Roles Of CSR Performance On Profitability Manufacturing Companies In Nigeria

ABSTRACT

This study is on the roles of CSR performance on profitability manufacturing companies in Nigeria. The objective of this study is to investigate the roles of corporate social responsibility performance on profitability of manufacturing companies in Nigeria. Three hypotheses were formulated to guide this investigation exercise. Primary data were used and were obtained through the use of a closed-ended form of questionnaire. Four hundred questionnaires were distributed personally by the researcher to top level management officers of the Butterfield Bakery, Coca-cola Plc., Dangote Flour Mill and Tuyil Pharmaceutical Industry – all being the sample industries that were selected in this study. Two hundred and seventy (270) of the administered questionnaires were generated with full response, this constituting 67.5% success rate. Chi-square (X²) and Spearman Rank Order correlation coefficient analysis techniques were used to analyse the generated data. The findings of the study pointed us to the fact that corporate social responsibility plays a significant role in improving the performance of manufacturing firms. The study recommended that corporations should specially earmark fund for corporate social responsibility projects in which they will like to enjoy its advantages in the long-run.

TABLE OF CONTENTS

COVER PAGE

TITLE PAGE

APPROVAL PAGE

DEDICATION

ACKNOWLEDGEMENT

ABSTRACT

CHAPTER ONE

INTRODUCTION

• BACKGROUND TO THE STUDY
• STATEMENT OF THE PROBLEM
• AIM AND OBJECTIVES OF THE STUDY
• RESEARCH QUESTIONS
• HYPOTHESIS
• SIGNIFICANCE OF THE STUDY
• LIMITATIONS OF THE STUDY
• OPERATIONAL DEFINITION OF TERMS

CHAPTER TWO

LITERATURE REVIEW

• CONCEPTUAL REVIEW
• THEORETICAL REVIEW
• EMPIRICAL REVIEW

CHAPTER THREE

METHODOLOGY

• RESEARCH DESIGN
• POPULATION OF THE STUDY
• SAMPLE SIZE AND SAMPLING TECHNIQUE
• TYPE AND SOURCES OF DATA
• INSTRUMENT OF THE STUDY
• METHOD OF DATA ANALYSIS

CHAPTER FOUR

• DATA PRESENTATION AND ANALYSIS
• INTRODUCTION
• QUESTIONNAIRE ADMINISTRATION RESULTS
• ANALYSIS OF DEMOGRAPHIC DATA
• HYPOTHESES TESTING

CHAPTER FIVE

• SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1     SUMMARY OF FINDINGS

• CONCLUSION
• RECOMMENDATION

CHAPTER ONE

1.0 INTRODUCTION

1.1 BACKGROUND TO THE STUDY

Corporations around the world are struggling with a new role, which is to meet the needs of the present generation without compromising the ability of the next generations to meet their own needs. Organizations are being called upon to take responsibility for the ways their operations impact societies and the natural environment. They are also being asked to demonstrate the inclusion of social and environmental concerns in business operations and in interactions with stakeholders (Van Marrewijk&Verre, 2003).

Corporate social responsibility (CSR) is a crucial business strategy since it strengthens the bond between stakeholders and the company. This is due to the fact that disclosure of corporate social responsibility is a crucial tool for communicating with stakeholders about the topic of social responsibility activities. Alodia and Atmadja (2018) contend that as stakeholders need information to make informed decisions, their interests can be served by making corporate social responsibility reporting transparent. Companies are also able to build a solid reputation among stakeholders when it comes to reporting on their corporate social responsibility. It comprises presenting data on environmental reporting, human resource, product, and consumer information, as well as firms’ participation in community activities, to society at large (Zaid&Nasiri, 2018). According to Agustina and Sudibyo (2022), companies’ CSR disclosures demonstrate their economic, environmental, and social concern, which helps the government support favorable social, economic, and environmental conditions in the neighborhood. As a result, businesses frequently view CSR as a way to engage stakeholders and the public at large, foster mutual understanding, and establish legitimacy.

Taking on corporate social responsibility involves giving the firm’s characteristics enough thought. There are many different types of firm features, including size, age, profitability, leverage, industrial sector, location, kind of operation, corporate governance structure, and any other characteristic that sets one company apart from another (Alodia&Atmadia, 2019; Tanor, 2018; Zaid&Nasiri, 2018; Instianingsih, 2015; Agbome, 2021; Ganewatta&Priyadarshanie, 2016). Although seen as a strategy to win over stakeholders, corporate social responsibility may not bring about the intended benefits for the business (Ali & Isa, 2018). Companies would consider their ability to operate unaltered even in the face of negligible corporate social responsibility feedback because corporate social responsibility is a cost spent through foundations or non-profit organizations with no direct return.

Business and society are intertwined, and firms are required to behave for the good of society, according to a large body of corporate social responsibility literature (Dahlsrud, 2008). In the past, businesses retreated during crises. However, as stakeholder capitalism spreads and the place of business in society continues to change, firms are rising to the occasion.

This study will serve as an added contribution to the existing work of other authors that has discussed issues on corporate social responsibility such as Friedman, (2008), McGuire, (1988), Van Marrewijk&Verre, (2003), Dacin, (1997); Larsen, (2000); Reign, (2001); McWilliams and Siegel (2001) as it goes further to examine the impact and how various factors surrounding corporate social responsibility, how its affect firm performance and it is going to be useful for managers in making good decisions.

Corporate social responsibility (CSR) has emerged as a crucial corporate strategy, and the impact of this practice is currently one of the most crucial reporting concerns in international business contexts (KPMG, 2014; Meynhardt& Gomez, 2019; Panda, D’Souza, &Blankson, 2019). This follows growing criticism that financial reporting is inadequate in meeting the informational needs of all stakeholders who want to evaluate a company’s past and future performance because it only gives a partial account of business activities and disregards the social impact that an entity has (Flower, 2015). Due to this, recommendations for improved corporate responsibility reporting had been made.  There is a general unhappiness with the conventional accounting system and its methods, whose use has negative broader social repercussions. Therefore, it has come to be accepted wisdom that the business reporting model must be urgently expanded, especially in light of the difficulties of corporate social responsibility reporting. As a result, more businesses are revealing their efforts and performance in relation to social activities (Tamvada, 2020).

Corporate social responsibility (CSR) is a crucial business strategy since it strengthens the bond between stakeholders and the company. This is due to the fact that disclosure of corporate social responsibility is a crucial tool for communicating with stakeholders about the topic of social responsibility activities. Alodia and Atmadja (2018) contend that as stakeholders need information to make informed decisions, their interests can be served by making corporate social responsibility reporting transparent. Companies are also able to build a solid reputation among stakeholders when it comes to reporting on their corporate social responsibility. It comprises presenting data on environmental reporting, human resource, product, and consumer information, as well as firms’ participation in community activities, to society at large (Zaid&Nasiri, 2018). According to Agustina and Sudibyo (2022), companies’ CSR disclosures demonstrate their economic, environmental, and social concern, which helps the government support favorable social, economic, and environmental conditions in the neighborhood. As a result, businesses frequently view CSR as a way to engage stakeholders and the public at large, foster mutual understanding, and establish legitimacy.

Through philanthropy, businesses give outright donations or in-kind support. Through advocacy, businesses can influence public policy. Through corporate social responsibility initiatives, businesses put their resources to good use for the benefit of society (WEF, 2020)

However, it’s important to acknowledge that corporate social responsibility (CSR) disclosure is still primarily voluntary and unregulated, particularly in emerging nations, despite the demand for a robust corporate reporting model to include social disclosure. CSR has mostly remained voluntary and relied on codes of conduct for self-regulation, with the choice to follow the codes of conduct firmly in the hands of enterprises (Agudelo et al. 2019; Lamarche&Bodet 2018). It enables organizations to apply and evaluate the codes of conduct in a flexible manner in accordance with their preferences.

Therefore, it is evident that the decision to participate in and disclose CSR information is mostly discretionary and would be dependent significantly on the cost-benefit analysis by the firm given that CSR reporting is still largely optional by firms in Nigeria. Therefore, diligent efforts have been undertaken to investigate the causes of CRS, although Dabor and Dabor (2015) and Soyinka, Sunday, and Adedeji (2017) have noted that in-depth research in this field is still in its early stages, and there are many inconsistent findings (Egbunike&Tarilaye 2017). The purpose of this study is to add to the conversation on the role of CRS on profitability of manufacturing companies in Nigeria.

1.2 STATEMENT OF THE PROBLEM

The increasing adoption of corporate social responsibility (CSR) in businesses (SourceWatch, 2008; Sagar and Singla, 2003; Hoffman, 2007) has grown with its corresponding challenges, which may include ethical violations (Aluko et al., 2004;Lantos, 2002), economic dishonesty (Amaeshiet al., 2007), commitment problem(Holmes, 1977), gender complications, controversies and agitations (Marshall, 2007), profit-making problems (Capaldi, 2005; Scott, 2007) and accountability mechanism weaknesses (Brennan, 2008).

According to Osuala (1982), the statement of research problem serves to elaborate upon the information implied in the title of the study. Hence in this research work, the researcher seeks to investigate the impact of corporate social responsibilities on the profitability of some selected manufacturing company in Nigeria to its domain which can in tureen enhance the prospects of the business. Particularly because of the profit factor in business, a lot of organizations have not embraced corporate social responsibility as imperative but recent social developments have shown that this should not be so. Why this should not be so as the significance of the positive attitude of business organizations to corporate social responsibility is the bedrock of this study.

It is against the background that this study check to investigate the role of CSR on the profitability of the manufacturing companies in Nigeria in order to close the gap existing in the literature mentioned above.

1.3     AIM AND OBJECTIVES OF THE STUDY

The main aimof the study is to examine the roles of Corporate Social Responsibility practices on Manufacturing Companies’ profitability in Nigeria. The specific objectives are to:

1. Examine the role of CSR on profitability of selected manufacturing companies in Nigeria.
2. Determine the relationship between CSR and Turnover in Nigeria Manufacturing Companies

• Identify the relationship between CSR and Tax avoidance of selected manufacturing companies in Nigeria.
  • RESEARCH QUESTIONS

1. Is there any relationship between CSR and profitability of selected manufacturing companies in Nigeria?
2. What is the relationship between CSR and Turnover of Nigerian Manufacturing Companies?

• Is there any relationship between CSR and Tax avoidance of selected manufacturing companies in Nigeria?

1.5 HYPOTHESIS

Based on the research objectives, the hypotheses of this study will be stated in the null form as follows:

H1:    There is no significant relationship between Corporate Social Responsibility and profitability of Manufacturing Companies in Nigeria.

H2:        There is no significant relationship between CSR and Turnover of Nigerian Manufacturing Companies.

H3:    There is no significant relationship between CSR and Tax avoidance of Manufacturing Companies in Nigeria.

1.6    SIGNIFICANCE OF THE STUDY

Campbell 2007, in synthesis, the benefits and advantages that corporations adopting CSR initiatives may obtain are the following: increased employee loyalty; gaining legitimacy and access to marketer; less litigation; increase quality of product and services; bolstering public image and reputation and enhanced brand value; less volatile stock value; avoiding state regulation; and increased customer loyalty.

The justification for carrying out this research work cannot be over emphasized. This work will be beneficial to the community/society through CSR, job, and better standard of living will be provided for the community, and it will change their habit, capacity building and create wealth and employment. corporations goodwill and community acceptance profit, growth, competitive edge and image genuine dialog with stakeholders and pride values to their families and employee world and environment, balance ecosystems, waste management, clean and green environment, researchers, It will serve as stepping stone to those who want to conduct research into this topic.

Finally, this study will be carried out by the researcher, on the premise that such is not common in the field of Accounting, which is one important and core area from which the issue of CSR needed to be observed. At the end of the study, it will be well appreciated after taking into consideration the costs and benefits of the practice.

1.7     LIMITATIONS OF THE STUDY

A research of this nature has its hitches or problems. The following are some of the limitation that may be encountered in carrying out this research work:

Time factor: This research work has limited duration to complete it, hence the researcher will limit his research to some selected Manufacturing Companies inEkiti state.

Limited finance: It will make the researcher focus on manufacturing company in Ekiti state.

1.8  OPERATIONAL DEFINITION OF TERMS

Some terms that are central to this research study context, to which clarification need be made to enhance better appreciation of the study and avoid confusion and misconception, have been included and explained as the following:

CSR: Corporate Social Responsibility

Corporate: A member of a large company

Corporation: A term used to describe a large business, company or organization or group of organizations that is recognized by law as a single unit e.g. multinational corporation.

Responsibility: Has to do with a duty to help or take care of something or someone.

Ethical Code/Standard: This is connected with morally correct or acceptable beliefs and principles about what is right and wrong. The outlined behaviors expected of businesses/corporations/enterprises.

Manufacturing Company: A business organization or industry that engages in the production of goods in large quantities in factory for the purpose of making money through the sale of the produced goods (products).

Society: A business immediate and remote jurisdiction where people live together in a community, sharing the same ideas, customs, beliefs and laws.

Corporate Philanthropy: The practice of helping the poor and those in need by a business organization. It may include charitable donations to non-profit groups of all kinds.

Self-Ombudsmanship: A practice of giving a self-evaluation as to activities performance or execution.

CHAPTER FIVE

5.0       SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1     SUMMARY OF FINDINGS

The hypotheses formulated for investigation and analysis in this study are concerned with therelationship between corporate social responsibility and profitability of Nigeriamanufacturing firms. The data obtained from the field indicated that all responses were given by married category of staff working in this study’s four manufacturing industries under consideration (i.e. Butterfield Bakery, Coca-Cola Plc., Dangote Flour Mill and Tuyil Pharmaceutical Industry). Most of the respondents who majorly constituted both the top level and middle level management staff falls between the age distribution of thirty-five (35) and fifty (50) years.

It was also observed that most of the respondents have spent more than three (3) years in the industry. This it is believed would have made them gained experience and understanding of the companies’ policy relating to the key issue being investigated – Corporate Social Responsibility role on their profitability.

As earlier pointed out, the data gathered were majorly directed and gotten from both top level and middle level management constituting ninety-seven percent (97%) of the entire respondents by managerial level distribution. The harvest of the instrument after administered resulted in an almost even distribution from the four sample industries.

Furthermore, the educational qualification criterion for distribution showed that a high percentage of the respondents have had their highest qualification within HND/B.Sc. and M.Sc. / MBA, making the level of validity and reliability placed on the data so high.

The year of establishment of the industries that have been considered also characterized the benchmark for measuring the relevancy of the data to the research work.

Finally, responses to items in the operational section of the questionnaire was presented and interpreted and the three formulated research hypothesis were tested. The use Rank Order Correlation Coefficient were adopted for the test of these hypotheses.

5.2     CONCLUSION

There is no doubt given the findings of this study, that corporate social responsibility performance plays significant role in improving the performance of manufacturing companies as a whole. After subjecting the data collected to thorough test, the results showed that corporate social responsibility performance should be incorporated into every organization’s long-term goal/plan which invariably helps in ensuring growth, survival and continuity.

Also, from the findings of the study, conclusion can be reached that corporate financial performance, in greater dimension, will rest on a company’s perspective and attitude towards social responsibility programmes it intended and have been embarking upon. Data gathered suggested that manufacturing firms will enjoy good and healthy relationship with financial institutions and creditors given that they prioritize and implement, in the environment, worth-while social responsibility projects. Consequently, investment portfolio of manufacturing corporations will witness an upward movement as a result of the benefit that would be accruable to them when corporate social responsibility is observed. Growth and development would seem inevitable as constituting the long-term impact of the phenomenon studied. Summarily here, corporate social responsibility expenditure impact positively on the performance of manufacturing firms.

The manufacturing industries / companies, through their voluntary performance of social responsibility over the years, has proved that investment in social responsibility activities do not cause the demise of the business since it would make it to establish that social responsibility may not conflict with other business operations, neither does it impoverish the provider of fund. Instead, it is found to be supportive to business interest.

It should however be noted that for the company to be more responsive in assisting the society in the provision of viable social services, management must step up its more basic mission of maximizing profits. With social responsibility obligation in view, management team will step up their drive towards making better profit day-in-day-out with which other objectives can be met conveniently.

Finally, it can be concluded that since the greater portion of the populace, together with the government, places more importance and expectation on businesses to be responsible towards their immediate environment, corporations have no choice than to incorporate its exercise as a core programme of theirs in order to keep on existing; ensure customers’ retention; improve the industry image; create goodwill; and to attract potential investors.

5.3     RECOMMENDATIONS

Based on the findings of this study, it is recommended for manufacturing companies inNigeria to increase their investments in CSR as this would enhance their turnover and profitbefore tax. Investment in CSR would also boost the corporate image of the companies.Governmentneedstoputmachineryinplacetomonitororganizations’investmentincorporate social responsibility so as to serve as motivation for their involvement in socialresponsibility activities, particularly in their immediate environment. It is recommended forfuture researchers to investigate the relationship between CSR and profitability using largersamplesize.