CORPORATE SOCIAL RESPONSIBILITY AND ITS IMPACT IN OPERATIONAL ENVIRONMENT AND BUSINESS PROFITABILITY (A CASE STUDY OF EXXON MOBIL IN AKWA IBOM STATE)
1.1 BACKGROUND OF STUDY
Businesses primarily exist to make profit. The profit motive has often been perceived as representing a lack of concern for all other objectives of an organization. But, today businesses are realizing that in order to stay profitable in a rapidly changing environment, they would have to become socially responsible. Therefore, the belief that beyond making profit for the shareholders, business enterprises should also serve the interests of all other stakeholders has culminated into the concept of Corporate Social Responsibility (CSR). Presently, businesses continually face pressures from different stakeholders, such as employee pressures to recognise certain employee rights in the workplace, consumer pressures for the business to withhold price increase and to produce safe products, community and environmental pressures that the business operation does not threaten the safety of the local community (McWilliams and Siegel, 2001). Consequently, all of these pressures have contributed to making the concept of CSR more popular in the international business community.
It is pertinent to mention that although the idea of CSR has existed for more than half a century, there is still no consensus over its definition. CSR generally refers to business practices that are based on ethical values, compliance with legal regulations, and respect for people and the environment (Dahlsrud 2006). The World Bank defined CSR as the commitment of businesses to contribute to sustainable economic development by working with employees, the local community and the society at large to improve their lives in ways that are good for business and for development (Lantos, 2001). CSR is considered as corporate citizenship, which essentially means that a company should be a good neighbour within its host community (Freeman et al 2010). Carroll (2000) proposed a popular four part definition of CSR, suggesting that corporations have four responsibilities (economic, legal, ethical and philanthropic responsibilities) to fulfill before being considered as good corporate citizens. CSR can sometimes be referred to as sustainability development and at such requires an organization to pay attention to the economic, environmental and social impacts of it activities (Gray, Owen, and Adams, 1996). Sustainability development can be regarded as the practice of being accountable to stakeholders towards the aims of saving the planet and the people, while making profits from doing so (GRI, 2010). The planet (environmental), the people (social), and the profit (economic) goals of CSR (Sustainability development) is often referred to as the triple bottom line, which is a term that was coined by John Elkington of Sustainability UK (Elkington, 2010).
However, It is in line with the above exposition that this paper intends to carry out an in-depth study on Corporate Social Responsibility (CSR) to find out the rate of its implementation and actualisation by companies (both local and foreign) that tap resources of the country to achieve their set goals and objectives.
1.2 STATEMENT OF PROBLEMS
CSR has been a subject of debate especially in the oil producing and refining communities of the Niger Delta region of Nigeria especially Akwa Ibom State. The relationship between oil companies and some of their host communities have not been cordial owing to different perceptions of the role that the oil companies are expected to play in the development process of their host communities and on the contrary the extent of environmental degradation they have visited on the host community. On the one hand, the host communities claim that oil companies are not doing enough considering the amount of oil wealth taken away from their lands. On the other hand, oil companies feel that they are doing enough and, have, even gone beyond the realm of normal corporate social responsibility. The oil companies as stated by the likes of Chevron claimed to have implemented several projects in the host communities as part of their Corporate Social Responsibility. The claims include: construction of hospitals, roads and schools, providing portable water, electricity, sponsorship, scholarships and; supportive health campaign programmes among others. However the host communities in Niger Delta seem not to have accredited these acclaimed community development projects by oil companies as they continue in their hostile disposition to the companies (Alabi, 2012). The policy of CSR was therefore meant to pacify the host communities and alleviate their sufferings and at the same time create a peaceful and conducive operational environment for the oil companies to continue with their activities and increase their profitability.
1.3 PURPOSE OF THE STUDY
The overall objective of this study is to examine the impact of CSR on profitability of Exxon Mobil in Nigeria. Specifically however, the study seeks to:
- Determine the effect of CSR on financial performance of Exxon Mobil Nigeria in particular and other oil and gas companies operating in Nigeria in general.
- To identify the factors hindering cooperate social responsibility in Exxon Mobil
- Examine the extent to which company operations moderate the effect of CSR on financial performance of Exxon mobile Nigeria in particular and other oil and gas companies of Nigeria in general.
- To ascertain ways Exxon Mobil can be more socially responsible to their host communities.
1.4 RESEARCH QUESTIONS
The study sought to answer the following questions:
- What is the impact of CSR on financial performance of Exxon Mobil Nigeria in particular and other oil and gas companies in Nigeria in general?
- To what extent can government provide mechanism that will enhance corporate social responsibility of Exxon Mobil in Nigeria?
- To what extent does size of operations affect CSR in Exxon Mobil and the financial performance?
In line with the purpose of the study, the following hypotheses have been formulated: