Chapter 3: Corporate Citizenship and Corporate Social Responsibility 

Introduction: 

• Businesses as well as citizens have an important role to fulfil, such as following the King ll report
• Kind report: Booklet on corporate government with guidelines for the governance structures and operations of companies in South Africa.
• Everybody that lives in the country has a role to play in maximising the potential of the resources. (Human, natural or any other resources)

Citizens Roles and Responsibility: 

• Individuals and businesses have a duty to contribute to building the economy/ helping the people within their communities – creating the best standard of living possible to them –

Individual Citizens: 

• Individuals who are a part of the EAP (Economically Active Population) are contributing towards creating products or services which in turn create jobs/ build the economy.
• Many jobs are aimed specifically at helping the community – Teaching, social workers, medical staff –
• Individuals can also make a difference by volunteering, helping out in churches and out-reach projects.

Corporate Citizenship: Page 36

• Large businesses have their one CSI (Corporate Social Investment).
• CSI within businesses have their own projects that they work on as it counts towards their Integrated Reporting.
• For public companies on the JSE (Johannesburg Stock Exchange) enhances their SRI (Social Responsibility Index) points.
• Smaller businesses with fewer resources prefer to assist NGO’s (Non-Government Organisations) and CBO’s (Community Based Organisations). Smaller businesses can also have smaller projects that they are working on inside the business which is their projects.
• Good Corporate citizenship: Responsible actions being taken by businesses regarding economic involvement through day-to-day activities, fulfilling obligations.
• Giving back to society.
• Corporate citizenship is often seen exclusively as the business acting in a corporate socially responsible manner. This includes making donations to charities and encouraging employee’s involvement in poor communities.
• Efforts by businesses often focused on promoting self-interest – though public relations –
• Businesses in third world countries/ emerging markets find themselves in a difficult position due to society’s expectations. These expectations are not traditionally the responsibility of the commercial sector, but rather the government. 

Constitutional Rights:

• If you consider that citizens of a country have social, civil and political rights – Should be guaranteed by government – It becomes clear that government has failed and continues to fail in society when these rights are not institutionalised in everyday life.
• Social rights such as the right to have access to proper infrastructure/ other public services. It is clear that government cannot provide for the people of the country. Corporate citizenship argues that large corporations are required to take on some of the responsibility – helping provide these basic needs –
• Civil rights includes that the state ensures the right to freedom of movement/ protection
• Political rights include the right to vote, to lobby and participate in political actions.
• Large corporations cannot step in to provide these rights, however they can become an important role in ensuring that the government is fulfilling these rights. – Respecting the rights of citizens –
• Responsible citizenship requires corporations to act in a manner of respect towards the people of the country as well as they countries resources – Limiting pollution/ being responsible with new technology –
• Corporations should be accountable to society for their actions – just like governments are accountable for citizens –
• Counter arguments however state that the only responsibility of a business is to provide a good or service that satisfy a want or a need.
• It is true that successful profit-driven organisations contribute to the standard of living of their employees or of those who invested in their business, however it is also true that these large organisations exploit nature/ the societies – operate off of financial gain –

Corporate Social Responsibility: 

• CSR
• Get businesses to move from a ‘cheque-book approach’ of giving skills, time and effort to rather make a difference in the lives of the people of the country – More sustainable –
• CSR is the moral obligation to help
• CSI (Corporate Social Investment) is capital, resources and labour

Opportunities to address Social Responsibility issues: 

Businesses interact with the community. They have to be vigilant about the impact they are having.

Challenges affecting the need for CSI: 

• Inflation; economic crimes
• Unethical behaviour
• Cultural pollution – Dilution/ mixture of cultures –
• Illegal dumping; toxic or other waste materials
• Piracy or plagiarism; green-washing – Pretending to be green for publicity –
• Inefficient or destructive use of natural resources/ the environment
• Perpetuating illiteracy/ lack of education – not providing training or ABET skills – ; breaking laws – labour laws, tax regulations –
• Poverty
• Poor health care services
• Lack of/ poor infrastructure
• Political/ social issues that are not being addressed properly
• Inequity/ human rights issues

Positive impacts: 

• Job creation
• Providing goods and services
• Education/ training
• Nurturing social interaction in the workplace
• Promoting inclusion/ acceptance of diversity

• Large South African organisations especially JSE listed companies adhering to the new FTSE/JSE
• FTSE ( Financial times stock exchange)
• JSE ( Johannesburg Stock Exchange
• Responsible Investment Index Series – replaces the SRI. Reflects the JSE’s increased commitment in advancing corporate sustainability
• Multinationals are preaching the importance of Corporate Social Responsibility

Interest Groups/ the Demands Placed on Business by Each Interest Group: 

• Different interest groups/ the moral or financial demands placed on the organisations by each – often leads to conflict –
• Serving the interests of one party may be detrimental to that of another stakeholder
• Organisation’s primary social responsibility is towards the business itself – owners, employees, suppliers, consumers, competitors –
• Broader social responsibility – activities aimed at the country as a whole/ local community –

Primary Social Responsibility: 

• Owners: (Shareholders) – Contributed capital towards the business venture. They have a direct interest in the financial performance, because it will impact the value of their investments
• Employees: (Of the business) – All employees have an interest in the financial performance, because it has an impact on their remuneration
• Suppliers: (Suppliers of raw materials, capital goods, financial resources) – Expect prompt payment for the business. May conflict with the business’s interest of delaying payment to create better cash flow/ financial performance. If the business delays payment to the extent that suppliers cannot survive financially.
• Consumers: Have high expectations of a good quality product at a reasonable price. Being socially responsible towards consumers is bigger than this. The organisation should package products that will meet the needs of the consumer – convenience/ appearance – They should consider factors such as environmental impact when packaging is disposed of.
• Competitors: (Including businesses selling other brands/ substitute products) – CSR will include not selling counterfeit goods. Businesses spend large amounts on developing successful products/ then establishing their brands as a quality product. When a brand becomes successful it becomes a target of counterfeiting activities.
• Not only the issue of protecting brands that must be referred to when discussing Corporate Social Responsibility – intellectual property rights –
•  World Trade Organisations (WTO) defines intellectual property – Rights given to individuals over the creations of their minds –
• Rights may be attached to a work of art, literary works, industrial or commercial marks (trade marks)
• Business therefore has the responsibility of acting in a manner that respects any of these belonging to a competitor

Broader Social Responsibility: 

• Government: Has an interest in business operating.
• The government collects taxes from businesses and employees in the formal sector 
• The taxes are used to create infrastructure/ environment that stimulates more business operations
• In the interest of the government to create a tax system, can increase National Income Levels to their maximum without overburdening the business sector
• Broader Government objectives of transformation prompted Government to address the issue of Social Responsibility through various pieces of legislation – South African Constitution, Bill of Rights, Labour Relations Act, Skills Development Act –
• Broader Community: Expects business to familiarise itself and contribute to issues within the community. Issues such as:
• Ecological control and nature conservation without harming local communities.
• Sponsorship for sport activities
• Creation of infrastructure. Not only the responsibility of Government, private sector needed to contribute as well.
• South Africa has many examples of PPPs (Private-Public Partnerships)
• Broad Based Black Economic Empowerment (BBBEE)
• Upliftment of the poor – Improving literacy rates, Training and development (ABET – Adult Basic Education and training – )
• Health and safety
• AIDS prevention/ treatment
• Anti-drug abuse campaigns
• Air, water, noise pollution
• Government has policies. Legislations in place to deal with these issues, but lacks man power to enforce them. This results in it becoming a moral responsibility of the corporate sector to act in a socially responsible manner.
• Parallel imported goods – or grey goods, as they are often referred to – are genuine products imported by resellers from other countries where the brands are sold. They are bought at a cheaper rate there and resold in South Africa.

Arguments in favour if CSR: 

• If the business does not get involved; detrimental effect. In the businesses best interest to improve society by taking a proactive stance.
• Expertise and resource to deal with socio-economic problems are already within the business. -/ Moral duty of the business to help
• Less likely that Government will enforce the issue through legislation.
• Promote image of the business and gain good will
• Making a difference through job creation, improving general standard of living.

Arguments against CSR: 

• Many people believe that proving a good or a service is already being socially responsible
• Businesses should only be accountable for their shareholders because they are the ones who invested money into the company.
• Spending time on CSR detracts from their actual responsibility; employees are remunerated according to how well the business does
• Spending money on CSR will take money away from the company, the company then has to make this money up somehow. This could then have a negative impact on the economy
• Businesses getting involved in CSR may create expectations within the community. This could damage their image if they do not fulfil these expectations.
• Possibly a lot of criticism due to their lack of sustainability within CSR. The JSI checks different business involvement within CSR to see how sustainable their program is.

Principles to take into account in designing a CSR program: 

• They look at specific impact that they are having on the community/ environment.
• They look to see how they can be part of the solution instead of part of the problem.
• Important to first address internal issues before external projects

General Solutions: 

• Manufacturing businesses look at how they use raw materials/ the impact their production has on the environment
• Businesses must assess if they are supporting their employees adequately – Good remuneration, employment policies, cultural sensitivity, advanced sensitivity, working condition, training –
• All businesses analyse their products/ services. Inferior product can harm customers. Illegal activities are classified as such for a reason – Pornography, drugs –
• How/ where businesses acquire their input materials may be relevant – Illegally imported products/ buying on the black market (saving costs), using unregistered labourers (avoid paying minimum wages), products from sweatshops that violate the human rights of the employees.

Specific Solutions: 

Management should be aware of the following issues. They should also have specific policies in place.

• Environmental issues: Global warming, carbon footprint and other environmental threats need to be part of every business agenda. Small contributions add up – Recycling, green buildings, reducing packaging
• Labour issues: Businesses work within the confines of the Labour Law (LRA – Labour Relations Act. BCEA – Basic conditions of employment act). These acts ensure that the business is always up to date with new amendments. Management has to ensure that they communicate with their trade union representatives to protect the right of their workers
• Ethical issues: Profit becomes the driving force in competitive global market, common for business ethics to be forgotten. Businesses take short cuts on quality, working condition, benefits, environmental consideration – Help make extra money. Consumer watchdogs/ environmental organisations play an important role in ensuring businesses act ethically, in the best interest of the wider community.
• Piracy: Illegal copying/ selling of books, information, music, movies or any other intellectual property/products. Businesses/ people register copyright on ideas, products, productions so that they can get the benefit of selling them. The loss of sales, pirated copies are often of inferior quality – affects the original brand/image – Patents - (registered recipe/ procedure such as a new medication) Trade Marks – (Union symbol/image to identify a specific business/ product) similarly registered/ protected by law.
• Plagiarism: Illegal use of information does not mean the taking of registered materials/ Copying policies, documentation, advertising campaign of a competitor are examples that constitutes plagiarism in the business word/ results in bad publicity/ possible court cases.

Designing external CSR programs: 

• Designing a CSR programme, important to first look after the Primary Stakeholders (page 41) ensure that the business remains sustainable.
• Size and profitably of the business must also be kept in mind before pledging too many resources to outside projects.
• Type of business is also important: Accountants/lawyers have intellectual property that is far more useful to a community than financial donations.
• Needs within the community – not only helpful to make the project more successful. It is respectful to involve the community in decisions being made to assist them

Sustainability: 

• Donating food/ organising a spring day picnic for the underprivileged are noble causes, short-terms aims.
• In order to make a difference in the long term, important to set up structures to enable the community to start becoming self-sufficient
• Teaching skills that will enable them to get jobs means that they will be able to sustain themselves, long term
• Sustainable projects are therefore those where a process is set up to ensure that the project continues.
• Setting up a vegetable garden/ teaching the community how to maintain it, sustainable.
• Teaching marketable skills, creating contacts for entrepreneurs – Either with suppliers/markets – enables them to continue benefiting after the CSI intervention.

Individual Social Responsible: 

• The community/environment have so many needs that is important for all individuals to play their part

UN Sustainable Development Goals:

• UN (United Nations)

Signatory countries of the United Nations has agreed on the following 17 goals:

• No poverty
• Zero hunger
• Good health and well-wellbeing
• Quality Education
• Gender Equality
• Clear water and Sanitiser
• Affordable and clean energy
• Decent work and Economic Growth
• Industrial innovation and infrastructure
• Reduced inequalities
• Sustainable cities and communities
• Responsible consumption and production
• Climate action
• Life below water
• Life on land 
• Peace, Justice and strong institutions
• Partnerships for the gaols