Community-Based Approach in Extractive Industry for Corporate Social Responsibility Initiative - Research Paper Example

Community-Based Approach in Extractive Industry for Corporate Social Responsibility Initiative 1. Introduction A major feature of the developing countries is that they have emerging market with vast potential, which attracts lots of foreign investments and multinationals with their numerous products. Many of them are endowed with huge natural resources that are exploited by multinational organizations with scarce attention paid to the welfare of the communities. As a result, even though, their standard of living gradually improves with rise in per capita income, in practice, it is seen that development is more visible in the urban areas where rapid technology advancement and industrialization can be seen with proportional rise in income. The increasing gap between the rich and the poor becomes obvious because usually in the developing economies, the highly educated and the skilled class of people get the opportunities to benefit from the economic development. The corporate houses including the multinationals, must get involved in exercising their social responsibility with right earnest and contribute towards the all round development of the nation, especially the underprivileged segment of the society and the underdeveloped region which may even lack the basic infrastructural facilities. 1 (a) Statement of the problem Developing countries like Angola, Zambia, Zimbabwe, Togo etc. are rich in natural resources with huge potential of extractive industries. This is being exploited by the big foreign investment bodies and multinationals but the living standard of average citizen has remained dismal. The developing economies of the world urgently need to include all strata of the society in the process of development. But the external factors and limitation of scope, especially with regard to adequate funds, are proving to be pretty retrograde. The efforts of voluntary organizations and other national and international aid agencies are also not able to expedite the process of inclusion of the people who have been denied access to basic facilities like education, housing and employment. The onus therefore, comes on the corporate houses that must make it an intrinsic part of their organization’s mission and work towards attaining it with sincerity. 1(b) Purpose of the study The purpose of the study is to gauge the extent of the influence of the corporate social responsibilities of the multinationals in the sustainable socio-economic development of the population in developing economies. It is important that for sustainable development, marginalized population must be empowered so that they can become fitting partner in the socio-economic development. The study would make efforts to study the imperatives of the corporate social responsibilities of the companies vis-à-vis community based welfare programs. 1(c) Research question 1. What are the factors that significantly influence the decision making of the multinationals and foreign investment bodies in developing countries, especially with regard to community development processes? 2. How can community based approach to CSR convincingly mitigate external threats to the company and facilitate sustainable development of the country? 1(d) Hypotheses Corporate social responsibility (CSR) is a relatively new concept that is becoming increasing more popular among the multinationals and big corporate houses which have significant presence in a developing countries or are intending to enter the emerging market of developing economies. ‘The relationship between companies and civil society organizations has moved on from paternalistic philanthropy to a re-examination of the roles, rights and responsibilities of business in society. Corporate Social Responsibility (CSR), defined in terms of the responsiveness of businesses to stakeholders’ legal, ethical, social and environmental expectations, is one outcome of these developments’ (UNIDO, 2002). It is a fact that government alone cannot be responsible for the socio economic development of its population. Though it provides the basic guiding principles and policy parameters of development process in the various core areas, people must also take up the cudgels to get involved into the process along with the government, if the country is to achieve the distinction of sustainable development that percolates down to the people living at poverty line. The last few years have seen rising cases of CSR in the socially relevant areas like education, medical health, skill development programs for the under privileged, social issues like dowry, gender bias, disability etc. Where ever possible, they have forged strategic partnership with aiding agencies, government and NGO1s to participate actively to improve the socio economic status of the segment. Hence a detailed research regarding social responsibilities of the corporate houses and the strategies to make it more effective, are the need of the hour. ‘The forces and actors promoting corporate responsibility vary in different national contexts; and it is important to conduct research to clarify the roles of different stakeholders, as well as the types of pressures and opportunities that might promote corporate social and environmental responsibility’ (UNRISD, 2000). 1(e) Significance of the study With huge market potential and relatively low competition, global community is looking forward to tapping the emerging new market with zeal and interest. The changing paradigms of the global business environment have greatly influenced the wider implications of effective CSR imperatives producing considerable impact on the community development processes. ICAEW2 has advocated the ‘need for companies to prioritized risks’ (ICAEW, 1998). Hence, very often, the lack of necessary control mechanisms, not only corrode the trust of the investors but they also have long term repercussion on its market credibility and performance outcome. Looking at the wide scope of the dissertation topic, we would be taking up role of corporate governance in areas that have cascading effect on the overall performance quotient of the organization. 1 (f) Time schedule Serial Activity Time Schedule 1. Field Work 60 days 2. Compilation of data 40 days 3. Data entry and processing 30 days 4. Data analysis and evaluation 20 days 5. Writing and printing 45 days 2. Review of the literature The developing economies are in the transition phase of development and are often beset by huge problems of internal conflicts, adverse environmental impacts of emerging new paradigms of advancing technology, low awareness and abject poverty. It is seen that often, in the absence of government control and vigilance, the foreign agencies exploit the situation for their vested interests. Accountability towards community development comes low in their management agenda. They are “often neither responsive nor accountable to the poor” and “not accountable to anyone or accountable only to the rich and powerful” (Narayan et al. 2000, pp. 172 and 177). The concept of accountability has wide ranging implications and therefore can be defined in ways to suit the organizational aims and objectives while taking due account of the circumstances within which it is practiced. According to Ackerman ‘principles of accountability should ideally be applied before, during and after the exercise of public authority’ (Ackerman, 2004). Some argue that accountability must be assessed with the responsiveness of the implementation practices that are adopted according to the changing situations. According to Fox, ‘civil society demands for state accountability matter most when they empower the state’s own checks and balances’ (Fox, 2000, p. 1). It is seen that when the mechanisms of social accountability are institutionalized, it promotes transparency in the work place which is open to civic engagement. Goetz calls such type of accountability as ‘“transversal”, “hybrid” or “diagonal” accountability (Goetz and Jenkins, 2001). According to World resource Institute, there are still growing demand for energy and natural resource has led many low-income, resource-rich countries to open remote area to industrial development (WRI, page 1). Social scientists have further asserted that ‘we know very little about the developmental effects of CSR initiatives and what we know raises questions about both the efficiency of CSR approaches and the tangible benefits for the stakeholders’ (Frynas, 2005; Nielsen, 2005). Indeed, the wide ranging implications of the corporate governance need to be evaluated for development of strategies to meet the challenges of the general public. 3. Methodology and Procedure In order to meet the aims and objectives of the research proposal, the research methodology would mainly concentrate on the empirical research mainly based on qualitative research methodology. The proposed research study would be qualitative in nature but encompass elements of quantitative research also so that better and more accurate conclusions could be achieved. Qualitative research demonstrates and facilitates deeper understanding of the problem and helps to investigate the context in its entirety. 3.1 Sample collection and analysis Measurement techniques would comprise of questionnaires and interview schedules. Since the research involves the study of the factors that have far reaching impact on the business negotiations, a large sample size comprising of people and organization in the developing and developed economies who have been directly and indirectly involved in the business negotiations, would be considered. The sample would primarily be collected from people who either do businesses directly or indirectly in the developing economies. The study would be taking into account the conceptual model as well as the theoretical model. The samples selection and the questionnaires would be prepared as per the theoretical model of survey and a wider conceptual model of the research would be used to analyze the data. Primary data collection would be collected through detailed and qualitative and quantitative questionnaires prepared, keeping in mind the need for corporate social responsility and the facilitating factors that would promote and improve business activities. Special interview Schedules would also be used to gauge the responses of the people towards global business practices and the improvisations that are needed to be made in the current circumstances of conducting business in the emerging economies. Secondary information sources such as libraries, commercial bibliographic databases for peer review, internet resources and e journals would be used for literature review. 3.2 Data Analysis Comprehensive data analysis would be undertaken (Michael). Data analysis synthesizes the huge data that is collected and puts them into coherent form by applying appropriate statistical techniques and developing patterns. Software like SPSS would also be used to analyze the data using different techniques and interpreting the data in the wider context to understand the intricacies of corporate governance paradigms that influence community based approach to corporate social responsibilities. 4 Validity and reliability Validity is not the main concern of the qualitative research as the main purpose of the researcher is the deeper understanding of the views and thoughts of the persons rather than validation. Judicious and careful selection of sample would ensure the reliability of the data so that study would help to evaluate the existing modules of the various areas of business administration and would also help to analyse the needs and requirements of the changing business compulsions so that more innovative approach is encompassed in the community based approach to CSR to effectively participate in the sustainable development of the developing countries. 5. Limitations of the study Comprehensive sampling with wide ranging issues which influence the business outcome vis-à-vis its CSR, would be introduced in the questionnaires and interview schedules so that the scope of study is large enough to ensure the success of the research’s aims and objectives. The empirical method of the research is appropriate mainly because the aim and objectives of the research need a survey requiring qualitative analysis of the factors that have significant impact on the business strategies with various business partners. The study would be limited to the framework of developing economies’ paradigms that have significantly influence sustainable development and hence the sampling would be limited to the individuals and businesses that are directly or indirectly linked with extraction industries in developing economies. Some people have criticised these methods because of lack of absolute validity of obtaining proof. The limitation of sample size because of financial constraints is also one of the reasons cited for accurate and efficient analysis of the factors that may have significant impact on the negotiations. Reference Ackerman, John. (2004). Social Accountability for the Public Sector: A Conceptual Discussion. Draft paper prepared for the World Bank. Fox, Jonathon (2000). Civil Society and Political Accountability: Propositions for Discussion presented at the conference Institutions, Accountability and Democratic Governance in Latin America, The Helen Kellog Institute for International Studies, Notre Dame University, May 8, 2000. Frynas,J.G. (2005). The false developmental promise of corporate social responsibility: Evidence from multinational oil companies. International Affairs,81:581-98 Goetz, Anne Marie and Rob Jenkins (2001). Hybrid Forms of Accountability: Citizen Engagement in Institutions of Public Sector Oversight in India. Public Management Review, Vol. 3, Issue 3, pp. 363- 83. ICEAW.(1998). Internal Control – Guidance for Directors on the Combined Code [Turnbull Report], London: Institute of Chartered Accountants in England and Wales. Morris, Michael. Entrepreneurship and Emerging Enterprises. Available from: [10 April 2009]. Narayan, Deepa, Raj Patel, Kai Schafft, Anne Rademacher and Sarah Koch-Schulte (2000). Voices of the Poor: Crying Out for Change. Washington: World Bank. Nielsen, M.E. (2005) Child labour in the Bangladesh garment industry, International Affairs, 81:559-80 UNIDO Report. (June 2002). Corporate Social Responsibility: Implications for Small and Medium Enterprises in Developing Countries. Available from: < http://www.unido.org/doc/5162> [10 April 2009]. UNRISD Workshop. 23-24 Oct. 2000.Promoting Corporate Responsibility in Developing Countries: The Potential and Limits of Voluntary Initiatives. Geneva. Available from: [10 April 2009]. World Resource Institute. (2009). Breaking Ground: Engaging Communities in Extractive and Infrastructure Projects. Available from: [10 April 2009]. Read More