Corporate Social Responsibility

Altruism or a Marketing Scheme in Disguise?

Corporate social responsibility (CSR) refers to specific altruistic acts in which companies participate in order to support a particular organisation or cause. Some say this activity is important in a country like Ethiopia, where laws state that local non-governmental organisations (NGOs) must receive the majority of their funding from local sources to participate in ‘right based development activities’. Others however, are sceptical, and caution that CSR may just be another way for companies to market their good deeds in order to attract more customers and make profits. EBR’s Meseret Mamo spoke with stakeholders to learn more about the nuances of the issue and offers this report.

Although there are contending views on its nature, the concept of corporate social responsibility (CSR) has been gaining increasing attention from companies and senior executives in Ethiopia in recent years. CSR refers to charitable activities that a corporation or business undertakes in order to support a particular societal cause or organisation, usually outside the scope of profit motives. It also includes creating a favourable work environment for employees and producing environmentally-friendly products, among other activities.
For many businesses, embracing the concept right away is a rare phenomenon. However, SBG Industry PLC, which bottles Arki Water, signed a Memorandum of Understanding with the Kidney Failure Dialysis Charity Association. The company agreed to donate two cents to the Association from every bottle sold for the next two years on November 21, 2015, the day the factory was inaugurated in Sululta, 32km north of Addis Ababa.
The factory has the capacity to produce 260,000 bottles per day. If it were to work at full capacity and all bottles produced are sold, then it means bottler would give ETB5,200 per day to the charity.
Yusuf Abdulhamid, president of the Association, appreciates the donations that would come because of the CSR activity of Arki Water. He once told EBR that he desperately needs support for six patients in order for them to receive dialysis treatment. The money the Association expects from SBG Industries PLC will cover the cost of full dialysis for more than six patients suffering from chronic kidney diseases per session based on the current minimum price of the treatment, which is ETB985.
Nehmiya Autism Centre, another beneficiary of the charitable deeds of some companies, also testifies to the importance of corporate social responsibility activities that are becoming a trend among the business community. When the Centre was established in 2011, five parents who have autistic children were the main supporters of the Centre. Over the years, the Centre has grown and now supports 40 autistic children. As a result, the cost of administration, including house rent and staff salary has increased to ETB120,000 per month.
“It wouldn’t be possible [to run the Centre] without the helping hand of companies [in order to] support all these children,” according to Rahel Abayneh, who is the parent of an autistic child. “Ten companies are helping by giving us money as a donation, and I am working to get more sponsors, since there are 300 autistic children on the waiting list.”
Unlike recently established companies, renowned and well-established businesses have been engaged in CSR for years in order to contribute to certain causes. For example, in September 2015 Ethiopian Airlines announced that it will deliver more than 630 kilograms of medical supplies and equipment to the Kidney Failure Dialysis Charity Association in collaboration with Seattle Alliance Outreach, a United States-based healthcare NGO.
The statement posted on the official website of the Airlines states that the 21 free delivery flights puts Ethiopian Airlines amongst the carriers with the highest number of humanitarian delivery flights. The Airlines also says, in the first quarter of the current fiscal year alone, it offered free air tickets to 10 medical travellers to Bangkok, Delhi, and Bombay at a value of ETB191,775.
Dashen Brewery Share Company, one of Ethiopia’s breweries, is another company that spends money on societal causes. So far, the company has spent ETB66 million for the construction of the Bahir Dar and Mekelle stadiums, in the Amhara and Tigray Regions respectively.
Such efforts by companies demonstrate that CSR is becoming a trend in Ethiopia. With the expansion of multinational corporations in to developing countries like Ethiopia, it is expected to keep spreading.
Experts say discharging corporate social responsibility is important to companies in many respects. They assert that it helps them in building a positive reputation and awareness about their brand among consumers. This contributes to customer retention and loyalty; and helps to distinguish themselves easily among their competitors.
Despite the seemingly reciprocal benefits of engaging in CSR activities, those close to the issue say that in Ethiopia there are firms that use it as a promotional tool to help market their brands.
Rahel, who does fundraising for the autism centre mentioned earlier, has witnessed this first-hand. She says product and service promotion is the main impetus for the practice of CSR for some companies. “Advertisement and promotion are becoming the only reason for significant number of companies to assist Nehmiya Autism Centre, of which there is usually none in our case. This is the challenge I face when I look for funding,” she reveals. “I usually hear companies asking ‘what could we get from assisting the Centre?’ when I request donations.”
In fact, EBR recently observed such a tendency at an event organised at Harmony Hotel to raise funds for the renovation of a school in the rural town of Kuyera in the Southern Region. Several commercial banks that attended the event echoed the same question: ‘what is the benefit that we will get for supporting the renovation of the school?’
Mulatu Mebratu, a management consultant and lecturer at Addis Ababa University’s College of Business and Economics, argues that these motives by themselves would eventually prove detrimental to a company. “Doing [CSR] only for promotional purposes can compromise the future of a company’s [image,]” he says.
In Ethiopia, it has become common to see companies that pursue such strategies. For example, some do so by sponsoring a social event and promoting at least one product by giving it away or advertising CSR efforts on their product labels or packaging.
Veronica Tesfaye, SBG Industries’ marketing and logistics officer, however, says such motives are not behind her company’s recent initiative. “We could spend the money on advertisement but we chose to give our potential customers one more reason to drink our water,” she told EBR. “The company will print this act of charity on its package so that customers will know it before deciding to buy the water.”
Eden water also uses the same strategy; it gives two cents per bottle for environmental protection. This information is published on the label of the bottle.
Despite the different approaches used by companies, stakeholders say the development of a CSR culture is vital in Ethiopia, since NGO’s in the country are required by law to raise at least 90Pct of their budget from local sources if they wish to engage in issues of human rights, democracy and governance. “This is why the involvement of companies in charitable deeds has become crucial,” Rahel says.
Indeed, survival of local charitable organisations such as Nehmiya Autism Centre now depends on donations that come from firms in the form of CSR. Many charitable nongovernmental organisations and societies have downsized or vanished after the approval of the Charities and Societies Proclamation in 2011. However, the existing charity organisations still work to reduce societal problems like kidney dialysis and autism, which are areas where the government has exerted less effort to intervene.
Still, stakeholders argue that more needs to be done to incentivise, facilitate and regulate CSR activities in the county. They stress that it is in the government’s best interests to incentivise private sector activities that benefit society by introducing policies that provide tax privileges for CSR pursuits.
Government officials, however, state that the government is supporting these activities in a different manner. “Although there are no tax incentives, the government provides [other] incentives and encourages such activities,” says Belachew Taye, director of the Corporate Communication Directorate at the Ministry of Trade. “Companies that use labour-intensive strategies, environmentally friendly technologies and hire more women get priority when accessing loans and foreign exchange permits to import goods,” he says.
He also notes that companies that spend money towards the betterment of their surrounding communities are growing alongside the incentives the government is providing.
Despite the incentives provided by the government, tax benefits have yet to be part of the package, which differs from the structure of CSR in other countries. Tax incentives encourage businesses to make investments that benefit society. [By helping companies to get part of their resources, spend in charity activities back, government can facilitate and develop the culture of CSR in Ethiopia.]
Many developing countries, including Ethiopia, employ tax incentives to the business community in order to attract investments. Some stakeholders say similar tax incentive should be extended to companies that engage in CSR in order to stimulate charitable actions in a broad range of categories such as health, education and the environment. EBR