ABSTRACT

The term corporate social responsibility (CSR) is a term that does not have a common or universal definition. The term has been defined by various researchers but they describe and define it in different ways depending on the context in which it is used.

In this thesis corporate social responsibility is a self regulated set of activities vol-untarily undertaken by organizations to support social, environmental and eco-nomical issues. Supporting social causes calls for resources which stress the im-portance of the issue of raising funds, therefore the need to analyze the impact of CSR activities on financial performance from stakeholders perspective.

 

The aim of this study was to describe and analyze the impact of corporate social responsibility on financial performance. It also aimed at looking at the challenges and the opportunities in practicing CSR. A telecommunication company in Ghana, Airtel Ghana, was chosen as the case study for this research.

 

Theories that were utilized to study this topic were the definitions and types of CSR, CSR in Ghana, the opportunities and challenges and the relationship be-tween corporate social responsibility (CSR) and corporate financial performance (CFP).

Quantitative research data was gathered through structured questionnaires. A total of forty (40) questionnaires were sent to the stakeholders of the case company of which thirty-four (34) were answered and returned complete.

 

Based on the outcome of the questionnaires, it was deducted that there are chal-lenges as well as opportunities in practicing CSR. It was also revealed that there are three (3) impact between CSR and CFP, the impact were varying but the main impact noted was positive. The author, therefore, recommended that the case company should report corporate social activities to their stakeholders since not all of them were aware of CSR activities and its effect on the business perfor-mance.

1    INTRODUCTION

 

 

The thesis is based on the topic “Impact of Corporate Social Responsibility (CSR) on Corporate Financial Performance (CFP). The purpose of the research work is to describe and analyse the impact of CSR on business performance from stakeholders’ point of view. It is also aiming to look into the challenges and opportunities in CSR. A case study of Airtel Ghana Ltd will be carried out. Airtel Ghana is one of the emerging telecommunication companies in the country.

 

In this global dispensation, corporate social responsibility has been a topical issue for corporations’ decision making process. Hardly a day goes by without the society or the media reporting of environmental pollution, unethical misconduct or corporate misbehaviour by corporations in the society or the environment in which they operate. This is a result of the companies such as the oil industry, chemical industry, tobacco industry and mining industry etc. that directly cause harm to the environment and endanger the lives of the inhabitants. These continual practices of corporations have lead to the introduction of strict government regulations and this poses disservice to corporations. In order to survive in society and remain in business, there is the need to be economically, politically and socially responsible for the stakeholders in the community.

 

Corporate social responsibility is not only limited to the corporations that directly abuse the environment or the inhabitants of the society but there is virtually no business type that has not experienced the demand for societal responsibilities as well as governmental regulations. Some examples are banking, retailing, tourism, food and beverages, entertainment, etc.

 

Corporate social responsibility is a practice that aims to embrace responsibility of a company’s actions through effective participation and involvement in the activities of the consumer, the environment, society, the employees, direct stakeholders, and of all other institutions that may be considered as stakeholders. CSR can also be defined as the concept of incorporating the social and environmental concerns when making economic decisions in the business activities. Corporate social responsibilities are not only extended to the society or the environment in which one operates but it starts from within the company by being responsible for the employees both within and outside work. Employees are seen as the engine to the business and must be acknowledged and treated as such. As result there is the need for more involvement of employees’ personal lives such as housing arrangement, health care, marital issues when making transfers, children and all other compensation packages in relation to their work when management is making economic decisions of the company.

 

Business performance is conventionally measured in terms of profitability; profit is seen as the prime aim or goal of businesses, especially those in the private sector though recently the main objective has been the creation of shareholders worth. Shareholders’ worth cannot be created without mentioning profit maximization, and in order to maximise shareholders/stakeholders worth, there is the need to be responsible for them both economically, socially and environment-wise in order to gain good reputation and also attract investors in the society in which the company operates.

 

Corporate social responsibility and financial performance can be seen as two parallel lines which move in the same direction, the increase in one will lead to the increase in the other but it is not always the case in the sense that the correlation between CSR and Corporate Financial Performance (CFP) can also give a negative outcome. The high involvement in corporate social responsibility can lead to better financial performance and/or a better financial performance will create room for companies to participate more in corporate social responsibility. There is thus the need to analyse the challenges and opportunities of the impact of corporate social responsibility.

 

1.1    Research Problem and Objectives

 

The main research problem is to describe and analyse the impact of corporate social responsibility on financial performance.