Operations Management
Table of contents
Introduction 3
CSR and its Origin 3
Literature review 4
Basic components of Corporate Social Responsibility -extractive industries 6
Requirements for CSR strategies and reasons for engaging in CSR 7
Extend of CSR initiatives and level of performance in developed and developing countries 9
Canada 9
South Africa 10
Nigeria 11
Conclusion 12
References 14
Introduction
Corporate Social Responsibility (CSR) is a concept that has gained prominence in
many companies including extractive ones. CSR is one of the business strategies that these
companies are using to participate in the sustainability of the environment as well as the
community. It is one way of giving back to the societies in which they operate.
In developed countries, the scenario is considerably different. Such countries have an
already developed infrastructural and social sector. They are therefore involved in well-
established CSR programs which have international set standards. These programs’ main aim
is to enhance the competitiveness of these extractive industries in the international market. In
addition, developed countries unlike the developing countries have readily adopted these
CSR policies and strategies with great support from their government. An exemplary country
with well-established CSR programs in its extractive industries is the Canadian gas and oil
mining industries. This paper deliberates on whether extractive industries embrace CSR to
best of their abilities and any performances variations in developing and developed countries.
Development and definition of CSR are incorporated as well as critical examination of
various literatures on the mining industry among many other aspects relating to the topic.
CSR and its Origin
According to McWilliams & Siegel (2001), the term Corporate Social Responsibility
even though has been in the public domain for many decades, it became popular in the 1960s
and is nowadays used indiscriminately in organizations more to further moral and legal
responsibilities. Definition of the term CSR is both complicated and complex because of the
context and nature of the problems. The complexity arises from the fact that CSR is
intimately involved in the society, ecology, and economic systems that are high complex
dynamic systems (Sheehy, 2015). Regardless of these complexities, in general CSR is
defined as a form of corporate self-regulation entrenched in the business models of
companies. Its main role is to act as a self-regulatory mechanism through monitoring business
to ensure that they comply with the spirit of law, national or international norms, and ethical
standards. Some firms that have implemented CSR have gone beyond compliance to
engaging in acts that promote social good, and beyond the interests of the firm (Sheehy,
2015). CSR as well involves the corporate actions aimed at encouraging positive impact on
the stakeholders including employees, consumers, investors, communities and others as well
as impacting on the environment.
Literature review
According to Littlewood (2014), different people, ascribe different meaning to the
term CSR. In 2001 European Commission Green Paper, CSR is defined as the concept where
“entities integrate social and environmental concerns in their operations as well as their
interactions and association with stakeholders on a voluntary basis” (Littlewood, 2014, p. 17).
CSR in the mining industry therefore, ought to be on voluntarily basis if this defining is to go
by.
Various institutions and initiatives have also been advanced to ensure that mining
industries remain compliance and engage in social corporate responsibilities. Such initiatives
include the International Council on Mining and Metals (ICMM) and Mining and Minerals
Sustainable Development Project (MMSD) (Littlewood, 2014). Other initiatives include
corporate reporting on companies’ websites and engaging with ISO 26000 social
responsibility performance measurements, development of best practices, toolboxes, and
guidelines relating to CSR issues such as mining community development and sustainability
and mine closure among many others (Littlewood, 2014).
Despite the growth of CSR initiatives in industries, many questions remain about the
role of mining in economic and social development remain unanswered (Du Venage, 2015).
A good case is South Africa where despite discussion of CSR in the industry, there are still
questions on the depth of the adoption and implementation and the extend this has impacted
on the social and economic industry in South Africa.
According to Littlewood (2014), mining industry in Namibia contributes around 16
percent of the GDP and close to 50 percent of the merchandise exportation. This means that it
is a central industry in the economy of Namibia. Mining began between 1884-1915 under the
Germany colony. Copper mining started in 1906 in the northern region also known as
German South West Africa at that time. Diamonds were also found in the South West in
- Mining since 1970 has become diverse in Namibia and more minerals such as gold and
zinc are mined. Companies involved in mining have managed to deal with issues of
community sustainability and viability after mining through their CSR. This has been done in
different ways. The government also has laws that require compliance to legal requirement.
For instance, after mining, all structures and buildings are removed as per the license terms
(Littlewood, 2014).
According to Kirschke (2014), mining industries are impacting negatively on the lives
of many people especially is DRC, a top cobalt and the sixth copper producer nation.
Kirschke (2014) further argues that CSR activities of some of these companies are not
working as expected and therefore what they do can be described as, “Greenwash”. He argues
the companies have caused community displacement, and caused environmental wreckages.
According to Arko (2013), mining industry in Ghana has been in operation for close
to one hundred years. The companies to a large extent have been doing well and this has
enabled them to participate in corporate social responsibilities. They have supported the
communities in different ways through CSR. Nevertheless, the support provided by these
companies has been small and has not made any substantial differences. The Ghana Chamber
of Mines reports of these expenditures exemplify this fact. The way forward, is to ensure that
appropriate measures are in place to ensure that these companies participate in CSR (Arko,
2013).
Stakeholder in the mining industry such as the government, mining companies, civil
society, international financial organizations among others have a role to play in the
operations and CSR engagements of mining industries (Yakovleva & Vazquez-Brust, 2012).
Mining companies have to develop plans that will ensure that they do not pollute the
environment and contribute to climate change. They have as well to ensure that they support
the welfare of the people in the community. The level of commitment of different countries
when it comes to implementation of CSR has varied. These variations are because of
different reasons such as the negative perception in relation to the industry, controversial
nature of many mining investments, social and environmental externalities that for decades
have been associated with the mining industry. Other reasons are the weak legislations and
ability of states to monitor the activities of mining companies across the globe (Kirschke,
2014).
Basic components of Corporate Social Responsibility -extractive industries
Different extraction companies have adopted different CSR programs basing on the
type of the environment they are based upon. A CSR program has to be formulated with
regard to the situation at hand. A typical CSR program should encompass the main areas of
the community including social, environmental and the economic factors of a community.
A CSR policy entails the approval of the company by the local community.
Furthermore, an extractive company ought to be involved in the community activities, such
as involvement in local charities as well as supporting the local growth and sponsoring the
community events. Adopting a CSR program entails the consideration of the three aspects
including people, the planet, and the profits. The deviation in the corporate motives from
profits oriented operations to adopting the CSR program can be associated to the worldwide
change in the conscience of the corporate (Kirschke, 2014). The deviation entails that the
corporates exercise four particular responsibilities in addition to generating profits.
The main environmental factors that the policy should encompass include the
sustainability of the environment through waste recycling as well as proper waste
management strategies. Other approaches include provision of clean water for use, the
establishment of renewable sources of energy and the recyclable materials. It is the role of the
extractive industry to maintain an appropriate working environment as well decent social
appearance.
As much as CSR strategy is aimed at the voluntary social responsibilities, it is also
important to make sure that the economic aspects of the community are take account of. A
good CSR program should seek to promote the economic status of the community and at the
same time that of the extractive industry. The economic roles apply particularly to the
developing countries that are in the verge of establishing development for their countries. For
instance, an appropriate CSR strategy for extractive industry in developing countries is the
establishment of infrastructure and improvement of the communication networks in the
regions.
Requirements for CSR strategies and reasons for engaging in CSR
One s the strategies is sustainability whereby Corporates establish a foundation and
come up with ways of avoiding harmful effects of the mining activities in the environment t
they operate in. The CSR program should have the capability of sustaining the environmental
as well as the economic aspects of the community. License is another important aspect as
each extraction industry should be legitimate and should satisfy all the legal requirements. To
prove the legitimacy the company should obtain a letter of approval accompanied with a
license for operation.
In addition to the license for operation and sustainability, the CSR should also
comprise of a moral obligation meaning that it has responsibility to do the right thing, uphold
the ethical values pertaining to all the activities the company is involved in. The company’s
long-term commitment to social responsibility is also important when ascertaining the well-
being of the company to the commitment to CSR (Kirschke, 2014). The establishment of a
good past relationship is important in ensuring that the extractive company is well acquainted
to the CSR responsibilities.
In addition to the effectiveness of branding, companies have developed a new trend in
enhancing their CSR programs. Companies with well-developed CSR programs are perceived
more positively than those with poorly developed CSR programs. It is important to have a
mission and vision that goes beyond the profit driven purpose. Such companies give the
stakeholders as well as investors a warmer and better image and an impression that it will be
easy to interact with (Arko, 2013).
Extractive corporations engage in CSR programs so as to have an easier time when
dealing with the government regulations (Arko, 2013). The better the relationship a
corporation will establish with the immediate society, the better the perception of that
corporation in both the legal as well as in the public perspective. The participation of the
extractive corporation in the society’s social responsibility will also bar the company from
harmful activists that may launch against it. Lastly, one of the main benefits of CSR in the
workplace is the appropriate working environment created for the employees as well as for
the occupants of the society. CSR creates a sense of community and teamwork between the
society, stakeholders, and generally the overall corporation(Kirschke, 2014).
Extend of CSR initiatives and level of performance in developed and developing
countries
A number of international CSR initiatives and associations that promote CSR policies
in the extractive industries include the United Nations global contact initiative where the
extractive companies perform self-evaluations and report their performance in regard to the
ten principles. Another international initiative is the Europeans commission strategy for CSR
and sustainable consumption sustainable industrial policy (Miningfacts.org, 2015). The
global committee on mining and metals is managed by the largest mining companies and
comprises of a number of programs to improve sustainable mining. Extractive companies
additionally, have started pursuing certifications such as ISO 14000 which is an
environmental certification. SA 8000, which is a working standard certificate, and also AA
1000 which is accountability certificate (Miningfacts.org, 2015).
Canada
Canada is one of the developed countries that have embraced CSR programs in its
extractive industry. The Canadian extracting industries has laid out a foundation to ensure
that there is greater rationality in the advancement of the sector’s in the Canadian extractive
sector is a well-defined strategy as pertains to other developed countries (Andrews, 2007).
The CSR strategy for the enhancement of business and prosperity consists of four major
provisions. Examples of CSR strategies implemented include promoting the industry,
securing access to global markets, improving infrastructure among others.
The government of Canada has enhanced international performance guidelines for the
Canadian extraction companies. Such guidelines include first, the social and the
environmental sustainability for the mining projects with potentially harmful environmental
and social repercussions (Miningfacts.org, 2015). Secondly, the guidelines on voluntary
principles on human rights and security for projects involving public or private security
forces (Miningfacts.org, 2015). The global reporting initiative for CSR is the other guideline
for reporting by the mining sector. Canada has therefore, succeeded in its CSR initiatives in
this sector.
Developing nations in Africa and Asia have also embraced CSR initiatives in
extractive industry due to various reasons such as prevention of pollution, conserving
environment, adhering to international codes, take advantage of the natural resources to
achieve economic and social development as well as protect its environment among other
reasons (Mzembe, and Downs, 2014). Most of the African countries have devoted their CSR
efforts in protection of the environment, social economic development, and improvement of
infrastructure (Smith, 2008). Various African countries that have adopted the concept of CSR
include; Mali, guinea, Tanzania South Africa and Nigeria among others (Mzembe, and
Downs, 2014).
South Africa
In the recent past, CSR has become globally popular accompanied by widespread
management methodologies, technologies, and new ideologies. The impact of the CSR in
South Africa has seen great developments with increased social responsibility and
sustainability of the countries mining industries. The CSR initiatives in South Africa’s
mining industry have resulted to increased communities growth as well as infrastructural
development. The major impacts CSR in South Africa’s mining industry include; increased
efficiency in the societal gains pertaining to the aspects energy and water usage. In addition,
safeguarding of the environment has been more efficient following the establishment of CSR
policies by the mining industries. Furthermore, safeguarding local employee’s safety has
been more addressed (Mzembe, and Downs, 2014).
Advocates of CSR believe that CSR is a major breakthrough to solving majority of
the social issues that the government has failed to address. In addition, they also argue that
knowing that an institution is morally and socially responsible will attract more investors.
However, the opponents of CSR argue that the most important goal of a business if profit
generation and not social development. Other critics argue that corporate industries are not
institutions meant for moral purposes (Mzembe, and Downs, 2014).
South Africa has played a major role in defining and enhancing the CSR initiatives.
Nevertheless, for the CSR to be fruitful and to be properly executed in South Africa, it is
important to lay emphasis on the liability and equality of businesses CSR practices. CSR is
viewed as exclusively associated to big businesses which explains why there has been
reluctance in smaller companies in complying with the CSR measures since they feel that
their operations will go unnoticed (Bond, 2008).
Nigeria
Nigeria is one of the largest nations with the largest economy in Africa classified
under developing economies. The country had enjoyed its oil and gas extractions that have
contributed to its economic growth.
The country has various policies that companies must adhere to when engaging in
their activities. CSR is one of the ways that oil and Gas Company give back to the society
through their CSR initiative. In a study conducted by Gabriel (2007), most of the
multinational companies in Nigeria dealing in gas and oil participate actively in the corporate
social responsibility. The company contributes to the society through various as including,
measures to curb environmental pollution, sponsorships, community services among many
others (Watts, 2004). Many of the host communities in Nigeria have higher expectations in
community development initiative. However, pressure from the community keeps on piling
up because some of the companies do no keep their promise (Frynas, 2005).
Most of the community members are interested in the social projects that give them
hope of a stable and prosperous future. The companies in Nigeria have as well embraced
development initiatives to portray to the people how socially responsible they are. In some
areas in the Niger Delta, they are marred with unstable environment as there is ethnic
disputes and conflicts over oil revenues (Gabriel, 2007). Companies such as Shell and Oil
have participated in the CSR to resolve the conflicts. Recommendations to solve the problems
have as well been made. These recommendations includes, enhance further cooperation with
the Nigerian government to ensure that the situation is peacefully resolved. There is also need
to improve transparency in order to avoid human rights violations as well as resource
exploitation. Shell has the duty to continue handling the situation to see if there would be any
positive outcome.
It is therefore, evident that both developed and developing countries have embraced
CSR initiatives in their countries to foster change and to achieve certain goals and aims.
Countries such as Canada have put in place various measures to ensure that it protects its
environment as well as contribute to social and economic development of their people. Most
African countries such as South Africa and Nigeria have also embraced the concept of CSR
and is transforming their them on different frontier. Even though, most developing nations
have lagged behind on this area, the concept is gaining momentum on daily basis.
Conclusion
Creation of awareness is a major trend occurring in most extractive industries all over
the world. Integration of the CSR programs with the functioning of the extractive industries
has resulted to development of multiple benefits in both developed and developing countries.
In addition, there has been contribution of the implementation of CSR policies by the
international community. Some extractive companies in the developing countries however,
have remained reluctant to adopting CSR strategies as a component of their conventional
business. Most developed countries have successfully implemented CSR strategies to
advance different interests. The developing countries such as Congo, South Africa and
Botswana among others are in the process of putting in place such strategies to impact
positively on the society, and environmental.
There has been great impact in integrating CSR into the business strategies of the
extractive industries .The benefits of such integration has resulted to robust impact on both
the appearance and the accomplishments of a company. Extractive industries all over the
world continue to seek opportunities to comprehensively capture a greater proportion of the
benefits of resources extraction and at the same time ensure that they develop the community
that they operate in. Local governments should support their extractive industries so as to
ensure that they in the best way reap the benefits that accompany the implementation of such.
Upcoming small and medium sized industries should also be encouraged to adopt such
strategies. Besides, large mining industries should be taught on the benefits that accrue the
implementation of CSR industries.
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