An Analysis of the Impact of Corporate Social Responsibility in Business Today

CHAPTER ONE INTRODUCTION 1. 1 Background of the study Over the past twenty years an irrefutable shift to Corporate Social Responsibility (CSR) in companies has occurred (Martin, 2004). Corporate Social Responsibility (CSR) is about the contributions a company makes to society through its core business activities, its social investment and philanthropy programs. The concept of corporate social responsibility in business has become a popular subject of discussion and debate within both business and academic circles.The paper analyses the impact behind the shift to CSR through a case study analysis of Kenya Pipeline Company and their ensuing effects regarding CSR.

Additionally, the ethical proclivities associated with CSR have been analyzed to determine what, if any, effect ethics has on Company’s profits (Jeffrey et al, 2006). This will lead KPC to shift from ethical behavior to perceived ethical behavior via the public relations quick fix a facade of public relations that does not actually change the way companies operate.Although many experts noticed the outward growth of CSR, few have noticed that CSR has also been changing internally in meaning – an exception is Carroll’s study of the definitional changes of CSR – (Carroll, 1999). The concept of CSR, particularly in terms of how it relates to other organizational goals, has been steadily evolving ever since the concept was introduced half a century ago.The purpose of this study is to trace the conceptual development path of theories on CSR and to reflect on the implications of change towards KPC and give evidence that suggests the company has failed to effectively meet their economic, social, and environmental responsibilities. Companies like KPC have the responsibility of being economically responsible through producing goods and services, providing jobs or employment, providing prompt and good payment to suppliers, paying taxes as well as meeting the objective of being the margin of making profits.

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Businesses also have legal responsibility of abiding by law in relation to registration, licenses, registering of employees to statutory bodies and remittance of the deductions, insurance, minimum wages and complying with the labour laws (Mitchell and Sikka 2005). 1. 2 History of Kenya Pipeline Company Ltd. Kenya Pipeline Company Limited (KPC) is a wholly owned State Corporation under the Ministry of Energy. It was established by the Kenyan Government in 1973 under the Companies Act Cap. 486 and the State Corporations Act.

The company started its commercial operations in 1978. It was charged with the task of transporting, storing and dispensing petroleum products safely and efficiently from Mombasa to the hinterland and the neighboring countries through a pipeline. Kenya Pipeline Company operates a pipeline system for transportation of refined petroleum products from Mombasa to Nairobi and western Kenya towns of Nakuru, Kisumu and Eldoret. The entire pipeline system network consists of a 450km 14-inch pipeline from Mombasa to Nairobi, and a 446km 8-inch extension from Nairobi to Western Kenya.The total storage capacity for all KPC depots is 600,626m3. In collaboration with the Government, KPC facilitates the implementation of Government policies: • Acts as a Government agent in specific projects as directed through the Ministry of Energy.

The Company works with the Government in the implementation of key projects such as the extension of the Oil Pipeline to Uganda and the LPG import handling and storage facilities. • Assists in the fight against fuel adulteration and dumping. • Ensures efficient operation of petroleum sub-sector.To ensure that the products flow rate and maintenance work is effectively managed, the pipeline is segmented so that after a given distance, intermediate Pump Station (PS) have been constructed. There are twenty eight (28) such pump stations country wide and they it is the only company in the East Africa Region that gives this service and for the last twenty seven years (27), it has enjoyed monopoly in this area.

KPC has plans to extend the existing pipeline system from Eldoret to Uganda and Rwanda.The overall objective of setting up the Company was to provide the economy with the most efficient, reliable, and safe and least cost means of transporting petroleum products from Mombasa to the hinterland. The company is mandated to carry out the following:- • To build a pipeline for the conveyance of petroleum or petroleum products from     Mombasa to Nairobi, for the account of the Company or for the account of others, and any other pipelines in East Africa as the Company may determine. To own, manage or operate such pipelines and any other pipelines and all ancillary pumping, storage and other facilities and such other plant, equipment and installations, movable and immovable, as the Company may consider desirable and to manufacture, construct, maintain or modify any of the same • To market, process, treat and deal in petroleum products and other products and goods that may conveniently be dealt in by the Company and to provide transport and other distributive facilities, outlets and services in connection therewith. . 3 Problem Statement Over the years the quest for corporate success in the business sector as well as social responsibilities has generated a lot of interest especially with the global witness of the numerous high profile cases of corporate governance failures.

KPC being a wholly government owned institutions, is not exempted from this dilemma of whether to contribute to CSR activities or focus on its major objectives of providing essential services of storing, distributing petroleum products on behalf of petroleum companies (Shippers) while making profits for the main shareholder, the government or contribute to the society and other stakeholders like employees and the community.The widespread incidence of corporate failures and the increasing inability of government to meet their basic responsibility to society as well as regulate business activities among others has resulted in the re-evaluation of the business society relationship and formation of new corporate social responsibility thinking. Kenya Pipeline Company is expected to broaden their accountability to include not only the shareholders but more importantly the stakeholders at large. For instance, in spite of the vast wealth gained by KPC, the communities surrounding the company depots and the region remain poorer.They have in general also failed to gain from the money generated by the company either through jobs creation.

In the National budget, under which a share of the revenue generated from KPC is partially restored, the developments have been created to reach the citizens through intermediaries. These intermediate links have equally turned out to become another source through which those implementing them add to their wealth, instead of being a source for poverty alleviation among the communities.This state of affairs calls for immediate attention and remedy. Undoubtedly, the development spending by the KPC has brought in schools, clinics, and other infrastructure to some remote parts of the country that might otherwise be far more marginalized by the Kenyan government, but many of these projects are inappropriate to address the needs of the communities and more importantly are often left uncompleted. Others, because of incompetence or corruption, if ever completed are inconsiderately carried out efficiently.

However, it should be noted that these development spending by the KPC has only reached significant levels. Although there are surprisingly few good-quality independent scientific data on the overall or long-term effects of pollution yet available evidence does indicate that oil-led development in general has seriously damaged the environment and the livelihood of many of habitants and that poor environmental standards in relation to oil spills, gas flaring and pipe leakages have contributed to these problems (Onishi 2002; Onwuchekwa 2004; Olujide 2006; Akpan 2006).For instance, while KPC had reached its ultimate capacity and the demand continued to increase especially for export products, the export trucks are allowed to lift product from Nairobi thus exposing the road network to the very risk of damage that the initial intention of installation of the petroleum pipeline network was meant to address (Mitchell and Sikka 2005).Moreover, it should be necessary to reiterate that it is not that the KPC company is not responding at all to the corporate social issues but instead is whether these social responsibilities efforts are able to meet with the environmental and socio-economic requirements of their communities and this is one of the aims and objectives this study intend to analyse. This research therefore, intended to find out the type of CSR activities practiced by KPC and its impacts with a view of giving recommendations to the research problem under study.

In Kenya, companies have witnessed a monumental increase of assaults and allegations as a resultant effect of not fulfilling their corporate social responsibility functions. This situation therefore suggests that companies should re-evaluate the impact of their social responsibility strategies so as to renew their corporate identity as well as increase business performance. In addition to this some researchers who tend to asses this phenomenon have most often focused attention on the theoretical discourse, the cost benefits it offers, as well as it’s associated economic and profit derivation among others.This research therefore seeks to analyse the corporate social responsibilities of KPC with the purpose of exploring its impact on communities and see how it’s possible improvement would influence business performance. 1.

4 Aims and Objectives of the Study The following aims and objectives were designed to accomplish this study: 1. To determine the motivation behind CSR functions and investment projects undertaken by companies but with particular reference to Kenya Pipeline Company. 2.To analyse and suggest feasible ways through which the impact of corporate social responsibility could be improved profitably in Kenya Pipeline Company so as to increase business performance 3. To establish the rationale for CSR in KPC’s business in meeting their objectives of existence and if they require constant reviews.

1. 5 Research Questions In order to address the problems highlighted in the research work, certain relevant research questions were deemed necessary of which include the following: 1.To what extent has Kenya Pipeline Company effectively and efficiently carried out their corporate social responsibility functions on communities? 2. To what extent do the policies of the company reflect the interest of its host communities and establish if the relationship between the two is cordial. 3. Which, organizational CSR processes contribute to green innovations in your perspective? 4.

What role would CSR play in that process? What role has CSR played to date in the process of innovation? 1. 6Significance of Study The research would demystify any mystery surrounding CSR in state-owned corporations in this regard KPC.This study therefore, is one of the early studies in the developing countries particularly Kenya and has the potential of exposing to the managements of companies the benefits accruing from effective implementation of corporate social responsibility practice in the communities in which they operate. Hence the research will enable KPC to re-examine whether its corporate social responsibility activities and practices are achieving the objective for which they are being implemented and also provide it with information that will aid in deciding whether to retain its current programs or change them for better results.Furthermore, it will also provide the communities with valuable information on the feasibility of their demands. KPC will use the information to convince its main shareholder, the government to approve its CSR budget as well as understand the concept better thereby embracing the bit that is beneficial to all stakeholders.

The government would benefit from the study by understanding the impact of CSR to state-owned corporations thereby planning appropriately and make its investment decisions wisely.It will also use the information to implement CSR in other state-owned corporations that have not fully embraced this concept and for those that are already in it, improve their practice to the benefit of the society as well the organization. Finally, it will help the researcher in understanding and applying business and management research techniques, thus enabling her to gain better insight about corporate social responsibility and also be more equipped in undertaking future research.Apart from enabling the researcher obtain a Bachelor of Science Degree in Communication and Public Relations from Moi University; she will also be able to gain knowledge on research writing for future use. The researcher will be well equipped to offer consultation services on CSR to organizations as well as society at large. This will also enable the researcher know the dynamics of CSR.

1. 7 Scope and Limitations of the Research This study will concern itself only with the investigation into the impact of corporate social responsibility on business today using Kenya Pipeline Company as the case study.However, naturally it would be accepted in a research endeavour to study as many companies as possible but reality often runs contrary to this situation. It is not out of place therefore to encounter problems and obstacles in a study of this nature. Prominent among them includes time factor, which usually is in very short supply and other resources such as money regulate choices in endeavours such as this. These constraints have resulted in the selection of one company within Kenya and have neglected many choices.

Hence the generalization of the findings of the study beyond the confines of Kenya Pipeline Company may be considered mproper. Perhaps, another unpalatable outcome is that the choice of Kenya Pipeline is restricted to Kenya and precisely Mombasa, Nairobi, Western and its environments. More so, it is possible that some cultural and other environmental factors peculiar to communities can influence matters in relation to corporate social responsibility. Furthermore, it is possible that the use of one method of analysis might have limited the empirical data generated from the fieldwork. Nevertheless, this study is a major effort in analysing the impact of corporate social responsibility on organizations with particular reference to Kenya Pipeline Company.The study hopefully is expected to help the organization in managing their stakeholders through the mechanism of good practice of corporate social responsibility.

1. 8 Conclusion KPC being a wholly government owned institution, is not exempted from this dilemma of whether to contribute to CSR activities or focus on its major objectives of providing essential services of storing and distributing petroleum products on behalf of petroleum companies (Shippers) while making profits for the main shareholder, the government or contribute to the society and other stakeholders like employees and the community.This chapter has attempted to present a preview of the research, by introducing the research aims and objectives, presenting the background information, the importance of the research as well as its possible limitations. The subsequent chapter provides a comprehensive review of extant literature. The research in other words attempts to uncover how good practice of corporate social responsibilities can be a constructive and valuable marketing strategic tool amidst the increasing crisis between companies and host communities in Kenya.