Businesses are hubs of making profit through taking different types of risks. All businesses generally involve either extracting goods from nature (primary industry) or providing goods and products from the products of primary industry (secondary industry) or providing services including trade and distribution of goods and products of other industries (tertiary industry). The common features of businesses, irrespective of the class of industry they belong to, are that they require resources for operation; they engage men, money, minutes, managers and machines; they serve people’s needs, they operate within laws and orders of their host communities and they generate income. Wherever and whenever they fail to exhibit any of the features above, businesses fail and liquidate! Businesses are set up to outlive their founders and become unicorns.
Businesses have two different types of responsibilities – company’s business responsibilities (CBRs) and corporate social responsibilities (CSRs). Company’s business responsibilities are statutory duties that businesses must perform in order to continue to exist. These responsibilities include, but not limited to, production of goods, products or services; payment of rent on business premises if not the owner, procurement and storage of adequate raw materials for production; attraction and recruitment of young and agile workers regularly, marketing of quality goods, products and services in order to be competitive; payment of salaries and wages to workers; distribution of goods, products or services to the market; payment of taxes and dues; and getting regular feedback for business improvement.
Corporate social responsibility (CSR) is a business model that helps a company to be socially accountable to itself, its stakeholders, and the public at large. There are four types of CSR: philanthropic, environmental, social (ethics) and economic. Philanthropic initiatives focus on issues like scholarship schemes to students of the immediate host community, construction of roads leading to the host community, construction of markets, construction of school buildings, hospitals and recreation centres etc. Environmental initiatives focus on issues like conservation of wildlife, preservation of natural resources, observation of climate change factors and adopting the zero-emission principles, etc. Social responsibility is about fair and honest adherence to ethics in business operations. Economic responsibility is about the promotion of value for money (Vfm) and fiscal support of all the other initiatives above.
CSR and CBR are now major concerns of corporate governance. Corporate governance is the structure through which companies are directed and controlled by boards of directors (BODs). BODs are responsible for the leadership and operation of their companies. The shareholders’ roles in corporate governance include to appoint the directors and the auditors, and to satisfy themselves that an appropriate corporate governance structure is put in place. The four (4) P’s of corporate governance are: people, process, performance and purpose. Examples of good corporate governance practices include: corporate social responsibilities, being climate change compliant, respect for workers’ rights, transparency of executive conducts, regular payment of rewards, awards, human capacity development, staff welfare and implementation of a code of conduct for employees, etc.
In business studies today, differentiating between corporate social responsibilities and business responsibilities may be a herculean task. For example, should human capacity development of staff be seen as CSR or as CBR? Should development of communal roads leading to the business office of a company and the host community, which definitely will aid the movement of staff and raw materials into the company and finished goods to the market, be seen as CSR? Should good cotton seed given as aids to cotton farmers by a cotton manufacturing firm be seen as CSR or CBR? Should a hospital, built by a company for a friendly host community, be regarded as CSR? In answering these questions, one should consider the objectives of the activities. Government is responsible for the provision of roads, hospitals and schools. Any construction outside the premises of a business is a CSR. While CBRs contribute directly to business goals, CSRs do not contribute directly to business goals. They only add to the goodwill of a company.
Some CSRs are embarked upon so as to reduce payment of tax and benefit from improved goodwill. Some CSRs are tax deductible, while some CSRs are good means of advertising a business. For example, owning or sponsoring a football team will reduce profit before tax (PBT) and tax paid to the government. The construction of Obajana-Kabba concrete road in Kogi State by Dangote Group is seen by some as CSR while some see it as CBR. The concrete road, the longest of its kind in Nigeria, built by AG Dangote Construction Company cost the Dangote Group N11.5 billion but the job was awarded to the Group on tax concession basis at N5.24 billion. The difference of N6.26 billion was part of the Corporate Social Responsibility (CSR) of the Dangote Group to the host community. Dangote Group also constructed and commissioned the 26 kilometre Itori-Ibese Concrete Road in Ogun State, Nigeria, in June 2016.
Efforts are ongoing by researchers and business management scholars to identify and define, in clear terms, what constitutes CSRs and CBRs. The benefits of defining these responsibilities of corporate organisations clearly will be beneficial to corporate tax management and to the government. Businesses as hubs of making profit will not mind any legal means they can use to maximise profit and avoid tax. Labelling CBR as CSR is one of them. Government must be interested in costing and assessing CSRs, through consultants, to make sure that corporate organisations are not substituting CBRs as CSRs. Before tax deduction, costing of the infrastructure to be constructed must be done by professionals to make sure that it gives value for money (Vfm). Just as in Public-Private Partnerships (PPP), businesses can inflate the cost of the project they are donating to the public.
While philanthropic, social and environmental CSRs are definitely CSRs, economic CSRs are models to improve the quality, cost or time of production of products, goods and services of corporate organisations. Their bottom-line is that they help increase the patronage and sales of the organisation, the turnover and the profit. They ought not to be considered as CSRs, in the real sense.
