One more word on Nigerian CSR Bill

The World Business Council for Sustainable Development (WBCSD) defines Corporate Social Responsibility as the sustained commitment by business to contribute to economic development while improving the value of life of the labour force, their families, communities and broader society. Beyond simple philanthropy business action on CSR increasingly focuses on creating shared value or sustainability – the deliberate inclusion of public interest in corporate decision making and honouring of a “triple bottom line” to advance people, planet and profit. After all, as the WBCSD memorably stated, “businesses cannot succeed in societies that fail.”

Globally, Nigeria is a key country experimenting with regulating Corporate Social Responsibility (CSR) to address sustainable development issues and enable inclusive economic growth.

In 2008, the late Senator Uche Chukwumerije sponsored a bill entitled: A Bill for an Act to provide for the Establishment of the Corporate Social Responsibility Commission– popularly referred to as the “CSR Bill.” The bill sought to establish the Corporate Social Responsibility Commission a supervisory body that would be responsible for the control and regulation of the CSR activities of businesses in Nigeria. The CSR bill also proposed that all businesses undertake CSR activities utilizing not less than 3.5% of their gross annual profit. While urging the accountability of corporate organizations to their labour force, investors, consumers, host communities, the bill proposed sanctions for defaulting companies and incentives for companies who complied with the regulations.

Unsurprisingly, response to the bill has been not more than a wave of the hand. The Nigerian Employers Consultative Association (NECA) and Organized Private Sector (OPS) groups outrightly rejected the bill.

While CSR is an ostensibly worthy cause, stakeholders argue that the bill is fraught with challenges. Some suggest that the bill goes against the voluntary essence of CSR. Further, that the pursuit of CSR through the regulatory-bureaucratic apparatus means, both forceful and punitive, would impose additional costs on doing business in Nigeria. Already the Ministry of Trade and Industry has a stated commitment to enhancing the ease of doing business in Nigeria, an area in which the country lags behind. The World Bank Ease of Doing Business 2015-2016 Report, ranks Nigeria 169 out of 189 world economies in relation to the regulations and constraints surrounding business activity. Similarly, the Global Competitiveness Report, which assesses the competitiveness landscape of 140 economies, providing insight into the drivers of their productivity and prosperity, ranked Nigeria 124 out of 140 in their 2015 report. A compulsory CSR regime would further damage Nigeria’s non-competitive business environment.

While the aspiration to engage business around sustainable development initiatives is laudable, there are other options to achieve this outside the blunt force of legislation and attendant regulatory risk. One possibility is integrating local environmental and social concessions within emergent public-private partnership agreements, particularly in the large-scale infrastructure projects on the horizon. Under this framework, corporations would be encouraged to invest in capacity building and local enterprise development within their value chains. This practice has antecedents in Nigeria’s oil and gas sector with International Oil Companies required to infuse ‘Local Content’ in their projects in terms of supporting technical capacity-building of Nigerians and the strengthening of local supply chains.

Relatedly, government could enhance transparency around the use of taxes such as the Education Tax Fund, signalling a willingness to engage with businesses to find solutions to national development challenges. Also, the government could articulate a ‘laundry list’ of National Development Priorities and specific plans to which corporations can subscribe. Here, broad governmental commitments to SMEs, employment, security and so on do not count, but coherent and actionable plans to which the private sector could lend technical and financial capital.

The case of India, a similar emerging market context, would suggest that going the legislative path to drive corporate responsibility may have unintended consequences on the very spirit of creating shared value between business and society the law is intended to foster. In 2014, India became the first country in the world to mandate corporate social responsibility, requiring companies to spend 2% of their net profit on social development. These social development activities include measures to eradicate hunger, promote education, environmental sustainability, protection of national heritage and rural sports amongst others. Some of India’s leading indigenous business balked at the CSR bill, rejecting it as a tax and citing already existing corporate commitments on CSR. Others argued that this would create forced philanthropy, tick box behaviour (i.e. companies beginning to grab the easiest solution for their required spend), masking of data to avoid compliance, corruption and the difficulty of choosing the right NGOs due to their influx into the CSR arena. Nigerian businesses echo similar reservations to the proposed CSR bill as in the case of India.

The appetite of government to regulate business engagement in CSR is not limited to emerging economies. In the United Kingdom, several bills have emerged to regulate the human rights impact of UK multinational companies. The Corporate Responsibility Bill was first introduced in the House of Commons by Linda Perham on June 2002, and was subsequently withdrawn. A new version, the Corporate Responsibility (Environmental, Social and Financial Reporting) Bill (CORE Bill) was tabled on 15 October 2002. Another Corporate Responsibility Bill followed this. None of these bills became law. Nonetheless, the failure of these integrated legislative initiatives should not suggest that CSR regulation is neither a credible nor a conceivable alternative for the control of corporate behaviour that may adversely affect the civil liberties of individuals and communities in host countries. The fact that such laws were and continue to be drafted, read, and debated indicates an increasing support of regulation of corporate conduct.

The missing ingredient here may be a more nuanced and contextualized approach to the project. Unlike the industrialized economies of Western Europe of which the UK is part, the Nigerian corporate landscape, from the largest Multinational Corporation to the smallest Small and Medium scale enterprise, is hampered by debilitating infrastructural challenges – poor power supply, transportation networks, clean water, education, healthcare and the like – which hamper the ease of doing business. The federal government in alliance with state and local governments should consider fixing infrastructure including energy, roads, rail systems, waterways, and social services (education, security, unemployment, housing, agriculture) setting clear and smooth processes around business registration, taxation and anti-corruption.

In this context, a necessary step to securing the buy-in of business around the sustainable development agenda is for the Nigerian government to communicate a coherent vision around infrastructure development and the ease of doing business, a vision clearly shared by the MDAs at all levels of the federation. These “fundamentals” include laws and enforcement determining how easily a business can be started and closed, the efficiency with which contracts are enforced, the rules of administration pertaining to a variety of activities – such as obtaining permits for land use, utilities and banking; processing documents for export and import. These details are rarely visible but play a critical role in unlocking the social, technical and financial capital the private sector can contribute to sustainable development in Nigeria. A voluntary CSR code reflecting critical national sustainable development goals & targets would not be out of order. Without having this ‘plumbing’ right the best crafted CSR law would be dead on arrival.