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52� African�Business�|�February�2013

FOCUS Corporate Social Responsibility

their operations an ethnic or environmental veneer, in a process known as ‘green wash- ing’. They fund adverts showing their prod- ucts against a backdrop of happy children, green meadows and clear water. They provide grants to worthwhile causes and use more space on their websites to describe their role in these projects than to their core economic activities. CSR officers are employed and even whole departments created to oversee their ‘do-gooding’.

Yet CSR is about much more than philan- thropy, although this can play a part. Cor- porate social responsibility should permeate every aspect of a company’s activities and not be sidelined or neatly cordoned off, in the same way that some history academics discuss black or women’s history as if they were minor extensions to the mainstream story of human- kind. Green washing can, however, play a role. In seeking to appear more ethical, businesses may begin to adopt some of the best practices employed by those firms that genuinely wish to make a wider positive impact.

CSR was originally taken to be the avoid- ance of negative activity. Workers in Zam- bian copper mines, for example, should be entitled to international standards of health and safety. South African factories should be designed to avoid silicosis –a devastat- ing lung disease that is common in poorly ventilated factories. Angolan oil pipelines should be secure enough to avoid soil and water pollution, while Nigerian gas should not be flared at source, thereby contributing to global warming. In the same vein, toys produced in Ghanaian workshops should not utilise paint that is poisonous to their end consumer: children around the world.

Now, however, those with a genuine inter- est in CSR argue that companies should seek to do good as well as avoid harm. This can mean investing in renewable energy projects, rather than merely avoiding heavily polluting coal fired plants.

It could mean providing training courses for workers that both help the company and help the individual, while also seeking to support local organisations that provide that training. It can also involve investment in water, power and transport infrastructure that can benefit the company as well as the local community.

As a result, supporters of CSR would argue that the approach can be good for profits as well as people. The positive PR generated by genuine CSR can also boost the bottom line.

Many companies now adopt a position of positive engagement in order to bridge the

Ethical business is better business

Corporate�Social�Responsibility� (CSR)�is�one�of�the�most�commonly� heard�phrases�in�the�international� business�world�today.�But�is�it�a� new�way�of�doing�business,�or�yet� another�box�that�has�to�be�ticked� by�executives�keen�to�get�on�with� the�business�of�making�money?� Many�international�firms�operating� in�Africa�have�comprehensive� CSR�policies�and�now�the�practice� is�being�taken�up�by�African� companies�themselves.�What�does� it�really�mean�and�what�are�the� implications�for�the�continent?� Report�by�Neil Ford

Economic enterprises cannot solely be judged by their balance sheets and the contribution that they make to GDP. Definitions of CSR vary widely in theory and in practice, but the World Busi- ness Council for Sustainable Development provides the following sound definition in its Making Good Business Sense report: “Corpo- rate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development, while improving the quality of life of the workforce and their families as well as of the local community and society at large.”

It should encompass sustainable devel- opment and fair treatment for employees, suppliers, customers and host communities both by the company itself and any compa- nies with which they trade.

In practice, many companies seek to give

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A combination of the stick and the carrot is better than merely excluding non-complying firms. Such an approach is surely only applicable where no potential bidder for a contract can offer the CSR standards expected by a bidder

FOCUS Corporate Social Responsibility

Opposite: Gas flaring in Nigeria and, left, diamond processing in Botswana.

gap between different levels of social and environmental consideration in different parts of the world.

In China, for instance, many Western companies work alongside suppliers over many years to improve working conditions, environmental regulation and social coop- eration step by step. Some argue that a com- bination of the stick and the carrot is better than merely excluding non-complying firms. Such an approach is surely only applicable where no potential bidder for a contract can offer the CSR standards expected by a bidder.

The African angle CSR is often regarded as a western phenom- enon and only relevant to Africa with regard to the activities of international companies operating on the continent. Some feel that companies have enough of a challenge oper-

ating in many African states without placing yet more obstacles in their way. Yet embracing CSR can help to ensure that Africa and its people derive more benefit from the economic activity that they host, while minimising the social and environmental downside. Moreo- ver, it would be totally wrong to market Af- rican states as locations where international firms can avoid the kind of social, economic

and environmental obligations that are taken for granted elsewhere in the world.

South Africa is probably the most suc- cessful African country at promoting CSR. Its empowerment legislation is designed to encourage companies to have a more posi- tive impact on the society within which they operate. In addition, companies listed on the Johannesburg Stock Exchange are now required to produce annual CSR reports listing their “social, transformation, ethical, safety, health, and environmental manage- ment policies and practices”.

Under changes to the New Companies Act that were introduced in 2008, the government now seeks to “reaffirm the concept of the company as means of achieving economic and social benefits”.

Panasonic of Japan has formulated a CSR policy for Africa based on the protection of labour rights, human rights and the environ- ment. A company spokesperson said: “In the procurement of articles and services, we base our evaluation and selection of suppliers on compliance with laws and regulations and accepted standards of behaviour and agree- ment with our business philosophy and code of conduct.” In other words, suppliers must sign up to Panasonic’s ethical guidelines on doing business.

The diamond industry has sought to im- prove its image because of international fu- rore over blood or conflict diamonds. De Beers, for instance, now has more than 8,500 organisations, including retailers and mines, participating in its Best Practice Principles Assurance Programme.

The policy states: “Although the Kimberley Process Certification Scheme and the World Diamond Council System of Warranties had been launched in 2003 to address the issue of Conflict Diamonds, no single stand- ard existed to evidence full ethical practices throughout the diamond pipeline addressing social, employment, business, health and safety and environmental issues.”

De Beers says: “We saw an opportunity to leverage our leadership position in the diamond pipeline to establish a benchmark for best practice not only within the diamond mining sector, but also to drive best-practices standards through the cutting, polishing and jewellery manufacturing pipeline.”

All participants are required to maintain online CSR workbooks covering a wide range of topics, some of which are then assessed

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‘We saw an opportunity to leverage our leadership position in the diamond pipeline to establish a benchmark for best practice not only within the diamond mining sector, but also to drive best- practices standards through the cutting, polishing and jewellery manufacturing pipeline’ – De Beers

United Nations CSR guidelines

Human Rights Principle 1 Businesses should support and respect the protection of internationally proclaimed human rights; and

Principle 2 Make sure that they are not complicit in human rights abuses.

Labour Principle 3 Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining;

Principle 4 The elimination of all forms of forced and compulsory labour;

Principle 5 The effective abolition of child labour; and

Principle 6 The elimination of discrimination in respect of employment and occupation.

Environment Principle 7 Businesses are asked to support a precautionary approach to environmental challenges;

Principle 8 Undertake initiatives to promote greater environmental responsibility; and

Principle 9 Encourage the development and diffusion of environmentally friendly technologies.

Anti-corruption Principle 10 Businesses should work against corruption in all its forms, including extortion and bribery.

Source: United Nations Global Compact Office.

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54� African�Business�|�February�2013

FOCUS

by a third party auditor. Where a material breach is raised, the group is considered to be non-compliant with the BPP Programme and the sight-holder may face termination of its contract.

The jewellery industry has become a test case for CSR, partly because of attempts to tackle blood diamonds, but also because of the sheer reach of the industry. A single item can contain metals and gemstones from a dozen different countries, many of them in Africa, while many components are trans- ferred to other centres for processing and polishing. Many items are then assembled in East Asia before being marketed elsewhere in the world. Pressure is now being put on firms to account for the provenance of their raw materials. The US Patriot Act and similar legislation in other Western states requires the diamond, gold and coloured gemstones sector to monitor and report ‘suspicious’ transactions.

Moving on from the Kimberley Process, the World Jewellery Confederation (CIBJO) is now encouraging member companies to have a positive role in the societies within which they operate, as well as avoiding having a negative impact. CIBJO president Gaetano Cavalieri concedes that this is partly in order to “To defend the industry from the various challenges that could threaten our reputation and integrity”.

However, he also wants the industry: “To function as a positive influence, serving as a means for sustainable economic and social development in the communities and coun- tries in which we are active” and “To be fully transparent in the way we operate our busi- nesses and about what we sell.”

Many talk about CSR as if it is an entirely new innovation. Yet CSR is related to the fair trade movement, the Extractive Indus- tries Transparency Initiative (EITI) and the Publish What You Pay Campaign, in that it encourages ethical behaviour.

It also follows from the Quaker belief, developed in the UK in the 17th and 18th cen- turies, that the main aim of private enterprise is to add value to society and not just to make a profit. It is part of the age-old struggle be- tween the state, individuals and private en- terprise to promote their own needs.

Few now argue against the benefits of capitalism but its direction of travel can be adjusted. A balance of power is needed in the relationship between host communities and corporations in order to create a more just society for all.

Human Rights Impact Assessments The African Institute of Corporate Citizen- ship (AICC) seeks to promote the use of Hu- man Rights Impact Assessments (HRIAs) by stakeholders as a means of assessing a company’s performance.

It argues that an HRIA “helps a company to gain a thorough understanding of the im- pact of corporate activities, a better under- standing of the stakeholders’ perspectives, and ways to manage corporate impacts in a process that benefits all involved.” n

AICC lists the following benefits: n Maintaining a good company and

product reputation; n Effective risk identification and

management; n Improvement of stakeholder relations; n Creating a legal and social licence to

operate; n Increased motivation and productivity

of workers; n Understanding the society in which the

company works; n Creating an attractive investment

climate; n Contribution to CSR and sustainable

development.

However, it is vital that assessments are carried out at regular intervals in order to examine changes over time. A variety of human rights indicators are used in the assessment: n Indicators are based on and linked to

human rights standards; n They measure the extent to which duty

bearers are fulfilling their obligations and right holders enjoying their right;

n Indicators need to be accurately for- mulated and must be appropriate to the context of the business activity;

n Indicators are a means to identify changes and measure short and long term impacts;

n They assist in the identification of risks and warn of potential violations;

n Indicators can be divided in policy, pro- cess and performance indicators;

n Policy indicators determine the status of corporate strategies, policies and codes of conduct;

n Process indicators measure the effects of procedures to implement the strategies and policies on human rights;

n They include qualitative and quantita- tive indicators.

Canadian Business for Social Responsibility’s community checklist

1. Make an explicit community commitment (a) Business basics: Meet community demands for cost effective products and services (b) Philanthropy: Meet community needs without apparent business benefit (c) Commercial Initiatives: Partner with community based organisations that support business success (d) Community Investment:: Engage in long term strategic community partnerships

2. Donate 1% of pre-tax profits

3. Prioritise local employment and suppliers

4. Incorporate social values into purchasing decisions

5. Consider local/regional employment and training needs in human resources strategy

6. Have a board and management team that understands community interests

7. Conduct social and environmental impact assessments

8. Gather and promptly respond to community complaints

9. Involve community stakeholders in: (a) Programme Definition (b) Performance Indicator Development (c) Program Evaluation

Diamond mining in Sierra Leone: gemstones are a test case for CSR.

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