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Corporate Social Irresponsibility: A Widespread Phenomenon

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BY ADEREMI MEDUPIN

As popularly rendered, the term, Corporate Social Irresponsibility (CSI or CSiR), was first introduced in the 1970s by J. S Armstrong in a 1977 article, “Social irresponsibility in management”, published in the Journal of Business Research, in reference to instances of business doing wrong in relation to the environment, community, society, ethics, and business practices. It is a concept crafted to capture the behaviour of businesses in a less than ideal way with regards to their legal obligations, ethical commitments, and the consideration they give to economic, social, and environmental factors. Of course, CSI is the opposite of Corporate Social Responsibility (CSR) given that irresponsibility is generally understood as the antithesis of responsibility and revolves around companies being irresponsible through various means such as not putting anything back into the local community, not trading ethically, or being fraudulent. Conceptually, as rendered by an analyst, a socially irresponsible act is a decision to accept an alternative that is thought by the decision maker to be inferior to another alternative when the effects upon all parties are considered. As ably summed up in January 2014 by Mirela Popa and Irina Salanțăin in their article, “Corporate social responsibility versus corporate social irresponsibility”, CSI is the failure of businesses to meet the expectations of society thus usually associated with unethical acts of corruption, bribery, environmental degradation, and social injustice.

As recounted by Popa and Salanțăin, CSR was developed around 1950s and 1960s when the United States of America witnessed the birth of the modern activist movement. Along with this there was a rising interest in the environment, the social and the consumer movement which dramatically shaped the business world and channeled it toward CSR by attracting unwanted media attention to unethical behaviour. In essence, corporate social responsibility was triggered by public opinion arising from a decreasing favourable public perception of major corporations. Out of necessity, therefore, companies back in those days found in CSR policy and initiatives a way to compensate for wrongdoing, to react and save themselves from the threats of the time. Of course, there are hundreds of definitions of corporate social responsibility, even as it has now become a key marketing and branding reference point for most large and medium sized corporations. It is also alternatively referred to as corporate conscience, corporate citizenship and sustainable responsible business. Now, all over the world, it is expected that firms will perform CSR with specific target to the need of its community and other stakeholders. So, what are the actual differences between corporate social responsibility and corporate social irresponsibility?

Comparing CSI and CSR

The difference between CSI and CSR is brought out very clearly in a tabular presentation by the duo cited above albeit borrowed from a third author which is reproduced hereunder.

CSI versus CSR

CSI view

CSR view
Environmental degradation and pollution are inevitable and little precaution is taken. Environmental degradation and pollution are not inevitable and should not be tolerated, and it is important to raise awareness and commit to action
Employees are a resource to be exploited Employees are a resource to be valued.
Minimal community consultation and involvement. Maximum community consultation and involvement.
Only basic, and sometimes reluctant, compliance with legislation pertaining to CSR Compliance with, as well as policy and practical actions that go beyond the minimum legislative requirements for CSR.
Ethical issues are on the periphery Ethical issues are central to the organization
New technologies should be developed and introduced to the market. New technologies should be developed, tested, evaluated and only introduced to market if they do not cause harm.
Treating suppliers and customers unfairly.

Working fairly with suppliers and customer

Sustainability defined in terms of business survival.

Sustainability defined in terms of business, environment and community survival and mutual growth

Profit is the sole purpose of the business and must be achieved at any cost

Profit is one of many purposes of the business and should be achieved, but not at any cost.

 

As the Table shows, CSI neglects environmental, ethical, and social responsibilities and primarily focuses on profitability. It is pertinent to note that these days, almost every large corporation, especially in the economically advanced countries makes some effort to indicate how they are committed to communities that ostensibly lie beyond basic business objectives (i.e., making profits).

Incidentally, corporate social irresponsibility has grown in significance over the last decade during which the practice of ‘organised irresponsibility’ assumed prominence, in which people in positions of power and influence benefit from the risks they create. The structures and systems that support the right of some privileged actors to behave irresponsibly are central to this understanding and concrete local examples should come to mind concerning for example, Nigeria’s oil and gas industry. As the examples in the following section will demonstrate, cases of CSI range from oil spills to misrepresenting the environmental benefits of products to unsafe working conditions, labour exploitation, sexual harassment, unethical sales practices and accounting scandals.

Country Cases of CSI monitored and reported by Corporate Justice Coalition

The reality must be appreciated that cases of CSI can be found across the globe; what is instructive is that in general, there is greater tolerance of corporate misbehaviour in developing countries-possibly out of ignorance and/or helplessness- than in their advanced counterparts. The cases covered by the Coalition – being a body of organisations and individuals coming together to end corporate abuses of human rights, are as highlighted below:

Bahrain-Spyware: activists tortured. Surveillance technologies such as FinFisher have been used as a means to exercise political control and to spy on activists, human rights defenders, journalists and dissidents to stifle political opposition and undermine democratic development. Find out how a Business, Human Rights and Environment Act could have made a difference- Briefing posted on May 30, 2023
Brazil-The Samarco Dam Disaster: BHP’s failure to take sufficient action. Communities living along the River Doce have been severely impacted by the Samarco dam disaster. More than 700,000 victims, including representatives of Krenak Indigenous communities are taking their case against BHP to the UK courts in the largest group claim in English legal history- Briefing posted on June 15, 2023.
Brazil-Beef: human rights abuses, deforestation and land conversion. Indigenous communities in the Amazon are continuously battling for land ownership and land use rights. Workers at cattle ranches were forced to work 17 hours a day and were left to live in deplorable conditions- Briefing posted on May 30, 2023
Malawi- British American Tobacco and Imperial Brands: child and forced labour in tobacco farms. Malawi is one of the top five tobacco leaf-producing countries in Africa. Farmers often work under exploitative and hazardous conditions. In certain tobacco producing regions, 57% of children are engaged in child labour on tobacco farms- Briefing posted on May 30, 2023
Nigeria- Shell’s impunity for destruction in the Niger Delta. Over a number of decades, oil spills from Shell’s operations led to devastating environmental impacts with disastrous consequences for the local residents. The spills contaminated the communities’ land and waterways which they relied on for farming, drinking, and washing– Briefing posted on May 30, 2023
Tanzania-Barrick Gold: killings and violence against local communities. The Kurya or Kuria people are the majority ethnic group of Tarime district. The North Mara mine severely impacted their way of life and led to brutal violence- Briefing posted: May 30, 2023
Thailand-Tesco’s value chain: exploitation and wage theft. Workers in Mae Sot face a weak rule of law, substandard wages and labour conditions, as well as employers denying workers the rights to join unions and exercise their rights to freedom of association and collective bargaining-Briefing posted on May 30, 2023
UK-Leicester’s Sweat shops: abuses in Boohoo’s value chains. When the Sunday Times published an investigation alleging labour exploitation, deplorable working conditions, and illegally low rates of pay – as low as £3.50 an hour – in Leicester-based factories making clothes for Boohoo, it shocked the UK- Briefing posted on May 30, 2023 [Note: BoohooGroup PLC is a leading online fashion group, servicing fashion-conscious consumers]
Zambia-Kabwe: Anglo American’s lead poisoning legacy. For decades, the Kabwe mine was operated without adequate environmental safeguards, leading to lead contamination of the soil. Medical studies conducted over the past 45 years have shown extreme levels of lead in young children which has affected generations with lead encephalopathy and fatal lead poisoning- Briefing posted on May 30, 2023.
All the country cases monitored by Corporate Justice Coalition as reproduced above deal with instances of interfaces between organisations –or in the case of Bahrain, the state on one hand and on the other, the society; however, these as well as other cases of CSI, the malfeasance is usually the outcome of some internal misrule such that when it spills into the open registers as scandal. As we know, a corporate scandal can occur any time there is evidence of unethical behaviour, negligence or third-party interference that impacts a company’s reputation; this can include evidence of ‘creative’ accounting, fraudulent business practices, data breaches or anything that damages the environment. In this vein, financial scandals such as the collapse of Barings Bank and Lehman Brothers together with accounting scandals such as Enron and Worldcom are well-known examples of irresponsibility. IG platform has displayed details of ‘top 10 biggest corporate scandals’ as being the following:

1. Enron scandal: The Enron scandal is undoubtedly one of the most famous corporate scandals of all time. The Scandal involved Enron duping the regulators by resorting to off-the-books accounting practices and incorporating fake holding. The company utilized special purpose vehicles to hide its toxic assets and large debts from the investors and creditors. The company’s share price fell from $90.56 to under a dollar as the crisis unfolded, with Enron forced to file for what was then the biggest bankruptcy in history.

Volkswagen emissions scandal: The Volkswagen (VW) emissions scandal – also known as ‘emissionsgate’ and ‘dieselgate’ – started in September 2015. It turned out that the company had been fitting what some industry commentators described as ‘defeat devices’ to its diesel cars, which included software that would detect when the cars were undergoing laboratory testing and turn on controls to reduce nitrogen emissions. The cars would then appear to comply with the agency’s standards but, in some cases, were actually emitting up to 40 times the nitrogen dioxide limit when driving on the road. This discovery led to investigations worldwide, with some estimates suggesting the scandal affected up to 11 million cars.

3. Lehman Brothers Scandal: The bankruptcy of Lehman Brothers on September 15, 2008, was the climax of the subprime mortgage crisis Ethical malpractices were core in the fall of the Lehman Brothers’ investment company. The firm invested without a proper analysis as required by ethics. Failure to conduct useful marketing research led to excess leveraging of mortgage firms. As the subprime mortgage crisis took effect, Lehman Brothers found itself unable to repay its debt as clients were defaulting on their loans. More than 70% of its value was wiped out in the first half of 2008 alone and the company was forced to file for bankruptcy in September of that year.

BP Scandal: BP did not have adequate controls in place to ensure safety; the April 20 blast aboard the Deepwater Horizon rig killed 11 people and caused one of the worst oil spills in history. The crisis started in April 2010 when the Deepwater Horizon oil rig exploded in the Gulf of Mexico, causing oil to gush into the sea. The effects were devastating for the local ecosystem, wildlife and locals, and BP was forced to pay billions of dollars in compensation since the crisis.
Uber Scandal: Uber drivers, employees, and managers would schedule rides on other apps to book them and then cancel at the last minute. Besides, there were multiple accusations of sexual harassment at the firm and questions over its ‘stop-at-nothing’ approach to expansion. The latter allegedly saw it using illegal technology to evade law enforcement, poach drivers from competitors and spy on users. Even though some were not proven, the claims affected the price of the company’s shares, which were traded privately at the time.
Apple Scandal: Millions of people were affected when the models of iPhone 6and 7 and SE were slowed down in 2016 in a scandal that was dubbed batterygate. The report was that a software update had reduced the performance of their iPhone but that this had corrected itself when they replaced the battery. The company offered a discount on battery replacements as a gesture of goodwill for those affected.
Facebook Scandal: Facebook’s biggest scandal hit in March 2018, when the Guardian and New York Times reported that a firm called Global Science Research had harvested data from millions of Facebook users in 2013 – without their explicit consent. These details were later sold to Cambridge Analytica, who used it to create highly-targeted ads to encourage users to vote for Trump and Brexit. The furore surrounding this scandal was so serious that Mark Zuckerberg was called to answer questions in front of Congress in the US.
Valeant Pharmaceutical Scandal: The Valeant Pharmaceuticals scandal started in August 2015 when Bernie Sanders and other congressmen asked the company to explain why it had raised the price of two drugs. Valeant’s pricing model is unethical because it harms people and the integrity of the insurance payment system. The only parties that benefit from the price gouging of this type are Valeant’s management and its owners. The company has since changed its name to Bausch Health Companies Inc.
Kobe Steel Scandal: The Kobe Steel scandal started in October 2017 when the company revealed that it had falsified data about the quality of its aluminum, steel and copper products. What happened was that Kobe employees faked reports to make it look as though products met the specifications requested by customers when in fact they didn’t. The scandal initially concerned copper and aluminum parts, but later spread to steel products, too. The scandal led to a major dip in Kobe Steel’s share price and the resignation of CEO Hiroya Kawasaki. The company’s March 2018 report on the scandal found that it had ‘a management style that overemphasized profitability, and […] inadequate corporate governance.’
Equifax Scandal: Equifax is one of the ‘big three’ credit agencies. In March 2017, personally identifying data of hundreds of millions of people was stolen from Equifax, one of the credit reporting agencies that assess the financial health of nearly everyone in the United States, In September 2017, the company became aware of a major security breach, which it said could affect around 145 million of its US consumers plus many more around the world. The data stolen included names, social security numbers, birth dates and addresses – information typically used by banks and other financial institutions to confirm identities. Many of the consumers who were affected by the breach could therefore become victims of identity theft in the future, making this one of the most serious breaches of personal data in recent years.

As Maria Rotundo- in the piece of September 6, 2021, published in India Forbes Magazine, titled: “The roots of corporate social irresponsibility”, rightly observed, while CSR has been widely embraced, corporate social irresponsibility (CSiR) continues to be widespread.

Is CSR a ruse?

In an August 2012 Master degree thesis to Kent State University, Gina A. Conley pointed to how the popularity of the environmental movement has flooded society with organizations claiming to have upheld their social responsibility through environmental consciousness. Global environmental problems such as limited resources, pollution and climate change are affecting the values and attitudes of the public; the result has been a frantic bid by companies to present themselves as CSR compliant when indeed their actions are more of CSI.

Corporate hypocrisy occurs when a company’s actual CSR performance differs from its claims, which means that the lower the perception of CSR performance is, the higher the perception of hypocrisy will be. In this vein, I find some merit in the submission by Emmanuel Ndzibah of the University of Vaasa in the article, “CSR: A Strategic Tool for Business – Trick or Treat?” being a Conference Paper in September 2009 to the effect that: As much as the concept of CSR is genuine, it is often used as a tool by which organizations ‘throw‐dust’ into the eyes of their stakeholders. This can be seen as a typical trick deployed by many a business to maneuver around critical issues pertaining to their social responsibility as a strategic tool, really a trick, cunning or deceitful action.

With hypocrisy, when actions conflict with prior reports of CSR, consumers may capitalize upon the event and infer negative attributes as factors driving the behaviour. These perceptions, in turn, may lower overall brand evaluations and decrease future patronage. Incidentally, research shows that some organisations may be motivated to engage in CSR as a proactive way to camouflage, offset, or compensate for prior or future CSI. The real danger is that once the hypocrisy is unmasked, the organisation suffers one of the most serious disadvantages of a misplaced CSR: the impact on public image. The logic is that, once you’re in the public eye, you’re more likely to be scrutinized for everything you do. As an organization that upholds its credibility with its actions, you may be subject to criticism over the smallest infraction. Given the pivotal role of oil and gas in the economies of relevant resource-rich economies, a word on the Nigerian scene is in order. This is especially so in view of the fact that the oil and gas industry is a leading sector of business that has to continuously engage in corporate social responsibility practices such as social, economic, political, legal, technological and environmental areas.

CSI in Nigeria

There are several cases of evident irresponsibility on the part of business operators especially the large multinational corporations in Nigeria that have inflicted costly damage on populations, faithfully documented by scholars. Examples include the Bodo oil spill-(amongst many other oil spills in the country); Pfizer’s clinical trial of a polio drug that killed 11 children and rendered several others blind and deaf. Some of the negative consequences of the multinational corporations in the oil sector in Nigeria include gas flaring, oil spills, environmental pollution, negative social impacts, conflict and violence.

A casual look at the country’s oil and gas sector lends credence to my long held persuasion that the government, at both national and sub-national tiers have been collusive by turning their eyes away from gross acts of corporate infractions. In other words, the Niger Delta crisis is fundamentally a result of years of neglect of the states that constitute the oil rich Niger Delta States with the MNCs behaving irresponsibly towards the host communities through their philanthropic gestures rather than behaving responsibly by genuinely holding and treating the communities as real stakeholders. I come in peace, please.

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