Impact of Social Responsibility on Business Profitability
Chapter One
Research Objectives
The general objective of this study is to examine the effect of the Corporate Social Responsibility of Nigeria Bottling Company PLC on its profitability. Specifically, the study sought to achieve the following objectives:
- To find out how Nigeria Bottling Company PLC carries its CSR as a major partner in the fast-moving consumer goods(FMCG) industry.
- To find out the challenges of NBC in practicing its CSR
- To investigate whether Corporate Social Responsibility guarantees customers‘ confidence and security of depositor‘s
CHAPTER TWO
LITERATURE REVIEW
INTRODUCTION
CSR as defined by European Commission (2001) is ―a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis‖ following increasingly aware that responsible behaviour leads to sustainable business success. CSR is about managing change at company level in a socially responsible manner which can be viewed in two different dimensions:
- Internal – socially responsible practices that mainly deal with employees and related toissues such as investing in human capital, health and safety and management change, while environmentally responsible practices related mainly to the management of natural resources and its usage in
- External– CSR beyond the company into the local community and involves a wide range of stakeholders such as business partners, suppliers, customers, public authorities and NGOs that representing local communities as well as environment. A company should focus on areas such as economic, environmental and social when developing sustainability strategy (Szekely & Knirsch 2005). Sustainability strategy development can be based on legitimacy, economic and social theories. These theories explain social disclosures pattern by organisations (Haniffa & Cooke 2005). Thus, CSR practices can be based on the these three
Legitimacy theory is whereby corporate social disclosures were motivated by the corporate need to legitimise activities (Hogner 1982). This is where corporate management will react to community expectations (Guthrie & Parker, 1989). Thus, companies are expected to carry out activities that are acceptable by the community. Legitimacy also implies that companies will take cautious to ensure their activities and performance acceptable to the community given a growth in community awareness (Wilmshurst & Frost 2000). Corporate social disclosure can be used to appease some of the concerns of the relevant publics and also as a proactive legitimation strategy to obtain continued inflows of capital and to please ethical investors (Haniffa & Cooke 2005).
Economic theory reflects the degree of association of CSR and financial performance by taking consideration of cost-related advantages, market advantages and reputation advantages (Chamhuri & Wan Noramelia 2004). In the business, CSR is concerned with employment, lifelong learning, consultation and participation of workers, equal opportunities and integration of people towards restructuring and industrial change. Basically, the formation of policies is influenced by the authority employment strategies, the initiative on social responsible restructuring, the initiatives to promote quality and diversity in the workplace and health and safety strategy.
The social issues include the benefits offered in terms of training related to safety, health and environment, donations, education scheme, medical benefits and others. (Chamhuri & Wan Noramelia 2004). Environmental issues emphasize on preserving and conserving natural resources such as conducting recycling activities, noise reduction action plan to pursue noise improvement initiatives, water and process treatment and compliance with authority regulations and requirements. Many enterprises recognized the importance of their responsibilities towards the environment and take them seriously by setting targets for continually improving their performance. CSR social activities may include charitable contributions to local and national organisations such as fundraising, donations and gifts in areas where it trades and others like regeneration of deprived communities, reclamation of derelict land and creation of new regeneration jobs.
CHAPTER THREE
RESEARCH METHODOLOGY
INTRODUCTION
According to Oni (2003), research methodology is used to describe all the methods involved in the collection of all information required for a study. This chapter contains research design, population and sampling size, research instrument, validity and reliability of data, measurement of variable, data analysis technique, limitations of the research methodology of the study.
RESEARCH DESIGN
Research design is the structuring of investigation aimed at identifying variables and their relationship to one another. This is used for the purpose of obtaining data to enable the researcher test hypothesis or answer research questions. It is an outline or scheme that serves as a guide to the researcher in his effort to generate data for his study. In this study, the research design used is the survey design. A survey research design is one in which the sample subject and variables that are being studied are simply being observed as they are without any attempt to control or manipulate them (Ojo 2003). The survey research design is aimed at discovering the inter-relationship between variables. Questionnaires was used as the instrument of gathering information from knowledgeable respondents and also going beyond the observation of the correlation between independent and dependent variables.
POPULATION AND SAMPLE SIZE
The study population is very large, so 100 respondents were selected from the top level management, middle level management and the supervisors which should be a good representation of the population based on stratified sampling. This cuts across the various departments in the organisation such as corporate affair department, customer services department, retail department, marketing department and others. Again 300 customers were selected from customers through random sampling. Finally five(5) business partners of NBC were interviewed on face to face discussions to solicit their views on the subject of the study. In all 405 respondents were used for the research.
CHAPTER FOUR
DATA PRESENTATION, ANALYSIS AND INTERPRETATION
DESCRIPTIVE STATISTICS:
Section A
CHAPTER FIVE
SUMMARY, RECOMMENDATION AND CONCLUSION
INTRODUCTION:
This chapter tends to briefly revisit what was set out to achieve as previously stated in chapter one of this study. It also introduces in few paragraphs what has been done in the previous chapters. It will provide a smooth ground into the finding and recommendation.
Findings – CSR impact on Nigeria Bottling Company PLC’s Profitability
In chapter one and two corporate social responsibility has been defined by many writers who looked at it from numerous perspectives. The research work was basically conducted to find out if Nigeria Bottling Company PLC embarks on CSR, if CSR has any significant impact on Nigeria Bottling Company PLC‘s profitability and to know if there are challenges faced by Nigeria Bottling Company PLC for embarking on CSR. In carrying out the study, primary and secondary sources of data were made use of in gathering relevant information. From the information gathered, it was found that as CSR of Nigeria Bottling Company PLC increases, there was a corresponding increase in profits of Nigeria Bottling Company PLC. For example in 2006 when the amount spent on CSR was GHc 332,500m the reported profit after tax was GHc19, 831m , in 2007 the amount spent on CSR was GHc 621,100m the reported profit after tax was GHc 21,543m, in 2008, amount spent on CSR was GHc 780,605m and GHc 30,473m was reported as profit and in 2009 above GHc1.2Million was spent on CSR and GHc 35,074m.
CSR in the Community
Corporate social Responsibility is an accepted practice by both Nigeria Bottling Company PLC and members of the host community. This was supported by the positive responds obtained from the questionnaire.
Nestlé’s Financial Commitment to CSR
There has been increasing amount spent on CSR (2006 – 2009) and a corresponding increase in Nigeria Bottling Company PLC‘s profit records (2006-2009), which is supported by the responses from the questionnaire that CSR has a positive impact on the profitability of Nigeria Bottling Company PLC. Responses also showed that Nigeria Bottling Company PLC stands to gain other benefits such as Large Customer Base, Customer Confidence, Good corporate Image and Other attributable Benefits aside profitable.
Other Benefits NBC derives from CSR – Value Creation
From the research it came out clear that indeed CSR programmes embarked by NBC has created value for Nigeria Bottling Company PLC as stakeholders and customers are comfortable transacting business with NBC. Again stakeholder businesses also grow and therefore improves customer loyalty. This was one major breakthrough NBC has achieved to stay competitive and the preferred fast moving consumer goods NBC in Nigeria.
Does NBC embark on CSR? – Customer Ignorance of CSR programmes
The study also revealed that even though Nigeria Bottling Company PLC is doing a lot of community based social intervention programmes, the customers or the people in the community are not aware of such programmes. This is because NBC has not done enough to communicate to the community on the programmes intended to make life much easier for the society.
CONCLUSION
The concept of CSR has become more and more common in business practices and customers today almost expect companies to be socially responsible. Even though CSR is very important for companies, it has historically not been a very lucrative approach for them to involve in these activities. The business of the 21-st century will have no choice but to implement CSR. Like any successful management strategy, a CSR process needs both high level management vision and support, and buy-in at all levels of the company.
CSR does not give immediate results. The same CSR initiative will also not work for all types of organisations. Designing CSR initiative requires careful planning and implementation mechanism. Corporate organisations should integrate the innovative CSR strategies into different marketing communication strategies to build and sustain a competitive advantage. Corporate social responsibility has a significant impact on the profitability of NBCs, and it is a positive impact, which includes good business relationship, good will among other benefits. In today‘s competitive market, CSR offer an opportunity for companies to explore other areas of improving profitability. Customers have become very sophisticated and very much aware of their environment against the perception that corporate organisations make a lot of profits, it becomes imperative for these companies to put back into the society through corporate social responsibility programmes. Even though the benefits from CSR are over a long time of time, it is such that it gives a lot more intangible benefits to the organisations. Such benefits include, customer loyalty, brand image, improved corporate image, market share and community presence.
Unfortunately, all these benefits cannot be quantified in monetary terms but translates into improving the profits of the organisation over time. Indeed CSR is capital intensive and needs an extensive programme backed by executive support to roll out various CSR programmes. Small and medium enterprises are unable to engage in such ventures due to factors already indicated in the study such as long return on investments, lack of commitment from the executive and the expertise to run such programmes. Government organisations even though may engage in corporate social responsibility programmes its is usually not capital intensive. Of course these organisations are not income generated but are sub-vented by the government and so there is not an allocation for the society. CSR activities are usually donations to deprived communities and groups.
As to whether CSR can be a business strategy for companies to achieve corporate targets and objectives such as competitiveness in market or market share is another study that can be researched further.
RECOMMENDATION
This section recommends measures to be considered by academia, corporate organisation and stakeholders as well as customers so long as corporate social responsibility is concerned.
CSR deserves greater attention and more commitment from corporate organizations in that it guarantees other benefits other than just profits. This offers an opportunity to the corporate world to think out of the box and explore other potentially viable areas to improve the company profits portfolio. Corporate organisations stands to gain over a period of time some leverages other that just products and services they render to the society.
CSR projects should be well structured and implemented to have maximum impact. This would enhance the well-being of the beneficiaries. From the survey it revealed that some customers or inhabitants of a community are not aware of any CSR programme ongoing. Mostly they bare unable to connect with the results of the programme. It tends out that the community expectations are somewhat different form the corporate organisation. Organisations could liase with community authorities to identify areas or opportunities available to them to better the lives of the people through the provision of some social amenities. This will go a long way to improve the general living standards of the people.
Corporate organizations should intensify efforts to educate the public on their primary responsibilities, various commitments to other stakeholders and operational/financial limitations. By doing so, the public will begin to show understanding and appreciation of the efforts and contributions of such organizations. In most instances if the customers or the people in the community are involved, monitoring becomes feasible and measurable. Corporate organisation should also involve the community in the planning, formulation, implementation and evaluation of CSR projects. This will eliminate stakeholder conflicts that may arise in some societies.
Governments and local authorities should explore the areas where a certain amount of tax will be used by the organisation to undertake community based projects such as schools, electricity, clean water, jobs and income generating activities. This can be in a form of tax exemptions granted to these organisations. This will make the corporate organisation be more responsible in the area of work and contribute significantly to national development.
For academic and industry discussions i recommend that further study should be conducted to establish the real value in monetary terms how much CSRs contribute to the organisations profitability. Also further research should be conducted to quantify how much or to what degree these CSR programmes have impacted on the society and its corresponding value generation for the company.
REFERENCES
- Aborade, R.(2005), ―A Practical Approach to Advanced Financial Accounting” 2nd edition Master Stroke Consulting, Lagos. P. 1
- ADI, A.B.C. (2006). The Moral Economy and the Possibility of Accumulation in Africa: How the IFIs can Help West Africa Review
- Ajala V.O. (2005), ―Public Relations: in search of professional Excellence‖: 2nd edition, MayBest Nigeria Limited Ibadan, Pp203-204.
- Alexande, D and BRITTON, A (2000), ―Financial Reporting”, 5th edition, Thomas Learning Publishing, London, UK. Pp 45-65.
- Asika, N. (2001) ―Understanding Nigerian Business Environment” First Edition. Concept Publications Lagos. PP 88.
- Asika N (1991): ―Research Methodology in the Behavioural Sciences‖. 1st edition, Longman Lagos, P 27.
- Azhar, .K. (2008), ―Strategic Management and Business Policy‖, Tata McGraw-Hill Publishing Company limited New Delhi p 418
- Branco, MANUEL CASTELO AND RODRIGUES, LÚCIA LIMA (2007): Issues in Corporate Social and Environmental Reporting Research: An Overview, in: Issues in Social & Environmental Accounting 1 (1), pp. 72-90
