Corporate Social Responsibility In Developing Countries Sociology Essay Example

minimal empirical research on the nature and extent of CSR in developing nations. Baskin's (2006) study stands out as an exception; it explores reported corporate responsibility behavior from 127 leading companies across 21 emerging markets spanning Asia, Africa,
Latin America,
Central and Eastern Europe.
This study compares these firms with over 1,700 prominent companies from high-income OECD countries.

In terms of examining CSR specifically in developing nations within Asia,
existing literature primarily focuses on this region. The main countries under scrutiny are China,
India,
Indonesia,
Malaysia,
Pakistan,
and Thailand.

Other countries with lower attendance include Bangladesh, the Pacific Forum Islands Sri Lanka, and Vietnam. The Journal of Corporate Citizenship's specific issue on CSR in Asia (issue 13, spring 2004) offers a comprehensive view of the argument's position. Birch and Moon (2004), the editors, observe that CSR presentation in Asia differs significantly across countries, with various CSR issues being addressed (e.g. education, environment, employee well-being) and methods of implementation (e.g. foundations, volunteering, partnerships).

Many quantitative studies support the idea of disparity in corporate social responsibility (CSR). Chapple and Moon (2005) discovered that approximately 75% of large companies in India claim to have CSR policies and practices, while only 25% in Indonesia do. Thailand (42%), Malaysia (32%), and the Philippines (30%) fall somewhere in between. The researchers also suggest that CSR development in Asia occurs in three waves, with community engagement being the most established form, followed by socially responsible production processes and employee relations. Welford (2005) conducted a comparative study of CSR in 15 countries across Europe, North America, and Asia and speculates that the low response rates from Hong Kong, Malaysia, Mexico, and Thailand may indicate that CSR is less prevalent in developing countries.

The research findings reveal

that developing countries consistently exhibit lower CSR performance compared to developed countries. In particular, Malaysia shows the weakest CSR performance, while Thailand excels in external factors such as child labor and ethics, and Hong Kong performs well in internal factors like non-discrimination and equal opportunities.

Africa

Studies on CSR in Africa primarily focus on South Africa, but also include research on Cote d'Ivoire, Kenya, Nigeria, Tanzania, Mali, and Zambia. Limited research exists specifically analyzing industry sectors; however, high impact sectors like agriculture, mining, and petrochemicals are frequently mentioned. Two notable sources of literature on this topic are Corporate Citizenship in Africa and the Journal of Corporate Citizenship special issue on CSR in Africa.

The study reveals that academic institutions and researchers in Africa have limited focus on corporate citizenship. Compared to the literature on corporate social responsibility (CSR) in developing countries, there is a strong emphasis on business ethics in Africa. In fact, 42% of all articles on CSR in Africa over the past decade are related to business ethics. This emphasis can be attributed to both ethics-focused journals and historical discussions about topics like colonialism, apartheid, corruption, and fraud.

In contrast, Latin America has received minimal attention when it comes to coverage of CSR among developing country regions. The main focus has been on Argentina, Brazil, and Mexico; however, Nicaragua and Venezuela also have some presence.

The Journal of Corporate Citizenship's specific issue on CSR in Latin America is a valuable collection of documents. De Oliveira (2006) states that the implementation of CSR in Latin America has mostly been influenced by socio-economic and political conditions, which have worsened various environmental and social problems like deforestation, unemployment, inequality, and crime.

Drivers

Having

given an overview of literature classifications on CSR in developing countries and insight into CSR in a regional context, I will now explore what distinguishes CSR in developing countries from its typical manifestation in the developed world - represented by America and Europe. A useful approach to analyzing this is studying the different drivers for CSR in developing countries. While these drivers are not exclusive to developing countries, they collectively demonstrate a unique understanding, motivation, and practice of CSR in emerging economies.

Political Reform is closely connected to Corporate Social Responsibility (CSR) in developing nations. The process of socio-political reform influences business conduct by incorporating social and ethical concerns. Latin America provides a prominent example as the region has experienced significant changes since the 1980s, such as democratization, liberalization, and privatization. These transformations have compelled businesses to assume greater accountability for social and environmental issues (De Oliveira, 2006).

In South Africa, the transition towards democracy and addressing historical injustices has played a crucial role in promoting CSR. This can be observed through enhanced corporate governance (Roussouw et al., 2002), corporate efforts for societal improvement (Fourie and Elo, 2005), measures for black economic empowerment, and business ethics (Malan, 2005).

Visser (2005a) provides numerous instances of legislative reform in South Africa between 1994 and 2004 that are related to CSR in socio-economic, environmental, and labor-related areas. Furthermore, several Central and Eastern European countries have prioritized CSR due to the potential for European Union membership, as it is considered a best practice within the EU (Baskin, 2006).

Cultural Tradition

While CSR is often viewed as a Western concept, particularly in its modern form, there is evidence suggesting that developing nations' understanding of CSR

is heavily influenced by long-standing indigenous cultural traditions centered around philanthropy, business ethics, and community involvement. In Latin America specifically, Sanborn (2002), cited by Logsdon et al. (2006), emphasizes that "diverse traditions of community self-help and solidarity have deep roots in the region's pre-Hispanic civilizations and include the mutual aid societies, trade unions, and professional associations that emerged in the 19th and early 20th centuries" (p.).

2).

Socio Economic Precedences

In developing countries, the socioeconomic environment and the resulting development priorities have a significant impact on CSR. According to Amaeshi et al. (2006), CSR in Nigeria is mainly concerned with addressing socio-economic challenges such as poverty relief, healthcare provision, infrastructure development, and education. This differs greatly from Western CSR priorities which include consumer protection, fair trade, green marketing, climate change concerns, or socially responsible investments.

Similarly, CSR approaches imported from developed countries may not address important issues like poverty and tax avoidance in Latin America (Schmidheiny, 2006). Conversely, locally developed CSR approaches are more likely to tackle social and environmental problems specific to the region such as deforestation, unemployment, income inequality, and crime (De Oliveira, 2006). Michael Spicer, former senior executive for mining company Anglo American and CEO of the South Africa Foundation, argues that aligning CSR with the socio-economic priorities of a country or region benefits business. He also suggests that companies in developing countries should actively shape the socio-economic and political landscape to create a business-friendly environment (Middleton, 2005). The response to the socio-economic challenge of HIV/AIDS is an example (Brennan and Baines, 2006).

Crisis Response

CSR responses often arise in various crises associated with developing countries.

These crises encompass economic, societal, environmental, health-related, and industrial challenges. Newell (2005) highlights

the economic crisis experienced in Argentina during 2001-2 as a notable milestone that significantly impacted corporate social responsibility (CSR), prompting debates about the role of businesses in poverty alleviation. Similarly, Dunfee (2006) identifies climate change and HIV/AIDS as crises compelling CSR initiatives in developing nations. Often, CSR actions, especially of a philanthropic nature, are more likely to be triggered by catastrophic events with immediate consequences.

The strong corporate response to the Asian tsunami (Fernando, 2007), the Bhopal catastrophe in India (Shrivastava, 1995), and the hanging of Ken Saro-Wiwa in Nigeria (Wheeler et al.,2002) has put pressure on companies to demonstrate corporate social responsibility.

In this context, it is important to recognize that there are shortcomings in government action. Another chapter of this book examines CSR as a form of governance or as a response to governance challenges (Levy and Kaplan, Chapter 19).

Corporate social responsibility (CSR) in developing nations is often seen as a solution to the governance gap caused by inadequate or corrupt governments. These governments fail to provide crucial social services such as housing, infrastructure, healthcare, and education. This perspective aligns with the prevailing trend observed in developing nations characterized by ineffective institutions and poor governance. Consequently, private actors like families, religious groups, or increasingly businesses are frequently tasked with addressing these issues.

In addition, proponents of CSR argue that companies can contribute to improving living conditions due to the difficulties faced by initiatives led by developing country governments. Moon (2002a) suggests that this reflects a broader shift towards "new governance" approaches where governments seek alternative ways to operate and share responsibilities. This shift may be driven either by an overwhelming burden of responsibilities or an acknowledgment

that they do not possess all the solutions for society's challenges. Often, this entails establishing social partnerships between non-profit and for-profit organizations.

Moon et Al. (2005) note that this is an example of corporations adopting a 'civic republicanism' approach, where they intervene in areas previously under government authority through privatization or welfare reform. Matten and Crane (2005) further suggest that companies should engage in citizenship activities in areas where government has not yet established citizenship rights. These activities may involve improving working conditions in sweatshops, ensuring employees receive fair wages, and funding education for child laborers even without legal requirements. However, there are many critics of this approach.

According to Hamann et Al. (2005), CSR is an unequal response to administrative gaps and a more proactive approach is needed to guide local administration towards accountability and inclusiveness. Blowi eld and Frynas (2005) also question whether CSR serves as a stepping-stone towards better national regulation in developing countries or if it is a part of a longer-term effort to overcome the limitations of territorially prescribed judicial and welfare mechanisms in regulating the global economy (p. 509). The approach of addressing administrative gaps in CSR also raises concerns about dependencies, particularly when communities rely on companies for social services while these companies primarily prioritize their responsibilities towards stockholders. This may lead to cost-cutting measures or disinvestment from certain regions if it is more profitable elsewhere. Additionally, there is the issue of perceived complicity between governments and companies, as witnessed in the case of Shell in Nigeria (Ite, 2004).

Market Access The other side of the socio-economic priorities driver can be seen as an untapped market for unfulfilled human needs. This

idea is the foundation for the growing body of literature on 'bottom of the pyramid ' schemes, which focus on turning the four billion poor people in the world into consumers (Prahalad and Hammond, 2002; London and Hart, 2004; Rangan et al., 2007). However, it is important to note that there are critics and challenges associated with businesses entering the development sphere (Harcourt, 2004). Additionally, CSR can also be viewed as a facilitator for companies in developing countries seeking access to markets in developed countries. For example, Baskin (2006) identifies competitive advantage in international markets as one of the key drivers for CSR in Central and Eastern Europe and Asia.

Similarly, Araya (2006) discovered that among the top 250 companies in Latin America, those with an international gross revenues focus were five times more likely to have CSR coverage compared to companies that sell products locally or regionally. This finding holds particular significance as developing countries continue to globalize and adhere to international stock market listing requirements, which include various forms of sustainability performance reporting and CSR code compliance (Visser, 2005a). Chapple and Moon's (2005) study of seven Asian countries reaffirmed this trend by finding a strong correlation between international exposure, whether through international sales or foreign ownership, and CSR coverage. Additionally, CSR is frequently utilized as a collaborative strategy for entering or cultivating new markets.

For example, the AED/Mark Partnership with Exxon Mobil was established to develop a viable market for insecticide-treated mosquito nets in Africa and improve access to these nets for pregnant women through targeted subsidies (Diara et al., 2004). Similarly, ABB utilized a partnership approach to corporate social responsibility (CSR) in order to

implement a rural electrification project in Tanzania (Egels, 2005).

International Standardization

Despite the debate surrounding the imposition of Western CSR approaches on developing countries, there is ample evidence that CSR codes and standards play a crucial role in driving CSR in these nations. As mentioned earlier, Baskin's (2006) study of CSR practices in emerging markets reveals increasing adoption rates of ISO 14001 and the Global Reporting Initiative's Sustainability Reporting Guidelines.

Codes are frequently utilized as a corporate social responsibility (CSR) response in developing sectors like agriculture, chocolate production, and textiles. They are also employed to address urgent social issues in developing countries such as child labor and the role of women in the workplace. CSR is often driven by standardization imposed by multinational corporations, aiming to achieve global consistency across their subsidiaries and operations. For instance, a study conducted in Asia revealed that multinational companies are more inclined to adopt CSR compared to those solely operating in their home country. However, the CSR practices of these multinational companies tend to differ from the profile of the country they operate in, rather than reflecting their country of origin (Chapple and Moon, 2005).

Economic Duties

The significance of companies' economic contribution in developing countries cannot be underestimated, as they often face a lack of foreign direct investment, high unemployment rates, and widespread poverty. Instead of perceiving this as a negative aspect, Fox (2004) suggests viewing it as a development-oriented approach to corporate social responsibility (CSR) that prioritizes the enabling environment for responsible business practices in developing nations and emphasizes both economic and equity aspects of sustainable development. This approach aligns with the European perspective on economic responsibility,

which differs from the profit-focused approach prominent in the USA (Crane and Matten, 2007a). In the context of developing countries, CSR highlights the significance of "economic multipliers," such as investment and income generation, production of safe goods and services, job creation, investment in human capital, establishment of local business connections, promotion of international business standards, support for technology transfer, and development of physical and institutional infrastructure (Nelson, 2003).

For this reason, companies operating in developing countries increasingly report on their economic responsibilities through the creation of 'economic value added' statements.

Ethical Responsibilities

According to Crane and Matten (2007a), ethical responsibilities hold a higher priority in Europe compared to the United States. However, in developing countries, ethics seem to have the least influence on the CSR agenda. This does not mean that developing countries have been unaffected by the global trend towards improved governance (Reed, 2002). In fact, the King Reports on Corporate Governance in South Africa in 1992 and 2002 have been at the forefront of including CSR issues worldwide.

The 1992 King Report was the first global corporate governance code to discuss stakeholders and emphasize the importance of business accountability beyond just shareholders (IoD, 1992). Likewise, the 2002 revised King Report was the first to incorporate a section on integrated sustainability reporting, covering social, transformational, ethical, safety, health, and environmental management policies and practices (IoD, 2002). While this progress is encouraging, it remains the exception rather than the rule. Developing countries typically dominate Transparency International's annual Corruption Perception Index and Global Corruption Barometer rankings. Moreover, respondents from these countries generally agree that corruption still significantly affects business. The World Bank's (2005) Investment Climate Survey conveys a similar message.

Decisions In summary, I have proposed that CSR in developing states exhibits the following distinct characteristics (Visser et al., 2007). CSR tends to be less formal or institutionalized compared to the CSR standards often employed in developed states, such as CSR codes, standards, management systems, and reports. In cases where formal CSR is implemented, it is typically done so by large, prominent national and multinational corporations, particularly those with renowned international brands or those aspiring to attain global recognition.

Formal CSR codifications, criterions, and guidelines that are most relevant for developing countries are typically focused on specific issues such as trade, supply chain, and HIV/AIDS, or specific sectors like agriculture, textiles, and mining. In developing countries, CSR is often associated with philanthropic activities or charity, such as corporate social investments in education, health, sports development, the environment, and other community services. Making an economic contribution is often considered the most important and effective way for businesses to create a social impact.

Through investing, occupation creative activity, revenue enhancements, and engineering transportation, businesses often find themselves engaged in the provision of societal services that would be considered the responsibility of the government in developed countries. This includes investing in infrastructure, schools, hospitals, and housing. The prioritized issues under the corporate social responsibility (CSR) umbrella are often different in developing countries. For example, they involve tackling HIV/AIDS, improving working conditions, providing basic services, ensuring supply chain integrity, and alleviating poverty. Many of these CSR issues in developing countries pose dilemmas or trade-offs. Examples include development versus environment, job creation versus higher labor standards, and strategic philanthropy versus political governance.

The concept and implementation of corporate social responsibility (CSR) often aligns

closely with traditional community values and spiritual beliefs in developing countries. For example, in South Africa, the principle of African humanitarianism (ubuntu) and in China, the idea of a harmonious society (xiaokang) reflect this resonance. The emphasis on CSR in developing countries can serve as a catalyst for identifying, designing, and testing new CSR models and business theories. For instance, Prahalad's Bottom of the Pyramid model and Visser's CSR Pyramid for Developing Countries can be applied in these contexts.