What are the firm’s ethical responsibilities to society and how does taking care of these responsibilities lead to sustainability?
Firms and Companies operate within a society, therefore (beyond earning revenue for shareholders) they ought to behave responsibly and ethically all other stakeholders – which includes the environment (where customers come from) and their immediate community.
Although the Government has the responsibility to take care of its people, the firm should be ready to make its own contribution. Taking into account the interest of the society will eventually be in the interest of the company in the long term because they are inextricably linked to the society. This has now come to be termed Corporate Social Responsibility. According to the European Union, Corporate Social Responsibility is
“a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with stakeholders on a voluntary basis”.
The United Nations came up with the “UN Draft Norms on the Responsibilities of Transnational Companies and other Business Enterprises” which seeks to establish an international framework for mandatory standards of Corporate Social Responsibility, Human Rights Compliance and environmental protection.
The company has to first comply with the law of the land, have a sense of propriety (in their products and process); regard their Shareholders (through stewardship and ethical profit-making), be transparent to their customers; treat employees ethically; fulfil contracts and obligations; – then engage in Societal development.
In Nigeria, CSR is typically focused on philanthropy, charity, donations, event sponsorship, and so on. In reality, this is only one aspect of CSR. This CSR practice in Nigeria may be related to our agrarian way of life and family/kinship production pattern. Less emphasis is placed on employee relations, product and process improvement, environmental improvement, and so on. It is hoped that CSR Expectations will be more strictly enforced in Nigeria. Donations and charity may alleviate some of the effects of poverty in society, but their effects are only temporary. As a result, a company should take a humanistic approach to CSR by designing and developing people-centered solutions and organizations that empower members of society.
For example, rather than donate N50,000,000 to a musical organization, an instrument production Company can invest in research and development to create way cheaper yet quality products. Or Rather than donating N15,000,000 to a rural organization, a firm could establish a factory in the area to create long-term employment. Or rather than doing a N100,000,000 Bonanza draw, a Company can invest that money into providing stable power supply to a local community.
The truth is that society requires more opportunities rather than alms or charity. Members of society will thrive when they have access to a supportive environment. It is preferable to teach a society how to fish rather than to provide it with fish. To foster greater development in Nigeria, firms must shift their societal obligations from a donation mentality to an investment mentality. Although donations are possible, they should be of modest magnitude.
It is worth noting, however, that there are limitations and tax waivers or repercussions for assistance. As a result, a company’s assistance or CSR activities should be reasonable, genuine, and not done in such a way that the company’s profit is eroded. Also, political donations do not qualify for Corporate Social Responsibility and firms should avoid sponsoring political parties or politicians as Section 221 of the 1999 Constitution prohibits such.
Finally, a company should be conscious of the environmental impacts of its activities on the environment and should never intend to cause harm to the environment or any member therein. The drive for profit should not trump the interest of members of the community. The case of Trafigura shows how careless decision making and intentional harm-causing decision, could end up to be costlier in the long run. Where a company discovers that a harm has been done to the environment or society, it should ameliorate and remediate such.
In summary, the Company should:
– Make Ethical business decisions that positively impact the society.
– Ensure it operates in an ethical manner (eschewing bribery, nuisance, and other vices).
– Avoid waste and environmental pollution.
– Be Accountable in its financial reporting and transparent in its disclosures to customers and members of the society.
– Respect the rule of law.
– Create and respect ethical values (as was seen in the case of SouthWest Airlines).- Leave a positive impact on its society and support like endeavours.
Doing these will lead to sustainability in the long run.