Description
CHAPTER ONE
1.0 INTRODUCTION
Corporate Social Responsibility (CSR hereafter) as a concept has attracted worldwide attention and acquired a new significance in the global economy (Akinyomi, 2013). Keen interest in CSR in recent years has stemmed from the introduction of globalization and international trade, which have reflected in increased business complexity and new demands for enhanced transparency and corporate citizenship (Jamali & Mirshak, 2007). Moreover, while governments have traditionally assumed sole responsibility for the improvement of the living conditions of the population, society?s needs have exceeded the capabilities of governments to fulfil. In this context, the spotlight is increasingly turning to focus on the role of business in society and progressive companies are seeking to differentiate themselves through engagement in CSR.
Corporate social responsibility (CSR) is an area which has gained much attention in the last 10-15 years. There is no generally accepted definition of CSR, however, attempts have been made to define the area. The EU-commission presented a definition in 2001, which was changed in 2011; Corporate social responsibility is the responsibility of enterprises for the impacts of society (EU commission, 2011). The term CSR encompasses a variety of issues revolving around companies? interactions with society. The sorts of issues covered include ethics, governance, social activities such as philanthropy and community involvement, product safety, equal opportunities, human rights and environmental activities. When considering CSR from the perspective of the accounting profession, such consideration is necessarily and inextricably linked with social (and environmental) reporting or accounting. Social accounting was itself a product, in part, of the early social responsibility movement of the 1960s (see Drucker, 1965), but also appeared around the same time the environmental movement emerged (Gray & Guthrie, 2007). Interestingly, while social issues were the initial research focus of accounting academics, these were to some extent overwhelmed by the emphasis on environmental issues that came later.
Corporate social responsibility is goal oriented and based on norms of the society and the company. It is a concept describing a company?s obligations to be accountable to all of its stakeholders in all its operations and activities on a voluntary basis. The literature is replete with other definitions of CSR. The concept in the opinion of Windsor (2001) is open to conflicting interpretations. Some authors have equated corporate social responsibility to morality (Phillips & Margolis 1999). Some described it as corporate citizenship (Carroll, 2004). Rugman and Verbeke (1998) included environmental responsibility. Nicolau (2008) defines socially responsible companies as those which in profit-making operational decisions, considers the full scope of environmental impact and balances the needs of stakeholders.
Despite the need for business to be morally conducted, one of the primary concerns in CSR discussions is whether organizations pursue it for economic reasons or simply because doing so has intrinsic merit. Some studies have imputed philanthropy reasons as stated in Carroll, 2004 study. However, there have been few empirical tests in support of the intrinsic merit motive, which makes CSR practice susceptible to the popular accusation of being a gimmick for profitable public relations and marketing strategies. For Rapti & Medda (2012), the main force that drives companies to adopt corporate social responsibility is CSR?s financial benefits. Recent studies indicate that a large majority of Chief Executive Officers believe that CSR can improve a firm?s competitiveness which is critical to its future success (Accenture and UNGC, 2010). Carroll?s (1999) admonition is that the corporate entity firm should strive to make a profit, obey the law, be ethical, and be a good corporate citizen. The common underlying understanding of the CSR concept is the voluntary engagement of companies in integrating their business operations with the social and environmental concerns of their stakeholders.
1.2 STATEMENT OF THE PROBLEM
In recent years, customers, employees, suppliers, community groups, governments, and some shareholders have encouraged firms to undertake additional investments in corporate social responsibility (CSR). Some firms have responded to these concerns by devoting more resources to CSR. Other companies’ managers have resisted, arguing that additional investment in CSR is in consistent with their efforts to maximize profits. The resulting controversy has induced researchers to examine the relationship between CSR and financial performance, in an effort to assess the validity of concerns regarding a trade-off between investment in CSR and profitability. Existing studies of the relationship between CSR and financial performance suffer from several important theoretical and empirical limitations. One major concern is that these studies sometimes use models that are mis-specified in the sense that they omit variables that have been shown to be important determinants of profitability.
Promoters of CSR have argue that organizations should integrate economic, social and environmental concerns into their business strategies, their management tools and their activities, going beyond compliance and investing more on human, social and environmental capital (Belal and Momin, 2009; Perrini, 2006 ). However, previous studies have observed that although the concept of CSR has been recognized as an important ingredient for business success, the relationship between CSR and companies? financial performance has been inconclusive, controversial and open to further research (Lee and Park, 2010; Wijesinghe and Senaratne, 2011). The evaluation of the impact of CSR on firms? financial performance is considered important in view of limited research on this topical issue in Nigeria. This study is therefore, aimed at filling this gap.
1.1 OBJECTIVES OF THE STUDY
The objectives which this study tends to achieve are as stated below:
I. To find out whether or not Corporate Social Responsibility performance leads to an increase in profit.
II. To evaluate the impact of Corporate social responsibility on the financial performance of an organization
1.2 Research Questions
This study tends to investigate and provide answers to the research questions listed below:
I. Does Social Responsibility performance leads to an increase in profit?
II. Does Corporate social responsibility increase financial performance of an organization
1.3 Research Hypotheses
The hypotheses were formulated in the null form:
Hypothesis 1
H01: Improved Corporate Social Responsibility performance does not lead to an increase in profit.
Hypothesis 2
H02: Corporate social responsibility has no impact on the financial performance of an organization.
1.4 Significance of the Study
The significance of the study include the following
1) The study will create awareness on the corporate social responsibility
2) The awareness on corporate social responsibility will further improve a firm?s financial performance.
3) Confidence of stakeholders of corporate social responsibility information will be enhanced.
4) This study will help to improve the knowledge and managerial practices.
1.5 Scope of the Study
This scope of this study in terms of its contents is restricted to the concept of Corporate Social Responsibility and Organisational Performance of Organisations. The study is limited to the Beverage Industry with particular emphasis on Fan Milk Plc, Ibadan which serves as the main study. The researchers restricted the study to Ibadan because of limited finance and time constraint; hence Ibadan is used by the researchers as a sample representative of the entire nation.
1.8 Definitions of Terms
Business Policy: It is the active process of guiding and directing the course of an organization toward the attainment of objective.
Environment: The environments of an organization are those elements, institutions, organization and system whose activities and services are essential for the effective performance of the organization but are not subject to its control.
Organizations: This is a system of coordinated activities of a group of people working co-operatively towards a common goal, under authority and leadership.
Performance: Refers to the quality and quantity of work produced.
Productivity: A measure of production efficiency, a ratio between output and input.
Social Responsibility: This is the reactive responsiveness to an organization?s obligatory operational, activities like economic, productive and legal requirement to its stockholders and stakeholders.
1.9 Historical Background of Fan Milk Plc, Ibadan
The Company FAN MILK PLC was incorporated in Nigeria in November 1961, and the diary plant went into production by 3rd of June, 1963. The first directors of the company were Eric Enarbog (Chairman) and founding members. Fredric Clerke, William Hardy, Lars Skensued and Chief B. Olufemi Olushola. The initial capital was 50,000 pounds of which 10% was held by Nigerian Investors. The name FAN MILK and the FAN VOGO was exclusively made by Eric Embony Diary plant located at Eleyele Industrial Layout Ibadan, but inspite of its modest size, it was equipped with the most modern equipment in the market at that time. The Original range of diary product was limited to plainfull cream with chocolate flavoured milk. Both products were held and packed in the revolutionary and unorthodox triangular park of which FAN MILK was the first company to produce such in West Africa