Corporate Social Responsibility - Coca-Cola India - Case Study Example

Student: Institutional Affiliation: Date of Submission: 1.0 Introduction Corporate Social Responsibility is increasingly being considered as a strategy to gain competitive advantage. Global companies are now embracing Corporate Social Responsibility as a way to achieve the Triple Bottom line as opposed to the Single Bottom line. For any organization to achieve sustainable long-term profitability, a company will have to replace the single financial bottom line with a balanced triple financial bottom line that will embrace environment, economical and social objectives in the business setup. Corporate Social Responsibility implementation helps organizations to ultimately achieve all three objectives (Keys, Malnight & Graaf, 2008). This report will analyze the main challenges of sustainability faced by global organisations developing Corporate Social Responsibility strategies in complex stakeholder environments. The report will focus on identifying the specific challenges that the global organizations face while implementing their CSR initiatives with the hope of achieving sustainable growth. Corporate Social Responsibility is an important strategy to both public and private organizations in both the developing and developed countries. The report will analyze two global companies who have used Corporate Social Responsibility and the challenges of Corporate Social Responsibility in reference to the two companies (Keys, Malnight & Graaf, 2008). For the purpose of this report, Shell Petroleum in Nigeria and Coca Cola Inc in India will be analyzed. The paper will make recommendations on how these organizations can cope with these strategies. 2.0 Understanding Corporate Social Responsibility Corporate social Responsibility is an evolving business concept and as such, it does not have a universally accepted definition. In broad terms, it can be defined as conducting the activities of a business in such a way that they can account for the impact of the business on the environment and the society. Corporate Social Responsibility means the commitment of an organization to develop policies that embrace responsible practices in their day to day activities and to continuously report on the progress they have made in implementing these practices. In the past CSR was viewed as a mere philanthropic activity aimed at protecting and improving the livelihood of the society. However, companies are continuously embracing this concept as a strategy to not only help and improve the society but to also give the company a competitive niche (Rangan, Chase &Karim, 2014). Since business play an important role in creation of wealth and jobs to the society, understanding the concept of CSR is very important. It allows businesses to take advantage of opportunities while creating ways of mitigating the risks especially. Before implementing the CSR strategy, it is important to understand and engage all stakeholders who are affected by the activities of the business if this strategy is to be successful. The figure below indicates the stakeholders of the company (Rangan, Chase &Karim,2014). 3.0 Challenges Facing Organizations in implementing CSR strategies Various challenges often limit organizations from implementing a successful integration of Corporate Social Responsibility policies. Thus, organizations with good strategies need to familiarize themselves with typical challenges in order to realise their objectives. There are many challenges facing organizations using CSR strategy. First challenge is the lack of total organizational commitment to Corporate Social Responsibility. Some organizations experience difficulties in implementing the set CSR activities due lack of willingness from the employees and even the leadership itself. Many employees see such activities as waste of time and energy as it does not directly affect them job description. More often than not, this challenge comes by as a result of poor sensitization and education on the advantages of CSR activities by the management. Second, organizations often face challenges in integrating CSR with core business values as well as practices. Many organizations fail to harmonize the CSR strategies with the organizational values and as such, employees fail to recognize the CSR as a significant objective in the company’s success. Employees depend largely on the values, vision and mission statements to understand what is expected of them. Lastly, is the lack of financial resource needed to undertake CSR activities. As the name suggests, Corporate Social Responsibility practices are intended to be free and out of good faith. Howbeit, these activities often require huge amounts of money for them to be implemented. The activities to be carried out by an organization need to reach the whole community for the results to be felt. For instance, some of these activities often involve the building of schools and hospitals for the community. Thus, the organization cannot depend on its revenue to fund such projects, instead, it often need resources from the government and NGOs to initiate them. Ultimately, CSR projects can fail to materialize as sponsors may fail to honour their promises. 4.0 Focus on Coca-Cola India Before 1977, the Coca-Cola Company was the leading manufacturer of beverage in India (Hills and Welford, 2005 ). Later, it had to pull out of the country due to the Foreign Exchange Regulation Act that required it to cut its equity stake thus revealing its guarded secret formula. The Janta party initiated this regulation in order to govern all foreign organizations’ operations in India (Hills and Welford, 2005). However, in 1993, the ban was lifted and Coca-Cola took the earliest opportunity to venture back into their business. Since then, the Coca Cola Company is estimated to have invested around US$1.2 B in India. Accordingly, the Coca-Cola’s investment stands to be the biggest foreign investment in India (Hills and Welford, 2005). 4.1 The Allegations Facing Coca-Cola Activities in India Overtime, Coca-Cola India has faced pressure to close down in areas such as Mehdiganj, Kala Dera and Plachimad due to various allegations (Hills and Welford, 2005). Some NGOs from India Resource Centre have occasionally accused the company of polluting the environment. The company has been accused of discharging wastewater into the surrounding and at times in rivers. In addition, the company has been accused of causing water shortages. Thus, communities living around Coca-Cola plants experience a great deal of water shortage (Hills and Welford, 2005). 4.2 Challenges Facing Coca-Cola India in Implementing CRS Strategies Notably, Coca-Cola India faces various challenges in implementing its Corporate Responsibility policies. The first challenge is lack of community participation in its CSR practices. Evidently, research shows that the Indian community has an inherent disinterest in participating in Corporate Social Responsibility activities thus disadvantaging Coca Cola’s incentives. However, the major contributing factor this challenge is because there is little awareness concerning CSR wit in the communities more so in the remote areas (Berad, 2011). For example areas such Plachimada and Dera has high rates of illiteracy thus making it hard for the communities in such areas to understand this aspect. The challenge is further intensified by the lack of commutation between the company and the respective local community. Second, there lacks efficient Non-Governmental Organizations that can identify and analyse the immediate needs the Indian local communities need. For an effective CSR to be realised, an authentic evaluation of the communities’ needs must be done for the CSR to be relevant. Accordingly, reports indicate that many remote areas are yet to experience the benefits of an efficient NGO. The local communities lack efficient NGOS that can work along with Coca-Cola and other organizations for successful implementation of CSR policies (Berad, 2011). Third, there is lack of consensus when it comes to implementing CSR policies. Berad (2011) in his survey gathered, that inherent lack of consensus between NGOs concerning CSR developments plays a vital in limiting the Coca Cola’s ability to undertake CSR initiatives. Accordingly, Coca-Cola India cannot undertake an impact analysis of the already rolled out CSR policies continuously. Ultimately, issues with transparency also play a big role in undermining the implementation of CSR policies. Studies show that India has high rates of corruption, which in turn reflects in the CSR projects initiated by organizations. Since the project depends on both the company and community, transparency is fundamental in the implementation process. This inherent lack of transparency often affects the trust building process between the firm the local community negatively. 5.0 Focus on Shell and its CSR Policy Implementation in Nigeria With an area of 70000Km2, the Niger Delta region contributes to over ninety percent of Nigeria’s export incomes as well as approximately seventy percent of Nigeria’s revenues (Ite, 2000). Presently, Shell’s international crude oil production comes from Nigeria and accounts for seven percent of the company’s profits (Boele, 2013). Established 1937, Shell has over the years spread across Nigeria and other countries in the African countries. Over the years, Shell has always based its CSR strategy on the organization’s management as well risk. Few months before the 1995 CSR problems of Shell Nigeria, the company hardly faced challenges in its implementation of CRS policies. Following the 1995 CSR problems, the company decided to adopt community assistance (CA) approach in fulfilling its Corporate Social Responsibilities. This new approach focused only on corporate philanthropy (Boele, 2013). Some of the Corporate Social Responsibility which shell undertakes includes; first, initiating clean water projects. The organization has over time drilled boreholes and wells for local communities. Second, Shell has often facilitated the development of small businesses by giving out small finance credit. Third, the organization has also created support centres in order to help farmers. Ultimately, the organization also builds community hospitals and clinics, roads as well as other infrastructures such rural electrification. 5.1 Challenges facing Shell’s Implementation of CSR Strategies in Nigeria Although the organisation has managed to carry out successful CSR activities, Shell also faces various challenges in its continuous involvement in community initiates. First, Nigeria’s context-specific problems such as theft and corruption undermine the organization’s commitment in implementing its CSR policies. For instance, funds that are set aside for the community projects are often embezzled by the liaison officials in collaboration with corrupted village leaders such as the chiefs. Moreover, the country also experiences inter-ethnic conflicts more often, which is an impediment to CSR strategy implantation. Second, the liaison officers often fail to involve the beneficiaries of CSR thus making it difficult for Shell to implement its CSR policies fully. For a CSR implementation to be realised, the community must participate by constantly interacting with the initiators. In Sell’s case, the local leaders and representatives sometimes meet with the liaison officers once in a year, even after a formal understanding has been reached and sign against. Such trends make it difficult for projects to move on promptly (Paine and Moldoveanu, 2013). Third, is lack of human resources need to plan and execute proper CSR projects. When developing a CSR policies Shell often acts as a quasi-development agency thus needs competent and effective executors given the as the projects are long-term oriented. Moreover, the management staff hardly spends time with the community and as such cannot understand the local communities’ specific problems. Fourth, the Organizations at times fail to integrate Corporate Social Responsibility activities into a huge development plan. More often than not, the organization’s bigger regional development plan seldom features CSR strategies. Consequently, implementing CSR policies is difficult, as it often needs such basic plans. This is because CSR implementation affects the company’s financial budgets among other resources. Another key challenge is associated with Shell’s staff social attitudes. Shell’s staff is typically trained on technical grounds due to the nature of their job. As such, they lack social skills, which is a fundamental factor when it comes to relating with local communities when addressing the CSR initiatives of the organizational. Such inefficiency can lead to a negative impact on the employees’ attitudes towards CSR and may undermine the organizations commitment in implementing the CSR policies. Many of these employees are highly trained, and expect things to work quickly, as their technical brains dictate that way. In effect, when discoursing with the community, they may fail to build relationships with communities because of their nature of speedy discussions. Consequently, they may spend long periods trying to deliberate the roots of the challenges they initiated. Recommendation and Conclusion From the above analysis we have identified various challenges faces global multinational in implementing CSR strategies with specific reference to shell in Niger Delta region and Coca-Cola India. According to Miliman et al (2010), for an organization to successfully implement its CSR strategies, it should follow these five key steps. The above outlined steps can model can be utilised by Coca-Cola India and Shell Nigeria to achieve economic and societal benefit simultaneously. Therefore, for successful implementation of CSR strategies there should be proper planning, ongoing analysis and feedback. References Berad, N.R., 2011. Corporate Social Responsibility–Issues and Challenges in India. International Conference on Technology and Business Management, 28-30. Bernstein, S. Shell in Nigeria. Business Students Focus on Ethics, 8, 269 Boele, R., Fabig, H., Wheeler, D., 2013b. Shell, Nigeria and the Ogoni A study in unsustainable development: II. Corporate social responsibility and ‘stakeholder management’ versus a rights-based approach to sustainable development Sustainable Development 9 (2), 121 135 Hills, J., and Welford, R., 2005. Coca-Cola and water in India. Corporate Social Responsible Environment Management, 12 (3), 168-177. Keys T, Malnight T.W,& Graaf K.V (2008). Making the most of corporate social responsibility. Retrieved on 19th October 2014 from http://www.mckinsey.com/insights/corporate_social_responsibility/making_the_most_of_corporate_social_responsibility Miliman J, Ferguson J, & Sylvester K (2010), Implementing CSR Strategies. Gobal Business Issues, 29-33 Paine, L. S., & Moldoveanu, M. (2013) Royal Dutch/Shell in Nigeria case study, 9-399 Rangan K, Chase L.A, and Karim S (2014) Why Every Company Needs a CSR Strategy and How to Build It. Retrieved on 19th October 2014 from http://hbswk.hbs.edu/item/6871.html Read More