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Business Studies Grade 12

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Topic 1: Social Responsibility and Corporate Citizenship / Corporate Social Responsibility and Corporate Social Investment

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Introduction: The way in which business operations are conducted has changed over the last two decades. Businesses have not always been as committed to corporate social responsibility as they are today. Corporate Social Responsibility (CSR) became a popular topic in the 1990s when the political environment in South Africa began to change.

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Introduction: The word social refers to society and to the public at large. The word responsibility refers to accountability and duty. Social responsibility refers to the publics duty to further the interests of society. Businesses are corporate citizens- this means that businesses have a responsibility towards society. Corporate Social Responsibility (CSR) refers to a businesss responsibility to further the interests of the community in which it operates. CSR is about making profit in a responsible way- i.e conducting business by taking into account the impact of a businesss operations on the environment, employees and the community in which it operates.

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Introduction: Triple bottom line( people, planet, profit) serves as a guideline for responsible business practice: Environmental sustainability (planet) Business operations have an impact on environmental resources. Businesses must attempt to strike a balance between impacting the environment and maximising profit. Economic sustainability (profit) Business should aim to achieve ling-term growth and sustainability, instead of maximum short-term profit. Social sustainability (people) Businesses have a responsibility towards employees and towards the community in which they operate. This is achieved by, for example: Ensuring that business operations are not harmful to the community. Ensuring that employees are working in a safe and healthy working environment.

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Introduction: CSR includes advancing the well-being of employees and other stakeholders: Initiative to advance the well-being of others in a business context: Employees Employee motivation initiatives: Offer incentives when performance targets are met. Create opportunities for promotion. Provide employees with job security. Employee development initiatives: Skills training. Learnership programmes. Mentorship programmes. Rehabilitation and wellness initiatives: Assist employees who suffer from addiction problems with rehabilitation. Offer counselling to employees who experience personal trauma. Stress management initiatives: Provide employees with access to recreational facilities such as gyms. Create awareness of the correlation between stress and disease. Arrange wellness-days for employees to have their cholesterol and blood pressure measured by medical professionals. Organise team building events Treat employees fairly and with respect.

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Introduction: Initiatives to advance the well-being of others in a business context: Clients Ensure that prices are market-related and fair. Advertising should not be false, misleading or deceptive. Ensure production and delivery of quality goods and services. Society A business should consider the impact of its operations on society. A business can contribute to the well-being of society through CSI projects, such as: IADS awareness projects. Projects to raise funds for less fortunate people. Projects to raise awareness of violence against women and children. Projects to provide shelter for homeless people. Anti drug abuse campaigns. Environment A business should consider the impact of its operations on the environment, by: Complying with all environmental laws. Contributing money towards environmental research. Refraining from testing products on animals. Minimising pollution. Finding alternative energy sources.

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Definition of Social Responsibility: It is an ethical objective aimed that all individuals and organizations have a responsibility to benefit the community as a whole. It also includes the awareness of the consequences of actions for the community and environment. This responsibility ma be in the following forms: Passive: avoidance of any actions that may damage the community and environment. Active: take steps that can benefit the community by initiating projects that have a positive impact on individuals, community and society.

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CORPORATE SOCIAL RESPONSIBILITY (CSR): Definition: The way in which businesses manage their time to influence their stakeholders (individuals, organizations who somehow made a commitment to the business) in a positive way. To ensure the business own survival in the future the business should take care of the well-being of its stakeholders. A continuous objective of the business to behave ethically in order to make a positive contribution to economic development. CSR implies that businesses recognize the need to give back to the community in a sustainable manner. The focus will vary from business to business because the focus of the business CSR initiatives differs, e.g. some businesses focus on community involvement, while others focus on the manufacture or distribution of socially responsible products.

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CORPORATE SOCIAL RESPONSIBILITY (CSR): The basic principles of CSR are: Businesses accept their responsibility for their impact on society and the environment. Businesses react responsibly to the behaviour of their stakeholders, e.g. ensure that they support ethical suppliers. The relationship between the business and the broader community must be managed effectively to increase profits, but also to add value to the community. Primary social responsibility: meet the needs of the stakeholders who are directly connected with the business, e.g. owners, employees, customers, suppliers and competitors. Broad social responsibility: refers to the broader community, not just clients, which also include various levels of government.

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Corporate Social Responsibility (CSR) Nature of CSR: Businesses implement CSR programs for various reasons: Some see it as a sign to promote their image of the fulfilment of social responsibility, others are driven by the philanthropic culture (do something positive in the lifting of the community). Most businesses, however, are motivated by a combination of factors to implement their specific CSR programs, e.g.: The community expects it from the business and businesses would like to see that they fulfil these expectations. Economic benefits for the business (avoiding penalties and legal expenses and acceptance of credit because they do something good, e.g. reducing the carbon footprint). Ethical considerations such as responsible business agreements and relationships in the workplace.

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CORPORATE SOCIAL RESPONSIBILITY (CSR): The nature of CSR: We can say: CSR aims to protect the natural environment in which a business operates. CSR means not pursuing profit at any cost. CSR aims to be sustainable. CSR aims to create a safe working environment for employees. CSR is transparent. CSR builds a businesss reputation. CSR is relevant. CSR is ethical. Claims from government because of limited resources available to the government: The CSR programs that the business undertakes should positively contribute to the lifting of the community in which they work. It must be strategic in nature and not just random attempts without a positive impact on the community. Social Responsibility and Corporate Citizenship / Corporate Social Responsibility and Corporate Social Investment

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Corporate Social Responsibility (CSR) Process of CSR: Assess a business in terms of financial, economic and social sustainability. Identify areas for improvement in terms of the extent to which a business considers the impact of its operations on the environment and community. Devise a strategy to address the weaknesses identified in the previous step. Businesses must then decide what Corporate Social Investment to make: Identify a need in the community which can be addressed through CSI. Register CSI-projects and programmes with relevant institutions. Draw up a budget for the chosen projects. Ensure beneficiaries are legitimate.

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Corporate Social Responsibility (CSR) Benefits of CSR for businesses: CSR helps build a businesss reputation. Businesses with good reputations attract good candidates. CSR contributions are awarded BEE points. Employees feel more positive about employers who look after employees and conduct business in a responsible way. CSR-programmes help build customer loyalty. CSR-programmes help create a positive image of businesses among consumers. Many investors prefer investing in businesses that conduct business ins a responsible way. CSR creates employee opportunities, e.g. if a school is built, teachers must be appointed.

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Corporate Social Responsibility (CSR): Benefits for the Community: CSR improves a communitys standards of living, e.g. By providing healthcare services. CSR can create employment opportunities by appointing members of local communities. CSR benefits communities by providing education and training through skills development. CSR teaches Communities to become self-sustainability, for example growing vegetable gardens. CSR focuses on sustainability- ensuring that resources will be available for future generations. CSR focuses on protecting the environment. Infrastructure is often improved as businesses expand. Product safety for customers because laws are strictly enforced. Safe disposal of pollutants by the community benefit the community.

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CORPORATE SOCIAL RESPONSIBILITY (CSR): Problems and challenges relating to Corporate Social Responsibility for businesses: CSR costs money that could have been invested more profitably Businesses carry a heavy load- businesses a tax intended for building infrastructure and addressing socio-economic problems. On top of this, businesses are expected to make CSR contributions Businesses are required to prepare detailed CSR reports- this is time consuming. Employees are often expected to participate in CSR- programmes in their free time. Production time is lost when time is spent on CSR-programmes during business hours. Many CSR-programmes are not successful, because businesses tend to focus more on implementation than on maintenance e.g. a business budgets to equip a school with computers, but does not provide for the maintenance of these computers. Small businesses do not always have enough employees to implement CSI-initiatives.

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CORPORATE SOCIAL RESPONSIBILITY (CSR): Problems and challenges relating to CSR for community: Communities do not always enjoy the intended benefits of CSR-programmes, because business tend to focus on implementation only not on maintenance as well. Businesses are not always equipped to address social problems. Communities can avoid taking responsibility for themselves, because they expect a businesss CSR- initiatives to provide for them.

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CORPORATE SOCIAL RESPONSIBILITY (CSR): Components of CSR: Components of Corporate Social Responsibility: Environment Business must take into account the impact of their operations on the environment. Business operations must be conducted in a manner that ensures that natural resources are available for future generations. Ways in which business can be environmentally responsible: Contribute money towards research aimed at finding alternative sources of energy. Recycle, e.g. paper, empty cartridges and dated equipment. Use energy saving globes Reduce paperwork by keeping correspondence digital.

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CORPORATE SOCIAL RESPONSIBILITY (CSR): Components of CSR: Components of Corporate Social Responsibility: Ethical corporate social investment Corporate Social Investment (CSI) is an extension of a businesss, Corporate Social Responsibility. CSI mainly focusses on addressing socio-economic issues such as poverty and a lack of education within the community in which a business operates. Ethics and CSI are complementary concepts. The point od CSI is defeated when it is not implemented in an ethical manner. Ways in which businesses can contribute towards ethical social investment: Ensure corporate social investment projects have legitimate track records. Ensure that the purpose of CSI is to benefit the community, and not to raise profit.

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Health and safety Businesses have a responsibility to ensure the safety of employees at work and of people who visit their premises. Businesses operations must not pose a risk to the health and safety of communities.. Ways in which businesses can contribute towards the health and safety of role players and people who visit the business( employees, consumers, suppliers, government officials): Adhere to health and safety requirements as per the Occupational Health and Safety Act( No. 85 of 1993). Provide protective gear to workers who work with dangerous materials. Employers who employ more than twenty employees must appoint at least one health and safety representative for every 100 employees( shops and offices) ;and at least one health and safety representative for every fifty employees in the case of all other workplaces. Do regular maintenance of machinery and office equipment. Devise an emergency plan in case of an emergency, e.g. fire.

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Socioeconomic development (SED) Although socio-economic development (SED) is not a component of CSI, SED is closely related to CSI. Like CSI, SED aims to further the interests of communities, but the difference is that SED is specifically aimed at promoting access to the economy for black people. SED comprises four elements: Infrastructural development Educational development Community development Healthcare development Businesses receive BEE-points for qualifying for SED contributions. Businesses make SED contributions according to the industry in which they operate. Ways in which businesses can contribute towards socio- economic development: Infrastructural development, e.g. programmes that provide communities with solar power. Educational development, e.g. providing a disadvantaged school with computers. Community development, e.g. programmes that develop arts, culture and sport. Healthcare development, e.g. HIV/ Aids programmes.

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CORPORATE SOCIAL RESPONSIBILITY (CSR): Issues that challenge CSR: Businesses aim to further the interests of the communities in which they operate through CSR. However, some problems just seem too big to be solved. Examples of such problems include: HIV/AIDS South Africa has one of the highest HIV-prevalence rates in the world an the infrastructure to deal with this problem is lacking. Although businesses are making a contribution, the effects of HIV/Aids are overwhelming: Children become orphans when their parents die. These children, often very young, drop out of school because they simply cannot cope with running a household and going to school. Parents cannot take care of their children in the final stages of the disease. Employees who live with HIV/Aids are absent more often.

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CORPORATE SOCIAL RESPONSIBILITY (CSR): Issues that challenge CSR: Examples of such problems include: Unemploymen t Although government has devised several strategies to address unemployment, it is still a very big problem. Businesses contribute towards solving this problem by offering learnerships to unemployed people. However, in many businesses there are simply not enough positions available for businesses to make a significant contribution. Poverty Many businesses try to alleviate poverty by donating clothes or other valuable items to underprivileged communities. Although these contributions are extremely helpful, it is not really addressing the root of the problem.

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Corporate Social Investment (CSI) : Definition: CSI forms part of Corporate Social Responsibility. It refers to the time, money and other resources businesses spend on improving the standard of living of the community in which they operate. The main aim of CSI is not to increase a business profits, but to use a business resources to benefit a community. Not seen as a marketing activity. CSI is a business contribution to communities over and above their normal business activities.

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Corporate Social Investment (CSI) : Definition: Projects aimed at development and lifting of the community and operated out of the companys resources. Addressing specific socio-economic issues such as poverty, HIV/Aids, illiteracy, etc., by making the business resources available to non-profitable organizations which are involved in lifting programmes in the community or by getting self- involved in lifting programs. The original goal of CSI was philanthropic, but later it became clear that the reputation of the business can be promoted through CSI. Originally SCR and CSI was seen as the same thing but it is now defined differently. Where CSR refers to the business overall responsibility to the business environment in which it operates, CSI is a sub-component of CSR and the goal is the lifting of the community through ways that will improve the quality of life through direct investment.

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Corporate Social Investment: Nature of Corporate Social Investment: The nature of Corporate Social Investment refers to the characteristics of CSI : CSI contributes towards sustainable development. CSI is enforceable by law and government requires businesses to make CSI contributions. CSI plays a positive role in the development of communities. CSI reveals a businesss attitude towards the community in which it operates.. CSI is a long-term investment. CSI is relevant to the South African context where socio-economic upliftment is such a priority. The main focus of CSI is not to increase profit, but to support communities

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CORPORATE SOCIAL INVESTMENT: Nature of Corporate Social Investment: Although South Africa is behind the rest of the world regarding CSI, the King Code largely contributed to CSI practices in South Africa. It does not matter what the nature is that the business chooses, but it should aim to lift the society and the environment in which it operates. The nature of CSI depends on the CSI policy of the business and the specific needs that exist within the community.

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CORPORATE SOCIAL INVESTMENT PROJECTS: Businesses are free to decide their level of involvement is CSI. Examples of CSI projects include: Projects that focus on nature conservation, e.g. cleaning up a polluted area or creating awareness of the dangers of pollution. Providing education and training to disadvantaged people, e.g. bursaries, providing resources to schools, fund appointment of extra teachers ore renovating dilapidated school buildings. Expanding infrastructure, e.g. by being involved in building a community centre or renovating rundown houses. Investing in the well-being and advancement of employees, their families and communities, e.g. by providing employees with housing subsidies, creating jobs or teaching a community to become sustainable by cultivating small vegetable gardens. Projects that focus on human rights, e.g. initiative that support early childhood development ( right to education), initiatives that help communities with housing ( right to shelter) or initiatives that help to restore the dignity of communities. Initiatives that help to combat crime, e.g. starting a neighbourhood watch or counselling for substance abusers.

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Corporate Social Investment: Responsible business practice: Businesses should be good corporate citizens. Corporate citizenship suggests that businesses do not pursue profit at any cost, but consider the impact of their operations on the community. The cornerstones of responsible business practice are: Transparency Fairness Accountability The JSE launched a Social Responsibility Index (SRI) to identify listed companies that implement the principles of responsible business practice.

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Corporate Social Investment: Responsible business practice: The SRI measures the performance of listed companies against the criteria of the triple bottom line: Social sustainability Economic sustainability Environmental sustainability Examples of responsible business practice include: Creating a safe and healthy working environment Fair and equal treatment of all employees. Limiting or eliminating the impact of a business operations on the environment. Launching Corporate Social Investment initiatives to give back to society Paying fair wages Manufacturing products that are safe to use.

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Challenges to the business regarding the long-term needs of society: Businesses face the following challenges regarding CSI: Sustainability Sustainability refers to a business long term commitment to a community and to CSI. However, it may be possible that a business cannot continue with a CSI-initiative (e.g. when a business goes bankrupt). Maintenance Many great CSI contributions have already been made and many of these contributions focused mainly on implementation, for example a business donating computers to a school. The success of initiatives like these, is compromised if the business does not also provide for computer training, maintenance and security of the new computers. It is therefore possible for a business to spend millions of Rands on CSI, yet a community never enjoys the benefit of the initiative.

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Challenges to the business regarding the long-term needs of society: High cost of CSI CSI requires a commitment form businesses to be actively involved in a community. This commitment requires both employees time, who work hard as it is, as well as money. CSI can distract a business attention form its core activities. Businesses need to remain focused on their core activities in order to be profitable and at the same time make corporate social investments. Making a true difference South Africa faces a variety of socio-economic problems. Many businesses spend fortunes on initiatives to uplift a communities. However, it appears that much of this effort is not yet visible, as many South Africans remain illiterate, poor, uneducated and homeless.

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Challenges to the business regarding the long-term needs of society: Keeping up with societys long- term needs Businesses need long-term CSI strategies for communities where people are poor and unemployment is high. Handing out food parcels, for example does not uplift a community in the long run. Instead, businesses must strive to address the core issues (education and skills training). Building a clinic is easy, but making sure that the clinic functions optimally is a much harder task. Hence, businesses must do comprehensive long-term planning in order to make sure that the needs of societies are addressed over the long-term.

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Legislative requirements: Some legislation has an impact on businesses CSR and CSI. In May 2004, the JSE launched South Africas first CSI 0ndex Public companies must apply to be listed on this index. There are 94 different criteria that businesses must comply, including commitment to BEE, dealing with HIV/AIDS in the workplace, fair labour practices, environmental sustainability, contribution to reduce global warming, etc.

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Legislative requirements: Public companies must report on the following: Environmental Issues: Business policy, how it is managed, reporting, etc. Employee issues: training, employee-employer relationships, equal opportunities, health and safety, HIV/AIDS. etc. Other social issues: Black Economic Empowerment, community involvement, stakeholders involvement, reporting to stakeholders, etc. Management issues: Practices of the Board of Directors, code of ethics, risk management, etc. The JSE requires all public companies listed on the JSE, regardless of whether they are listed on the CSI index, to submit an annual integrated report on environmental, social, economic and financial achievement.

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Legislative requirements: Employment Equity Act Aims to promote equal opportunities in the workplace and to eliminate unfair discrimination. CSI must be inclusive. Skills Development Act Aims to redress past imbalances through education and training. Many CSI initiatives are aimed at skills development, education and training.

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Legislative requirements: BEE and BBBEE Aims to empower black South Africans by encouraging black ownership of businesses. According to the BBBEE Act and the new BEE codes (effective April 2015), businesses are assessed against the five pillars of BBBEE: ownership, management and control, skills development, enterprise and supplier development and socio-economic development. Businesses are rated according to the amount spent on CSI and SED. National Skills Development Strategy The National Skills Development Strategy is a strategy that focuses on redressing past imbalances through skills development. Many CSI initiatives concentrate on skills development, education and training.

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Legislative requirements: Human Resources Development Strategy A long-term strategy that aims to empower people through skills development and education. SETAs act as vehicles to provide skills development and training. Many CSI initiatives concentrate on skills development, education and training.

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Differences between CSI and SED: Similarities between CSI and SED: CSI and SED both depend on time, money and other resources from businesses. CSI and SED both aim to improve the standard of living of communities. CSI and SED both have a positive impact on society CSI and SED both address socio-economic issues CSISED Aim to improve the standard of living of the greater society. Directed at improving the standard of living by making any contribution to the community Specifically aim to promote access to the economy for black people. Directed at: Infrastructural development Educational development Community development Healthcare development