Strategic Leadership in Corporate Social Responsibility

There are written and unwritten social contracts between businesses and societies that leadership and strategy should deal with. Society is becoming more and more pluralistic making business and societal relationships more dynamic. A pluralistic society often has a multitude of stakeholders and special interests which is characterized by tens of thousands of special-interest groups. Diversified stakeholders and interests can be dealt with better when they are approached by strategic leadership. Directly or indirectly, Corporate Social Responsibility (CSR) related issues and concerns have long been a subject of discussion in the Ethiopian business environment. A case in point is that recently MIDROC Gold, the first large scale gold mining factory, located in Lege Dembi, Skakiso Wereda of Guji Zone in Oromia Regional state faced public outrage in connection with an alleged environmental pollution. This resulted in the suspension of the mining company’s license by Ministry of Mines, Petroleum and Natural Gas (MoMPNG). Such issue shows that the relationship between businesses and society need care and should be approached strategically through strategic leadership practices and interventions. It is important for businesses, the community, and the government to establish transparent undertakings.

In order to highlight this, I will explain the role of strategic leadership from the perspective of CSR. But before discussing what CSR is and its benefits; it is important to understand leadership and strategic leadership.

An effective leader creates an inspiring vision of the future, motivates and inspires people to engage with that vision, and manages the delivery of the vision. Strategic leadership focuses on how executives can transform their organizations by learning and applying adaptive changes in relation to dynamic local and international circumstances. Strategic leaders need good strategic decision making capacities over four facets: intelligence, design, choice, and implementation. They need also six abilities: anticipate, challenge, interpret, decide, align, and learn.

In most cases strategic leaders have transformational competencies that include strategic thinking, innovative thinking, and situation management. Transformational leadership (sometimes called visionary leadership and inspirational leadership) usually includes articulating an appealing vision, leading by example, talking about personal value, and making self-sacrifices for a team or organization. Transformational leaders guide, encourage, and facilitate the collective efforts of members to adapt and survive in an uncertain and sometimes hostile environment. These competencies are in-line with strategic leadership competencies.

Strategic leaders should lead projects and programs for organization and business success. And projects success is often as much a result of the organizational environment (inside and outside the organization). Senior leadership and management have the role of creating an environment that promotes project success. They should take a knowledge based and a systematic approach to projects – look at projects as systems of interrelated activities in the strategy of the organization and towards stakeholders. Leading projects and programs, to get strategic value from them across the organization and society is the role of organizational executives and managers.

But, when businesses abuse their power, society questions the business’s trust and legitimacy. And this affects sustainability, which is about meeting the needs of the present without compromising the ability of future generations to meet their own needs. It focuses on the creation of a good quality of life for both current and future generations of humans and nonhumans. To lead and operate businesses sustainably, we should consider carefully the macro-environment (social, economic, financial, political, technological, environmental, and legal). Among the macro-environmental factors, humans are part of their natural environment (climate change, energy, water, biodiversity, land use, chemicals, toxics and heavy metals, air pollution, ozone depletion, oceans and fisheries, deforestation); which is extremely complex and need to be approached systematically and comprehensively.

One such approach is CSR, which encompasses economic, legal, ethical, and philanthropic components. It is about being profitable, obeying laws, avoiding questionable practices, and being good corporate citizens respectively. CSR focuses on long-term responsibilities that reach future generations of stakeholders.

Classical economics view argues against CSR, saying that management has only one responsibility to maximize the profits of owners or shareholders. On the other hand, the enlightened self-interest view argues in favour of CSR, stating that if a business is to have a healthy climate in which to operate in the future, it must take action now to ensure its long-term viability. That view is getting more momentum and becoming the first choice around the world.

CSR is related to the concept of ‘Triple Bottom Line’, also known as the three pillars of sustainability: People, Planet, and Profit. Triple bottom line has a perspective of economic, social, and environmental concerns that makes corporate sustainability its goal. In relation to these concepts, Stakeholders Bottom Line Perspective views the firm that has multiple bottom lines that benefit corporate social performance. Such view believes that the impacts of benefits of social performance cannot be fully measured or appreciated by considering only the impact on the financial bottom line.

Contemporary CSR is more about corporate citizenship that collectively embraces the host of concepts related to CSR.

In order to be perceived as good corporate citizens; companies have certain responsibilities they must fulfil. Corporate citizenship embraces corporate social responsibility, responsiveness, and performance.

That emphasizes obligation & accountability; action & activity; and outcomes & results respectively. Corporate citizenship serves a variety of stakeholders and it has the benefit of improving employee relations, customer relationships, business performance, and enhancing marketing efforts. Corporate citizenship has a global perspective called Global Corporate Citizenship; as a global business citizen, a global business enterprise (including its leaders and managers) has responsibility to exercise its rights and implement its duties to individuals, stakeholders, and societies within and across national and cultural borders.

Taking such issues into account, in recent years, the term strategic corporate social responsibility has captured the idea of integrating a concern for society into the strategic management process of the firm. Such perspectives ensure that CSR is fully integrated into the firm’s strategy, mission, and vision. Strategic management also may focus on a particular CSR topic or core value to the business firm. In this concept, sustainability is focused on the “triple bottom line” discussed above. The concept goes beyond the concern of the firm and argues that the survival and renewal of the greater economic system, social system, and ecosystem are important.

As part of strategic leadership practice, after considering the pros and cons of CSR, most business leaders and managers today embrace the idea of the business case for CSR that reflects why businesses believe that CSR brings distinct benefits or advantage to their organization and the business community. The business case for CSR should be supported by Social Responsible Investing (SRI) – a broad-based approach to investing and considers both the investor’s financial needs and an investment’s impact on society. SRI approaches to investing are also referred to as mission investing, responsible investing, triple bottom line investing, ethical investing, sustainable investing, or green investing.

In all cases, it is advisable that strategic leaders work with systematic business responses to the environmental challenge, crisis management, issues management, stakeholder management, sustainability, and strategic environmental management. Issues management and crises management are two key approaches by which companies may plan for the turbulent stakeholder environment. Given the current media coverage, crises communication is so important.

In the contemporary world; strategic leaders should understand that they cannot be effective, efficient, and sustainable unless they incorporate CSR issues in the business direction, planning, operation, and reporting in systemic, comprehensive, integrated, and holistic fashion. Strategic leaders should plan, implement, and report CSR activities transparently. Among others, reports should include CSR and sustainability. All stakeholders of business should participate in the process and ensure that there is check and balance, control, transparency, honesty, and cooperation for the benefits of the business itself and society at large.

On the other hand, government has responsibility to make in place favorable business policy, creating favorable business environment, and ensuring peace and security. The business, the local community & local administration, federal & regional government, civil society, media, and all business stakeholders should own business so that society benefit can be insured. All these can be possible if CSR is approached at strategic level, and strategic leaders have the responsibility and accountability to do so. If so, business in Ethiopia would flourish in sustainable way and the country becomes more competitive both in domestic and international market.

6th Year . June 16 – July 15 2018 . No.63