COLLEGE OF BUSINESS AND MANAGEMENT SCIENCES (COBAMS)

SCHOOL OF BUSINESS

PROGRAM: MASTER OF PUBLIC INFRASTRUCTURE MANAGEMENT

(MPIM)

PIM 7102: MORDERN MANAGEMENT TECHNIQUES

GROUP 2 COURSE WORK/PRESENTATION

NAME REG. NUMBER SIGNATURE

TURYAGYENDA NDYABEGYERA 2020/HD06/16612U

LUSWATA BRIAN BALAM 2020/HD06/16600U

FACILITATORS:

DR. PETER TURYAKIRA (PHD)

PROF. UMAR KAKUMBA

DATE: 1st April 2021

GROUP 2 PRESENTATION

QN: With reference to organizational experiences, analyze the rationale and challenges
of Corporate Social Responsibility

1. Corporate Social Responsibility (CSR) Defined

There is no universally accepted definition of Corporate Social Responsibility. One
scholar has gone as far as asserting that, “We have looked for a definition and basically
there isn’t one.” (Jackson and Hawker, 2001). However, there is a wealth of definitions
on the subject which have contextualized CSR in various dimensions. In spite of the
various definitions, CSR has been consistently been referred to in five dimensions,
namely: a) the social (relationship between the company and society); b) economic (as
a way of maximizing business prospects and competitiveness); c) Stakeholder dimension
(interaction with shareholders, stakeholders, employees, suppliers, community, etc); d)
environmental cause (protecting the natural environment); and, e) voluntary
contribution not prescribed by law (based on ethical values). (Dahlsrud, 2008)

CSR has been generally defined as the continuing commitment by a business to behave
ethically and contribute to economic development while improving the quality of life
of the work force and their families as well as of the local community and society at
large (Moir, 2001). In the general scheme of things, CSR is an indicator of good
corporate governance (Simonis, Udo, 2005)

1..1. Classifications of Corporate Social Responsibilities

These responsibilities have been classified by different scholars with minor modifications
but the underlying theme and substance is as follows:

a) Economic responsibilities: be profitable to shareholders, provide quality goods

and services to clients, and provide good jobs to employees;
b) Legal responsibilities: a requirement to comply with the laws of the land and
play by the rules
c) Ethical responsibilities: conduct business in a morally upright manner;
d) Philanthropic: promote good causes that contribute to the alleviation of poverty
and betterment of society. (Lantos, 2002)
1.2 Theories of Corporate Social Responsibility
The following CSR theories have depicted and guided the present practise of corporate
social responsibility (CSR): Classical theory. Social Contract theory; Instrumental theory;
Stakeholder theory; and legitimacy theory.

1.2.1 Classical Theory

This theory is to the effect that the objective of the organization is to maximize profit
in the best interest of the shareholders (Friedman, 1970). This has been criticized for its
lack of concern for other stakeholders such as employees and the customers.

1.2.2 Social Contract theory

This theory is to the effect that organizations have an obligation to the society hence,
there is direct and indirect mutual obligation between business and society (Dusuki,
2009: 5).

1.2.3 Instrumental theory

Instrumental theory is to the effect that organizations conduct CSR as a means to achieve
profits (Van der Merwe and Wöcke, 2006: 5). That philanthropic investment is geared
at obtaining a competitive advantage. Therefore, CSR activities are a form of business
operation to maximize profits for shareholders (Rodríguez and LeMaster, 2007: 7)

1.2.4 Legitimacy theory

This is premised on the fact that CSR is a means to giving a business the social
acceptability before the public. That businesses can build a good reputation in the eyes
of the public and employees through implementation of CSR. (Kuznetsov and
Kuznetsova, 2008: 5)

1.2.5 Stakeholder theory

This theory is premised on the notion that businesses derive their reputation and
survival by performing their social responsibility to all parties affected by their actions.
These stakeholders are not limited to its shareholders but also includes employees,
suppliers, customers and the general public. (Branco and Rodrigues, 2007: 5).
 2. Rationale of Corporate Social Responsibility
While the principal objective of an organization is to make profit for its shareholders
(especially in the case of a private company), CSR as a management concept helps
organizations integrate social and environmental concerns in their business operations
and interaction with their stakeholders. The benefits are plentiful and can based be
derived from the various dimensions that underpin the theories and approaches of CSR.

2.1 CSR as a business/economic growth mechanism

CSR is not a philanthropic activity which businesses invest in without expecting a return
(Turyakira, 2014). Sanjeev Gupta & Sharma (2009) assert that CSR is a business
opportunity which has emerged as an inescapable priority for business leaders and a
response to new conditions, new challenges and opportunities.

Firms which integrate CSR in their activities have the potential to be successful
financially due to the fact that it breeds customer satisfaction, job satisfaction and
corporate image (Cochran, 1984)

The Uganda Top 100 Mid-sized Companies Survey for 2019 notes that some companies
have become attractive brands to their clients due to their CSR activities. Ugandan
companies like Airtel and Nile Breweries Limited have become endeared to many
Ugandans and continue to appear in the list of the most reputable brands due to their
sponsorship of the Uganda Cranes. The brand image created by these CSR activities
inevitably increases sales and business prospects and consequently this creates a ripple
economic effect as these brands are consistently ranked as top tax payers in Uganda.

Other business-oriented activities such as fair pricing, product safety, ethical advertising
and meeting contractual obligations help an organization to improve its corporate
governance and boosts business growth. Abor and Adjasi, (2007) notes that, “good
corporate governance underpins market confidence, integrity and efficiency and hence
promotes economic growth and financial stability”.

A well implemented CSR strategy will bring along competitive advantages such as
enhanced access to credit and investment opportunities, increased sales and profits, and
cost savings. For example, UNRA has made some costs savings through community
engagements whereby some members of the community have donated free land for
the extraction of gravel materials for the construction of public roads. In many instances,
consumers are more willing to buy from a socially responsible business compared to
one that is socially irresponsible (Asongu, 2007: 7).

On the other hand, Ramaswamy, V et al (2008) opines that firms with less corporate
social responsibility take long to grow compared to those with great corporate
responsibility practice as the latter use the corporate governance principles to add the
required synergy for growth.

2. 2. Corporate social responsibility as an environmental safeguard

Corporate Social Responsibility is a useful tool for the ever-increasing number of

organisations concerned about social and environmental responsibilities and are
interested in improving their accountability and efficiency in environmental
management. For example, it is a legal requirement for firms that are going to undertake
activities which might affect the environment to undertake an Environmental Impact
Assessment. In the oil and gas sector, all the operators namely TOTAL, CNOOC and
Tullow Oil have complied with this obligation. The World Bank requires that all bidders
for its infrastructure funded projects demonstrate that they will implement
environmental and social safeguards such as protecting wetlands, use of metallic
scaffolds to reduce deforestation etc. UNRA also requires that all contractors on its road
construction projects put in place measures that protect the environment.

Many companies have thus developed strategies of protecting fragile eco-systems by

putting in place measures to control pollution, compliance with environmental
regulations set by NEMA, recycling and green campaigns to remediate environmental
degradation.

2.3 Corporate social responsibility is a social contract

This social-contract theory is a useful framework for understanding the relationship

between businesses and customers. Customer-perceived value is enhanced when
businesses practice ethical behaviors that bridge the gap between business and the
clients. Turyakira (2012) makes the case that customer value, created through brand-
building efforts, leads to long-term profitability and competitive advantage.
Organizations can apply the social contract theory to interact with society. While
businesses must follow laws and regulations, they also must meet implicit non-legal
expectations. These expectations are premised on the idea of corporate philanthropy,
or doing good causes. Organizations can give back to the community and as a way of
appreciation for the revenue streams they get from the society by volunteering in local
charities or schools, donating products and running environmentally friendly
campaigns. These things show that a business is serious about its social contract and that
it recognizes the value of giving back. A leading philanthropist such as MTN Uganda
has “Senkyu” initiatives aimed at giving back to its clients through gift hampers, free
airtime and data etc.

As a result of this social contract, organizations are expected to do CSR in response to

the wants and needs of its stakeholders, including customers, employees and the public
at large. They are expected to contribute to infrastructure development, sponsoring
treatment for indigent patients, providing work-place incentives to employees such has
material and psycho-social support. By investing in a social business, CSR can contribute
to the development and success of a larger social impact ecosystem.

2.4 CSR as a tool of maximizing stakeholder satisfaction

While the overarching objective of the organization is to maximize profits for the
benefit of its shareholders, there are other stakeholders that benefit from CSR. These
include its employees, customers, suppliers and the general public. (Turyakira, 2012)

CSR creates an opportunity for increased client satisfaction through client engagement,
support for social causes, and application of good business ethics such as fair pricing and
price discounts. For example, UNRA has a scorecard through which it evaluates its
contractors on how best they benefit the community through their CSR activities. This
evaluation entails parameters such as whether the contractor has employed the
community, has implemented the sexual harassment policy, sourced local materials etc.

In the same vein, employees are beneficiaries of a well implemented CSR strategy. The
Employment Act (2006) and the Occupational Health and Safety Act (2006) require
employers to provide safe and conducive environments to their employees. Even in the
absence of compelling legislation, Employers practicing CSR tend to provide better pay
and other material incentives to their employees which enhances their productivity.
Employees enjoy working with companies with a good public image and are committed
to promoting good causes.

The benefits to the wider public are seen through corporate philanthropy such as
sponsoring social welfare programs and poverty alleviation initiatives.

2.5 Corporate Social Responsibility as a philanthropic event

As part of their social contract, organizations are expected to voluntarily support good
causes. There is an ethical responsibility to voluntarily give back to the society from
which organizations derive revenue. The advent of the COVID-19 pandemic ushered in
a new wave of Corporate Social Responsibility in Uganda as many organizations
contributed generously towards the government’s COVID-19 Relief efforts. Many
public-spirited companies approached the Ministry of Health with donations of life-
saving medicines and Personal Protective Equipment for the front-line Health Workers.

While many companies use philanthropy as a business tool to enhance their public
image and thus increase their sales, nonetheless the public benefits from these initiatives
as these companies respond and contribute to relief efforts in times of disaster and
natural calamity. In these situations, CSR is seen as funds supplementary to the funds
being spent by the government for example the COVID-19 relief fund in Uganda which
is a result of CSR.

3. Challenges of Corporate Social Responsibility

Turyakira (2017) summarizes the challenges of CSR as lack of specific corporate

strategies, financial resources and skills.

3. 1. Financial constraints

The problem with CSR is that it is usually the bigger organizations (e.g. MTN, Nile
Breweries, Airtel) with bigger resources that practice it. Most organizations in Uganda
are Small and Medium Enterprises (SMEs), are undercapitalized and employ less than 5
but with a maximum of 50 employees with the value of assets, excluding land, building
and working capital of less than Ug.shs 50 million (US$ 30,000), and the annual income
turnover of between Ugshs.10-50 million (US$6,000-30,000). (Kasekende, 2003).
SMEs are the largest employer of workers and not the multinationals, and this is typical
of developing countries like Uganda where about 80% of the population is employed
by the SMEs (Mullineux, 1997). The lack of capital and access to credit therefore makes
CSR a distant dream and luxury for most Ugandan organizations.

3.2 Voluntariness of CSR

Currently there is no law on enforcement of CSR in Uganda. While the Companies Act
of 2012 provides a comprehensive set of requirements for registered companies such as
financial reporting, demarcation of rights and duties between staff and management
among other corporate governance practices, the Act is however silent on CSR. The
aforesaid state of affairs means that majority of Uganda’s SMEs that are unregistered
and operate as sole proprietorships do not comply with corporate governance. Many
SME managers do not find the need to put into practice such principles, after all it is
discretionary.

3.3 Poor management and Socio-cultural attitudes

One of the main challenges facing organizations that want to move to practice
corporate social responsibility is getting buy in or support from the top executives. In
most cases, many people in the company will question whether CSR will produce
financial value. In Uganda, CSR is largely a non-existing entity in the public sector. It is
mostly perceived as an alien concept that is meant for the private sector.

Secondly, given the low levels of education and ignorance, most managers of SMEs do
not see the relevance of the concept and are not skilled to develop strategies and apply
these concepts. Wanyama (2006) blames corporate governance failure on the fact that
majority of SMEs in Uganda are poorly managed. They operate as sole proprietorships
that employ unqualified relatives and often fuse ownership with administration and
management. The fact that there is no single SME listed on the stock exchange is an
indication of the low level of compliance of Uganda’s SMEs.
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