Abstract

Companies have taken the initiative to be socially responsible over the years, rather than only focusing on maximizing wealth and neglecting the effective management of externalities. Institutions have realised that their growth largely depends on their role played in the society.

The lapses in the operations by businesses ethically, environmentally and in the philanthropic domains have hindered many businesses from growing to desired expectations. Most often these business operators don’t quickly see the effect of their actions since they are mostly presented indirectly and not directly.

This study aims to assess the effect Corporate Social Responsibility activities on the growth of small and medium size Enterprises in Buea. Specifically, the study seeks to examine activities of philanthropic, Ethical and Environmental Corporate Social Responsibility of businesses in Buea.

To achieve these objectives, the study employs a descriptive survey design to sample 120 correspondents of SMEs using a close ended survey questionnaire. It was observed that philanthropic CSR activities have a positive significant effect on the growth of SMEs at 95% confidence interval, where SMEs engagement in philanthropic activities recorded an increased in financial performance.

It was also revealed that SMEs engagement in Environmental CSR activities also recorded an increase in growth. It was concluded that SMEs engaged in philanthropic CSR activities, Ethical CSR activities and Environmental CSR activities had an increase in ROA, ROE and ROI. Based on the findings, it was suggested that the Cameroon government should provide incentives (tax incentives) to SMEs that are engaged in CSR activities, this will help encourage SMEs to be engaged more in CSR practices.

CHAPTER ONE

INTRODUCTION

1.1 Background to study

The last decade has brought about wealth and progress in the economic sector, however, economic success has not necessarily contributed to a better world. Over the past decade, the largest corporations have grown faster than the economy as a whole (Griffin and Molley, 205). In 2002, the collapse of Worldcom and Enron (Fadul, 2004) demonstrated that ethical problems created by ethical greed could generate considerable social distress. Since the financial crisis of 2008, the US government, economically minded legislators, non-governmental organisations (NGOs) and the general public have become more concerned about the nature of corporate ethics and responsibility (Falk and Blaylock, 202)

The public pays attention to the different social initiatives taken by companies. These companies are quickly beginning to realise that to have a competitive advantage on the market, they need to invest more on social issues. Companies are becoming more transparent regarding how they are being socially responsible.

CSR was viewed as a tool to curb the abuse of corporate power in larger corporations and redirect it toward the production of social goods. However, corporate misconduct and financial scandals have exploited all of these efforts, creating a business environment of uncertainty and distrust in the market and among stakeholders (Harkonen, 2017).

Corporate Social Responsibility (CSR) has become an inevitable necessity. The practice of Corporate Social Responsibility is now a global phenomenon. There is a growing need for firms operating in various communities to have a great deal of harmony with their host communities. It was widely contested in the late 1880s, during the early stages of industrialisation, whether firms should take on social duties (Carlsson & Akerstom, 2008).

A business exists because of the relationship between employees, customers, shareholders or investors, suppliers and managers who develop strategies to attain success. Moreover, an organisation usually has a governing authority often that provides oversight and direction (BOD) to make sure that the organisation stays focused on its objectives in an ethical, legal, and socially acceptable manner which are the different levels of social responsibility including philanthropic.

These organisations agree, collaborate and have confrontations on the organisations dealing within their environment. Social responsibility of companies is considered an important corporate concern. Employee satisfaction, customer loyalty, and environmental concerns, for example, are all corporate responsibility principles worth debating. The obligation of an organization’s social responsibility is to maximize its beneficial impact on stakeholders while minimizing its negative impact (Amaeshi, Adegbite, & Ragwani, 2016, Campbell, 2007).

Many international companies view growth as a result of profitability, liquidity, turnover, and other factors. Companies have switched from quantitative to qualitative performance in response to shareholder wealth as the intensity of competition increases at both the firm and industry levels.

Furthermore, as a result of the introduction of forces affecting firm performance and a company’s strategic choice to attain its aims and objectives, companies have elected to embrace tactics such as cheap pricing, product differentiation, and focus. The outcome of this is the increase in market share and market growth rate of the company. This is one of the easiest ways a company can achieve competitive advantage over its competitors.

Corporate Social Responsibility requires companies to be publicly accountable not only for their financial performance but also for their social and environmental community improvement and sustainable development objectives. According to (Pranjali, 2011), the World Business Council for Sustainable Development (WBCSD) defines CSR as a contribution to long-term economic development; it is also claimed that there is no way to avoid serious consideration of corporate social responsibility: the costs of failure are simply too high.

There are innumerable win chances waiting to be discovered: every action in a company’s value chain intersects with social variables in some manner, from how it buys or procures to how it conducts research, and yet few organizations have considered this. The idea is to use a company’s particular strengths to assist social causes while also improving your competitive position.

According to (Porter, 2005), today’s leaders must stop being defensive and start thinking strategically about corporate responsibility. Successful executives and leaders understand that CSR is unavoidable, and their long-term success is dependent on maintaining a positive relationship with society today.

These Corporate Socially Responsible businesses could also be referred to as socially responsible businesses (SRB). SRBs carry on responsible entrepreneurship, corporate citizenship, corporate accountability, and corporate sustainability. Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic social development while improving the quality of life of the workforce, families, local community and society at large (World Business Council, 2012).

It is basically a partnership between the business corporations and socially active groups for the purpose of society development and community growth. In real sense the corporate socially responsibility is the coalition of business operation with social standards. Corporate Social Responsibility is an extended model of Corporate Governance, based on the fiduciary owed to all the firms ‘shareholders.

It is about how companies manage the business processes to produce an overall positive impact on the society. Companies and organizations have a responsibility to go above and beyond what the law requires in order to contribute to a better society and a cleaner environment. It becomes a method of doing business and a way of thinking about it. i.e. a type of organizational culture (Duarte et al, 2009).

Corporate Social Responsibility is an integral part of the business corporations as it not only provides support to beat the business competitor but also provide help to grow the business in the society. So, by focusing on the financial success and community growth, the company can increase it growth rapidly as compared to their competitors. With the increasing esteem and popularity of CSR more and more companies are playing an important role in growing societal values and community development regarding environmental policies, human rights and business ethics.

Companies are beginning to pay equal attention on the social and environmental focus as well as financial performance and business growth. Some companies are operating CSR much more than their lots of business opponents. Companies that practice CSR gain a positive reputation in the market and attract more job seekers and customers, resulting in improved organizational performance (Viswesvaranet al., 1998), hence growth. On the other hand, by implementing CSR, the company is able to increase consumer loyalty, employee satisfaction, and business growth. Today, CSR is being used to build a positive relationship with the public (Nolan et al., 2009).

Corporations also use it as a preemptive strategy to protect themselves from unforeseen risks and corporate scandals, possible environmental accidents, governmental rules and regulations, eye-catching profits, brand differentiation, and a better relationship with employees based on volunteerism terms. Corporations are voluntarily incorporating CSR into their business strategies, mission statements, and values across numerous domains, while adhering to labor and environmental laws and balancing the competing interests of various stakeholders (Kashyapet al.,2006).

For many years, CSR has been popular in North America (Matten & Moon, 2008). The notion has recently extended to Europe and Sweden, and it has even become fashionable for Swedish corporations to engage in CSR (Jenkins, 2005). The term “Corporate Social Responsibility” is well-known in academic circles, with research and practice reaching back to the 1950s (Carroll & Shabana, 2010).

Despite raging world problems such as poverty and environmental degradation (United Nations, 2015), the desire to maximize profits has driven many companies to focus their resources on profit maximization, causing them to lose sight of the impact their activities will have on the environment they operate in. Companies are designed to make money. People make them realize the profit in the process of making it.

People could be found within the organization, the economy, or society. In order for profit maximisation to be achieved, the society must be satisfied in order for profit maximisation to be achieved. If society is not happy, the profit motive is lost since the firm’s products are not consumed, reducing effective performance and so growth, according to the triple bottom line (TBL) theory proposed by Jonh Elkington (1994).

1.2 Problem Statement

The concept of good Governance is an important part of CSR because it relates to providing comprehensive and excellent CSR reports. In order for the stakeholders to know about a company ‘s CSR initiative, it needs to be reported. Good governance also ensures equity, effectiveness and efficiency, rule of law, participation and transparency and has always pointed as the base for growth.

This is not fully realised in our context due to many factors ranging from promotion of the consumption of imported products than homemade which discourages the growth of local companies, loose agreement with multinationals to exploit citizens, as citizens are not fully aware of the specific things these companies are to carry out and are thus bound to embrace all even the unfavourable ones, no clarity of functions, numerous and high tax burden limits their abolition, lack of good governance in general, improper reporting, small nature of businesses in general, restricted access to growth, administrative bottlenecks. Institutions/organisations/businesses which have operated for five years and above are supposed to have grown to profit levels (for profit making) and surpluses/excesses (for not for profit) that allows them to comfortably carry out CSR without much pressure from outside. This is because productivity cost would have greatly reduced per unit with the expansion of the organisations, increase employment rates and employees‘ satisfaction derived, but it is not the case.

The ten top ranked companies in Cameroon are supposed to be a boost to SMEs in the country but that is not the case in Buea. MTN ranked topmost for example does not have adequate security over its transactions as inhabitants in Buea complain of being scammed.

Victims go to the office and don’t get immidiate treatement most often. This makes its ethics to be questioned in most cases. Hysacam which is also ranked among the top ten frequently goes on strike for reasons known to them. This leaves the town of Buea really dirty and not suitable for businesses to fully operate.

This makes household to dump refuse inappropriately like non degradable plastics on cultivable land which hinders the proper growth of plants. Their action also causes improper burning of refuse causing air pollution as timing is not taken into consideration. These actions give rise to environmental degradation and health problem which are not healthy for a society. Hysacam also fails in its philantropic aspect as it values its pay by government more than the human lives that will be affected as a result of their actions.

Eneo, which is also ranked on the list fails in its obligation to supply electricity as there is blackout time and again in the city of Buea. This electricity shortage stands as a great hindrance to those business that cannot afford generators like small cold stores and documentations. It also stands as a hindrance to those students who are engaged in business.

This is because they usually schedule their programs to study in the night and do business in the day, but light failure pushes them to study during the day foregoing business. These issues tend to question the ethical, philanthropic and environmental CSR activities of SMEs in Buea. The government of Cameroon has tried to check these by employing more people in these domains but the problems keep persisting and therefore a call for this study.

The general management issue addressed in this study was the major decision-making issues faced by SMEs leaders while engaging in CSR efforts due to their restricted resources. The specific management problem addressed by Sarbults (2003) was to determine for Buea-based SME enterprises whether the leadership decision of CSR investment method is effective as indicated by increased business growth when operating in the SME sector in Buea.

Adopting CSR principles also comes at a cost, which could be one-time or ongoing, so it should benefit the company and increase its long-term viability. A company can’t keep pursuing a strategy that continuously generates negative cash flow.

Being socially responsible, according to Orlitzky, Schmidt, and Reynes (2003), should have a positive influence on the bottom line in order to be sustainable. However, because the expenditures are instantaneous and the rewards are not necessarily related, it appears that the cost and benefit time frames are often out of sync (king and lenox 2001).

This study will fill in the gaps left by past scholars because there have been few studies on this topic in Buea. This study thus strives to answer the question:” What is the effect of CSR activities on the growth of Small and Medium Size Enterprises in the Buea Municipality”?

1.2 Research Questions

The main research question is,” What is the effect of CSR on the growth of SMEs in the Buea Municipality?” Specific research questions:

1. To what extent does the philanthropic activities of SMEs affect the growth of businesses in Buea?
2. How does accountability, transparency and commitment of SMEs in Buea affect their growth?
3. What is the effect of environmental activities on the growth of SMEs in Buea?

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