WILLIAM GUMEDE: Why SA’s CSR models need to change

The corporate social responsibility (CSR) models used by many companies in SA are unsuitable for a developing country, making them often irrelevant and lacking credibility. As a consequence they largely have insignificant social impact.

The dominant CSR model used by SA companies is more suited to developed countries. CSR is the idea that companies have a responsibility to operate in a fashion that exercises duty of care for wider society, people, economy, environment and the future. It is a central pillar of corporate governance.

Yet CSR is often a small unit in many companies and those who run it are marginal in the business rather than integral to its functioning. SA CSR initiatives are largely public relations focused — media catching sports events, celebrity driven functions and superficial photo-op “developmental” projects devised by company managers who are far removed from the needs of impoverished communities.

Glossy CSR is in many cases just PR-speak, talking glibly of the “triple bottom line” and “profit, people, planet”, whereby the business is supposedly committed to prioritising social, environmental and sustainability impacts in tandem with profitmaking. Yet except for these “commitments” there are often few sustainable projects to show.

The result is that stakeholders are resentful, angry and say most of the CSR they experience is mere window-dressing. Irrelevant CSR models undermine the social licence to operate of many companies — the approval of the community, stakeholders and wider society. Companies in developing countries, with their huge developmental needs, require more appropriate CSR models.

In SA in particular, with its historical inequalities where past profits were made by exploiting excluded communities and where the structural imbalances of the past still affect the present, companies have greater social, environmental and economic responsibility. In such a context a more holistic CSR is crucial for a company to secure the “social licence” to operate.

Countries have dominant corporate cultures, which influence their CSR models. SA’s dominant mainstream corporate culture comes from apartheid and was based on a segregation of opportunities based on race, cheap black labour, corporate welfare for whites and stripping the environment.

Many industrialised country companies operating in poorer African countries operate on almost the same model, with benefits segregated between expatriates and locals, stripping the local environment and trying to pay as little tax as possible.

SA needs new approaches to CSR. A CSR model for SA companies cannot be relegated to a marginal unit in an organisation but should encompass all operations of a company. A companywide approach to CSR must look at the firm operating as a responsible democratic corporate citizen, which models sustainability in its internal as well as its external operations and considers the future impact of its current operations. Employees, contractors, customers and communities have to be seen as stakeholders in a similar way as shareholders.

Within companies, gender equality, nonracialism, diversity and ethical decision-making have to be actively strived for. There should be no gender pay gap between women and men doing the same work. There should not be excessive pay gaps between the highest paid executives and ordinary employees. In countries where historical instances of discrimination against colour, gender or religion exist, companies should genuinely introduce diversity, redress and inclusivity.

A CSR model has to reject a corporate culture that demands extreme profits above all else, and measure success in more sustainably inclusive ways. The business operations of a CSR model in a developing country should be done in a sustainable way, whereby the business practices minimal harm.

CSR should include human rights, fair labour practices and fair-trade practices. CSR includes a responsibility to ensure sustainable use of natural resources, reducing greenhouse gas emissions and pollution and rehabilitating the environment.

CSR involves treating customers, contractors and partners fairly — not exploiting the poor, the vulnerable and illiterate with higher fees than those who are more affluent, treating dependent contractors and businesses fairly, including paying them on time. In a developing country CSR has to involve companies providing industry-relevant skills and technical training to employees.

During apartheid black consumers were treated in a racist manner by SA companies. Unconscious bias, stereotyping and implicit prejudice of black people have become embedded in the culture of many companies.

During the apartheid era financial institutions “redlined” townships and therefore did not provide home loans to people in predominantly black neighbourhoods on the basis that they were unlikely to be able to afford or repay loans. This practice has continued in the postapartheid era.

It is alleged that insurance companies in many instances charge blacks more for insurance, deeming them supposedly “riskier” than their white peers. In 2018 consumer activist Emerald van Zyl took a major bank to the Equality Court for discrimination against more than 4,000 black customers by  allegedly charging them up to 40% more than white clients on their home loans.

Mobile operators have been accused of charging exploitive prices for data and not compensating customers whose livelihoods depend on data, for disappearing data. Insurance companies often refused to honour legitimate claims of customers giving sophisticated but dubious reasons why they refuse to do so.

Corruption by private sector companies is now the same as in the public sector. Price-fixing, exploitive practices and defective products have increased societal distrust against corporates. In 2017 three SA banks were implicated among 17 banking groups in colluding to fix the price of the rand, after an investigation by the Competition Commission.

In 2017 the department of water & sanitation revealed that 36 mines were operating without water licences, violating the National Water Act as they use water, waste and pollute without being monitored. Research by the Centre for Applied Legal Studies at the University of the Witwatersrand in 2018 on mines ranging from platinum to coal, found that very few of the social and labour plans mining companies signed up to were implemented. Mining companies failed to build houses, provide childcare and bursaries and conduct training as promised.

In 2013, 15 construction firms agreed to pay fines totalling R1.4bn for collusive tendering related to the construction of facilities for the 2010 Football World Cup. In 2012 the Competition Commission announced several fishing companies had admitted to price fixing of pelagic fish, which includes anchovy, pilchards and redeye. Six of SA’s leading milk producers were accused in 2006 of price fixing in a case that continued until 2011. In 2007 a number of companies were found guilty of fixing the price of bread and costs of milling.

Communities increasingly march against mining companies for destroying the environment and striking black economic empowerment deals with dodgy traditional leaders and politically connected cadres who would be expected to shield these companies from community pressure when they damage the environment, fail to adhere to mining licence conditions such as providing social housing, and do not provide supplier opportunities for local small business.  

In a more sustainable developing country CSR model companies would empower communities, stakeholders and wider society more equitably. It is important to involve local communities surrounding mines and factor this into the value chain through the use of local small contractors and farmers for goods and services. Corporates must support local community development projects, educational programmes and fund sport and recreation facilities and community infrastructure projects.

CSR in SA and developing countries must prioritise reparations. In SA companies should give opportunities to former employees and their families who were excluded from company benefits during the apartheid era, and give them access to vocational and technical training, bursaries and housing funding as part of compensation for past exclusion. 

SA companies should also make sure they find black former employees and their families who have not received their pension payments. Many black employees died or suffered disability from illnesses such as tuberculosis, asbestosis and work accidents, but they or their families never received compensation.

SA’s corporates must rethink their flawed CSR models or risk rising anti-business feeling, community protests and legal action against them by previously disadvantaged communities.

• Gumede, an associate professor at the Wits School of Governance, is author of “Restless Nation: Making Sense of Troubled Times”. This is an edited version of his keynote address “Reimagining Social Impact” at the Annual Social Impact Symposium of Stellenbosch University.