IMPACT OF CORPORATE SOCIAL RESPONSIBILITY ON THE PROFITABILITY LEVEL OF A BUSINESS ENTITY
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IMPACT OF CORPORATE SOCIAL RESPONSIBILITY ON THE PROFITABILITY LEVEL OF A BUSINESS ENTITY
Chapter one
INTRODUCTION
1.0 Background of the Study
Corporate social responsibility is defined as a company’s ongoing commitment to behave ethnically and contribute to economic progress while increasing the equality of life of the workforce and their families, as well as the local community and society as a whole (Home and Watts 2006).
Today’s world is full with collaboration between providers of products and services and buyers of goods and services. To fulfil their objectives, the two sides must work together.
Companies today must rely on their clients or consumers to provide the necessary revenue, which leads to the company’s profitability. At the same time, customers who use the firm’s products expect the corporation to give back to the customers and society from which they have benefited. This is referred to as corporate social responsibility.
Recent developments have brought external duties to the forefront of corporate management’s priorities. It is difficult to ignore riots, customer advocacy, environmentalists, and other socially active groups, as well as government pressure.
In both the 1980s and 1990s, socially conscious issues were among the most pressing concerns for many businesses. As a result, corporations are adapting the concept of business corporations to society as a mode of corporate management.
In general, the profit motivation that drives enemy enterprise is profit. It is the motivations that lead owners, shareholders, and private owners to purchase shares and spend capital in businesses.
The profit motive drives the production of goods and services, and the profit earned secures the survival and extension of the business. Meanwhile, this is not to mean that immediate profit, which is critical to the growth, survival, and adaptation of an organisation, should be overemphasised.
A corporation’s lack of social responsibility at a specific moment, as well as the delivery of low-quality items to customers in the pursuit of quick profit, may result in a less positive corporate image of the business in the current dry.
In a highly competitive market for branded goods and services, a negative image may be devastating, causing sales to drop and profit margins to suffer significantly.
Many businesses and firms have long taken an interest in the communities in which they manufacture or sell their products. With the rise of huge corporations, this interest has expanded to include not only society but also education, health and social welfare, entertainment and the arts, and the environment.
According to Eneobong (1992), Andrew Cornegie in his book “The Gospel Wealth” mentioned two ideas from the standard declaration of corporate social responsibility:
1. The Charity Principle.
2. The Stewardship Principle.
3. The charity concept obliged more fortunate members of society to aid its less personable members, such as the unemployed, crippled, sick, and aged. The unfortunate may be added directly or indirectly through institutions such as churches and settlement houses.
The stewardship principle, drawn from the Bible, compels business and health professionals to see themselves as stewards or caretakers of their assets.
Cornegies believed that the wealthy held their money “in trust” for the rest of society and may utilise it for whatever purpose they judged appropriate or legal. However, he considered it as business’s responsibility to increase society’s wealth by expanding its own via sensible investment of the resources under its control.
Nwa (1999) identified the following as the key social duties that businesses owe to their stakeholders.
a. Shareholders – The company has an obligation to provide good returns on their investments and to pay reasonable dividends on capital.
b. personnel – To provide enough compensation that reflects a fair wage for a fair day’s labour, as well as to train and develop its personnel.
c. Customers – To supply high-quality products at reasonable prices, as well as timely delivery and after-sales service.
d. Government – To pay taxes and other levies on time and to help create job opportunities for citizens.
e. Community members – To provide recreation and enjoyment by supporting local events such as sporting activities, offering scholarship schemes to community members, and so on.
It is important to clarify that these environmental expectations on organisations are reasonable for the following reasons:
i. Business receives a charter from society and must meet its demands.
ii. Social involvement discourages further government rules and interventions.
iii. The organisation sells goods and services to the public. The society buys them, allowing businesses to profit and continue to exist.
iv. Improved social conditions help both society and business. The society benefits from job possibilities and goods and services, while the business benefits from hiring from the same society that consumes its products and services.
v. Businesses wield tremendous power, which should be matched by an equal level of responsibility.
vi. The enterprise’s internal actions have an impact on its external surroundings.
vii. Social responsibility promotes a positive public image.
viii. Social responsibility can also benefit stakeholders.
viii. The longer a firm remains in an environment, the greater the necessity for it to contribute to the development of that environment.
x. If social responsibility issues are not addressed, they will eventually have an impact on the general people, institutions, and organisations that operate in the environment. As a result, organisations help to solve social problems in their own interests as well as the interests of society as a whole.
1.1 Statement of the Problem
The following is the problem statement for the research work.
1. Many Nigerian firms do not give back to the society and community from which they derive profits.
2. It is difficult to define and assess what constitutes excellent social responsibility.
3. There are no guidelines for assessing corporate social responsibility.
4. There are no standards for judging ethics and performance in Nigeria’s business environment.
5. Companies, enterprises, and firms are often required to go above and beyond before fulfilling their social responsibilities.
6. As a result, many organisations view social responsibility as a waste of resources and money.
7. Many organisations believe that social responsibility is not part of their corporate aims.
1.5 Object of the Study
The study’s objectives are as follows:
1. Evaluate the numerous corporate social responsibilities of firms.
2. To assess the impact of corporate social responsibility on the company’s profits.
3. Evaluate how corporate social responsibility can be effectively managed.
4. To make necessary recommendations at the conclusion of the research project.
1.6 Significance of the Study
The successful completion of this study is expected to demonstrate the value of corporate social responsibility in a company entity.
This study will also act as a resource for potential future researchers who may be interested in this field of study.
The findings and outcomes of this research project will also help to contribute meaningfully to the huge body of information on corporate social responsibility that currently exists.
1.7 Definition of Terms
A. Stakeholders: These are the people who benefit from a firm. They include customers, the government, employees, shareholders, creditors, and suppliers, among others.
B. Shareholders: These are individuals who have a financial interest in the firm.
C. Management Account: This is a comprehensive financial picture of the business that is used to make decisions.
D. Cash flow: This is a budgeted examination of the sources and uses of monies.
E. Budget: A budget is a financial representation of a business that includes a statement of all revenue and costs.
F. Profitability: Profitability is defined as an organization’s surplus of production over its cost of production.
G. Productivity refers to the efficiency with which industrial output is carried out.
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