by Fabian Scherer

The bottom line

Corporate social investment is more than a passing phase

Corporate responsibility is the bottom line
Be socially responsible

South Africa's corporate legal landscape underwent a radical face lift when it was modernised in 2008 according to the New Companies Act 71.

The act aims to reaffirm the concept of the company as a means of achieving economic and social benefits. Many business models do not initially consider corporate social investment (CSI), yet it has become advantageous for companies to participate in future-orientated development of the community – not only idealistically, but also for financial advantages. In the end, a responsive social image contributes to attracting and maintaining high customer relationships. In South Africa, there is a need for initiatives that promote social growth.

The country’s corporate law does not explicitly oblige businesses to engage in social initiatives. It does, however, have internationally renowned measures implemented to ensure businesses act in a way that is socially responsive.

To be able to be listed on the Johannesburg Stock Exchange, it is necessary for companies to comply with three reports that form part of the King Report on Corporate Governance. It obliges the companies to report "at least annually on the nature and extent of [their] social, transformation, ethical, safety, health, and environmental management policies and practices".

Companies that do not invest in corporate social responsibility (CSR) initiatives need to explain why they do not do so. Businesses are required to provide information about potential social initiatives as well as outline their future prospects of sustainability. The South African corporate law focuses on the businesses position and the role it plays in society.

Companies often depict themselves as sustainable and socially responsible. First Principles, a sustainability research company, has specialised in surveying the South African population about their opinions toward CSR in South Africa. In April 2011, it published a study in which 1 000 South Africans from urban and rural areas were questioned. It was found that the biggest share of the people see backlog demand in the education and training sector – not in human health, environment or poverty.

Among the country’s economic communities, which were divided into 12 sectors, the financial sector was regarded as being most socially responsible. Certain individual companies were praised more than the average. South Africans think their government is the organisation that fulfils its social responsibilities the least, followed by alcohol, tobacco, oil and mining companies.

In addition, the majority attaches more value to the manner in which companies carry out their business than to additional external social initiatives. Many mining companies put much effort into CSI among communities, however, the wildcat strikes over the last months have shown that employees are everything but satisfied with the administration of the business.

South Africa’s model of corporate law, in terms of CSR, has induced several outstanding social initiatives by the private sector. The high social dissatisfaction within the country shows a different side. In the perception of many South Africans, most companies do not act as responsibly internally as they do outwardly.

It may be commendable to support disadvantaged communities as a company, but the first focus should be on being socially responsible toward one’s own employees. The problem is that paying adequate salaries and promoting social contributions for employees is more difficult to exploit on a marketing level than building a school in a rural village.

 

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