The nuances of corporate social responsibility
AT A time when the economy is facing significant headwinds, companies are now increasingly resorting to revising their budgets in order to cut costs. Often times, it is the advertising and marketing departments that suffer the most.
Opinion is however split as to how much of the budget for corporate social responsibility (CSR) activities has to be reviewed.
Obviously, it is crucial to maintain the delicate balance between the drive to make profits and the expectation from communities within which the companies operate.
However, the word “corporate social responsibility” (CSR) has become so much of a cliché that many people rarely pay attention to it whenever it is mentioned.
But there are inherent expectations that the market has towards corporate citizens.
Just because companies feed off communities for their sustenance and continued existence, they are therefore naturally expected to contribute towards the well being of the same communities.
It is important to note, however, that CSR is often erroneously interpreted to mean donations to charity, music and sport.
Well, it involves much more than donations.
In fact, when CSR is considered, donations occupy the lower rungs of the ladder.
CSR refers to the ability of organisations to consider and manage their impact on a variety of stakeholders.
Stakeholders might refer to shareholders, employees, customers, suppliers, statutory authorities, banks and the environment.
American scholar Professor Archie B Carroll, who in 2012 was awarded the Lifetime Achievement Award in Corporate Social Responsibility, opines that CSR encompasses the economic, legal, ethical and philanthropic expectations placed on organisations by society at a given point in time.
Economic expectations are often considered a first priority, followed by legal then ethical and, lastly, philanthropic expectations.
Carroll believes that it is absolutely important for companies to ensure that shareholders receive their dividends, employees working in good conditions receive their salaries, customers receive value for their money, and suppliers are paid on time.
In essence, CSR is not about posturing.
Some companies simply donate in order to court publicity. But as is often said, charity begins at home.
It is advisable that before companies go into the community to donate, they sort out whatever grievance that their workers might have.
It will be futile for a firm to make donations while its employees are going for months on end without being paid.
In as much as this might be construed as a philanthropic, the economic principles of the CSR will not be fulfilled.
According to Mr Milton Friedman — an American economist who received the 1976 Nobel Memorial Prize in Economic Sciences for his research on consumption analysis, monetary history and theory and the complexity of stabilisation policy — a corporation has no responsibility outside making profit for shareholders.
Shareholders are likely to have misgivings in instances where the company frequently doles out money in the name of charity while they are not getting a return on investment.
There is a feeling that shareholders should always be a priority.
Experts also believe that the legal responsibilities that are attendant to the CSR function are meant to persuade companies to follow the laws of the jurisdiction in which they are based as well as internal moral views or objectives that the organisation has set.
Non-compliance to the law also result in the breach of social responsibilities that are expected from organisations.
In addition, statutory obligations have to be considered before the company thinks of making other investments elsewhere.
Obligations to bodies such as the Zimbabwe Revenue Authority should always be considered to be sacrosanct.
Rules and regulations are the essence of any society and must therefore be respected.
Also, in as far as CSR is concerned, ethical responsibilities relate to what is expected by society from companies compared with what those organisations have to do from an economic or legal viewpoint.
It relates to doing what is seen to be right compared with doing what is simply legal.
But philanthropic responsibilities, which most people are familiar with, concern actions desired of organisations rather than those required by organisations.
These activities also refer to discretionary behaviour to improve the lives of others.
This is where charitable donations and recreational facilities are recognised.
Sponsoring arts and sports events is also part of philanthropic activities.
This is usually at the bottom of the ladder when it comes to corporate social responsibility.
So it is paramount that when a company is developing a CSR strategy, it should always ensure that it gets its priorities right.
Shareholders and employees should always be high up the chain.
Taurai Changwa is a member of the Institute of Chartered Accountants of Zimbabwe and an estate administrator. He has vast experience on tax, accounting, audit and corporate governance issues. He is the managing director of SAFIC Consultants. He writes in his personal capacity and can be contacted at tauraichangwa1@gmail.com or whatsapp on 0772374784.