CSR Reporting Impact In Nigeria Accounting Essay

Published: Last Edited:

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

The study looks at the corporate social responsibility (CSR) reporting impact in Nigeria, as well as the existence, growth and the extent to which business has complied with the legal requirement and their reporting practices more generally. Furthermore, indigenous organization who embraced such initiatives recognizes and practice CSR as corporate philanthropy designed to addressing socio-economic development challenges in Nigeria.

This finding proves that CSR is a limited to a small area and socially rooted construct, as the 'waves', 'issues' and 'modes' of CSR practices identified amongst indigenous firms in Nigeria reflect the firms' responses to their socio-economic context. In as much as corporate firm is focused only on taking out of the society and not giving back, then they have minimize the importance of the need to give back to the society (their host communities). Such intention habitually renders the entire community uninhabitable. An example of the Niger Delta area in Nigeria, translates a bad reputation on the part of corporate identity as the oil community perceived this as mistreatment and greed for profitability and wealth maximization within a sour economy of Nigeria.

This study is therefore, intended to consider the imperative reporting impact in Nigeria, in terms of the practices of CSR on the Nigeria society. The perceived gap theoretically created is attached and looked into for possible resolution, using the various industries as a case study. Data collected for this study are from secondary sources, relying profoundly on the significant information available from various sector, and other sources.

1. Introduction

At a starting point in history, societal hope from business organizations did not exceed proficient resource allocation and its maximization. But in the present day, it has transform, and contemporary business must reflect beyond profit maximization in the direction of being at least socially responsible to its humanity. Today's heightened interest in the role of business in society has been encouraged by increased sensitivity to the awareness of environmental and ethical issues. It is therefore very essential for all to realize that public outcry for increased social responsibility will not disappear if business organizations fail to respond to the challenges these had posed for the society.

In Nigeria, a country with a history of religious and tribal anxiety, some steps has being taken and more steps are finally being taken to embrace the concept and practice of CSR which is evolving and ways to ensure international best practices are constantly being explored. Inclusive, the need to make use of CSR to ensure sustainability is evident and urgent everywhere in the world but conceivably nowhere more so than in Africa. This study will discuss the reporting impact, of corporate social responsibility (CSR) within Nigeria and assert what must happen in order for corporate social responsibility (CSR) practices to grow and stay permanently.

2. Background of Study

In as much as Corporate Social Responsibility (CSR), deals with the set of standards to which a corporation pledge in order to make its impact on society, they have the potential to make positive contributions to the development of society and businesses. Many organizations are opening to see the benefits from developing strategic CSR agendas. The CSR progress is spreading over the world and lately, a large number of process and frameworks have been built-up, the majority being developed in the West.

According to Nigeria, studies on CSR is well in existence, but the notion is more to studies, focused mainly on multinational companies and less neither on indigenous companies nor on the regional contexts in which the companies operate (Amaeshi, Adi, Ogbechie & Amao, 2006).

This research, though, will take its focus on Nigeria specifically. The purpose is to investigate and analyze the reporting impact of CSR in Nigerian perspective. This study was conducted carefully, reviewing all applicable literature from both peer-reviewed sources and economic commissions dealing with Nigeria and its contemporary course

3. Theoretical framework and review of related literature

Definition of CSR

Within the literature on CSR, diverse researchers explain it in different ways. There is no general definition of CSR, corporations have outlined different definitions and there are several perceptions of the term according to the context locally and among the countries. CSR refers to open and transparent business practices that are based on ethical values and respect for the community, employees, the environment, shareholders and other stakeholders. The European Commission (2001) defined CSR as "a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis" where a stakeholder includes anyone who has a direct or indirect interest in the business entity. Take for instance, the supplier, labor, customers & community are well thought of stakeholders as an aftermath of their contributed value and also impacted by organization. While Shareholders are a division of stakeholders and they are entity or institutions that officially own one or more shares of stock in a public or private corporation.

However, the theory that is most important to the idea of CSR is the stake holder theory. Their theory posits that an organization long-term existence bank on addressing stakeholder's need and CSR has exceeded beyond firm responsibilities to stakeholders and the society (Freeman, 1984; Donaldson and Preston, 1995). Corporation or manager must weigh the advantage and expense of reporting their CSR information and activities. Porter and Kramer (2006) suggested that CSR can go beyond being costly, constraint & philanthropy doings. It can be an effective means of innovation and competitive edge.

When firm consider being socially responsible, a lot of benefit are attached in regards to employee productivity, developed labor relations and less complain from host communities because of environmental problems. With the said benefits, corporation with CSR will perform well. Cochran and Wood (1984), McGuire et al. (1988), and Beurden and Gössling (2008) document a positive association between CSR and financial performance. Literature on reporting depicts a high level of disclosure which helps to decline information irregularity between managers and investor.

However, Blacconiere and Patten (1994) discovered that corporation that disclose environmental information in their financial report prior to a chemical leak, go through a reduction of negative market reaction, compared to firms that provided less such information. Their outcome implies that investors interpreted such disclosure as a positive sign of the firm managing its exposure to future regulatory costs.

A recent research, Dhaliwal et al. (2009) shows that corporations with a large cost of equity capital mostly disclosure CSR report, while a quite superior CSR performance like a reduction in the cost of equity capital. According to Healy and Palepu, (2001) posit that CRS reporting can or maybe used by stakeholders as a line of attack against firms, which can damage their value. For example, host communities can use report information on the environmental impact of firm to sue them and the disclosure of the result of the firm's product on end-users health & safety can as well bring issues to the company resulting into a loss of competitive edge. In as much as CSR reporting is of high value to the firm, it also helps to give a sustainable value to the community, as long as it follows the triple bottom line (TBL) model which talks about the economic, social & environmental bottom line wellness. As regards to the above study, organization who wants the support of the public and is also willing to give back to the society, have no option but to act in accordance with the basic "ground rules" (Carrol, 1979, p. 50).

Nine published sources were reviewed during the course of this study to learn and identify the current (CSR) practices, reports and impacts in Nigeria. The following is a summary of each source regarding its application of (CSR) initiatives within Nigeria.

In an article titled "Corporate Social Responsibility from a Nigerian perspective", According to a study on CSR in Nigeria"Corporate Social Responsibility in Nigeria: Western Mimicry or Indigenous Influences?" (Amaeshi, Adi, Ogbechie & Amao, 2006) it was found that indigenous Nigerian companies perceive and practice CSR as corporate philanthropy aimed at addressing socio-economic development challenges in Nigeria. CSR was mainly seen from a philanthropic perspective as a way of "giving back" to the society.

In"Corporate Social Responsibility (CSR) in Nigeria: western mimicry or indigenous practices?" An interview states that it is necessary mainly to remind the companies which make huge profits from Nigeria that their customers are not only economic clients but social beings with social needs which can be enhanced by the corporate social responsibility activities. While this comes across as a reasonable expectation, it will be worthwhile to situate it within the context offered by the Nigerian corporate governance framework for such social orientations. Unfortunately, this will be hard to achieve as long as the institutional framework places more emphasis on firms as private actors, with private rights mainly embedded in contracts (license of operation), and less emphasis on firms as fabrics of the society with the purpose of providing some social benefits (i.e. employment, productivity, economic growth, sustainability, etc) (Fannon, 2003).

The article "An assessment of the impact of corporate social responsibility on Nigerian society", discusses the revisit of Carroll's CSR pyramid from a Nigerian perspective, stating that in Nigeria, economic responsibility still get the most emphasis while philanthropy is given second highest priority, followed by legal and then ethical responsibilities. According to the report of (Pedersen and Huniche, 2006) below are the reasons for this:

Firstly, the socio-economic needs of the Nigeria societies in which companies operate are so huge that philanthropy has become an expected norm. Companies also understand that they cannot succeed in societies that fail.

Secondly, many Nigerian societies have become dependent on foreign aid and there is an ingrained culture of philanthropy in Nigeria.

A third reason, according to the report, is that CSR is still at an early stage in Nigeria, sometimes even equating philanthropy.

It is important to stress that in Nigeria philanthropy is more than charitable giving. HIV/AIDS is an example where the response by business is essentially philanthropic but clearly in companies own economic interests. The low priority for legal responsibilities is, according to the study, not due to the fact that Nigeria companies ignore the law but the pressure for governance and CSR is not so immense. Ethical perspective seems to have the least influence on the CSR agenda. This is not to say that African businesses are unethical.

The article "Corporate Social Responsibility Practices in Mobile Tele-Communications Industry in Nigeria" again presents that many organizations in Nigeria are driven by the need to make more and more profits to the detriment of all the stakeholders. Some do not adequately respond to the needs of host communities, employees' welfare (cheap labour often preferred), environmental protection and community development. Research has shown that CSR can increase profitability, sustainability, integrity and reputation of any business that includes it in its policy. However CSR involves the commitment shown by companies to contribute to the economic development of a local community and the society at large. The adoption of CSR policy should not be driven or motivated by increased profit. Rather, giving back to the society that gave to the business first should be the motivating factor (Nkanga, 2007).

In "Corporate Social Responsibility and Profitability of Nigeria Banks", questions have been asked;

(a) Is there any relationship between Corporate Social Responsibility and Banks profitability? (b) What impact does Corporate Social Responsibility have on the bank's profitability?

To shed light on the above designed questions, it can be traced to the issue of heavy shortage of power supply in Nigeria; while most organizations have to alternate power supply rather than the relatively cheaper National grid (PHCN). This and some other issues have been militating against efficient operation of business organization in Nigeria. For this purpose, firms have to factor the cost of fueling the alternative source of power which is pricey among others (like LPFO/Blackoil, AGO/diesel and GAS) into their factors of production or operations as in the case of banks. It's evident that the above stated issues, has effect on banks and its customers' habits as well, while the growing demands for clear and hard facts about the social and environmental performance of banks by an increasingly well-informed variety of stakeholders have made corporate social responsibility (CSR) the vogue. All of these, in a country with high shortage power supply. Banks are worried by this because; with the modern day banking hardly could any bank function without power supply and least to operate its technological gadget that aids the effective and efficient (Amole, 2012).

"Corporate Social Responsibility Disclosures by Environmentally Visible Corporations: A Study of Selected Firms in Nigeria" further investigate into the lacking disclosures of corporate social responsibility & corporation environmental reporting among listed firms in Nigeria. According to (Gray, Owen and Adams, 1995), businesses in the form of corporations operate within the framework of a social systems and thus despite the limited mandatory reporting requirements, literatures on corporate social disclosures suggests that an increasing number of companies in developed economies are now providing corporate social responsibility disclosures at varying levels.

"Environmental Issues and Corporate Social Responsibility: The Nigeria Experience", talks about the environmental degrading in Nigeria, whereby making environment worse in quality or to pollute it directly or indirectly, via substances, or energy into the environment resulting in deleterious effect of such a nature as to endanger human health, harm living resources, ecosystem and material property and impair amenities or interfere with other legitimate uses of the environment (Ajayi and Adesina, 2005; Slack, 2006). This is where Nigerian's government has failed, to look into the supporting CSR initiatives. Inclusive, Koontz and Weihrich (1988) argued in favour of social involvement of corporate organizations stating that corporate social responsibility is the creation of a better social environment benefits both society and business. Society benefits through better economic conditions and employment opportunities, while corporate organizations gain from a better community, since the community is the source of its human and natural resources and the consumer of its products and services.

"Contributions of Corporate Social Responsibility to Agriculture and Rural Development" reviews the ineffectiveness of the Nigerian government's based on CSR practices on supporting agricultural operations and development. In as much as CSR is seen as "corporate "philanthropy'' it is not usually applied to agricultural and rural development in Nigeria. So therefore, CSR interventions should be developed with full cognizance given to the agricultural and rural development policies. The interventions will be expected to help address some of the agricultural and rural development challenges (Mafimisebi, et.al, 2010).

"Oil Companies and Corporate Social Responsibility in Nigeria an Empirical Assessment of Chevron's Community Development Projects in the Niger Delta" presents the problems of insufficient CSR efforts in regards to development to the communities. Inclusive, the delicate tension, agitation and crises in the oil communities have persisted regardless of different hard work by the government to generate a peaceful atmosphere between the host communities and the oil companies, yet the host communities remain hostile and constantly at variance with the oil multinationals (Alabi, 2012)

4. Theoretical framework

Again, there are a myriad of definitions of Corporate Social Responsibilities (CSR), each considered valuable in their own right and designed to fit the specific organization. The majority of definitions incorporate the three dimensions to the concept, that is, economic, environmental and social dimensions into the definition, what is usually term the triple bottom line.

In spitefulness of the broad adoption of CSR, base on the existence, growth and practices, it is visible from the reporting impact on business in Nigeria that it has from the foundation been highly contentious and politically charged. These speak about the short comings, of failed CSR implementations, lack of government support and intervention. This means that the components of triple bottom line are not always met as expected by the society. The triple bottom line is considering that companies do not only have one objective, profitability, but that they also have objectives of adding environmental and social value to society (Crane & Matten, 2004).

According to Carroll´s (1991) Pyramid of Corporate Social Responsibility, indicates that CSR constitutes of four kinds of social responsibilities; economic, legal, ethical and philanthropic. The model considers CSR to be framed in such a way that the entire ranges of business responsibilities are embraced. Below is the illustrated model:

The pyramid demonstrates the four components of CSR with economic performance as the basic block. After that is the duty to be ethical. At its most fundamental level this is the obligation to do what is right and to avoid harming stakeholders. Finally business is expected to be a good corporate citizen. This is embedded in the philanthropic responsibility, where in business is expected to contribute financial and human resources to the community and to improve the quality of life.

The question is why do most corporations only care about maximization of profit and financial return ignoring giving back to the communities?

The answer from the helpful theory is that;

Most customers are the main driving force for various companies. However most corporations in Nigeria fail to comprehend their purpose in the community. According to Löhman & Steinholtz (2004) the necessities from the customers today are strong and the increased competition has driven companies towards the conception of new values. The companies must now understand their roles in society and more and more consumers require that companies have responsible products and principles that are of value for the consumer.

Furthermore, with regards to Nigeria and the advancement of CSR, the nation has been party to several international human right treaties and there are a number of national initiatives addressing corporate governance and environmental issues. Despite this, it still seems to be many bureaucratic and institutional hindrances for the effective implementation of many of these initiatives (http://www.thecommmonwealth.org). The next section present information on definition, drivers and development of CSR from a Nigerian point of view

5. Corporate Social Responsibility - Definition and driving forces in Nigeria

To have a good comprehension of CSR from a Nigerian viewpoint it is of value to explore the drivers for, and advancement of CSR in Nigeria. The thoughtful view of CSR across the globe, hold opposing views to that, of how CSR is perceived in Nigeria and what the precise driving forces are.

According to a study on CSR in Nigeria ''Corporate Social Responsibility in Nigeria: Western Mimicry or Indigenous Influences" Local Nigerian companies see and practice CSR as corporate philanthropy aimed at addressing socio-economic development challenges in Nigeria. CSR was mainly seen from a philanthropic perspective as a way of "giving back" to the society.

All respondents of the study agreed that CSR is obligatory in the Nigerian business society.

The reasons for this response included for example the need for private companies to complement the government in providing for the people. Some also argued that many of the companies in Nigeria make huge profits and ought to give back to society to gain legitimacy (Amaeshi, Adi, Ogbechie & Amao, 2006). Furthermore, Ajadi (2006), in a concept paper on Corporate Social Responsibility in Nigeria delivered to British Council Conference on CSR in Nigeria 2006, specifies some additional specific drivers for CSR in Nigeria which are as follows:

The failure of centralized, government controlled economy to develop the country

The extraordinary transaction cost to business of corruption and other failures of social capital

The history of conflict and waste in the extractive industry exemplified by the Niger Delta

The Nigerian population whose majority is under the age of 25 and is largely ignored despite the fact that they are critical to the survival and future prosperity of business and the country at large.

The potential benefit of a commercially active and productive country of over 120 million potential consumers

Corporate Social Responsibility - Development in Nigeria

Jackson, (2003) writes that despite the accomplishment of many international companies it does not seem as if the corporation have managed to transfer this success to the communities where they are operating due to lack of stakeholder participation and insight in stakeholders interests.

The report calls for "improved governance and capacity building, the pursuit of peace and security, investment in people, economic growth and poverty reduction, and increased and fairer trade". Businesses apparently have an imperative role in this transformation process, where a lot of efforts can be embedded within the framework of CSR.

The Nigerian oil sector is subjugated by multinational companies. To compensate for the government´s control failures and to protect their own business interests, the corporations often engage in CSR. The history of formalized CSR in Nigeria can be traced back to the CSR practices in the oil and gas multinationals. The CSR actions in this sector are mainly focused on remedying the effects of their extraction activities on the local communities. The companies provide pipe-borne waters, hospitals and schools. Many times these initiatives are unplanned and not always sustained (Amaeshi, Adi, Ogbechie & Amao, 2006).

According to a study on CSR in Nigeria (Amaeshi, Adi, Ogbechie & Amao, 2006) it appears that Nigerian companies are engaged in one CSR activity or the other. However, 85 percent of the respondents said that there is an awareness of CSR in Nigeria but without significant actions, while 7.7 percent either claimed there is almost no awareness with significant actions, respectively as shown in the table below.

Table.1: Level of awareness

The report above shows that there is more importance on community involvement, less on socially responsible worker relations and almost none with regard to socially responsible products and processes (Amaeshi, Adi, Ogbechie & Amao, 2006). Despite the fact that progress are made, Echefu and Akpofure (2003) declare that various statutes, the framework for the EIA process, and the entire environmental regulatory process, it disclose that many of the statutes are not working according to intentions. The authors stipulate that there is a duplication of the functions in the processes which results in serious bottlenecks and bureaucratic confusion in the environmental process of Nigeria. Summarizing above, there are positive trends with a number of national initiatives regarding corporate governance and environmental initiatives. At the same time, it still seems to be bureaucratic and institutional hindrances for the effective implementation of many of these initiatives.

Summary theoretical findings

Base on the findings above, unfolds a CSR idea that has trend up without the idea being structured within a general and established upon definition. Some argue that this has forced several issues since corporation do not share the same perceptive with regards to CSR definition, Inclusive, others have opted to see the lack of a common CSR definition as a possibility for the different actors who have been involved in shaping the CSR framework to develop CSR in accordance with their own interests.

Comparing the idea of CSR in the West to that of Nigeria, it is observe that the development of CSR in the West has gone through varieties of initiatives based on framework and guidelines from different stakeholders including the government. While that of Nigeria is different development based on the fact that it is at its early stage. The next chapter presents CSR Reporting in Nigeria

6. CSR Reporting in Nigeria

Long before now, corporate reporting deals with financial information to investors. However, the voluntary reporting of environmental impacts and initiatives in organization annual reports is obvious among many organizations making it known to the public that they have gone beyond making profit, but to as well give back to the society. In a report by Amaeshi (2006) explains that corporation can make known to the society about their CSR operations via their annual report and while this is being done, transparency and accountability is detected within the organization.

In other part of the world like Asia pacific nation, a comparative research by Williams & Pei (1999) shows that corporate reporting by Australia & Singapore communicate their disclosure on their website. Thus when compared to Malaysia & Hong Kong, there no imperative difference. Williams & Pei (1999) stated that disclosure is effective in the first two mention nations is because of their technological advancement which is seen as an effectual mechanism for delivering information to the public

However, in Nigeria the CSR reporting is relatively new and somewhat in the state of succeeding. But this development will systematically become a norm and also be embraced so as to picture most corporation and their operations a good image. Furthermore, the issue of environmental degrading can be trace back to Nigeria. A case of oil multinational in the Niger detla region of Nigeria, inclusive giant telecommunication industries, drug manufacturers and the banking sector as well.

In most case, MNEs Corporation sign agreement with local government to execute their industrial operations, not considering the importance of the host communities. As an aftermath of all this, has resulted into a violation of environmental regulations, giving a negative feedback to the oil communities as well as issue of radioactive radiation from uncontrolled mounted telecommunication mast.

A study by Olorode (2000) traced the root problem of the Nigeria Civil war of 1967-1970 to socio-political forces in the oil sector. Stake holders are much focused on how to strategically fit in the communities their corporate success in terms of social development and economic enhancement. Oil industry like Shell, are also a major players to CSR initiatives, bringing about job employment opportunities to the host communities. Macleod (2001) claims that despite the fact that corporate social reporting is very hard to measure, it is very imperative to communicate to the public, because of the quality and benefit attached to it. Doing that, it will at the end of the day present a good way of assessing the impact of operating a business.

Conclusively, CSR initiatives are being embraced momentously in Nigeria as firms endeavor to portray a good image in their host communities.

Statement of problem

As based upon the above publications, the problem in Nigeria is simple: Since CSR itself as an initiative by corporation is seen as charity donor, a way of "giving back" to the society , it is at the end of the day done in favour of the companies own economic interests. Inclusive, the Nigerian society's dependency on foreign aid is a major setback for the development of the communities. Furthermore, most of the big firms in Nigeria, has cultivated the habit of refusing to disclose to the public, their present CSR involvement and practices to the public via their annual report. Lastly, the lack of government support on CSR motives makes the whole process unethical eliminating the ability of CSR to grow and thrive, thus hindering country's transformation

Research question

Is there an obtainable model that will stabilize CSR initiatives to a larger extent in Nigerian permitting it to thrive?

What is the reason for CSR in most organization & how does Nigeria practice it?

What major project has oil companies contributed to economic growth and development through community development programmes in health, education, transportation, agriculture, etc in local communities?

Inclusive is there any level of host community's satisfaction with the oil firm's CSR, how relevant are the CSR project of the oil firm to the needs of the communities in Nigeria?

Research objectives

The objectives for this research study were to discover the current state of CSR reporting impacts within Nigeria, review published suggestions for improvement, and consider those suggestions in light of historical relevance within other developing countries.

Research methodology

This research was conducted via secondary source to gain insight into the current conditions of CSR initiatives in various organizations via their reporting in Nigeria. The study reviewed all available publications on the topic.

Discussions and Conclusion

As evidence in prior section, CSR in Nigeria is quite a fresh idea that kicked off via multinational (primarily from oil and gas sector) to remedy the effects of their extraction activities on the local communities). Coupled up is the banking sector who also integrated CSR practices into its operation as well as to maximize financial performance and both social and environment transformation. Inclusive, the giant telecommunication industries in Nigeria as well gave room for setting up of formal CSR strategies supporting various communities where they run their business operations. Again and according to theoretical findings, there are many of definitions of CSR which fit the different firm in question, just like how it fits into different organization in Nigeria.

From all indication, the CSR adoption has a link with the West. However, philanthropy as stated, receives a high priority in Africa including Nigeria. Meaning to say that most firm in Nigeria practice CSR as corporate philanthropy primarily basically to rule out the socio-economic development challenges. If it is seen as philanthropic motives by the originators, could it be seen as business motive in Nigeria? More to the point is the fact that, CSR in Nigeria has placed positive impact on the society, but not to a large extent. This is based on the fact that its approach most of the time is unplanned and gives an unsatisfactory response back to the host communities.

According to the CSR activities as claimed by the various mobile operators in Nigeria shown in the table (refer to appendix 1) all the mobile industries has exercise social responsibilities.

However, Olaleye (2011) explains that some multinational ICT corporation in Nigeria feels it is the right of the government to responsible for her citizens. Thus, they have not been adding values to Nigerians and they show less or no concern to Nigerians welfare.

Inclusive, CSR disclosure, in annual reports, as shown in (refer to appendix 2) depicts that the firms was more of higher significance than being socially responsible. But overall, there was an effort towards earning legitimacy among all their identified stakeholder groups by publishing their CSR efforts (Cormier et al, 2004, and Ismail and Ibrahim, 2009). Table 2, on the other hand shows that there was an endeavor towards giving back to the communities from where they got their economic benefits.

Lastly, companies need to treat their stakeholders as an asset and priority, because they add value to their business. When they establish a strong relationship with them, based on the fact they don't only care about profits, but also consider the host communities where they operate in, the public will always support them. It is also good for companies to meet the components of the triple bottom line as this can serve as a competitive edge for them. The reporting of the CSR doings in both the annual reports and company's homepage is not only for the public knowledge, but as part as satisfying the obligation.