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1 A CONCISE REPORT FOCUSING ON KEY CHALLENGES FACED BY GLOBAL ORGANISATIONS IN IMPLEMENTING CORPORATE SOCIAL RESPONSIBILITY (CSR) POLICIES. A report by Mr Dare Adenuga

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Page 1: KEY CHALLENGES FACED BY GLOBAL ORGANISATIONS IN IMPLEMENTING CORPORATE SOCIAL RESPONSIBILITY (CSR) POLICIES. FOCUS ON SHELL NIGERIA

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A CONCISE REPORT FOCUSING ON KEY CHALLENGES FACED BY GLOBAL

ORGANISATIONS IN IMPLEMENTING CORPORATE SOCIAL RESPONSIBILITY

(CSR) POLICIES.

A report by

Mr Dare Adenuga

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TABLE OF CONTENTS

1. INTRODUCTION...................................................................................................................3

2. DEFINING AND UNDERSTANDING CORPORATE SOCIAL RESPONSIBILITY (CSR).....................4

FIGURE 1: THE PYRAMID OF CORPORATE SOCIAL RESPONSIBILITY..............................................................5

3. THE DEVELOPMENT OF CORPORATE SOCIAL RESPONSIBILITY..............................................5

3.1 CHALLENGES OF CORPORATE SOCIAL RESPONSIBILITY.......................................................6

TABLE 1: CHALLENGES AND ISSUES TO SUCCESSFUL CSR STRATEGY IMPLEMENTATION BY ORGANISATIONS.....6

4. COCA – COLA INDIA (CCI) AND CSR......................................................................................7

TABLE 2: COCA – COLA INDIA ENVIRONMENTAL CSR INITIATIVES............................................................7

4.1 ALLEGATIONS AGAINST COCA-COLA PRACTICES IN INDIA..................................................8

TABLE 3: ALLEGATIONS AGAINST COCA – COLA INDIA (CCI)...................................................................8

4.2 DRIVERS OF CSR AND PERTINENT CHALLENGES FACING COCA- COLA INDIA IMPLEMENTION OF CSR POLICIES............................................................................................9

TABLE 4: KEY CHALLENGES FACING COCA – COLA INDIA IMPLEMENTATION OF CSR POLICIES.....................10

5. SHELL IN NIGERIA DELTA REGION.......................................................................................11

FIGURE 2. MAP OF THE NIGER DELTA, NIGERIA.................................................................................12

5.1 SHELL AND CSR IN NIGERIA..............................................................................................12

TABLE 5: SHELL CSR INITIATIVES IN NIGER DELTA...............................................................................13

5.2 CHALLENGES FACING SHELL IMPLEMENTION OF CSR POLICIES IN NIGER DELTA REGION OF NIGERIA.................................................................................................................................13

TABLE 6: KEY CHALLENGES FACING SHELL NIGERIA EXECUTION OF CSR POLICIES.....................................14

6. CSR AS A STRATEGY AND THE BENEFITS.............................................................................16

7. SUMMARY RECOMMENDATION AND CONCLUSION...........................................................16

TABLE 7: FIVE STEP PROCESS TO CSR IMPLEMENTATION......................................................................17

REFERENCES..........................................................................................................................18

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1. INTRODUCTION

Corporate social responsibility (often referred to by the acronym CSR) is emerging as a

noteworthy discipline across multinational organizations, governments, social

entrepreneurs and NGOs (Inderjeet 2012).

This report aims to detect the key challenges faced by organizations in implementing

corporate social responsibility in its business operations. The report will concentrate on

identifying and understanding the key challenges in CSR implementation, establish their

importance and critically evaluate key points with references to academic literature.

Corporate social responsibility (CSR) is important to both private and public

organisations operating in developed and developing countries (Okpara 2009).

This paper will critically analyse, and discuss relevant cases, challenges of CSR in

reference to two organisations: Coca – Cola India and Shell Petroleum Nigeria.

Furthermore, the advantages of CSR will be discussed in order to develop and identify

organisational strategies for achieving and implementing successful CSR policies.

Finally, recommendations are discussed on how organisations can meet these

challenges.

2. DEFINING AND UNDERSTANDING CORPORATE SOCIAL RESPONSIBILITY

(CSR)

Although a significant body of literature exists, the problem of a universal and singular

definition of CSR remains (Abreu and David, 2004: 109). Since it first emerged in the

1950s (De Bakker et al., 2005), many ambiguities have surrounded the concept of CSR

(Lindgreen et al 2009). It may be defined as “a concept whereby organisations integrate

ecological and social concerns in its operations” (Cited in Gill 2007).

CSR represents the continuing commitment by an organization to behave ethically and

contribute to economic development, while improving the quality of life of its employees

and their families, as well as of the local community and society at large (Watts and

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Holme, 1999). The basis of what is considered to be the modern definition of CSR is

embedded in Carroll’s “Pyramid of Corporate Social Responsibility.”

According to Carroll (1979) ‘the social responsibility of a business encompasses the

economic, legal, economic and discretionary (philanthropic) expectations that society

has of organisations at a given point in time’’. The link between organizations and the

environment is clear in his definitions (Gill 2007). In the private sector, CSR is important

in addressing the “triple bottom line” of “people, planet, and profit” (Elkington, 1998)

Berger et al, (2007) argued that CSR goes beyond business ethics to include a wide

range of issues for organizations. Moreover, Friedman (1970) stated ‘the business of

business is business’. The Figure below illustrates Carroll’s Pyramid of Corporate social

responsibility.

Figure 1: The pyramid of corporate social responsibility

Unfortunately, organizations in sub-Saharan Africa, particularly Nigeria have been

unable to fully implement progressive and sustainably CSR policies (Okpara 2009).

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3. THE DEVELOPMENT OF CORPORATE SOCIAL RESPONSIBILITY

Intensified attention to Corporate Social Responsibility has not been entirely intentional.

Several international organisations awoke to it only after being affected by public

responses to issues they had not until that time thought were part of their organization

duties. Nike, for example, faced consumer boycotts after the New York Times and other

media outlets reported abusive labour practices at some of its Indonesian suppliers in

the early 1990s and Shell Oil’s decision to sink the Brent Spar oil rig, in the North Sea

led to Greenpeace protests in 1995 (Porter and Kramer, 2006).

Since Corporate Social Responsibility has gained attention from the pressures between

society and organisations (Friedman, 1970; Handy, 2002; Martin, 2002; Kooskora,

2006), most CSR initiatives have been overridden by the voices of good rather than the

complexity associated with actual implementation of CSR policies (Gill 2007). Global

pharmaceutical organisations are expected for example to respond to the AIDS

epidemic in Africa even though it is far-off from their principal business operations

(Porter and Kramer, 2006).

3.1 CHALLENGES OF CORPORATE SOCIAL RESPONSIBILITY

Several challenges limit the successful integration of CSR policy in organisations

operations. Table 1, identifies some of the challenges which hinder the implementation

of a successful CSR strategy.

Table 1: Challenges and Issues to Successful CSR Strategy Implementation by Organisations.

Lack of total organizational commitment to CSR

Challenges in integrating CSR with core business values and practices

Lack of financial resources to pursue CSR practices

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Economic and commercial pressure

Different views in the role and responsibility of organisations (e.g. – Friedman

vs. Freeman

Strong Stakeholder (interest) conflict

Source: Berad 2011.

When organisations find it difficult to implement Corporate Social Responsibility policies

or successfully link it to core organisational practices, companies such as Shell Nigeria

will be unwilling to fully commit and assign the crucial skills and time to such CSR

undertaking (Berad 2011).

Porter (2006) and Windsor (2006) argue that ‘corporate social responsibility’ involves a

key focus, requiring a strategic approach rather been controlled by outside pressures or

good intents.

Integrating ‘Corporate Social Responsibility’ strategy into an organisations core

operation to create competitive advantages and benefits will be briefly discussed later in

the report.

4. COCA – COLA INDIA (CCI) AND CSR

Coca-Cola was the leading beverage manufactures in India until 1977 (Hills and

Welford 2005) it pulled out from the country rather than reveal its guarded secret

formula and cut its equity stake as required under the Foreign Exchange Regulation Act

(FERA), which the Janta party –– introduced to govern the operations of foreign

organisations in India (Hills and Welford 2005). In 1993 Coca – Cola saw as an

opportunity to make a comeback after the ban was lifted.

Since returning in 1993 Coca-Cola estimates it has invested around US$1 billion in

India, making it one the country’s biggest international investors in India (Hills and

Welford 2005). Table 2, identifies some of its recent CSR environmental initiatives.

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Table 2: Coca – Cola India Environmental CSR Initiatives Environmental due diligence before acquiring land or starting projects.

Environmental impact assessment before commencing operations.

Groundwater and environmental surveys before selecting sites

Compliance with all regulatory environmental requirements

Ban on purchasing refrigeration equipment containing CFCs

Waste water treatment facilities with trained personnel at all company-owned

bottling operations

Energy conservation programmes

Source: Hills and Welford 2005

4.1 ALLEGATIONS AGAINST COCA-COLA PRACTICES IN INDIA

Coca – Cola India has come under intense scrutiny and allegations from Non-

Governmental Organisations, mostly from the India Resource Centre, led by activist

Amit Srivastava India (Hills and Welford 2005). These allegations are divided into four

distinct categories, highlighted in the Table below.

Table 3: Allegations against Coca – Cola India (CCI) Water shortages Communities across India living around Coca-Cola’s bottling

plants are experiencing severe water shortages as a direct

result of Coca-Cola’s extraction of water from the common

groundwater resources. NGOs say several studies have

confirmed the significant depletion of the water table.

Pollution Coca-Cola has been discharging its waste water into the fields

around its plants and sometimes into rivers and Ganges, in

surrounding areas. The result has been that groundwater and

soil has been polluted.

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Distribution of toxic

waste

Coca-Cola has been distributing solid waste to farmers in two

communities, Plachimada and Mehdiganj, as ‘fertilizer’. Tests

conducted by the BBC found cadmium and lead in the waste,

effectively making it toxic waste. Coca-Cola stopped the

practice of distributing its toxic waste only when ordered to do

so by the state government.

Products contain

pesticides

Tests conducted by a variety of agencies, including the

government of India, found Coca-Cola products contained high

levels of pesticides.

Source: Hills and Welford (2005), Case Study - Coca-Cola and Water in India

Coca – Cola has been constantly pressured to permanently close down bottling facilities

in Plachimada, Kala Dera and Mehdiganj (Hills and Welford 2005), due to several

allegations.

4.2 DRIVERS OF CSR AND PERTINENT CHALLENGES FACING COCA- COLA

INDIA IMPLEMENTION OF CSR POLICIES

Organisations tend to assume CSR is a fringe issue for their trade and consumer

gratification is of more importance. They apparently imagine that consumer satisfaction

is only about price and customer service, but fail to realise the changes that are taking

place globally that could damage the organisation (Berad 2011). Some of the drivers

pushing organisations towards CSR identified by Berad (2011) research on

organisations in India include the following:

The shrinking role of government in CSR initiatives

Demands for greater corporate disclosure from key stakeholders including

communities, consumers, suppliers, employees and investors.

Increased consumer interest

Intense investors pressure

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Several other CSR drivers may be added to this list as it is not exhaustive. The Table

below highlights key challenges faced by Coca – Cola India in implementing CSR

policies.

Table 4: Key Challenges facing Coca – Cola India Implementation of CSR Policies Lack of Community Participation in

CSR Activities

Research by a plethora of authors

suggest that there is an inherent lack of

local community interests in involving or

contributing to the CSR activities of Coca

– Cola India. Largely attributable to the

fact that there exists little or no

awareness about CSR within the

grassroots communities such as Kala

Dera and Plachimada. The issue is

further intensified by a lack of

communication between Coca – Cola

India and the grassroots local community.

Non-availability of efficient NGOs Reports suggest that there a lack of

efficient NGOs in local communities that

can evaluate and detect the needs of the

community and work along with

organisations like Coca-Cola India to

ensure successful implementation of CSR

policies.

Lack of Consensus on

Implementing CSR Issues

Evidence from Berad (2011) survey

identifies the inherent lack of consensus

among local NGOs regarding CSR

developments. This factor tends to limit

Coca – Cola India abilities to undertake

impact analysis of their CSR policies on

an ongoing basis.

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Issues of Transparency The integral Lack of transparency is one

of the key challenges faced by Coca –

Cola India. This lack of transparency

unfortunately impacts the process of trust

building between Coca – Cola India and

rural communities negatively.

Source: Berad (2011)

The four key challenges identified in Table 4 faced by Coca – Cola India are not only

limited to them. Other factors such as political pressures constitute other challenges the

organisation face in implementation of its CSR policies.

5. SHELL IN NIGERIA DELTA REGION

Shell’s Oil Nigeria drilling began in 1937 (SPDC, 1998b). In 1938, the organisation was

given an oil exploration license and the organisation first found commercial oil in the

Niger Delta region of Nigeria in 1956. The first shipment of crude oil left Nigeria in 1958

(SPDC, 1998).

Poverty is a prevalent issue in the oil exploration region of Nigeria (Ite 2004). The region

boasts an estimated population of 20 million people in the nine oil producing states.

Figure 2 below, is a map of Nigeria showing the nine states typically considered as part

of the Niger delta region.

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Source: Frynas (2000)

Figure 2. Map of the Niger Delta, Nigeria

Covering nearly 70 000km of land, the Niger Delta region accounts for over 90% of

Nigerian international export incomes and nearly 70% of revenues to the Nigeria

Federation Accounts (Ite 2004).

Currently, 14% of Shell’s global crude oil production is from Nigeria, yet it accounts for

only 7% of their profits (Boele 2001).

5.1 SHELL AND CSR IN NIGERIA

Just before the pressure of the 1995 CSR issues of Shell Nigeria, the organization’s

CSR strategy focused on reputation management and risk. Shell adopted a community

assistance (CA) approach to fulfil its social responsibilities, which focused solely on

corporate philanthropy (Ite 2004).

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According to Uwem Ite (2004) research, Shell focused on 7 key areas highlighted in

Table 5 below.

Table 5: Shell CSR Initiatives in Niger Delta Clean water projects Local community clean water initiatives

such as drilling bore holes and wells

Small finance credit and business

development

Personal cash generating initiatives such

as fishing and local transportation

Agriculture Creation of support centres to help farmers

Education Provision of scholarships

Health Care Building community hospitals and clinics

Voluntary Training Basic skill training in welding or plumbing

Other Infrastructure Roads, rural electrification projects.

Source: Uwem Ite 2004

Shells CSR strategy of community assistance seemed to place great importance on

one-time ‘gifts’ (Ite 2004), as an alternative to creating sustainable CSR policies and

focused solely on what the organisation felt rural communities lacked (Ite 2004).

This top-down CSR implementation approach became the beginning of the end for the

organisation, as local communities started viewing the CSR initiatives as charity, and a

form of rent for Shell’s use (and abuse) of their environment and resources (Ite 2004).

5.2 CHALLENGES FACING SHELL IMPLEMENTION OF CSR POLICIES IN NIGER

DELTA REGION OF NIGERIA

Shell's corporate social responsibilities came under intense pressure in 1995 (Wheeler

et al. 2002). First there was the Brent Spar incident, followed by the execution of

Nigerian military regime of Ogoni writer, environmentalist and human rights activist Ken

Saro-Wiwa and eight of his contemporaries on November 10, 1995 (Lawrence 1999 and

Boele et al. 2000a). It is clear that the effect of these two cases induced a negative

response the firm's CSR system (Wheeler et al. 2002).

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Shell believes its most positive impact to Nigeria economy is through the oil taxes and

royalties paid to the government coffers (Shell International,1995a). Frynas (2005), in

table 6 identified some key challenges facing shell in Niger Delta.

Table 6: Key Challenges facing Shell Nigeria Execution of CSR Policies Country and context-specific issues While Shell may have some exceptional

strategies and skilful staff, the firm also faces

many practical implementation problems as a

result it finds it hard to implement CSR policies.

Country specific challenges ranging from

corruption to theft: for example, funds allocated

for communities are some instances embezzled

by Shell’s liaison officers with the collusion of

corrupt village chiefs. Nigeria also suffers from

inter-ethnic conflict which can impede CSR

implementation.

Failure to involve the beneficiaries of

CSR

Community participation and constant interaction

is considered as the top route for CSR by

organizations as diverse as the World Bank and

Oxfam. In the case of Shell even when a formal

understanding has been signed, the local people

sometimes meet and discuss with the company’s

liaison officer less than once a year.

Lack of human resources In the case that organizations like Shell set out to

act as quasi-development agencies, they tend to

lack the human resources to plan and execute

genuine CSR initiatives. Furthermore,

management staff rarely spend time in the

community. Hence they cannot understand

specific local problems. Even if one CSR

conscious manager is devoted to genuine CSR

implementation, his/her replacement may not be

as dedicated and may halt a CSR program

begun by his/her predecessor.

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Failure to integrate CSR initiatives

into a larger development plan

Due to the nature of corporate objectives of

organizations like Shell and the challenges of

implementing corporate social responsibility

initiatives, it is not unexpected that CSR hardly

forms part of Shell’s bigger regional development

plans. Without such basic plans in place CSR

implementation of policies cannot simply

succeed.

Social attitudes of oil company staff This is related to the lack of effective human

resources, and the negative impact of the social

attitudes of Shell staff. That is the social values

that guide the decisions makers.

Firstly, employees commonly in responsible

within oil companies like shell tend to have a

managerial and/or engineering background, and

are highly skilled at dealing with technical and

managerial challenges, and this thinking is

reflected in their attitudes to CSR. The

restrictions of technical/managerial methods can

be seen in the way in which rural communities

are consulted. A discussion exercise with local

representatives is expected to be qualitative and

inherently discursive, needing in-depth

deliberations and the creation of a good

understanding among the local people.

Handling discussion exercises like this from a

technical/managerial angle leads top level

management to speed up discussions with the

local people and to try to achieve an instant

objective rather than to build relationships with

the community and spend long periods

deliberating the roots of challenges.

Source: Frynas 2005

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Rampant corruption and the federal government’s failure to build basic infrastructure are

some of the other key factors impeding the successful implementation of Shell Nigeria

corporate social responsibility policies (Boele 2001b).

6. CSR AS A STRATEGY AND THE BENEFITS

“The essential test that should guide CSR is not whether a cause is worthy but whether

it presents an opportunity to create shared value—that is, a meaningful benefit for

society that is also valuable to the business” (Porter and Kramer, 2006: 8). As a result,

they show how a company can create a corporate social agenda, composed of

“responsive CSR” and “strategic CSR” (Gill 2007). Strategic CSR aims at accomplishing

large and distinctive social and business benefits from a strategically focused set of

CSR policy implementation (Carlisle and Faulkner, 2004; Crawford and Scarletta, 2005

cited in Gill 2007).

The benefits of CSR include many dimensions of business activities: investor relations,

recruitment, productivity, risk management, market positioning and even research and

development.

7. SUMMARY RECOMMENDATION AND CONCLUSION

Michael Porter and Mark Kramer (2006) proposed that CSR should be interconnected to

core corporate objectives that are leveraged for increased economic and social values

(Cited in Miliman et al. 2008).

The report has identified the key challenges faced by organisations in implementing

CSR policies with specific references to Coca-Cola India and Shell in Niger Delta region

of Nigeria.

Miliman et al. 2008, proposed a five step process for how organisation such as Coca-

Cola and Shell Nigeria can implement a successful Porter’s Strategic Corporate Social

Responsibility Model. Table 7, highlights the five key steps to implementing Strategic.

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Table 7: Five step process to CSR Implementation

Scoping the organization’s environment for ways the firm can translate societal

issues which impact it into some type of a corporate advantage.

Development of an expanded menu of CSR program options to create corporate

opportunities associated with these societal issues.

Analysis of strategic CSR policies based on reference to economic and, societal

impacts as well as other relevant core variables.

Execution of the specific strategic CSR program option which often involves

coordination with other businesses and sectors.

Evaluating both the economic and social effects and discussing results within

the organization and to key stakeholders.

Source: Miliman et al, 2008.

Michael Porter’s (2006) strategic CSR model can be effectively utilised by Coca-Cola

India and Shell Nigeria to achieve societal and economic benefits simultaneously

(Miliman et al, 2008). The fifth stage of the approach allows for each party to build trust

and transparency, while also improving communication between both organisations and

its key stakeholders.

Strategic CSR requires careful planning, ongoing analysis and feedback, and long term

implementation for its success (Miliman et al, 2008). However, as pointed out by

Miliman et al (2008), ‘‘the benefits of this approach -- improved economic impact,

increased sales, and reduction of organizational risks -- are considerable and can

enable an organization to solve difficult problems and create new opportunities for

growth while also having a positive impact on society’’.

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