Coronavirus (COVID-19) Pandemic and Corporate Social Responsibility

Annotation:

The novel coronavirus continues to affect individuals, businesses, and economies of many nations. Since the outbreak of the virus, companies have struggled to survive due to the various policies aimed at containing the pandemic. In addition, companies face immense pressure to provide Corporate Social Responsibility to cushion the adverse effect of the pandemic on employees, customers, and the communities. This article explores employee, customer and community CSR activities adopted by companies during the COVID-19 pandemic. The result provides evidence that African companies seek to increase their corporate citizenship and legitimacy by engaging in several CSR activities in times of crisis.

?Keywords

COVID-19 pandemic, Corporate Social Responsibility, employee CSR, customer and community CSR, African companies, stakeholder theory

Introduction

COVID-19 also called coronavirus is a global pandemic that continues to disrupt livelihoods, business, and economies of nations. World Health Organization (WHO) declared the virus a health emergency by the end of January 2020 and a pandemic in in the middle of March 2020. Approximately, a year after the declaration of the virus as a pandemic, cases of infection stood at 132 million and close to 3 million deaths. The United States of America (USA), Italy, and Brazil are among the worst hit countries. The adverse effect of the pandemic continues to manifest in many facets of businesses due to the imposition of restriction of movement and economic activities. Many commentators perceive that the coronavirus pandemic is much worst that any global crisis witnessed in recent history (Garcia-Sanchez, & Garcia-Sanchez 2020), which is evident in the sharp decline of business activities and Gross Domestic Products (GDP) of several countries. The pandemic generates social issues, which include the exertion of enormous pressure of companies to engage in social responsibility programs aimed at reducing the adverse effect of the pandemic on their stakeholders. Specifically, companies’ approach to employee, customer, and community CSR could significantly change to reflect the needs to attend to these important stakeholders.

In Nigeria and other African companies, CSR approach of companies often include philanthropic activities that are in line with need to reduce the high poverty rate. Other approaches such as ethical and altruistic CSR rank lower that customer, employee, and community CSR, because the society pays more attention to short-term benefits of companies’ programs (Nasir 2020). Immediate business response to the pandemic includes social distancing, restriction of movement and travels, and work from home, leading to huge losses, especially in transport, hospitality, and tourism industry (Manuel & Herron 2020). The effect of the pandemic is not uniform across nations, with some witnessing more devastating consequences than others. For example, the Nigerian economy declined by 6% by the middle of 2020 due to unprecedented decline in crude oil revenue. The country also witnessed a significant increase in unemployment rate by 27% (Nasir 2020). The long run effect of the pandemic is associated with slow economic recovery and a shift in business strategy to meet stakeholder needs.

Stakeholder theory holds that a firm is a nexus of relationship involving shareholders, employees, government, society, and other parties affected by the business operations. The theory emphasizes the importance of responding to the needs of the various stakeholder groups and the firm’s ability to create value for all those affected by its operations. Thus, stakeholder management is necessary for firm’s willing to meet their stakeholder needs (Mahmud et al. 2021). Recently, studies on the effect of the pandemic have started emerging (Shengzhi et al. 2020; Popkova, DeLo, & Sergi 2021; Vethirajan, Mahalingam, & Shunmugam 2020; Garcia-Sanchez & Garcia-Sanchez 2020). On their part, Shangzhi et al. (2020) found that community CSR has an immediate and stronger effect on firm value during the period. Vethirajan et al. (2020) identified the CSR programs of leading firms in India during the pandemic to include activities aimed at building good corporate image, reputation, and brand. Furthermore, Garcia-Sanchez and Garcia-Sanchez (2020) assessed the CSR practices of Spanish firms during the COVID-19 and found that companies actions include protecting the interest of investors and shareholders, favoring the well-being of the vulnerable groups and the Spanish society in general, and combining commercial interests with previous altruistic actions. While these studies offer important insights into CSR programs during the pandemic, they typically were conducted in the context of developed countries. Thus, since the coronavirus pandemic is a recent development, extant literature has not investigated CSR strategy by African companies during the period. In addition, since studies have shown that cultural factors, institutional, and regulatory settings play a role in corporate strategies (Bui & de Villiers 2017), findings of previous studies conducted in the light of developed nations may not apply to the African emerging markets. Consequently, this paper investigates the CSR activities during the COVID-19 pandemic by companies in Africa.

Using a descriptive approach and content analysis, results indicate that companies engaged more in employee, and customer and community CSR programs. In line with the stakeholder theory, we find that African companies have adopted specific employee CSR activities that include remote working, social distancing, and travel restrictions, and provision of relief packages. Specific activities targeted at customers and community include distribution of food products, provision of relief packages to frontline workers, and work from home policy for employees. The results indicate that African companies have adopted programs aimed at establishing their legitimacy and portraying themselves as good corporate citizens.

This paper contributes to the emerging literature on the COVID-19 impacts on business and strategies in general, and CSR practices in particular. So far African firms have been excluded from the sample of recent literature in this emerging area of research. In this article, we provide evidence on the CSR priority of African companies, whose response seems to mirror the high poverty rate through need to supply basic needs such as food and cash donations to the society. Overall, the results point to the convergence of interest between companies and their host communities and that CSR activities during the pandemic are targeted at satisfying the need of employees, customers, and community.

The remainder of the paper is prepared as follows. Section two presents literature review, encompassing concept of corporate social responsibility, review of related literature and the theoretical framework. Section three details research design. Sections four presents the results of the study, while section five concludes the work

Literature Review

This section explains conceptual issues, reviews related studies, and presents the theoretical framework.

Corporate Social Responsibility (CSR)

Traditionally, organizations were viewed as being responsible only to their stockholders (Decker 2004). In that sense companies were required to generate profit to the stockholders while complying with the laws in which they operate. However, as corporations grew in importance and their impact on host communities became more obvious, the traditional view of corporations gave way to the stakeholder view. The stakeholder perspective maintains that companies are responsible for a broad range of stakeholders, including employees, creditors, governments, communities, and investors, among others. Consequently, CSR became a tool for ensuring that companies give back to these stakeholders make up for their actions. In this regard, the International Organization for Standardization (ISO) documented internationally accepted principles that incorporated broad view of the organization beyond satisfying the interest of shareholders and complying with laws and regulations.

The World Business Council for Sustainable Development defines CSR as a firm’s continuing commitment to be ethical and contribute to economic development while improving its employees’ quality of life and that of the local community and society at large. CSR has been classified into four dimensions namely philanthropic, ethical, legal, and economic (Carrol 1991). Garcia-Sanchez and Garcia-Sanchez (2021) extended these dimensions into five to include economic and legal responsibilities, ethical CSR, altruistic CSR, strategic CSR, and customer, community, and employee CSR. Economic and legal responsibilities are mandatory actions that guide managerial decisions and ensure a company’s long-term survival. This type of actions is sometimes not considered CSR because it is mandatory, and noncompliance may trigger legal problems. The economic responsibility of firms is that it should avoid exploiting customers but offer considerable prices for its goods and services. The pricing strategy should be efficient enough to guarantee adequate profitability and support the goal of profit maximization and achieving competitive advantage.

Employee, Customer, and Community CSR

Employee CSR are activities targeted at positively affecting the life of employees and their families (Garcia-Sanchez & Garcia-Sanchez 2021). Employees are viewed as internal firm stakeholders (Chaudhary & Akhouri, 2018) because they work for the company and strive to enhance its reputation, and brand image through strengthening company-community relationship and provision of social welfare. Employee engagement is beneficial for both employer and employee (Mahmud et al. 2021), because employees’ CSR perceptions replicate their views about not only the scope to which their firms engage in CSR but also the effect of their business operations on various stakeholders. Employee and customer and community-based CSR is the most likely way for businesses to handle crisis such as the global pandemic and benefit from it in the long-term. Businesses tend to respond to the needs and desires of the society and their stakeholders, in addition to maximizing the positive and minimizing the negative effects of their operations in the society (Vethirajan et al. 2020).

Stakeholder theory emphasized the interconnection between firms and the society. This means that the decision and actions of one will affect the other. Firms obtain social licenses to operate from their host community and the community in return expects the company to compensate for the adverse impacts of its business operations. Since the outbreak of the deadly virus, national governments have come up with measures to contain the spread of the coronavirus. Given the scale of disruptions and the vulnerability of societies to the virus, business have been pressured to contribute their quota in this regard. On their part, federal governments of several nations have imposed lockdowns, travel restrictions, social distancing, and ban on social gatherings, among other measures. Mahmud et al. (2021) observed that more than 30% of the world’s population have faced geographic and national lockdowns, and other restrictions. As the world went into lockdown, the inequality present in societies became more visible in both developed and developing countries. The communal life was deeply hit by COVID-19 and communities have consequently become too susceptible to go about their daily lives. Health, income, shelter, and other necessities of individuals are in danger due to the risks and uncertainties the novel coronavirus disease has brought about. Gaining the trust of the community is in the interest of businesses and such can be achieved through empathy. Therefore, in such critical times, companies are morally expected to help their communities. In response to the community pressure, which affects a company’s CSR policies (Skouloudis et al. 2015), companies tried to enhance their relationship with their employees, customers, and the community by providing PPEs, essential products, cash donations, and other philanthropic activities. This effort should be viewed as an opportunity to improve corporation’s legitimacy and enhance their corporate citizenship (Mannuel & Herron 2020). However, businesses face challenges of their own, including fall in demand for their products, shortage of raw materials, and accessibility to international markets. These hinders their ability to build company-customer relationship during the pandemic.

?

Review of Related Literature

New empirical evidence on the effect of coronavirus pandemic is emerging (Oyewale et al. 2020; Ponkratov et al. 2020) and the role of companies in tackling the adverse effects of the pandemic (Aguinis et al. 2020). In this regard, Manuel & Herron (2020) demonstrated that the benefit companies will reap determine CSR practices. Similarly, Ahmed (2020) synthesized literature on the economic impact of the novel coronavirus and found that in addition to sharp decline in stock prices, the pandemic significantly affects transportation and travel companies, industrial production firms, and hospitality industry. In addition, Oyewale et al. (2020) examined the effect of the coronavirus pandemic and the several lockdown measures on small and medium enterprises.?They found that non-agricultural enterprises were adversely affected leading to declining sales, fall in investment, and low access to raw materials.?On their part, Shangzhi et al. (2020) investigated whether CSR affect firm value during the COVID-19 pandemic and found that community CSR has a stronger and more immediate impact on firm value. Another interesting finding of the study is that companies in the hospitality industry gained improved stock performance by investing in employee, community, and customer CSR.

Popkova, DeLo and Sergi (2021) found that there is a high complexity of strengthening CSR in developing countries during the COVID-19 era and that the highest manifestation of CSR is in entrepreneurship transition to remote operations. The findings suggest future improvements in remote employment and online purchase and sales of goods and services due to the experience from pandemic. In addition, Vethirajan et al. (2020) identified the CSR activities by leading firms in India during the pandemic. The result showed that companies focused on building good image, reputation, and brand by supporting government fight against the virus through providing face masks, bedded facilities, medical equipment, and free meals.

Furthermore, Garcia-Sanchez and Garcia-Sanchez (2020) assessed the CSR practices of Spanish firms during the COVID-19 and found that companies actions were divided into three clusters of responsibilities. These are protecting the interest of investors and shareholders, favoring the well-being of the vulnerable groups and the Spanish society in general, and combining commercial interests with previous altruistic actions. Huang, Chen, and Nguyen (2020) assessed organizational resilience and CSR as a response to the COVID-19 crisis in the context of Chinese firms. The results indicated that firms having greater CSR performance prior to the pandemic experienced less losses and take a shorter time to recover from the pandemic. Though the literature has attempted to provide early evidence on the impact of the pandemic, none has incorporated African countries in their analysis hence the need for this study.

Methodology

This article investigates CSR activities by African companies in response to the COVID-19 pandemic. Consequently, the article utilizes descriptive research design to analyze data collected through content analysis. We collect data from company’s annual reports through content analysis. The population consists of all 153 companies listed on the Nigerian Stock Exchange as of December 2020, which are available on the African Financials website. To determine the sample size, we excluded 48 companies that did not publish their annual reports and accounts as of 31 March 2021. Also, 25 companies that did not report on CSR activities in response to the COVID-19 pandemic were dropped. Thus, our sample included only 79 companies whose annual reports were published and available on the company’s website by 31 March 2021, and who reported on CSR activities in response to the COVID-19 pandemic.

From Table 1 above, the highest percentage of listed companies is the Financial Services sector (31.4%), followed by the Industrial Holding/Building and Associated companies (19%) and then Food and Beverages (9.2%), and Energy and Mining (9.2%). On the other hand, Engineering has the least percentage of listed companies (2.6%).

After determining the sample size, we performed a content analysis of the annual reports by focusing on the activities in response to the COVID-19 pandemic. Content analysis is useful because the textual information is qualitative in nature, hence the need to read the text before coding it into categorical variables. We classified actions into employee CSR and customer and community CSR. Employee CSR includes remote working, health assessment, social distancing and travel restriction, awareness campaign, and provision of relief packages. Customer and community CSR includes customer protection, provision of food and hygiene products, and cash donations. We codified the qualitative data into categorical variable taking the value of 1 if a firm reports CSR activity in response to the COVID-19 pandemic and 0 otherwise. Initially, we went through the annual reports of 20 companies and classified all employee and customer and community CSR into 11 activities. Table 2 below shows the employee CSR and customer and community CSR undertaken by the companies.

For the analysis, we used the classification above. If a company performs each of the 11 activities, we assign the value of 1 and 0 if it does not. Furthermore, descriptive statistics by way of charts are used to analyze the different CSR initiatives. The analysis is presented in section four.

?Discussion of Results

This section discusses the SCR actions companies have taken during the coronavirus pandemic. We use charts to explain the specific actions taken by companies towards customer and community, and employee targeted CSR.

Customer and Community CSR

The sampled companies have all reported CSR activities during the COVID-19 pandemic. Figure 1 shows the specific customer and community CSR undertaken by the sampled firms.

?Figure 1 above shows that 89% of the companies contributed to the community by donating food and hygiene products, 69% provided some form of relief packages to frontline workers and another 69% gave out cash donation to the government. Also, 54% adopted employee protection measures and another 54% provided medical aid to the community. Lastly, 31% of the companies provided relief packages to vulnerable communities. From the results, it seems that companies gave more priority to donating food and hygiene products and less priority to provision of relief packages to vulnerable communities. The finding is similar to the results of Shengzhi et al. (2021) who found that community CSR has stronger and immediate effect on firm value.

Employee CSR

Figure 2 below shows the employee CSR practices undertaken by the sample companies during the pandemic.

Figure 2 above shows that all the companies in the sample have adopted work from home (remote working) and social distancing and travel restrictions. This complies to the Stay-at-Home Order of Federal Government of Nigeria between March and April 2020. In addition, 54% of the companies engaged in awareness campaigns for their employees and another 54% provided their employees with relief packages. The relief packages included the provision of personal protective equipment, such as face masks and hand gloves, provision of medical help line, free transportation, and internet access for remate working. Lastly, 43% of the firms have provided their employees with frequent health assessment. Our results corroborate the findings of Vethirajan et al. (2020) who demonstrated that companies focused on building good image, reputation, and brand by supporting government fight against the virus through providing face masks, bedded facilities, medical equipment, and free meals.

The findings are in line with the stakeholder theory as it reveals the inter-relatedness between businesses and their most important stakeholders. These results also conform to the notion that businesses understand that they can create long term value and enhance their corporate image and reputation by engaging in CSR activities (Mahmud et al., 2021). In difficult times as the COVID-19 pandemic companies can enhance their market share by upholding business and social duties in line with the needs of their employees, customers, and their community. Studies have already shown that a firm’s commitment to employees and customers can enhance its corporate citizenship because the firm is its communities’ best neighbor (Kochhar, 2014). Therefore, as the pandemic is ravaging businesses and economies, there is a growing pressure on companies from their stakeholders to support employees, customers and the community in ways that will reflect interconnection between companies and their host communities. These findings highlight the need to provide specific items that are much needed during these difficult times such as PPEs to frontline workers, ventilators, and support governments in the fight against the virus.

?Conclusions

The coronavirus pandemic continues to batter world economies and affect businesses from various sectors. Due to growing pressure from stakeholders, businesses have engaged in CSR activities to support their employees, customers, and the community. Studies on the CSR activities in response to the pandemic are only recently beginning to emerge. We add to the emerging COVD-19 and CSR literature by investigated CSR activities during the pandemic in the context of African emerging economies. The results show that common employee CSR activities include donation of food and hygiene products, cash donations to the government, relief packages to Presidential Task Force and frontline healthcare workers, provision of customer protection measures, and relief programs for vulnerable communities. Furthermore, the specific customer and community CSR activities adopted by the companies include implementation remote working, social distancing and travel restrictions, engaging in awareness campaigns, provision of relief packages to the community, and conducting health and mental assessment for employees.?

The findings of this article have both theoretical and practical implications. Theoretically, the results indicate that companies seek to satisfy the needs of the stakeholders (employees, customers, and community). This supports the stakeholder theory which emphasized that companies must strive to meet not only the interest of shareholders, but also other stakeholders who are affected by its operations. Practically, the results highlight the importance that African business place on employee, customer and community CSR during the coronavirus pandemic and provides a good basis for understanding how these companies will behave in similar circumstances in the future. In addition, the findings also shed light on how companies can enhance their legitimacy, gain reputation, build reputation, and boost their corporate image in times of crisis such as the coronavirus pandemic. Furthermore, the findings are relevant to investors and business managers because it reveals how companies have engaged in philanthropic CSR activities to establish and maintain their legitimacy, and thus the evidence can lead to a more cordial existence between companies and their stakeholders. The CSR activities undertaken by these companies reflects the enormous pressure which they face due to the challenges that the society faces because of the pandemic.

This article suffers two limitations. First, we included in the sample only companies listed on the Nigerian Stock Exchange. The implication is that the findings may not be generalized to other companies in other countries because of the differences in institutional structures and cultural factors. Also, the challenge faced by companies due to the pandemic is not uniform across countries and therefore CSR strategies may be divergent across nations. Future studies may consider examining CSR programs in response to the COVID-19 pandemic by incorporating in the analysis companies from several countries.

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