News of Nigeria’s drug and food regulating agency (NAFDAC) sealing off Chocolate Royale due to the discovery of expired products in its stock holdings has recently featured in the news. In a statement, NAFDAC’s spokesman, Anslem Okonkwor, said the agency sealed off Chocolate Royale “for various unethical practices and non-adherence to good manufacturing and hygienic practices.” Chocolate Royale has since responded that the goods were held to be destroyed. Regardless of the veracity of the claims, the public uproar following this episode highlights the expectation of stakeholders for firms to be sound corporate citizens in the communities where they operate.
According to Investopedia “Corporate Citizenship entails the extent to which businesses are socially responsible for meeting legal, ethical and economic responsibilities placed on them by stakeholders. The aim is for businesses to create higher standards of living and quality of life in the communities in which they operate, while still preserving profitability for shareholders”. In simple terms, it means that businesses operate in their communities of interest for the good of all stakeholders including internal stakeholders such as shareholders and employees, and external stakeholders such as governments, consumers and the communities where they operate.
In today’s environment where stakeholders are more aware and interested in the environmental, social and governance impact of businesses, corporate citizenship is necessary to secure and maintain a social license to operate. Furthermore, stakeholders such as consumers and employees are now more willing to use their individual power to punish companies that do not share their values. The ubiquity of social media also means there is no hiding places for businesses, as whatever happens in Lagos will have reverberations in Lusaka or Luxembourg.
Corporate citizenship involves adopting ethical practices in business operations, fair employment practices, tax compliance, and a commitment to minimizing negative environmental impact of their operations. To be sure, an argument against the principle of corporate citizenship is that it increases the cost of firms which detracts from its ability to remain a viable business and engage in productive activities that provide more sustainable benefits to the country e.g. through taxation, employment, linkages with the local economy. However, companies are finding that the short term costs of doing business the right way is a fraction of potential damage from poor citizenship in form of reputational loss, fines or divestment as a result of community tensions.
In response to the impetus in the environment, companies have started embarking on corporate social responsibilities (CSR) schemes. In many cases these are patchwork efforts, which give a good photo opportunity but which would not bear under close scrutiny. Corporate citizenship starts when the core of the organization, i.e. the board and senior leadership, adopts ethical business as a core strategy which is incorporated and implemented in every area of the business ranging from sourcing raw materials to marketing of products and disposing of operating waste.
As time goes on, companies will find that corporate citizenship is no longer optional. It is necessary if a company must maintain its raison d’etre.