THE ROLE OF BUSINESS IN SOCIETY: FOREIGN DIRECT INVESTMENTS (FDI) AND THEIR IMPACT ON SUSTAINABLE DEVELOPMENT IN NIGERIA.
Mr. Peter Friday Okomoh (B.Sc., Accounting) No 5, Ojodu Abiodun Road, Off Alhaji Kosoko Road, Berger B/Stop Ojodu, Lagos, Nigeria. Tel: 234-80-23046741 E-mail: firstname.lastname@example.org
Paper For 2004 World Bank Institute (WBI)/ Wharton Business School International research/ Essay Contest on CSR for Future Leaders. February 2004.
INTRODUCTION 1.0 Background Is the business of business strictly business? If the answer to this question is no, how then do we define the business of business in the twenty first century and beyond? Traditionally, the business of business is an open market economy has been defined to be the creation of wealth for shareholders, employees, customers and society at large. No other human activity matches private enterprise in its ability to Marshall people, capital and innovation under controlled risk in order to create meaningful jobs and produce goods and services profitably. However, recent developments in the external business environment within the last decade, such as the 2001 World Summit on Sustainable Development (WSSD), has shown that various parties and persons are beginning to see the need to re- define the role(s) of business in society. Organizations and institutions of business such as the World Business Council on Sustainable Development (WBSCD) have seen a need to redefine the role(s) of business in society to reflect of the environmental impact of corporate activities on one hand, and how these environmental situations affect the future of mankind on the other. On organizational level, corporate policies of business around the world, particularly the multinationals have started reflecting the new demands of their external environment. Some companies have had to re-define the mission statement of their organizations in order to reflect these new role(s). The concept of Corporate Social Responsibility (CSR) that hitherto was the sole policy focus of large business is now being favorably considered and adopted as a national development strategy by government and other public sector agencies. Thus, it is not surprising to observe the emergence of two key concepts that come to reflect the “new” role(s) of business in the society. These concepts are Stakeholder and Sustainable. The Stakeholder Concept as it relates to business that managers are out to serve the interests of all those who have a “Stake” in the firm. The stakeholders include shareholders, employees, suppliers, customers, and the communities. The very purpose of the firm according to this view is to serve and co-ordinate the interest of its various
stakeholders. It is therefore the moral obligations of the manager (and thus the firm) to strike an appropriate balance among the various interests in directing the activities of the firm. The Sustainable Concept on the other hand holds that the present generation has been reckless and wasteful in both its exploitation and use of natural resources by pursing a series of socio-economic and industrial policies which endanger global environmental security. Viewed as doctrine of qualitative societal change, the sustainable concept underlines the perils of global environmental degradation- oil spills, deforestations, acid rain, ozone depletion, toxic waste, et cetera- and calls for the institution of policies that would do less damage to the environment, meet the “needs” of the present generation and, also allow future generations to meet their own needs. Against this background, one is quick to ask the following questions: 1. 2. 3. Has the emergence of concepts such as stakeholder and sustainable really been influential in the re- definition of the role (s) of the business in society? To what extent have companies considered and adopted these concepts in the conduct of business activities? What impact has this had on society and business? This paper will attempt to answer these questions by looking at the contribution of Foreign Direct Investments (FDI) to sustainable development in Nigeria. The country presents a classic environment for this study owing to its peculiar socio-economic and political history. This ‘developing’ country is considered a “Mecca” of sorts for foreign investors owing to its vast human, material and natural resources and is also one with a huge challenge in sustainable development as a result of crises relating to the Corporate Social Responsibility and behavior of the large multinational corporations in between various dispensations. 1.0.1 Purpose, Objectives and Organization of the Paper. The purpose of this paper is to demonstrate that the role of business in society has gone beyond the traditional definition of the creation of wealth for shareholders, employees and investors. This has culminated in the gradual movement in business to investing in sustainable development through Corporate Social Responsibility (CSR). The British American Tobacco (Nigeria) Limited has been specifically chosen for this study because it is one of the largest Foreign Investment to come into Nigeria after the long period of military rule. The specific objectives of the paper are as follows:
To critically examine the role, importance and contribution of Foreign Direct Investments (FDI) to sustainable development in Nigeria.
To determine to what extent this role is considered as a generalized role for businesses in the twenty-first century.
To assess the opportunities and challenges for corporate and public policy changes with a view to making foreign investments more beneficial to developing economies that depend on the inflow of Foreign Direct Investments (FDI) as a cost effective strategy of achieving economic growth and development.
This paper is divided into five main sections. In the second section, relevant literature on Foreign Direct Investment (FDI), Sustainable Development and Corporate Social Responsibility (CSE) are briefly reviewed to provide the background for understanding the major concepts and how they relate with each other. The third section examines sustainable development in Nigeria using a chronological approach that is based on two style of governance. The essence of this section is to show how the country has fared development-wise before and during democratic governance. The fourth section presents a study on British American Tobacco (Nigeria) Limited (BAT) and provides the evidence and manifestation of how a foreign investment by using Corporate Social Responsibility (SCR) can help achieve sustainable development in developing countries. In the fifth and final section, the paper concludes that foreign investments have the capacity to contribute to sustainable development if they will adopt a Corporate Social Responsibility (CSR) policy that reflects international standards and codes such as the AccountAbility (AA1000) Standards and Global Reporting Initiatives (GRI).
THE CONCEPTS: IMPLICATIONS
FOREIGN DIRECT INVESTMENTS (FDI). The United States Department of Commerce defines Foreign Direct Investment (FDI) to include all foreign business organizations in which a U.S. Citizen, organization or affiliated group owns an interest of ten percent (10%) or more. This definition is limited in scope because it considers the share capital perspective of Foreign Direct Investments (FDI) in isolation of any consideration for the corporate control aspects. The United Nations on the other hand has defined Foreign Direct Investment (FDI) as investment in enterprise located in one country but “effectively controlled” by residents of another country. This definition not only considers Foreign Direct Investment (FDI) from an investment point of view, but also equally defines the status of corporate control. Foreign Direct Investment (FDI) is the distinctive feature of multinational enterprise hence; a theory of Foreign Direct Investment (FDI) is also a theory of the multinational enterprise as an actor in the world economy (Hennart, 1982). Based on this theory, Foreign Direct Investment (FDI) is not simply (or even primarily) an international transfer of capital but rather, the extension of an enterprise from its home country into foreign host country. The extension of enterprise involves flows of capital, technology, and entrepreneurial skills and, in more recent cases, management practices to the host economy, where they are combined with the local factors in the production of goods and services. Foreign Direct Investment (FDI) is growing faster than world Gross Domestic Product (GDP) and world trade, thus showing the rising importance of Foreign Direct Investment (FDI). Fig 1 depicts the growth relationship between exports and FDI.
Figure 1: Growth Relationship between Exports and FDI.
800 700 600 500 400 300 200 100 0 FDI Export
Source: United Nations Centre on Transnational Corporations, World Investment Report: The Triad in Foreign Direct Investment (New York: United Nations 1991), Fig. 1 Page 5. Index of Foreign Direct Investment Outflows and the Current Value of Exports, 1975 – 1989 (1975 = 100). Over the 1975 – 1989 periods as a whole, FDI outflows and world exports grew at about the same rate. But since 1985, the growth rate of FDI outflows has spurted ahead of the export growth rate.
Since the early 1980s, Foreign Direct Investment (FDI) outflows have grown three times faster than exports and four times faster than world output. This rising importance of Foreign Direct Investment (FDI) in the international economy reflects several factors amongst which are: a. International flow of capital reduces the risk faced by owners of capital by allowing them to diversify their lending and investments (Feldstein, 2000). b. The global integration of capital markets can contribute to the spread of best practices in corporate governance, accounting rules and legal traditions (Feldstein, 2000). c. Foreign Direct Investment (FDI) allows for transfer of technology (Feldstein, 2000). d. Economists tend to favor the free flow of capital across national borders because it allows capital to seek out the highest rate of return. e. Promotion of competition in domestic markets.
In addition to the factors listed above, Foreign Direct Investment (FDI) has proved to be resilient during financial crisis. For instance in East Asian Countries, such investments was remarkably stable during the global financial crises of 1977-98. This is in sharp contrast to other forms of private capital flows – portfolio equity and debt flows- which were subject to large reversals during the same period (Dadush, Dasgupta and Rath 2000; Lipsey 2001). This resilience has led many developing countries to favour Foreign Direct Investment (FDI) over other forms of capital outflows furthering a trend that has been evident for many years – see fig. 2
Fig. 2: The Composition of capital inflows has shifted away from Bank loans and towards FDI and portfolio investment.
1978-81 FDI 11% Portfolio 9% 1982-89 FDI 16% Portfolio 44% 1990-95 FDI 20%
Source: Based on Bosworth and Collins (1999). As noted by Flood (1993), Foreign Direct Investment (FDI) flows to developing countries reached US$43.2billion in 1992, showing a Seventy Six percent (76%) increase from two years earlier, reflecting improved macro-economic performance, more welcoming regulatory regimes and active privatization programs In the 1980s and 1990s, Foreign Direct Investment (FDI) flows have shifted from the manufacturing and extractive sectors to the service sectors, particularly the new capital-intensive service industries, such as telecommunications and information technology. Foreign Direct
Investment (FDI), however, still exerts an important presence in export-oriented manufacturing.
SUSTAINABLE DEVELOPMENT The World Commission on Environment and Development (WCED) defines sustainable development as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” The WCED’s thesis of sustainable development posits that, the present generation has been reckless and wasteful in both its exploitation and use of natural resources by pursuing a series of socio-economic and industrial policies that endanger global environmental security. The commission defines the fundamental constructs of sustainable development as follows: A political system that secures effective citizen participation in decision-making. An economic system that is able to generate surpluses and technical knowledge on a self-reliant basis. A social system that provides for solutions for the tensions arising from disharmonious development. A production system that respects the obligation to preserve the ecological base for development. A technological system that can search continuously for new solutions. An international system that fosters sustainable patterns of trade and finance. An administrative system that is flexible and has the capacity for self-correction.
These principles constitute the fundamentals of sustainable development and they challenge both the ethical and technical imperatives of government policies as well as the strategic economic directions of companies. A thorough analysis and grouping of the WCED’s fundamental constructs (principles) of sustainable development reveals that there is a strong linkage in conceptual terms between sustainable development as seen by the WCED and the World Business Council on Sustainable Development (WBCSD). The WBCSD considers sustainable development to be made up of three fundamental and
inseparable pillars viz: generation of economic wealth, environmental improvement and social responsibility. Therefore, sustainable development according to the WBCSD is: Generation of economic wealth. Environmental Improvement. Social responsibility.
Of these three dimensions of sustainable development, social responsibility otherwise referred to as Corporate S ocial Responsibility (CSR) remains the broadest and most crucial in the quest for sustainable development. The reason lies in the broad scope of Corporate Social Responsibility (CSR), which turns around to include the first two dimensions in its classific ation of social responsibility. 2.0.3 CORPORATE SOCIAL RESPONSIBILITY (CSR) The World Business Council on Sustainable Development (WBCSD) defines Corporate Social Responsibility (CSR) as the continuing commitment of business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large. Corporate Social Responsibility (CSR) defines what a company has to do to win and enjoy the confidence of the community as it generates economic wealth and responds to the dynamics of environmental improvement. There is no common blueprint for Corporate Social Responsibility (CSR), but there are common themes amongst responsible companies, which include : The Board is committed to promoting Corporate Social Responsibility (CSR). Local laws and tax rules are followed. Stakeholders’ opinions are taken into account. There are high labor standards. Their economic, social and environmental performance and impact is monitored and reported to the public.
There is a high standard of employee training and steps aimed at raising awareness of the company’s responsibility.
There are four main forces driving Corporate Social Responsibility (CSR), they are the investment climate, civil society, the market place and the workplace. Each of these forces has a number of elements that helps it influence corporate behavior. For example, the marketplace is made up of elements such as consumers, investors and competitors. In theory, a dynamic market process is at work. The initial pressure for businesses to adopt Corporate Social Responsibility (CSR) comes mainly from consumers and society. These pressures then bring Corporate Social Responsibility (CSR) into the mainstream of a company’s activities. The business benefits through higher productivity and quality as well as improved relationship with suppliers and the financial markets also reward the company. As the company reaps the rewards, this puts pressure on their competitors to do likewise. As leading companies then go further, their competitors are forced to follow. However, this does not always happen particularly in developing economics. In developing economies, there is not usually the right environment for competitive business and it is difficult to enforce regulations governing business practices. The impact of Corporate Social Responsibility (CSR) on development can best be appreciated by taking a brief examination of what is referred to as the three generations of Corporate Social Responsibility (CSR). Figure 4 illustrates this process. It shows how businesses contribute to developmental impact through their core operations (production, employment, knowledge, taxes et cetera), and through their multi-stakeholder partnerships. The argument is that the lower down the activity is in the triangle, the greater its long terms impact on development.
Fig. 3: The Impact of Business on Development (adapted from Unilever, 2004).
With reference to poverty, the positive effect of Corporate Social Responsibility (CSR) on reducing poverty is still subject to debate. However, it is generally agreed that the core activities of a successful business can have a positive impact on poverty. Business can help to reduce poverty: By investing, producing, and paying wages and taxes, they can contribute to growth. By respecting labour standards and encouraging local sourcing they can contribute to pro-poor growth; By creating jobs, providing skills and training, and producing goods that meet the needs of the poor, their operations can have a direct impact on the poor.
DEVELOPMENT: THE NIGERIAN EXPERIENCE Nigeria being a developing economy has not been any different from other developing economies in using Foreign Direct Investment (FDI) as a strategy for achieving economic growth and development. However, unlike countries like Malaysia, Nigeria in spite of its
huge deposit of human, natural and material resources has failed to achieve rapid economic growth due to several factors, the principal of which is an unstable political environment occasioned by long periods of military rule. Under the military rule, Nigeria witnessed a decline in the influx of foreign investments as a result of various economic sanctions imposed on the country by the international community. To best explain the Nigerian experience in Foreign Direct Investment (FDI) and sustainable development, we shall take a look at the country in two different dispensations or eras: Pre-1999 and Post1999. The choice of 1999 as a central or focal era for this study is due to the country’s restoration to civil and democratic rule after about Sixteen (16) years of military reign on May 29, 1999.
PRE-1999 Prior to its independence from British Colonial rule, Nigeria had played host to a couple of foreign investments, companies like the United African Company (UAC) were involved in the purchase and export of Palm Oil which was a major foreign exchange earner for the country. However, the country’s independence in 1960 was to change a lot of things politically, socially and economically for it. Nigeria now had to take her future in her hands and so; various economic policies were adopted to ensure the young country’s survival. The first twelve (12) years of independence saw the country’s
economy being sustained by export earnings from agriculture. With a vast array of cash and food crops, the country soon became famous in Africa and beyond. Then in the mid seventies (70s) came the discovery of oil and with it several challenges that was to last for several years. Soon, major investments started coming into the country in order to tap the huge oil deposits there. By the late 1980s the country had been reduced to a monoincome economy. Budgets were based on estimated revenue from the international sales of crude oil.
Politically, the nation had undergone quite a traumatic experience. Between 1960 and 1995, the country had experienced eight major military take-overs (coup detats) some of them ending in bloodshed. Military rule was to remain the dominant form of governance for over twenty out of the country’s 39 years of independence. The period of military rule came along with certain characteristics, some of which include: i ii iii iv v Disregard for fundamental human rights. Suspension of the rule of law. Massive monopoly by firms having the favour of the military government. A gradually declining economy brought about by inconsistent economic policies; Large scale corruption and looting of public funds.
As a result of this socio-political situation, Corporate Social Responsibility (CSR) practices by large multinational corporations particularly in the oil and gas sector was taken for granted and therefore received very little attention from the government and civil society. Environmental pollution was at an all time high and citizens of the Niger Delta region were subjected to untold economic hardship. Marine life and soil fertility was devastated by frequent oil spills in the region. This phenomenon has been referred to as the “resource curse” thesis (Auty 1998). The pursuit of sustainable development via
Corporate Social Responsibility (CSR) and the activities of the oil companies operating in the Niger Delta region was soon to spark off an internationally celebrated confrontation between the late environmental activist- Ken Saro Wiwa – and Shell Petroleum Development Company (SPDC). Unfortunately, the war did not last for long as the activist along with eight other people were tried by a military tribunal and sentenced to death. This situation was to bring to fore, the human rights standards of Shell as a corporate citizen within the Nigerian nation state.
In summary, under the military, social construction of the Nigerian environment revolved around very crucial issues of governance. The most important of these was probably the conflicting claims of communities, the state and big business over control of natural resources and responsibility for human induced environmental changes. For the military and big business, the essential driving logic was economy not ecology. State officials and petro-business insisted that national security in the face of poor economic and social conditions meant that oil wells should keep flowing, irrespective of environmental damages (Ibeanu 2001).
POST- 1999 The inauguration of a democratic government in May 1999 raised hopes of redressing the ecological social and economic damages of military rule. The country began a gradual progression towards creating a political and social environment supportive of Corporate Social Responsibility (CSR) and ultimately sustainable development. establishment of democratic rule came the following: i. Empowerment of the constitution and renewed emphasis on the respect for fundamental human rights. ii. iii. Re-establishment of the rule of law. Building of a competitive economy through various policies such as the deregulation of various sectors amongst which were: the telecommunications sector, the down stream oil and gas sector, solid minerals resources et cetera. As a matter of fact, Nigeria witnessed greater Foreign Direct Investment (FDI) inflow between 1990 and 2001. Another factor responsible for the phenomenal increase in Foreign Direct Investment (FDI) apart from economic policies is the fact that the legal regime and its related institutions required for the creation of a market economy and suitable investment climate were priority public policy agenda of the new civilian regime. With the re-
The statistic below shows Foreign Direct Investment (FDI) activities in Nigeria since between 1990 and 2001. Table 1: Net FDI Inflows (as % of GDP) HDI Rank Country Net Foreign Direct Investment Inflows (as % of GDP). 1990 152 Nigeria 2.1 2001 2.7
Source: World Bank. 2003. World Development Indicators 2003. CD-Rom. Aggregates Calculated for the Human Development Report Office by the World Bank.
In the wake of the emerging competitive market economy in Nigeria, Corporate Social Responsibility (CSR) has now moved from the back seat of corporate policy and it is now in use, as a tool for achieving competive advantage in various industries and sectors where the deregulation policy has broken former corporate monopolies and brought about competition among companies within the sector. However, public sector support for Corporate Social
Responsibility (CSR) is still weak due to the ignorance of policy makers about the fundamental constructs of Corporate Social Responsibility (CSR) and its impact on sustainable development.
CASE STUDY: BRITISH AMERICAN TOBACCO (NIG.) LTD: PROMOTING SUSTAINABLE DEVELOPMENT USING CSR. Perhaps one of the best ways to facilitate an in-depth appreciation of how businesses contribute to sustainable development using Corporate Social Responsibility (CSR) is to undertake a study of what one of the major Foreign Direct Investments (FDI) in Nigeria since the take off of democratic governance is doing.
British American Tobacco Group is the world’s second largest tobacco company, with a global market share of almost fifteen percent (15%). The Group employs over Eighty-five thousand (85,000) people worldwide, maintains active business presence in One Hundred and eighty (180) countries, works with over two hundred and fifty thousand (250,000) tobacco farmers worldwide and has planted over two hundred and sixty seven thousand hectares of renewable woodlands. British American tobacco Nigeria was formed in October 2000. The company merged with the former Nigerian Tobacco Company (NTC) in November 2000 to form what is presently the largest tobacco company in Nigeria. The company is a private company and a fully owned subsidiary of the British American Tobacco Group. In September 2001, the company signed a Memorandum of Understanding (MOU) with the Federal Government of Nigeria for the investment of N150million in Nigeria. The investment is an integrative process that will impact on all aspects of the tobacco industry, from leaf growing through to the manufacture and distribution of tobacco products. Under the terms of the Memorandum of Understanding, British American Tobacco Nigeria is expected to partner with the government to achieve the following: Restructuring and entrenchment of discipline in the tobacco sector with a view to
having a better-regulated tobacco market. Significantly increase government revenue from the sector. Significantly reduce the incidence of contraband and counterfeit tobacco products in the Nigerian market. 4.0.2 Revitalize the tobacco-growing sector. ECONOMIC CONTRIBUTION
Revenue accruing to the government from the tobacco sector, which hitherto was marginal, has significantly increased since the establishment of Brit ish American Tobacco Nigeria. In 2002, the company paid over N6.5billion in taxes to government, over 10 times the revenue that had accrued to government for the tobacco sector before the company commenced operations in
Nigeria. In addition to the thousands of Nigerians who have been employed by the company, the tobacco-growing sector has started benefiting, with over 1,000 tobacco farmers engaged in 2002.
The company has a comprehensive Corporate Social Responsibility (CSR) framework. It is probably the first major Foreign Direct Investment (FDI) that came into the country with a goal of being a good corporate citizen. The company has adopted the Social Reporting Process (SRP) as a way of ensuring that its Corporate Social Responsibility (CSR) framework meets the direct social, environmental and economic needs of its key stakeholders. This is a corporate practice and policy that the company has adopted which allows its social performance to be objectively audited and independently verified both locally and globally. The Social Reporting Process is based on the AccountAbility (AA1000) standards and Global Reporting Initiative (GRI) and has the following objectives: a) Allow the company to engage with, listen and respond in a constructive and transparent manner, to the company’s stakeholders on issues that surround its business. b) Allow the company to engage with, listen and respond to stakeholders, who have direct and indirect influence over how the company operates. c) Allow the company demonstrates that it is meeting its commercial objectives in a manner consistent with reasonable public expectations of a responsible tobacco company. For the company, the starting point in the Social Reporting Process (SRP) is the identification of stakeholders. The company will then engage the stakeholders in
dialogue to address issues of mutual interests and seek agreement on the actions to be taken to address these issues. Based on the company’s dialogue with key stakeholders between 2002 and 2003, the following issues of concern and areas of corporate responsibility were identified:
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11.
Risk information and understanding. Risk reduction. Responsible marketing. Under-age smoking. Sensible regulation. Community support. Corporate Conduct and Accountability. Tobacco Growing Issues. Environment. Trade partners. Employee issues.
These are all Corporate Social Responsibility (CSR) issues, which reflects the minimum expectations of the stakeholders the company deals with in Nigeria. It is worthy to note here that the company addressed all these issues, but for the sake of volume, we shall consider two. 4.0.4 CORPORATE CONDUCT AND ACCOUNTABILITY The Issues British American Tobacco (Nigeria) limited being the leading tobacco company in Nigeria is also a major player in the manufacturing sector. This makes the company a relevant player in the Nigerian economy. Consequently, the company is expected to demonstrate exemplary corporate behaviour and to display high ethical standards. The company is also expected to be responsive to the expectations of all stakeholders, government, business partners, employees and society at large. Stakeholders felt that beyond operating to high ethical standards at corporate level, companies have a responsibility to influence employees and business partners to adopt high standards of integrity. Stakeholders: Concerns 1. British American Tobacco (Nigeria) Limited is expected to be proactive in entrenching
integrity and good corporate citizenship in all its activities and programs.
British American Tobacco (Nigeria) Limited should instill a sense of corporate
responsibility in other corporate bodies through its membership of industry association. 3. British American Tobacco (Nigeria) Limited should continue to ensure transparency in
its payment of taxes. British American Tobacco: Response, Views And Current Practice 1. The company will continue engaging in the Social Reporting Process (SRP) to engage stakeholders and assess the company’s performance on social and ethical issues. 2. The company will use its Social Reporting Process (SRP) to engage other members of industry associations to encourage them to adopt their own processes. 3. The company will organize a workshop for customs officials to enhance their
understanding of the computation of the excise duties at the company’s factories.
The company recognizes the significant responsibilities that its own business entails, and is committed to the highest standards of ethical behavior. The company believes that multinational companies have a vital role to play in demonstrating responsibility and transparency, and in many cases, going beyond compliance to address some of the wider issues of society. By embarking on social reporting, the company has committed itself to social, ethical and environmental auditing and accounting. The company’s code of conduct covers such topic as conflict of interest; insider trading; receipt of gifts; and unlawful or improper commercial and political practices. 4.0.5 COMMUNITY SUPPORT
The Issue With globalization and the expansion in the operations of multinational organizations, the expectations of communities where these organizations operate have been on the increase and this is especially so in developing countries where in many cases, there is a pervasive feeling that the governments are not meeting the expectations of their people. As societal expectations continue to change, multinational companies also need to evolve their responsibility to society.
Stake holders: Concerns 1. British American Tobacco (Nigeria) Limited, should provide scholarships to children of
the tobacco farmers and wholesalers. 2. British American Tobacco (Nigeria) Limited should assist those living with HIV/AIDS in
the host communities where they operate through the provision of anti-retroviral drugs, etc. 3. British American Tobacco (Nigeria) Limited should come up with community
development programmes in the communities where they operate. 4. British American Tobacco (Nigeria) Limited should encourage its farmers to assist the
country to produce more cash and food crops to reduce food deficit.
British American Tobacco: Response, Views And Current Practice 1. The company shall introduce a scholarship program for children of tobacco farmers in the 2004/2005 academic sessions. 2. The company will set up a foundation that will work with the International Institute of Agriculture (IITA) and relevant NGOs to support agricultural productivity and contribute to the fight against HIV/AIDS respectively. 3. The company will not acquire its own farmlands, as this will occasion the loss of a source of livelihood for thousands of tobacco farmers. Instead the company will continue to support them to grow. 4. The company’s foundation will continue to engage stakeholders with a view to identifying sustainable projects that will be implemented across the country.
The company recognizes the wider role of companies as corporate citizens and being a good corporate citizen means playing a part in the community in which the company operates and in which their employees live and work. The company approaches good corporate citizenship as an end in itself and have always been closely identified with the communities where it operates. The
company’s approach to community involvement is to seek to contribute to sustainable community development programs that can be eventually left to the communities to manage. In November 2002, the company established the British American Tobacco (Nigeria) Foundation, the role of which is to identify and implement sustainable development programs across the country. The foundation has commenced a poverty-reduction-program for unemployed youths in Kaduna State. In 2002, the company gave over Nine million Naira (N9million) in donations to different organizations and victim of disasters. The company through the foundation has formed a partnership with the Nigerian Red Cross Society to provide continuous support for the activities of the society. Currently, over 70 employees have signed up as members of the Red Cross. Other community programs include the introduction of an undergraduate internship program to contribute towards the development of promising Nigerian undergraduates as well as the launch of a “PROUDLY NIGERIA” campaign to support the efforts of the government to encourage Nigerians to buy locally produced goods.
IMPACTS ON SUSTAINABLE DEVELOPMENT Through its Corporate Social Responsibility (CSR) framework which is strengthened by the Social Reporting Process (SRP), British American Tobacco (Nigeria) Limited has contributed to sustainable development in Nigeria in the following ways:
Contributing to the reduction of poverty by engaging tobacco farmers and wholesalers and also through the poverty reduction programs of the BAT (Nigeria) Foundation.
Contributing to the economic growth of the host country through payment of taxes and the accentuation of a transparent, ethical social policy.
Supporting agricultural productivity through partnership with the International Institute of Tropical Agriculture (IITA).
Entrenching a style of business that is sensitive and responsive to the social, environmental and economic issues of its external business environment with a view to
making necessary adjustments to ensure that its activities have as little negative impact as possible.
Foreign Direct Investment (FDI) is an effective strategy that is used by developing countries of the world to achieve economic growth and development. Nigeria with its large reserves of human and natural resources presents foreign investors with a unique market in which to invest their money. However, as can be seen by the experience with large multinationals in the oil sector, such investments though having great economic benefits, may not deliver social and environmental benefits to various groups who are equally stakeholders in the industry. Therefore, Foreign Direct Investment (FDI) though contributory to economic development might in the long run not guarantee sustainable development in its entire ramifications.
For Foreign Direct Investment (FDI) to impact on sustainable development, both the public and private sector must pursue Corporate Social Responsibility (CSR) as an end in itself. From the public sector, the creation of a competitive economy through economic policies such as deregulation and privatization should be pursued. In addition democracy together with its
complementary institutions should be strengthened and corruption should be adequately tackled. From the private sector, companies, especially multinational corporations should voluntarily comply with various international, national and industrial regulations and codes of conduct. This is especially needful in industries where the market drivers (e.g. Competition) are weak and where there is no public policy or legislation to compel them to do such.
Foreign Direct Investment (FDI) such as the British American Tobacco (Nigeria) limited who can contribute effectively to sustainable development in Nigeria and indeed other developing countries of the world. The reasons as can be seen from this work is because:
The company pursues Corporate Social Responsibility (CSR) as a goal in itself; To this end, the company has a framework that guides it practices in any host country;
The company engages key stakeholders in its Corporate Social Responsibility (CSR) process, which enables the company deliver “on-the-target” CSR initiatives that impact directly on sustainable development.
The company abides by local laws and international codes of business conduct such as the Account Ability (AA1000) Standards and Global Reporting Initiative (GRI).
In conclusion, Foreign Direct Investments (FDI) are capable of making significant and direct contributions to sustainable development in host countries through their Corporate Social Responsibility (CSR) frameworks and policies. As Nigeria and other developing countries make efforts to attract foreign investors, care should be taken to ensure that such investors understand and appreciate the unique challenges facing them and that they are expected to contribute to sustainable development in all its ramifications and not just economic growth. 5.0.2 Wider Implications
Against the background of the issues raised and analyzed in this paper, three main implications are identified.
Firstly, business leadership of sustainable development initiatives can create a tendency for local communities and their governments to depend on external agencies and organizations for development initiatives that are the legitimate responsibility of the respective national governments and their people.
Secondly, in other to forestall a situation where a national government abandons its social responsibilities and obligations to its citizens, there is need for dialogue between the private and
public sector with a view to defining where the social, economic and environmental obligations of a company starts and where it stops. This in turn will mean that the national government’s social obligations will be equally spelt out. Of course such a dialogue will involve key
stakeholders such as: Foreign Direct Investment (FDI) companies, public or civil society and its supporting organizations, government and its agencies, multilateral organizations such as the World Bank Group and the United Nations Development Program et cetera Thirdly, local capacity has to be developed in both the private and public sector. The absence of experienced professionals could cause a mis-direction in efforts and might bring about a conflict at the end of the day. 5.0.3 Research Challenges and Imperatives
Challenges Research on Foreign Direct Investment (FDI) especially multinational corporations is very difficult and can be hindered by secrecy and lack of data. In most cases, major foreign investors particularly in the oil and gas sector rarely welcome close scrutiny and seem to be happy if the researcher easily gives up. Imperatives a. There is a need to critically explore the concept of a business-government partnership in developing countries, with a vie w to devising appropriate incentives and sanctions that guarantee accountability in public and private sector management (Ite 200) b. It would be worthwhile to examine the extent to which the “regulation” of Foreign Direct Investment (FDI) or multinational corporations through multi stakeholder initiatives would advance the agenda of Corporate Social Responsibility (CSR). In this regard, the possible strategies for increasing the effectiveness of the multi-stakeholder approach to sustainable development needs to be examined.
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