What Tanzania's entrepreneurs lack is Corporate Social Responsibility (CSR)

By Nyasigo Kornel

Corporate Social Responsibility (CSR) is a concept that organizations, especially corporations, have an obligation to consider the interests of customers, employees, shareholders, communities, and ecological considerations in all aspects of their operations. This obligation is seen to extend beyond their statutory obligation to comply with legislation.

The course that was conducted in TGDLC on CSR is closely linked with the principles of Sustainable Development, which argues that enterprises should make decisions based not only on financial factors such as profits or dividends, but also based on the immediate and long-term social and environmental consequences of their activities.

Today’s heightened interest in the role of businesses in society has been promoted by increased sensitivity to and awareness of environmental and ethical issues. Issues like environmental damage, improper treatment of workers, and faulty production that inconveniences or endangers customers are highlighted in the media.

In some countries government regulation regarding environmental and social issues has increased. Also, standards and laws are often set at a supranational level like what is done by the European Union.

Some investors and investment fund managers have begun to take account of a corporation’s CSR policy in making investment decisions (so-called ethical investing).

It is important to distinguish CSR from charitable donations and "good works" (i.e., philanthropy, e.g., Habitat for Humanity or Ronald McDonald House).

Corporations have often, in the past, spent money on community projects, the endowment of scholarships, and the establishment of foundations. They have also often encouraged their employees to volunteer to take part in community work and thereby create goodwill in the community, which will directly enhance the reputation of the company and strengthen its brand.
CSR goes beyond charity and requires that a responsible company take into full account its impact on all stakeholders and on the environment when making decisions. This requires the company to balance the needs of all stakeholders with its need to make a profit and reward shareholders adequately.

This holistic approach to business regards organizations as (for example) being full partners in their communities, rather than seeing them more narrowly as being primarily in business to make profits and serve the needs of their shareholders.

The scale and nature of the benefits of CSR for an organisation can vary depending on the nature of the enterprise, and are difficult to quantify, though there is a large body of literature exhorting business to adopt measures beyond financial ones.

Orlizty, Schmidt, and Rynes found a correlation between social/environmental performance and financial performance. However, businesses may not be looking at short-run financial returns when developing their CSR strategy.

The definition of CSR used within an organisation can vary from the strict "stakeholder impacts" definition used by many CSR advocates and will often include charitable efforts and volunteering.

CSR may be based within the human resources, business development or PR departments of an organisation, or may be given a separate unit reporting to the CEO or in some cases directly to the board. Some companies may implement CSR-type values without a clearly defined team or programme.

The business case for CSR within a company will likely rest on one or more of these arguments:
A CSR programme can be seen as an aid to recruitment and retention, particularly within the competitive graduate student market.

Potential recruits are increasingly likely to ask about a firm's CSR policy during an interview and having a comprehensive policy can give an advantage. CSR can also help to build a "feel good" atmosphere among existing staff, particularly when they can become involved through payroll giving, fundraising activities or community volunteering.

Managing risk is a central part of many corporate strategies. Reputations that take decades to build up can be ruined in hours through incidents such as corruption scandals or environmental accidents. These events can also draw unwanted attention from regulators, courts, governments and media. Building a genuine culture of 'doing the right thing' within a corporation can offset these risks.

In crowded marketplaces companies strive for a unique selling proposition which can separate them from the competition in the minds of consumers. CSR can play a role in building customer loyalty based on distinctive ethical values.

Several major brands, such as The Co-operative Group and The Body Shop are built on ethical values. Business service organisations can benefit too from building a reputation for integrity and best practice.

Furthermore, if the argument that Branding is a form of production, than an image of being a socially responsible corporation means that productivity is increased.
Some critics of CSR, such as the economist Milton Friedman, argue that a corporation's principal purpose is to maximize returns to its shareholders, while obeying the laws of the countries within which it works.

Others argue that the only reason corporations put in place social projects is utilitarian; that they see a commercial benefit in raising their reputation with the public or with government. Proponents of CSR, however, would suggest a number of reasons why self-interested corporations, solely seeking to maximise profits are unable to advance the interests of society as a whole.

The rule of corporate law that a corporation's directors are prohibited from any activity that would reduce profits.

Other mechanisms established to manage the principal-agent problem, such as accounting oversight, stock options, performance evaluations, deferred compensation and other mechanisms to increase accountability to shareholders.

Supporters of a more market based approach argue that: By and large, free markets and capitalism have been at the centre of economic and social development over the past two hundred years and that improvements in health, longevity or infant mortality (for example) have only been possible because economies - driven by free enterprise - have progressed.
In order to attract quality workers, it is necessary for companies to offer better pay and conditions which leads to an overall rise in standards and to wealth creation.

Investment in less developed countries contributes to the welfare of those societies, notwithstanding that these countries have fewer protections in place for workers. Failure to invest in these countries decreases the opportunity to increase social welfare.

Free markets contribute to the effective management of scarce resources. The prices of many commodities have fallen in recent years. This contradicts the notion of scarcity, and may be attributed to improvements in technology leading to the more efficient use of resources.

There are indeed occasions when externalities, such as the costs of pollution are not built into normal market prices in a free market. In these circumstances, regulatory intervention is important to redress the balance, to ensure that costs and benefits are correctly aligned.

Whilst regulation is necessary in certain circumstances, over regulation creates barriers to entry into a market. These barriers increase the opportunities for excess profits, to the delight of the market participants, but do little to serve the interests of society as a whole.
The course was conducted in collaboration with TGDLC and World Bank recently.

Tanzania Development Learning Centre (TGDLC) is a member of the Global Development Learning Network (GDLN) with over 120 networked development communication hubs globally. Its core function is to enable decision makers and mid-level professionals and practitioners to access and share the wealth of knowledge and experiences available in the world through the global communication system including video conferencing, Internet, Video, CD-ROM and Print.

TGDLC is a public interest, non-profit organization, whose operations will in future be met from the income it generates. As such, the Centre will be driven by both social benefit analysis and cost-benefit analysis.