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A new model for corporate social responsibility

15 March 2017

The article at a glance

Your business’s CSR activity must adapt to the market you’re in, new research reveals. In 2017, any company worth its salt has …

Your business’s CSR activity must adapt to the market you’re in, new research reveals.

Businesspeople with trees instead of heads on white background.

In 2017, any company worth its salt has some kind of corporate social responsibility programme. But what CSR looks like – and how important it is deemed to be – depends on your perspective.

In the developed world, certain standards are taken for granted and there is a risk that some types of CSR might be dismissed as “greenwashing”. In emerging economies, domestic-market focused companies may not have a CSR programme at all. But new research finds that exactly how much CSR you need, and what its focus actually is, depends on where you are in the world and, crucially, your market.

Professor Peter Williamson
Professor Peter Williamson

“Organisations from the developing world tend to evolve far greater CSR if they are multinationals than if they serve only their domestic market,” says Cambridge Judge Business School’s Professor Peter Williamson. “And as they spread subsidiaries internationally, the improvement in their CSR is much more significant if they operate in a developed country. In other words, they ‘step up’ to match the business environment in which they are operating.”

The reasons for this, found Williamson, are when those developing country multinationals (DCMNs) try to gain a foothold in a developed economy, they suffer what he describes as “reputation and legitimacy deficits”. He adds: “Being newcomers, most have not yet established their name internationally and therefore are unknown and, to a degree, untrusted. In addition, coming from a developing country they are not seen as sharing the same norms and values as developed international business nations. People suspect the quality of the product and process behind it and fear the standards will be lower.”

But while companies from developing nations are increasingly embracing CSR, some struggle with what that means, according to John Kojo Williams, co-founder of the Centre for CSR, West Africa. “Over the past five years there has been a lot of development of CSR in Ghana, Ivory Coast and Nigeria,” he says, “but organisations have had major misconceptions about it, such as: you only have to run a CSR programme once a year – and only if you’re in profit; you don’t need to do it if you pay taxes; it’s only for firms that degrade the environment; you mustn’t publicise your CSR programme as it’s against religious beliefs; and CSR equals donations to the needy and to orphanages – period! But some of those misconceptions are being demystified and local companies now realise they need to show stakeholders how socially responsible they are.”

Williamson’s research, which studied more than 400 firms in five developing nations – Brazil, Russia, India, China and South Africa – confirmed that if those companies traded only in their home market, social responsibility was not a priority, and nor was CSR as vital when trading in other developing countries. But it becomes a necessity when they start to trade in, say, America or Europe.

“If I’m a Chinese company and I go to Africa, people don’t have as negative a perception as when I go to the US,” says Williamson, Honorary Professor of International Management at Cambridge Judge. “And if DCMNs merely export, their CSR is significantly lower than if they operate subsidiaries in other countries. The more they go abroad, the more they invest in it.”

Williamson’s research also found the focus of that social responsibility shifts depending on where a DCMN is operating. “If it is in the US or Europe, its CSR is expected to be a given, and is more sophisticated. But customers and partners in developing countries aren’t interested in fine words and are suspicious of codes of practice. They want tangible, practical aspects such as safety that impact on their local community. People in poorer parts of rural China are rather more interested in local pollution levels than an equality policy.”

And where domestic or region-centric organisations do commit to CSR, the results can be life-changing – and life-saving. Telecommunications company Airtel Ghana, whose operations are almost exclusively carried out in Africa, this year provided a toll-free number for people in Sierra Leone to report cases of Ebola, and then used the data from these calls and texts to monitor how movement of people affected the spread of the virus.

Williamson says the impact of CSR programmes by Western companies in developing nations will lead to an increase in such initiatives in domestic firms – and it is happening. In 2010 Coca-Cola published its first sustainability report for its operations in China – two years ago the Chinese government passed a law saying every state-owned company must write one.

Indigenous African organisations are also following CSR examples of Western multinationals, according to the Centre for CSR, West Africa. “Many local companies are emulating the CSR structures of multinationals in the same market,” says Williams. “In the banking sector, indigenous organisations such as UniBank, Fidelity Bank and UT Bank in Ghana are emulating the likes of Standard Chartered, Ecobank and Barclays in discharging their CSR interventions and sometimes out-performing these multinationals on the local front.”

But there is still scepticism that some Western organisations are in danger of applying a one-size-fits-all approach to CSR with their operations in developing economies. “Most multinationals try to respond directly to the needs of our local West African market using a tailor-made CSR approach,” says Williams. “But a few try to copy and paste CSR programmes from their HQ onto a place like Ghana. For instance, while some local companies or multinationals would dig boreholes for communities without access to portable water, Nestle Ghana has a Water Treatment Project that helps the company reuse 30 per cent of waste water, which it says helps environmental sustainability. While this is an accepted CSR practice on the international scene, it does not resonate with local stakeholders as a CSR programme – it’s more seen as a good business practice.”

Whatever the focus, Williamson’s research suggests it is inevitable that multinationals, whether from developing or developed economies, will encourage and ultimately oblige indigenous organisations to introduce and develop effective CSR programmes. “There will be a convergence and domestic firms that become international will drag up domestic standards,” he says. “Western companies competing in developing markets will also raise the level of CSR expected from DCMNs.

“The message is that CSR activity is very much based on the context of where it is delivered and those it is aimed at helping and impressing.”