Corporate Social Responsibility (CSR) Implementation In Lebanon: A Causal Recursive System Abdulrazzak Charbaji, Ph. D Professor of Applied Statistics and Research Methods www. charbaji. com
Lebanon Area : 10, 400 sq km about 0. 7 times the size of Connecticut land: 10, 230 sq km water: 170 sq km border countries: Israel 79 km, Syria 375 km Population 3, 727, 703 (July 2003 est. )
http: //www. heritage. org/research/fe atures/index/downloads. html
http: //www. chaostan. com/legal. html Lebanon. Mixture of French Civil Law and Ottoman Civil Law. 2. 95. America and Switzerland both score 1. 9. Russia and Albania are both 3. 65, and Cuba, Laos and North Korea are the worst in the world, with 5. 0.
http: //www. ciesin. columbia. edu/in dicators/ESI/rank. html Environmental Sustainability Index 2002 Rankings Rank Country ESI 1 Finland 73 106 Lebanon 43. 8 142 Kuwait 23. 9
The purpose of this paper is To look closely at the CSR issue and to check if Lebanese firms are involved in corporate social responsibility
DEFINING CORPORATE SOCIAL RESPONSIBILITY A review of related literature reveals that the definition of CSR remains a problematic issue
At one extreme Frankental believes that CSR is ambiguous and indefinable term. , which can mean any thing to anybody (Frankental, 2001).
At the other extreme We find a motivational definition that argues that CSR is the fulfillment of a firm's self-actualization needs (Tuzzolino and Armandi , 1981)
The legitimacy of CSR relates to fundamental and crucial questions as to why do corporations exist?
• • • Should corporations be concerned with social performance as well as economic results? If so, what is meant to be “socially responsible”? Should economic performance be sacrificed for social performance? To whom does business owe “responsibilities’? What kinds of activities and programs should CSR include? And to what extent should social responsibility activities consume the company’s resources?
Carroll (1979) suggested that corporations have four responsibilities to fulfill: • Economic, • Legal, • Ethical, and • Philanthropic
Ethical responsibilities derive their source of authority from religious convictions, moral traditions, and human rights commitments. Business’ social responsibility was to maximize profits, subject to the constraints of the law. (Carroll, 2001)
Novak (1996) defined seven responsibilities. These are to: 1. Satisfy customers 2. Earn a fair return on the funds entrusted to the corporation by its investors; 3. Create new wealth, 4. Create and maintain new jobs; 5. Giving people the sense that their economic conditions can improve; 6. Promote innovation; and 7. Diversify the economic interest of citizens so to prevent the domination of the majority.
The Effect of CSR on Firm's Performance
previous empirical research has produced varied results • Some studies have argued for a positive relation (Moskowitz, 1972; Parket & Eibert, 1975). • Whereas others have concluded that CSR has negative effects (Aupperle, Carroll, & Hatfield, 1985; Vance, 1975)
REVIEW OF BASIC CSR THEORIES IN FINANCIAL ECONOMICS
The Property Rights Theory Rule Business only has an economic responsibility to make a profit while obeying the law. It implies that devotion of corporate resources to social causes is contrary to an implied contract with investors to maximize their profits.
The Social Institution Theory Public welfare is the primary concern Firms should provide employment opportunities for everyone, improve the environment, and promote worldwide justice even if it comes at the expense of profits
The Contractual Theory of the Firm A moderate and relatively recent view which now dominates the thinking in financial economics and that of public law
Company’s assets are provided by many groups including shareholders, such as employees, customers, suppliers, and the like, and so the company arises from the property rights and the right of contract of every corporate constituency, not just stockholders
Corporate Social Responsibility in Lebanon CSR is in its infancy stage in Lebanon & There is a scarcity of applied research into CSR in Lebanon
Lebanon’s Prime Minister Rafik Hariri wrote an article in which he notes that taking environmental issues seriously means that people are striving for a better quality of life
The Lebanese government Tackled environmetal issues such as: • Establishing an Environment Ministry, • Passing a clean – air Act, • Adopting a nation wild reforestation scheme, and • Including integrated environmental management in its policy statement.
A study prepared by the Mediterranean Environmental Technical Assistance Program (METAP) and the UNDP estimated the cost of environmental deterioration in Lebanon at US $565 million per year, that is around 3. 9% of GDP. It is the most among other Arab countries covered by the assessment
Today, Sukleen , has 384 committed institutions that are enrolled in environmental campaign for resources and energy preservation This initiative is undertaken to provide an outlet to the recycling community
HSBC is funding teacher – training seminars
IDAL launched a new service on its website, the “Investors Matching Service”, which aims at facilitating the creation of strategic international – local partnership One of the main criteria used in the evaluation include employment effort, environmental soundness and social liability
The project aims to promote enhanced the active participation of UN volunteers business and local communities. The project is composed of two phases, an action research phase and a partnership promotion and building phase
Action Research • The action research phase includes: A qualitative research study aimed at businesses to investigate why and how they become involved in development initiatives.
Partnership promotion and building • The project offer individual companies tailor-made strategies that benefit both their firm and local communities. Various activities under the project include: • Awareness through written, audio visual, and virtual media (website and e-mail list). Identification and formation of partnerships between various stakeholders including UNDP, other lead UN agencies, civil society, local community-based associations and NGOs, businesses, associations, chambers of commerce, universities, etc. Organisation of a national workshop to bring together businesses and development actors together for brainstorming, dialogue and joint action. Publications including reports, brochures, newsletters, case studies, and a guidebook on business-community relations. Formulation of Project Document/Joint Project Proposals with UNV/UNDP/UN Agencies/ New Academy of Business.
This year Go Green in Lebanon is supported by UNDP and its projects at the Ministries of Environment and Agriculture along with the private sector
Schtroumpf a local restaurant chain Is the initiator and co-manager of the ‘Go Green’ project. Its practices include partnering with educational institutes to raise environmental awareness; continuously recycling and using recyclable products; and organizing a wide range of activities mainly targeting youth including environmental contests, forums, seminars, etc
FTML- Cellis a subsidiary of France Telecom worldwide group/Orange • The company applies strict rules and policies, which prevent pollution and degradation of the landscape in setting up their network. • in August 2000, the company launched a Childhood Protection support programs for children who are rejected, abused, exploited in their work environment, for whom education is not provided or who are at risk of delinquency.
Coca-Cola • The company has supported the Lebanese community in various causes including the environment. Recently the company launched the Cedar Roots project, which included building the first cedar forest in the South of Lebanon (Jezzine).
Tetra Pak East Med • Tetra Pak takes active measures to ensure that its activities and products are environmentally friendly • Tetra Pak supports health and education through the development of the ‘Captain Mike’ schoolfeeding program that aims at providing better nourishment for children
To sum up, Even though CSR is becoming a corporate goal in Lebanon the international indices about Lebanon reveal that an imperative need exists for a project to identify gaps and opportunities in the provision of sustainable development
The Research Questions are: 1. What are the major characteristics of the selected sample for the study? 2. How many dimensions underline the measuring instrument? 3. What are the direct and indirect effects of the explanatory variables to the explained variation in the dependent variable?
The present study involved a sample of 406 including managers, assistant managers, directors, assistant directors
Findings of the Study Factor Analysis was ran on 217 valid cases without missing values out of 406 cases
KMO and Bartlett's Test KMO measure of sampling adequacy (KMO = 0. 650) and the Bartlett test of sphericity (B = 3608. 464, p =. 000) suggest that the data is suitable for factor analysis
Factor extraction using oblique rotation Returned a four-factor solution accounting for 81. 906% of variance among the original twelve variables two criteria were used: 1. Factor loading greater than 0. 70, 2. Eigenvalues greater than 1. 0
Factor 1 accounts for 30. 5 %of the variance (Z 4) could be called Environmental Management. It includes high positive loadings for “My organization issue CSR report that include performance against benchmarks ” ; “My company adopted CSR environmental impact policy” and; “My company has environmental mission statement”
Factor 2 accounts for 25. 28 %of the variance (Z 3) could be called TQM practices. It is a bipolar factor which includes negative high loading for “My company regularly track the satisfaction and/or complaints of customers” and; high positive loadings for “My organization is involved in minority and women employment”
Factor 3 accounts for 15. 2 %of the variance (Z 1) could be called Corporate Governance & Organizational Policy. It includes high positive loadings for “My company issue CSR Environmental report ”; “My organization issue CSR economic performance report”; “environmental guidelines for selecting suppliers”. And “My company uses employee performance appraisal systems that integrates compliance with code of conduct”
Factor 4 accounts for 10. 89 % of the variance (Z 2) could be called code of conduct. It is a bipolar factor which includes high negative loading for “My company has code of ethics”; high negative loading for; “our company has a system in place to handle employees grievances” and high positive loading for “My company implement code of ethics”.
Using factor scores and the dependent variable “Indicate the percentage of your company’s total shares held by ethical, sustainable, or socially responsible investors. ” , multiple regression analysis is conducted
The results of the regression analysis is highly significant (p =. 000) R 2 = 0. 948, indicates that almost all of the variance in the data is accounted for by the model
Path Analysis
Decomposing the Correlation Coefficients
Z 3 = P 31 Z 1 + P 32 Z 2 + Ru Z 4 = P 41 Z 1 + P 42 Z 2 + P 43 Z 3 + Rw Z 5 = P 51 Z 1 + P 52 Z 2 + P 53 Z 3 + P 54 Z 4 + Rv r 51 = P 51+ P 52 P 21 + P 53 P 32 P 21 + P 54 P 42 P 21 + P 54 P 43 P 32 P 21 r 52= P 51 P 21+ P 52 + P 53 P 31 P 21 + P 53 P 32 + P 54 P 41 P 21 + P 54 P 42 + P 54 P 43 P 31 P 21 + P 54 P 43 P 32 r 53= P 51 P 31+ P 51 P 32 P 21 + P 52 P 31 P 21 + P 52 P 32 + P 53 + P 54 P 41 P 31 + P 54 P 41 P 32 P 21 + P 54 P 42 P 331 P 21 + P 54 P 42 P 332 + P 54 P 43 r 54= P 51 P 41+ P 51 P 42 P 21 + P 51 P 43 P 31 + P 51 P 43 P 32 P 21+ P 52 P 41 P 21 + P 52 P 42 + P 52 P 43 P 31 P 21 + P 52 P 43 P 32 + P 53 P 41 P 31+ P 53 P 41 P 32 P 21 + P 53 P 42 P 31 P 21+ P 53 P 42 P 32+ P 53 P 43 +P 54
Conclusion
The true direct effect of Corporate Governance & Organizational Policy on the percentage of company’s total shares held by ethical, sustainable, or socially responsible investors is almost four times the simple relation but the relation is decreased because of the indirect negative effects implying a more environmental concern
Suggested methodology to construct “CSR” Index that aids in ranking countries on “CSR” scale
• Construct a valid instrument that can be used in measuring “CSR” • Use factor analysis to obtain factor scores for different dimensions underlying the “CSR” Obtain a grand total “CSR” score for each country in standardized score • Use median standardized as an index to rank countries on “CSR” scale
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