bangladesh, CSR is still voluntary with the exception of disclosure of expenditures on energy usage required under the Companies Act of 1994 and the Securities and Exchange Rules of 1987, which require the total amount spent on energy to be shown as a separate expenditure in the notes to the financial statements (Belal, 2001). Since corporate social reporting disclosure is voluntary in Bangladesh.

However, some progressive companies disclosed some information on community, environmental and consumer related activities. Imam concludes that the sample listed companies tend to represent a relatively minor quantity of disclosure when compared with corporate financial disclosures. In the absence of independent verification, the credibility of information disclosed is questionable. Furthermore Hossain et al. (2006) investigated CSR by using the annual reports of 107 non-finance companies, for the financial year 2002-2003, showing that: an average 8.33 per cent of Bangladeshi companies disclose social and environmental information in their corporate annual report. They concluded that the disclosure of social and environmental information made by the listed companies in their corporate annual reports in Bangladesh is “very disappointing” (Hossain et al., 2006 cited Azim 2011). In recent years there is considerable pressure from various agencies for companies to act responsibly and be accountable for the impacts they have on social, political and ecological environments. Companies are also expected to participate in solving social problems, such as poverty and infrastructure (Kok, Wiele, McKenna & Brown, 2001 cited Azim Mohammed 2011). Miyan was hopeful that a number of corporations are now following an increased commitment to CSR beyond just profit making and compliance with regulation. It also found that initiatives in CSR activities in Bangladesh are pioneered by Multinational Companies. Since Bangladesh is now exposed to global standards, it can be anticipated that the CSR activities in Bangladesh will continue to be extended. Firms are now trying to uphold their corporate image of socially responsible firms and consequently influence consumer buying decisions in favour of the goods and services marketed by them (Miyan M Alimullah September 2006). Though it is explained that CSR is a set of practices that forms a part of good management or business practices, much of it is about transparency and disclosure. Many organisations find that in actuality they already do much of what is considered “CSR“ but often do not have formalised systems to report on those activities. Additionally CSR should not be viewed as an add-on activity as it is a concept of good practice that cuts across an organisation (Belal 2008.). Zakir et al. disclosed that Bangladeshi firms should focus on CSR not only for improving corporate governance, labour rights, fair treatment of workers, community development and environment management, but also for industrialisation and ensuring global market access. Researchers hope that the government of Bangladesh is going to undertake an initiative to promote CSR practices. The objective would be to encourage the businesses to carry out the good citizen-like activities with the aim to reversing the perceived trend of businesses to have little commitment to society (Ataur, 2008). None of this research looked at the labour rights like workplace health and safety environment, employment standards, including general holidays, annual vacations, working hours, unjust dismissals, minimum wage, layoff procedures etc - issues that should be complied with by the company as well as CSR standards.

The writer is a Joint Secretary to the Govt. of Bangladesh.

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