Research Midas: Impact of Corporate Social Responsibility Accounting on Firm Profitability In Nigeria

Reference code: c014

ABSTRACT

Drawing empirical evidence from indigenous firms, this study explores the meaning and practice of corporate social responsibility in relation to its impact on profitability and company’s market share. The study embodies a survey in which data were generated by means of questionnaires and annual reports of selected companies in Lagos State. Sixty seven questionnaires were distributed in all. Responses from the survey and the hypothesis were statistically analyzed using regression, product moment correlation and simple percentage. The responses were also backed with secondary data obtained from the annual reports of the selected companies. The result of the study revealed that indigenous firms perceive and practice corporate social responsibility as corporate philanthropy. It was also discovered that the performance and reporting of social responsibility has a positive correlation with the profitability and market share of a company. This implies that, to an extent, corporate social responsibility influences the profitability and size of a company’s market share. The study concluded that, performance and reporting of social responsibility goes a long way in boosting the reputation, sales and profit level of a firm operating in Nigeria. Regardless of the harsh and unfriendly business environment in which the firms operate, companies that are responsive to their social actions continue to flourish, partly as a result of CSR activities yielding its return. Finally, the study recommends that Section or departments should be set up in these corporations whose sole and functional responsibility would be to discharge its social responsibility.

INTRODUCTION

................. The CSR concept evolution started with the concerns related to the damage created by business on environment and society at large by way of activities linked to their business operation that is, there are definite social and environmental costs of most commercial activities. A look at the abundant authoritative pronouncement governing financial reports reveals that accounting is a complex body of knowledge. One reason for such pronouncements is to proliferate that accounting must reflect what is taking place in its increasingly complex environment. The continual growth and expansion of accounting practices has led to a provision and recognition for the environment in which it thrives. The environment of accounting has undergone vast changes in the last two decades and an accelerating rate of change is in prospect for the future.

Accounting is moving from its traditional procedural base, towards a role which emphasizes its social importance. As a result, there was a need to extend the boundaries of accounting to cover its social responsibilities. These social responsibilities involve moving targets many of which are subject to government action and societal demands. (Glautier and B. Underdown 2001). In his speech at the World Economic Forum in Davos in January 1999, Kofi Annan, UN Secretary General, challenged businesses and countries to adopt universally agreed upon values in the areas of human rights, labour standards and environmental protection. This was the start of the network Global Compact for the 21st Century. As a result, Companies are under increasing pressure from society to take their social responsibility. This is especially so if it concerns companies with a business relation in a developing country, since these companies are more confronted with CSR issues.

The CSR movement initially had a strong focus on environmental issues resulting in the first UN global environment summit was held in Stockholm in 1972. The Earth Summit in Rio de Janeiro in 1992 marked a start for a changing business approach when business community made efforts to contribute to the dialogue on environmental, economic and social issues by establishing the Business Council for Sustainable Development (BCSD). The Bali Roundtable on developing countries in 2002 recognised the business sector as a primary drive of economic development and the World Summit for Sustainability identified business involvement as critical in alleviating poverty and achieving sustainable development (www.un.org).

Recently, the International Organization for Standardisation (ISO) is developing an international standard to provide guidelines for adopting and disseminating social responsibility: ISO 26000- Social Responsibility. Due for publication in 2010, this standard will "encourage voluntary commitment to social responsibility and will lead to common guidance on concepts, definitions and methods of evaluation." (ISO, 2009) The standard describes itself as a guide for dialogue and action, not a constraining or certifiable management standard.

In Nigeria, the current CSR concept started formulating in early 80’s. In 1980’s and 1990’s events like Shell spoiling the environment and violating the human rights in Nigeria, started a new wave of criticism which triggered a completely different thinking on CSR which is mostly philanthropic.

In response to the increasing societal pressure, many companies adopt the concept of corporate social responsibility (CSR) by introducing codes of conduct that are expected to ensure socially responsible business practices throughout the chain – from supplier of raw materials to final end-users (Pedersen and Andersen, 2006). Many firms go beyond what is required by their market and nonmarket environment and attempt to serve directly the needs of their stakeholders or, more broadly of society. For these firms, successful performance involves not only compliance with the law and public policies but also requires fulfilling broader responsibilities. This may include charitable donations and other ethical and discretionary responsibilities. Firms vary considerably in the scope of these activities. That is, the scope depends on their conceptions of the role of business in society and of corporate social responsibility. ...............

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TABLE OF CONTENT

CHAPTER ONE: INTRODUCTION
1.1 Background
1.2 Statement of the problem
1.3 Research questions
1.4 Research hypothesis
1.5 Objectives of the study
1.6 Significance of the study
1.7 Scope and limitation of the study
1.8 Organisation of the study
1.9 Definition of terms
References

CHAPTER TWO: LITERATURE REVIEW
2.1 Introduction
2.2 Development of corporate social responsibility
2.2.1 Basic approach to corporate social responsibility
2.2.2 Selected published standards of corporate social responsibility
2.3 The framework of corporate social responsibility
2.3.1 Sustainability-
2.3.2 The pyramid of corporate social responsibility
2.3.2 Corporate citizenship
2.3.4 The triple bottom line
2.4 Meaning and views of corporate social responsibility
2.5 Pros and cons of corporate social responsibility
2.6 Corporate social responsibility motives and consequences
2.7 Corporate social responsibility and profitability
2.8 Corporate social responsibility and company market share
2.9 CSR among Nigerian firms: development and perception
2.9.1 Individual perception of managers and executive officers in Nigeria
2.9.2 Corporate responsibility-royal Dutch/Shell group in Nigeria
2.10 The new meaning of corporate social responsibility
References

CHAPTER THREE: RESEARCH METHODOLOGY
3.0 Introduction
3.1 Research designs
3.2 Population description
3.3 Sample size determination
3.4 Sources of data
3.4.1 Primary sources of data
3.4.2 Secondary sources of data
3.5 Instrument of data collection
3.6 Design and administration of questionnaire
3.7 Method of data analysis
3.7.1 Karl Pearson product moment correlation coefficient
3.7.2 Regression analysis
3.7.3 Percentage analysis
3.8 Operational measure of variables
3.9 Validity and reliability of the research instrument
References

CHAPTER FOUR: DATA PRESENTATION, ANALYSIS AND TEST OF HYPOTHESES
4.0 Introduction
4.1 Presentation, analysis and interpretation
4.2 Test of hypothesis
4.2.1Test of hypothesis 1
4.2.2 Test of hypothesis 2
4.3 Discussion of result

CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATION
5.0 Introduction
5.1 Summary of findings
5.2 Conclusion
5.3 Recommendation
Bibliography
Appendix 1: Letter of recommendation
Appendix 2: Questionnaire
Appendix 3: Five year financial summary