The Concept of Corporate Social Responsibility
Corporate Social Responsibility (CSR) is a concept that emerged in the 1950s but today but is mainly explained in the framework of stakeholder theory, according to which the needs of stakeholders should be considered before the beginning of any operation.
The origins of CSR focus on business leaders and their donations to charities made to improve their public image. This approach idealizes companies as a charitable organization, seemingly not realizing that companies must make a profit, and cannot operate or exist without it. Spicer (1978) believed that the only purpose for a company to exist is to make money for shareholders and that their responsibility ends at paying taxes and following the laws. The third argument on CSR is more comprehensive, as it is seen as an equal balance between the interests of a company and obligations to its stakeholders (Turker 2009). Further studies in CSR reveal that it is an act of doing more social good that goes beyond the interests of the firm or any other legal requirements.
Corporate Social Responsibility in Petrochemical Companies
The petrochemical industry affects nature and both human and animal life adversely, which leads to public dissatisfaction. However, using CSR, it can reach various benefits, including an increase of company recognition, corporate value, and productivity. It can improve relationships with the stakeholders and differentiate themselves from competitors. Its implementation is influenced by culture, traditions, and regulations, etc.
The adoption of CSR in petrochemical industries is accompanied by such issues as conflicts of interest, industrial pressure, and failures in business. Nationalization schemes can be challenged by the lack of adequate local skills for the job. The process of the disclosure may affect the view of stakeholders about the company. CSR may raise conflicts between the host communities because of varied interests (Idemudia 2014). The implementation of CSR in the petrochemical industry is questioned because social orientation affects the proper aim of the organization.
Corporate Social Responsibility in Developing Countries
CSR in developing countries has been on a surge in the current decade due to environmental awareness, industrial pressure, and a total effect of globalization. CSR has evolved from being a form of charity to a strategy for survival and prosperity especially in industries, such as the petrochemical industries, which massively affect the environment and in developing countries where innovations on creative sustainability are yet to be implemented.
The evidence of rewards seen by petrochemical corporations in the developed countries from CSR implementation, companies in developing China, the Middle East, and other countries followed the adoption of CSR to improve their reputations (Liu, Garcia & Vredenburg 2014). The use of CSR is protection against scandal, and it builds reliability in companies. Since petrochemical companies provided the energy that is needed in the globe, the environmental impacts remain dire thus creating the need for organizations to use CSR as a means to avoid scandal. A positive reputation garnered from CSR is thus a strategic tool for companies to attract good business and good talent.
Corporate Social Responsibility and Transparency
According to the legitimacy theory, companies need to establish legitimacy in the internal operations to affect society to prove its worth to a company. The relevance of legitimacy among companies particularly about social and environmental accounting is tested during the defense of their legitimacy. This is where transparency is introduced. It involves genuineness information, which reveals the positive and negative effects on society and the environment. Legitimacy and transparency are tested by the disclosure of the environmental information of the company. Du and Veira (2012) report that organizations keep seeking to communicate their legitimacy through corporate social responsibility.
The use of CSR as a tool further affects transparency as the disclosure may easily be altered to suit the requirements of CSR and provide a deceitful image of the company’s CSR practices. The levels of disclosure from petrochemical organizations in the respective countries are low and are mostly affected by political and economic systems that incorporate corrupt practices in the reporting. There is a correlation between the level of disclosure and company characteristics, including size, age, and ownership, etc.
Corporate Social Responsibility in Petrochemical Companies of Saudi Arabia
In Saudi Arabia, CSR is not observed. It has charity programs and stewardship that are a part of CSR, but they do not meet the exact requirements of giving to the society, as there is still massive undermining of employees and the absence of social structures built by petrochemical companies in the communities where the firm’s activities are centered.
Currently, increased CSR activities in organizations in Saudi Arabia are noticed. Although CSR disclosure is positively related to the size of the board and the size of the audit committee, it is lower than the average. The CSR strategies of petrochemical companies in Saudi Arabia are misplaced as they are meant to attract good employees and guests as opposed to giving back to the society, which evidences deceptive CSR priorities and the absence of CSR initiatives among companies. As the high demand for the petrochemical product has increased the exploitation of natural areas from which the products are mined, honest CSR practices are important for Saudi Arabia (Asif and Muneer & 2007).
Thus, CSR plays a critical role in every organization. To discuss its role and effects, the characteristics of the firm should be approached, including firm size, nationality, age, and privatization. All in all, the literature review allows to presuppose that:
- Large companies are prone to disclose more information as compared to small firms because small companies may not afford cost from their resource base.
- The volume of environmental disclosure among companies that have a high foreign investment is higher because foreign companies try to improve their image in a host country.
- Older firms disclose more environmental information than younger firms because they are more sensitive to their reputation.
- There is a positive relationship between private companies and environment disclosure because the private sectors try to enhance their reputation to the public.
Asif, M & Muneer 2007, ‘Energy supply, its demand and security issues for developed and emerging economies’, Renewable and Sustainable Energy Reviews, vol. 11, no. 7, pp. 1388-1413.
Du, S & Vieira, E 2012, ‘Striving for legitimacy through corporate social responsibility: insights from oil companies’, Journal of Business Ethics, vol. 110, no. 4, pp. 413-427.
Idemudia, U 2014, Oil multinational companies as money makers and peace makers: lessons from Nigeria, Emerald Group Publishing Limited, Bingley.
Liu, X, Garcia, P & Vredenburg, H 2014, ‘CSR adoption strategies of Chinese state oil companies: effects of global competition and cooperation’, Social Responsibility Journal, vol. 10, no. 1, pp. 38-52.
Spicer, B 1978. ‘Accounting for corporate social performance: some problems and issues’, Journal of Contemporary Business, vol. 7, no. 1, pp. 151-170.
Turker, D 2009. ‘Measuring corporate social responsibility: a scale development Study’, Journal of Business Ethics, vol. 85, no. 4, pp. 411-427.